Document:

Exhibit 10.1

 

EXECUTION VERSION

 

 

JPMorgan Chase Bank, National Association
 P.O.  Box 161
 60 Victoria Embankment
 London EC4Y 0JP
 England

 

	
 
    	
April 24, 2013
    

 

To:                             Bally Technologies, Inc.
 6601 S. Bermuda Rd.
 Las Vegas, Nevada 89119
 Attention:                                         Chief Financial Officer
 Telephone No.:             (702) 584-7700

 

Re:                             Master Confirmation—Uncollared Accelerated Share Repurchase

 

This master confirmation (this “Master Confirmation”), dated as of April 24, 2013, is intended to set forth certain terms and provisions of certain Transactions (each, a “Transaction”) entered into from time to time between J.P. Morgan Securities LLC (“JPMS”), as agent for JPMorgan Chase Bank, National Association, London Branch (“JPMorgan”), and Bally Technologies, Inc., a Nevada corporation (“Counterparty”).  This Master Confirmation, taken alone, is neither a commitment by either party to enter into any Transaction nor evidence of a Transaction.  The additional terms of any particular Transaction shall be set forth in a Supplemental Confirmation in the form of Schedule A hereto (a “Supplemental Confirmation”), which shall reference this Master Confirmation and supplement, form a part of, and be subject to this Master Confirmation.  This Master Confirmation and each Supplemental Confirmation together shall constitute a “Confirmation” as referred to in the Agreement specified below.

 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Master Confirmation.  This Master Confirmation and each Supplemental Confirmation evidence a complete binding agreement between Counterparty and JPMorgan as to the subject matter and terms of each Transaction to which this Master Confirmation and such Supplemental Confirmation relate and shall supersede all prior or contemporaneous written or oral communications with respect thereto.

 

This Master Confirmation and each Supplemental Confirmation supplement, form a part of, and are subject to an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as if JPMorgan and Counterparty had executed the Agreement on the date of this Master Confirmation (but without any Schedule except for (i) the election of New York law as the governing law (without reference to its choice of law provisions) and (ii) the election that subparagraph (ii) of Section 2(c) will not apply to the Transactions.

 

The Transactions shall be the sole Transactions under the Agreement.  If there exists any ISDA Master Agreement between JPMorgan and Counterparty or any confirmation or other agreement between JPMorgan and Counterparty pursuant to which an ISDA Master Agreement is deemed to exist between JPMorgan and Counterparty, then notwithstanding anything to the contrary in such ISDA Master Agreement, such confirmation or agreement or any other agreement to which JPMorgan and Counterparty are parties, the Transactions shall not be considered Transactions under, or otherwise governed by, such existing or deemed ISDA Master Agreement, and the occurrence of any Event of Default or Termination Event under the Agreement with respect to either party or any Transaction shall not, by itself, give rise to any right or obligation under any such other agreement or deemed agreement.  Notwithstanding anything to the contrary in any other agreement between the parties or their Affiliates, the Transactions shall not be “Specified Transactions” (or similarly treated) under any other agreement between the parties or their Affiliates.

 

JPMorgan Chase Bank, National Association
 Organised under the laws of the United States as a National Banking Association.
 Main Office 1111 Polaris Parkway, Columbus, Ohio 43240
 Registered as a branch in England & Wales branch No. BR000746
 Registered Branch Office 25 Bank Street, Canary Wharf, London, E14 5JP
 Authorised and regulated by the Financial Services Authority

 

 

All provisions contained or incorporated by reference in the Agreement shall govern this Master Confirmation and each Supplemental Confirmation except as expressly modified herein or in the related Supplemental Confirmation.

 

If, in relation to any Transaction to which this Master Confirmation and a Supplemental Confirmation relate, there is any inconsistency between the Agreement, this Master Confirmation, such Supplemental Confirmation and the Equity Definitions, the following will prevail for purposes of such Transaction in the order of precedence indicated: (i) such Supplemental Confirmation; (ii) this Master Confirmation; (iii) the Equity Definitions; and (iv) the Agreement.

 

1.                                      Each Transaction constitutes a Share Forward Transaction for the purposes of the Equity Definitions.  Set forth below are the terms and conditions that, together with the terms and conditions set forth in the Supplemental Confirmation relating to any Transaction, shall govern such Transaction.

 

General Terms.

 

	
Trade Date:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Buyer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Seller:
    	
 
    	
JPMorgan
    
	
 
    	
 
    	
 
    
	
Shares:
    	
 
    	
The   common stock of Counterparty, par value USD 0.10 per share (Exchange symbol   “BYI”).
    
	
 
    	
 
    	
 
    
	
Exchange:
    	
 
    	
The   New York Stock Exchange
    
	
 
    	
 
    	
 
    
	
Related Exchange(s):
    	
 
    	
All   Exchanges.
    
	
 
    	
 
    	
 
    
	
Prepayment/Variable Obligation:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Prepayment Amount:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Prepayment Date:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Contract Fee:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation, if   any. On the Prepayment Date, Buyer shall pay Seller an amount in USD equal to   the Contract Fee, if any, in immediately available funds by wire transfer to   an account specified by Seller.
    

 

Valuation.

	
 
    	
 
    	
 
    
	
VWAP Price:
    	
 
    	
For   any Exchange Business Day, the volume-weighted average price at which the   Shares trade as reported in the composite transactions for United States   exchanges and quotation systems, during the regular trading session for the   Exchange on such Exchange Business Day, excluding (i) trades that do not   settle regular way, (ii) opening (regular way) reported trades in the   consolidated system on such Exchange Business Day, (iii) trades that   occur in the last ten minutes before the scheduled close of trading on the   Exchange on such Exchange Business Day and ten minutes before the scheduled   close of the primary trading in the market where the trade is effected, and   (iv) trades on such Exchange Business Day that do not satisfy the   requirements of Rule 10b-18(b)(3) under the Securities
    

 

2

 

	
 
    	
 
    	
Exchange   Act of 1934, as amended (the “Exchange Act”),   as determined in good faith and in a commercially reasonable manner by the   Calculation Agent (all such trades other than any trades described in clauses   (i) to (iv) above, “Rule 10b-18   Eligible Transactions”); provided that   the Calculation Agent shall use the Bloomberg Page “BYI US   <Equity> AQR SEC” (or any successor thereto) for such Exchange Business   Day to determine the VWAP Price, absent manifest error or unavailability of   such page or successor thereto.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Forward Price:
    	
 
    	
For   each Transaction, the arithmetic average of the VWAP Prices for all of the   Exchange Business Days in the Calculation Period for such Transaction,   subject to “Valuation Disruption” below.
    
	
 
    	
 
    	
 
    
	
Forward Price Adjustment Amount:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Calculation Period:
    	
 
    	
For   each Transaction, the period from, and including, the Calculation Period   Start Date for such Transaction to, and including, the Termination Date for   such Transaction.
    
	
 
    	
 
    	
 
    
	
Calculation Period Start Date:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Termination Date:
    	
 
    	
For   each Transaction, the Scheduled Termination Date for such Transaction; provided that JPMorgan shall have the right to designate   any Exchange Business Day on or after the First Acceleration Date to be the   Termination Date for such Transaction (the “Accelerated   Termination Date”) by delivering notice to Counterparty of any   such designation prior to 6:00 p.m. (New York City time) on the Exchange   Business Day immediately following the designated Accelerated Termination   Date.
    
	
 
    	
 
    	
 
    
	
Scheduled Termination Date:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation,   subject to postponement as provided in “Valuation Disruption” below.
    
	
 
    	
 
    	
 
    
	
First Acceleration Date:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Valuation Disruption:
    	
 
    	
The   definition of “Market Disruption Event” in Section 6.3(a) of the   Equity Definitions is hereby amended by deleting the words “at any time   during the one-hour period that ends at the relevant Valuation Time, Latest   Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the   case may be” and inserting the words “at any time on any Exchange Business   Day during the Calculation Period or Settlement Valuation Period” after the   word “material,” in the third line thereof.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Section 6.3(d) of   the Equity Definitions is hereby amended by deleting the remainder of the   provision following the term “Scheduled Closing Time” in the fourth line   thereof.
    

 

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Notwithstanding   anything to the contrary in the Equity Definitions, to the extent that a   Disrupted Day occurs (i) in the Calculation Period, the Calculation   Agent may, in its good faith and commercially reasonable discretion, postpone   the Scheduled Termination Date by no more than such number of Disrupted Days,   or (ii) in the Settlement Valuation Period, the Calculation Agent may   extend the Settlement Valuation Period by no more than such number of   Disrupted Days. The Calculation Agent shall also determine whether   (i) such Disrupted Day is a Disrupted Day in full, in which case the   VWAP Price for such Disrupted Day shall not be included for purposes of   determining the Forward Price or the Settlement Price, as the case may be, or   (ii) such Disrupted Day is a Disrupted Day only in part, in which case   the VWAP Price for such Disrupted Day shall be determined by the Calculation   Agent based on Rule 10b-18 Eligible Transactions in the Shares on such   Disrupted Day taking into account the nature and duration of the relevant   Market Disruption Event, and the weighting of the VWAP Price for the relevant   Exchange Business Days during the Calculation Period or the Settlement   Valuation Period, as the case may be, shall be adjusted in a commercially   reasonable manner by the Calculation Agent for purposes of determining the   Forward Price or the Settlement Price, as the case may be, with such   adjustments based on, among other factors, the duration of any Market   Disruption Event and the volume, historical trading patterns and price of the   Shares. Any Exchange Business Day on which, as of the date hereof, the   Exchange is scheduled to close prior to its normal close of trading shall be   deemed not to be an Exchange Business Day; if a closure of the Exchange prior   to its normal close of trading on any Exchange Business Day is scheduled   following the date hereof, then such Exchange Business Day shall be deemed to   be a Disrupted Day in full.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
If   a Disrupted Day occurs during the Calculation Period for any Transaction or   the Settlement Valuation Period for any Transaction, as the case may be, and   each of the nine immediately following consecutive Exchange Business Days is   a Disrupted Day (a “Disruption Event”),   then the Calculation Agent, in its good faith and commercially reasonable   discretion, may deem such Disruption Event (and each consecutive Disrupted   Day thereafter) to be either (x) a Potential Adjustment Event in respect   of such Transaction or (y) an Additional Termination Event in respect of   such Transaction, with Counterparty as the sole Affected Party and such   Transaction as the sole Affected Transaction and with the amount under   Section 6(e) of the Agreement determined taking into account the   fact that the Calculation Period or Settlement Valuation Period, as the case   may be, had fewer Exchange Business Days than originally anticipated.
    

 

Settlement Terms.

	
 
    	
 
    	
 
    
	
Settlement Procedures:
    	
 
    	
For   each Transaction:
    

 

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(i)
    	
if   the Number of Shares to be Delivered for such Transaction is positive,   Physical Settlement shall be applicable to such Transaction; provided that JPMorgan does not, and shall not, make the   agreement or the representations set forth in Section 9.11 of the Equity   Definitions related to the restrictions imposed by applicable securities laws   with respect to any Shares delivered by JPMorgan to Counterparty under any   Transaction; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)
    	
if   the Number of Shares to be Delivered for such Transaction is negative, then   the Counterparty Settlement Provisions in Annex A hereto shall apply to such   Transaction.
    
	
 
    	
 
    	
 
    
	
Number of Shares to be Delivered:
    	
 
    	
For   each Transaction, a number of Shares (rounded down to the nearest whole   number) equal to (a)(i) the Prepayment Amount for such Transaction, divided by (ii)(A) the Forward Price for such   Transaction minus (B) the Forward   Price Adjustment Amount for such Transaction, minus   (b) the number of Initial Shares for such Transaction; provided that if the result of the calculation in clause   (a)(ii) is equal to or less than the Floor Price for such Transaction,   then the Number of Shares to be Delivered for such Transaction shall be   determined as if clause (a)(ii) were replaced with “(ii) the Floor   Price for such Transaction”. For the avoidance of doubt, if the Forward Price   Adjustment Amount for any Transaction is a negative number, clause   (a)(ii) of the immediately preceding sentence shall be equal to   (A) the Forward Price for such Transaction, plus   (B) the absolute value of the Forward Price Adjustment Amount.
    
	
 
    	
 
    	
 
    
	
Floor Price:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Excess Dividend Amount:
    	
 
    	
For   the avoidance of doubt, all references to the Excess Dividend Amount shall be   deleted from Section 9.2(a)(iii) of the Equity Definitions.
    
	
 
    	
 
    	
 
    
	
Settlement Date:
    	
 
    	
For   each Transaction, if the Number of Shares to be Delivered for such   Transaction is positive, the date that is the second Clearance System   Business Day immediately following the Termination Date for such Transaction.
    
	
 
    	
 
    	
 
    
	
Settlement Currency:
    	
 
    	
USD
    
	
 
    	
 
    	
 
    
	
Initial Share Delivery:
    	
 
    	
For   each Transaction, JPMorgan shall deliver a number of Shares equal to the   Initial Shares for such Transaction to Counterparty on the Initial Share   Delivery Date for such Transaction in accordance with Section 9.4 of the   Equity Definitions, with such Initial Share Delivery Date deemed to be a   “Settlement Date” for purposes of such Section 9.4.
    
	
 
    	
 
    	
 
    
	
Initial Share Delivery Date:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Initial Shares:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    

 

5

 

Share Adjustments.

	
 
    	
 
    	
 
    
	
Potential Adjustment Event:
    	
 
    	
In   addition to the events described in Section 11.2(e) of the Equity   Definitions, it shall constitute an additional Potential Adjustment Event if   (x) the Scheduled Termination Date for any Transaction is postponed for   at least three consecutive Exchange Business Days pursuant to “Valuation   Disruption” above (including, for the avoidance of doubt, pursuant to   Section 7 hereof), (y) a Regulatory Disruption as described in   Section 7 occurs and is continuing for at least three consecutive   Exchange Business Days or (z) a Disruption Event occurs. In the case of   any event described in clause (x), (y) or (z) above occurs, the   Calculation Agent may, in its commercially reasonable discretion, adjust any   relevant terms of such Transaction as necessary to preserve as nearly as   practicable the fair value of such Transaction to JPMorgan prior to such   postponement, Regulatory Disruption or Disruption Event, as the case may be.
    
	
 
    	
 
    	
 
    
	
Excess Dividend:
    	
 
    	
Any   dividend or distribution on the Shares (other than any dividend or   distribution of the type described in Section 11.2(e)(i) or   Section 11.2(e)(ii)(A) of the Equity Definitions or any   Extraordinary Dividend). “Extraordinary Dividend”   means the per Share cash dividend or distribution, or a portion thereof,   declared by Counterparty on the Shares that is classified by the board of   directors of Counterparty as an “extraordinary” dividend.
    
	
 
    	
 
    	
 
    
	
Consequences of Excess Dividend:
    	
 
    	
The   declaration by the Issuer of any Excess Dividend, the ex-dividend date for   which occurs or is scheduled to occur during the Relevant Dividend Period for   any Transaction, shall, at JPMorgan’s election in its sole discretion, either   (x) constitute an Additional Termination Event in respect of such   Transaction, with Counterparty as the sole Affected Party and such   Transaction as the sole Affected Transaction or (y) result in an   adjustment, by the Calculation Agent, to the exercise, settlement, payment or   any other terms of the relevant Transaction as the Calculation Agent   determines appropriate to account for the economic effect on such Transaction   of such Excess Dividend.
    
	
 
    	
 
    	
 
    
	
Method of Adjustment:
    	
 
    	
Calculation   Agent Adjustment
    
	
 
    	
 
    	
 
    
	
Relevant Dividend Period:
    	
 
    	
For   each Transaction, the period from, and including, the Trade Date for such   Transaction to, and including, the Relevant Dividend Period End Date for such   Transaction.
    
	
 
    	
 
    	
 
    
	
Relevant Dividend Period End Date:
    	
 
    	
For   each Transaction, if the Number of Shares to be Delivered for such   Transaction is negative, the last day of the Settlement Valuation Period;   otherwise, the Termination Date for such Transaction.
    

 

Extraordinary Events.

	
 
    	
 
    	
 
    
	
Consequences of Merger Events:
    	
 
    	
 
    

 

6

 

	
 
    	
 
    	
 
    
	
(a) Share-for-Share:
    	
 
    	
Modified   Calculation Agent Adjustment
    
	
 
    	
 
    	
 
    
	
(b) Share-for-Other:
    	
 
    	
Cancellation   and Payment
    
	
 
    	
 
    	
 
    
	
(c) Share-for-Combined:
    	
 
    	
Component   Adjustment
    
	
 
    	
 
    	
 
    
	
Tender Offer:
    	
 
    	
Applicable;   provided that   (a) Section 12.1(l) of the Equity Definitions shall be amended   (i) by deleting the parenthetical in the fifth line thereof,   (ii) by replacing “that” in the fifth line thereof with “whether or not   such announcement” and (iii) by adding immediately after the words   “Tender Offer” in the fifth line thereof “, and any publicly announced change   or amendment to such an announcement (including, without limitation, the   announcement of an abandonment of such intention)” and (b) Sections 12.3(a) and   12.3(d) of the Equity Definitions shall each be amended by replacing   each occurrence of the words “Tender Offer Date” by “Announcement Date.”
    
	
 
    	
 
    	
 
    
	
Consequences of Tender Offers:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(a) Share-for-Share:
    	
 
    	
Modified   Calculation Agent Adjustment
    
	
 
    	
 
    	
 
    
	
(b) Share-for-Other:
    	
 
    	
Modified   Calculation Agent Adjustment
    
	
 
    	
 
    	
 
    
	
(c) Share-for-Combined:
    	
 
    	
Modified   Calculation Agent Adjustment
    
	
 
    	
 
    	
 
    
	
Nationalization, Insolvency or Delisting:
    	
 
    	
Cancellation   and Payment; provided that in addition to   the provisions of Section 12.6(a)(iii) of the Equity Definitions,   it shall also constitute a Delisting if the Exchange is located in the United   States and the Shares are not immediately re-listed, re-traded or re-quoted   on any of the New York Stock Exchange, The NASDAQ Global Select Market or The   NASDAQ Global Market (or their respective successors); if the Shares are   immediately re-listed, re-traded or re-quoted on any such exchange or   quotation system, such exchange or quotation system shall be deemed to be the   Exchange.
    
	
 
    	
 
    	
 
    
	
Additional Disruption Events:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(a) Change in Law:
    	
 
    	
Applicable;   provided that   (a) Section 12.9(a)(ii) of the Equity Definitions is hereby   amended by (i) replacing the phrase “the interpretation” in the third   line thereof with the phrase “, or public announcement of, the formal or   informal interpretation”, (ii) by replacing the word “Shares” where it   appears in clause (X) thereof with the words “Hedge Positions” and   (iii) by immediately following the word “Transaction” in clause (X) thereof,   adding the phrase “in the manner contemplated by the Hedging Party on the   Trade Date”; (b) Section 12.9(a)(ii) of the Equity Definitions   is hereby amended by replacing the parenthetical beginning after the word   “regulation” in the second line thereof the words “(including, for the   avoidance of doubt and without limitation, (x) any tax law or   (y) adoption or promulgation of new regulations authorized or mandated   by existing statute)”; and (c) JPMorgan shall not terminate the   Transaction for a Change in Law referred to in clause (Y) of Section
    

 

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12.9(a)(ii) of   the Equity Definitions except to the extent it is exercising its right to   terminate transactions as a result of a “Change in Law” event with respect to   other similarly situated customers in respect of similar transactions.
    
	
 
    	
 
    	
 
    
	
(b) Failure to Deliver:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
(c) Insolvency Filing:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
(d) Loss of Stock Borrow:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Maximum Stock Loan Rate:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Hedging Party:
    	
 
    	
JPMorgan
    
	
 
    	
 
    	
 
    
	
Determining Party:
    	
 
    	
JPMorgan
    
	
 
    	
 
    	
 
    
	
(e) Hedging Disruption:
    	
 
    	
Applicable;   provided, that   Section 12.9(a)(v) of the Equity Definitions is hereby modified by   inserting the following sentence at the end of such Section: “Such inability   described in clauses (A) or (B) above shall not constitute a   “Hedging Disruption” unless the Hedging Party determines that such inability   could result in continued performance by the Hedging Party under the Transaction   being commercially unreasonable or commercially impracticable.”
    
	
 
    	
 
    	
 
    
	
Hedging Party:
    	
 
    	
JPMorgan
    
	
 
    	
 
    	
 
    
	
Determining Party:
    	
 
    	
JPMorgan
    
	
 
    	
 
    	
 
    
	
(f) Increased Cost of Stock Borrow:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Initial Stock Loan Rate:
    	
 
    	
For   each Transaction, as set forth in the related Supplemental Confirmation.
    
	
 
    	
 
    	
 
    
	
Hedging Party:
    	
 
    	
JPMorgan
    
	
 
    	
 
    	
 
    
	
Determining Party:
    	
 
    	
JPMorgan
    
	
 
    	
 
    	
 
    
	
Hedging Adjustments:
    	
 
    	
For   the avoidance of doubt, whenever the Calculation Agent is called upon to make   an adjustment pursuant to the terms of this Confirmation or the Equity   Definitions to take into account the effect of an event, the Calculation   Agent shall make such adjustment by reference to the effect of such event on   JPMorgan, assuming that JPMorgan maintains a commercially reasonable Hedge   Position.
    
	
 
    	
 
    	
 
    
	
Non-Reliance/Agreements and
    	
 
    	
 
    
	
Acknowledgements   Regarding
    	
 
    	
 
    
	
Hedging   Activities/Additional
    	
 
    	
 
    
	
Acknowledgements:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

	
 
    	
 
    	
 
    

 

	
2.
    	
 
    	
Calculation Agent. 
    	
JPMorgan.   Whenever the Calculation Agent is required to act or to exercise judgment in   any way with respect to any Transaction hereunder, it will do so in good   faith and in a commercially reasonable manner. Following any
    

 

8

 

	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
determination   or calculation by the Calculation Agent hereunder, the Calculation Agent   will, upon request, provide to Counterparty promptly following such request a   report (in a commonly used file format for the storage and manipulation of   financial data without disclosing any proprietary models or other information   that is proprietary or confidential) displaying in reasonable detail the   basis for such determination or calculation, as the case may be.
    

 

3.                                      Account Details.

 

(a)                                 Account for payments to Counterparty:

 

Bank:              Bank of America, 300 S. Fourth Street, Floor 2, Las Vegas, NV 89101
 ABA#:                                      026009593
 Acct No.:                         990086803
 Beneficiary:   Bally Technologies Inc

 

Account for delivery of Shares to Counterparty:

 

To be provided by Counterparty separately.

 

(b)                                 Account for payments to JPMorgan:

 

Bank:              JPMorgan Chase Bank, N.A.

ABA#:                                      021000021

Acct No.:                         099997979

Beneficiary:   JPMorgan Chase Bank, N.A.  New York

Ref:                                                    Derivatives

 

Account for delivery of Shares to JPMorgan:

 

DTC 0060

 

4.                                      Offices.

 

(a)                                 The Office of Counterparty for each Transaction is:  Inapplicable, Counterparty is not a Multibranch Party.

 

(b)                                 The Office of JPMorgan for each Transaction is: London

 

JPMorgan Chase Bank, National Association
 London Branch
 P.O.  Box 161
 60 Victoria Embankment
 London EC4Y 0JP
 England

 

5.                                      Notices.

 

(a)                                 Address for notices or communications to Counterparty:

 

Bally Technologies, Inc.
 6601 S. Bermuda Rd.
 Las Vegas, Nevada 89119
 Attention:                                         Chief Financial Officer 
 Telephone No.:             (702) 584-7700
 Email Address:              ndavidson@ballytech.com

 

9

 

(b)                                 Address for notices or communications to JPMorgan:

 

JPMorgan Chase Bank, National Association
 EDG Marketing Support
 Email:            edg_special_equities_notices@jpmorgan.com

 

With a copy to:

 

Sudheer Tegulapalle
 Executive Director
 383 Madison Avenue, Floor 05
 New York, NY, 10179, United States
 Telephone No: (212) 622-2100
 Facsimile No: (212) 622-0398
 Email: sudheer.r.tegulapalle@jpmorgan.com

 

6.                                      Representations, Warranties and Agreements.

 

(a)                                 Additional Representations, Warranties and Covenants of Each Party.  In addition to the representations, warranties and covenants in the Agreement, each party represents, warrants and covenants to the other party that:

 

(i)                                   It is an “eligible contract participant” (as such term is defined in the Commodity Exchange Act, as amended).

 

(ii)                                Each party acknowledges that the offer and sale of each Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) thereof.  Accordingly, each party represents and warrants to the other that (A) it has the financial ability to bear the economic risk of its investment in each Transaction and is able to bear a total loss of its investment, (B) it is an “accredited investor” as that term is defined under Regulation D under the Securities Act and (C) the disposition of each Transaction is restricted under this Master Confirmation, the Securities Act and state securities laws.

 

(b)                                 Additional Representations, Warranties and Covenants of Counterparty.  In addition to the representations, warranties and covenants in the Agreement, Counterparty represents, warrants and covenants to JPMorgan that:

 

(i)                                   As of the Trade Date for each Transaction hereunder, Counterparty is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada.  Each of this Master Confirmation and the Supplemental Confirmation for such Transaction has been duly authorized, executed and delivered by Counterparty and (assuming due authorization, execution and delivery thereof by JPMorgan) this Master Confirmation, as supplemented by such Supplemental Confirmation, constitutes a valid and legally binding obligation of Counterparty.  Counterparty has all corporate power to enter into this Master Confirmation and such Supplemental Confirmation and to consummate the transactions contemplated hereby and thereby and to purchase the Shares and deliver any Settlement Shares in accordance with the terms hereof and thereof.

 

(ii)                                As of the Trade Date for each Transaction hereunder, the execution and delivery by Counterparty of, and the performance by Counterparty of its obligations under, this Master Confirmation and the Supplemental Confirmation for such Transaction, and the consummation of the transactions herein and therein contemplated, do not conflict with or violate (A) any provision of the certificate of incorporation, by-laws or other constitutive documents of Counterparty, (B) any statute or order, rule, regulation or judgment of any court or governmental agency or body having jurisdiction over

 

10

 

Counterparty or any of its subsidiaries or any of their respective assets or (C) any contractual restriction binding on or affecting Counterparty or any of its subsidiaries or any of its assets.

 

(iii)                             As of the Trade Date for each Transaction hereunder, all governmental and other consents that are required to have been obtained by Counterparty with respect to performance, execution and delivery of this Master Confirmation and the Supplemental Confirmation for such Transaction have been obtained and are in full force and effect and all conditions of any such consents have been complied with.

 

(iv)                            As of the Trade Date for each Transaction hereunder, (A) such Transaction is being entered into pursuant to a publicly disclosed Share buy-back program and its Board of Directors has approved the use of derivatives to effect the Share buy-back program, and (B) there is no internal policy of Counterparty, whether written or oral, that would prohibit Counterparty from entering into any aspect of such Transaction, including, without limitation, the purchases of Shares to be made pursuant to such Transaction.

 

(v)                               As of the Trade Date for each Transaction hereunder, the purchase or writing of such Transaction and the transactions contemplated hereby will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

 

(vi)                            As of the Trade Date for each Transaction hereunder, it is not entering into such Transaction, and as of the date of any election with respect to any Transaction hereunder, it is not making such election, in each case (A) on the basis of, and is not aware of, any material non-public information regarding Counterparty or the Shares, (B) in anticipation of, in connection with, or to facilitate, a distribution of its securities, a self tender offer or a third-party tender offer in violation of the Exchange Act or (C) to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares).

 

(vii)                     Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (C) has total assets of at least USD 50,000,000 as of the date hereof.

 

(viii)                      As of the Trade Date for each Transaction hereunder, and as of the date of any election pursuant to Section 15 or Settlement Method Election contained in the Counterparty Settlement Provisions with respect to any Transaction hereunder, Counterparty is in compliance with its reporting obligations under the Exchange Act and its most recent Annual Report on Form 10-K, together with all reports subsequently filed by it pursuant to the Exchange Act, taken together and as amended and supplemented to the date of this representation, do not, as of their respective filing dates, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(ix)                            Counterparty has made, and will make, all filings required to be made by it with the Securities and Exchange Commission, any securities exchange or any other regulatory body with respect to each Transaction.

 

(x)                               The Shares are not, and Counterparty will not cause the Shares to be, subject to a “restricted period” (as defined in Regulation M promulgated under the Exchange Act) at any time during any Regulation M Period (as defined below) for any Transaction unless Counterparty has provided written notice to JPMorgan of such restricted period not later than the Exchange Business Day immediately preceding the first day of such “restricted period”; Counterparty acknowledges that any such notice may cause a Disrupted Day to

 

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occur pursuant to Section 7 below; accordingly, Counterparty acknowledges that its delivery of such notice must comply with the standards set forth in Section 8 below.  “Regulation M Period” means, for any Transaction, (A) the Relevant Period (as defined below) for such Transaction, (B) the Settlement Valuation Period, if any, for such Transaction and (C) the Seller Termination Purchase Period (as defined below), if any, for such Transaction.  “Relevant Period” means, for any Transaction, the period commencing on the Calculation Period Start Date for such Transaction and ending on the later of (1) the earlier of (x) the Scheduled Termination Date and (y) the last Additional Relevant Day (as specified in the related Supplemental Confirmation) for such Transaction, or such earlier day as elected by JPMorgan and communicated to Counterparty on such day (or, if later, the First Acceleration Date without regard to any acceleration thereof pursuant to “Special Provisions for Acquisition Transaction Announcements” below) and (2) if Section 15 is applicable to such Transaction, the date on which all deliveries owed pursuant to Section 15 have been made.

 

(xi)                            As of the Trade Date, the Prepayment Date and any Cash Settlement Payment Date for each Transaction, Counterparty is not, and will not be, “insolvent” (as such term is defined under Section 101(32) of the U.S.  Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase a number of Shares with a value equal to the Prepayment Amount in compliance with the laws of the jurisdiction of Counterparty’s incorporation.

 

(xii)                         Counterparty is not, and after giving effect to each Transaction will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

 

(xiii)                      [reserved]

 

(xiv)                     Counterparty has not entered, and will not enter, into any repurchase transaction with respect to the Shares (or any security convertible into or exchangeable for the Shares) (including, without limitation, any agreements similar to the Transactions described herein) where any initial hedge period, calculation period, relevant period, settlement valuation period or seller termination purchase period (each however defined) in such other transaction will overlap at any time (including, without limitation, as a result of extensions in such initial hedge period, calculation period, relevant period, settlement valuation period or seller termination purchase period as provided in the relevant agreements) with any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master Confirmation, except for any such other agreements entered into with JPMorgan.  In the event that the initial hedge period, relevant period, calculation period or settlement valuation period in any other transaction overlaps with any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master Confirmation as a result of any postponement of the Scheduled Termination Date or extension of the Settlement Valuation Period pursuant to “Valuation Disruption” above or any analogous provision in such other transaction, except any such other transaction entered into with JPMorgan, Counterparty shall promptly amend such other transaction to avoid any such overlap.

 

(xv)                        Upon a request by JPMorgan, Counterparty shall as soon as reasonably practicable (it being understood that if requested, Counterparty shall use commercially reasonable efforts to provide such notice at least one day prior to the first day of, as applicable, the Calculation Period, the Settlement Valuation Period, if any, or the Seller Termination Purchase Period, if any) for any Transaction, notify JPMorgan of the total number of Shares purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception set forth in paragraph (b)(4) of Rule 10b-18 under the Exchange Act (“Rule 10b-18”) by or for Counterparty or any of its “affiliated purchasers” (as defined in Rule 10b-18) during each of the four calendar weeks preceding such day and during the calendar week in which such day occurs (“Rule 10b-18 purchase” and “blocks” each

 

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being used as defined in Rule 10b-18), which notice shall be substantially in the form set forth in Schedule B hereto.

 

(xvi)                     As of the Trade Date for each Transaction hereunder, and as of the date of any election with respect to any Transaction hereunder, there has not been any Merger Announcement (as defined below).

 

(xvii)                  There is not any applicable gaming law, rule or regulation in any jurisdiction in which it then operates or is licensed that imposes or would impose any obligation on any person who, under any relevant definition of ownership, owns less than 5.0% of any class of securities of Counterparty as a result of such ownership. Counterparty shall immediately notify Dealer if it becomes aware of any such obligation after the Trade Date.

 

7.                                      Regulatory Disruption.  In the event that JPMorgan concludes, in its reasonable good faith discretion, based on advice of counsel, that it is appropriate with respect to any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by JPMorgan, but provided that such policies or procedures are related to legal, regulatory or self-regulatory issues and are generally applicable in similar situations and applied to any Transaction hereunder in a non-discriminatory manner), for it to refrain from or decrease any market activity on any Exchange Business Day or Days during the Calculation Period or, if applicable, the Settlement Valuation Period, JPMorgan may by written notice to Counterparty elect to deem that a Market Disruption Event has occurred and will be continuing on such Exchange Business Day or Days.

 

8.                                      10b5-1 Plan.  Counterparty represents, warrants and covenants to JPMorgan that:

 

(a)                                 Counterparty is entering into this Master Confirmation and each Transaction hereunder in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 under the Exchange Act (“Rule 10b5-1”) or any other antifraud or anti-manipulation provisions of the federal or applicable state securities laws and that it has not entered into or altered and will not enter into or alter any corresponding or hedging transaction or position with respect to the Shares.  Counterparty acknowledges that it is the intent of the parties that each Transaction entered into under this Master Confirmation comply with the requirements of paragraphs (c)(1)(i)(A) and (B) of Rule 10b5-1 and each Transaction entered into under this Master Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c).

 

(b)                                 During the Calculation Period and the Settlement Valuation Period, if any, for any Transaction and in connection with the delivery of any Alternative Delivery Units for any Transaction, JPMorgan (or its agent or Affiliate) may effect transactions in Shares in connection with such Transaction.  The timing of such transactions by JPMorgan, the price paid or received per Share pursuant to such transactions and the manner in which such transactions are made, including, without limitation, whether such transactions are made on any securities exchange or privately, shall be within the sole judgment of JPMorgan.  Counterparty acknowledges and agrees that all such transactions shall be made in JPMorgan’s sole commercially reasonable judgment and for JPMorgan’s own account.

 

(c)                                  Counterparty does not have, and shall not attempt to exercise, any control or influence over how, when or whether JPMorgan (or its agent or Affiliate) makes any “purchases or sales” (within the meaning of Rule 10b5-1(c)(1)(i)(B)(3)) in connection with any Transaction entered into under this Master Confirmation, including, without limitation, over how, when or whether JPMorgan (or its agent or Affiliate) enters into any hedging transactions.  Counterparty represents and warrants that it has consulted with its own advisors as to the legal aspects of its adoption and implementation of this Master Confirmation and each Supplemental Confirmation under Rule 10b5-1.

 

(d)                                 Counterparty acknowledges and agrees that any amendment, modification, waiver or termination of this Master Confirmation or any Supplemental Confirmation must be effected in accordance with the requirements for the amendment or termination of a “plan” as defined in Rule 10b5-1(c).

 

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Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, and no such amendment, modification or waiver shall be made at any time at which Counterparty or any officer, director, manager or similar person of Counterparty is aware of any material non-public information regarding Counterparty or the Shares.

 

(e)                                  Counterparty shall not, directly or indirectly, communicate any information relating to the Shares or any Transaction (including, without limitation, any notices required by Section 10(a)) to any employee of JPMorgan or JPMS, other than as set forth in the Communications Procedures attached as Annex C hereto.

 

9.                                      Counterparty Purchases.  Counterparty (or any “affiliate” or “affiliated purchaser” as defined in Rule 10b-18) shall not, without the prior written consent of JPMorgan, directly or indirectly (including, without limitation, by means of a derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or equivalent interest, including, without limitation, a unit of beneficial interest in a trust or limited partnership or a depository share), listed contracts on the Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18 purchases of blocks (as defined in Rule 10b-18)) during any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable), under this Master Confirmation except through JPMorgan (it being understood that, for the avoidance of doubt, JPMorgan is under no obligation to execute any such purchases outside of this Transaction); provided, that (a) this Section 9 shall not limit Counterparty’s ability (or the ability of any “affiliate” or “affiliated purchaser” of Counterparty), (i) pursuant to its employee incentive plans, to re-acquire Shares in connection with the related equity transactions; (ii) to withhold shares to cover exercise price and/or tax liabilities associated with such equity transactions; or (iii) to grant stock and options to “affiliated purchasers” (as defined in Rule 10b-18) or the ability of such affiliated purchasers to acquire such stock or options, in connection with the Counterparty’s compensatory plans for directors, officers and employees or any agreements with respect to the compensation of directors, officers or employees of any entities that are acquisition targets of Issuer, so long as, in the case of clause (i), (ii) or (iii) of this sentence, any such re-acquisition, withholding, grant, acquisition or other purchase does not constitute a “Rule 10b-18 Purchase” (as defined in Rule 10b-18) and (b) that Counterparty or such “affiliate” or “affiliated purchaser” may purchase Shares in (x) unsolicited transactions or (y) privately negotiated (off-market) transactions that are not “Rule 10b-18 purchases” (as defined in Rule 10b-18), in each case without Dealer’s consent..

 

10.                               Special Provisions for Merger Transactions.  Notwithstanding anything to the contrary herein or in the Equity Definitions:

 

(a)                                 Counterparty agrees that it:

 

(i)                                   will not during the period commencing on the Trade Date for any Transaction and ending on the last day of the Relevant Period or, if applicable, the later of the last day of the Settlement Valuation Period and the last day of the Seller Termination Purchase Period, for such Transaction make (and, in the case of any third-party, use its commercially reasonable efforts to prevent any such third-party from making) any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction (a “Merger Announcement”) unless such Merger Announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares;

 

(ii)                                shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify JPMorgan following any such Merger Announcement that such Merger Announcement has been made; and

 

(iii)                             shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide JPMorgan with written notice specifying (i) Counterparty’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date of any Merger

 

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Transaction or potential Merger Transaction that were not effected through JPMorgan or its Affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date of any Merger Transaction or potential Merger Transaction.  Such written notice shall be deemed to be a certification by Counterparty to JPMorgan that such information is true and correct.  In addition, Counterparty shall promptly notify JPMorgan of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.

 

(b)                                 Counterparty acknowledges that any such Merger Announcement or delivery of a notice with respect thereto may cause the terms of any Transaction to be adjusted or such Transaction to be terminated, in each case to the extent expressly provided herein; accordingly, Counterparty acknowledges that its delivery of such notice must comply with the standards set forth in Section 8 above.

 

(c)                                  Upon the occurrence of any Merger Announcement (whether made by Counterparty or a third party), JPMorgan in its commercially reasonable discretion, based on the advice of counsel, may elect to deem that a Market Disruption Event has occurred and will be continuing on such Exchange Business Day or Days as determined by JPMorgan (it being understood that the consequences set forth under clause (x) of Potential Adjustment Event or under Disruption Event may occur as provided in such provisions).

 

“Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

 

11.                               Special Provisions for Acquisition Transaction Announcements.  Notwithstanding anything to the contrary herein or in the Equity Definitions:

 

(a)                                 If an Acquisition Transaction Announcement occurs after the Trade Date and on or prior to the Settlement Date for any Transaction, then the Calculation Agent shall make such adjustment to the Forward Price Adjustment Amount (including reducing the Forward Price Adjustment Amount to zero but not including making such amount a negative number), if any as the Calculation Agent shall determine to be necessary to preserve the fair value of the Transaction after giving effect to such Acquisition Transaction Announcement If an Acquisition Transaction Announcement occurs after the Trade Date, but prior to the First Acceleration Date of any Transaction, the First Acceleration Date shall be the date of such Acquisition Transaction Announcement.  If the Number of Shares to be Delivered for any settlement of any Transaction is a negative number as a result of any adjustment described in this clause (a), then the terms of the Counterparty Settlement Provisions in Annex A hereto shall apply.

 

(b)                                 “Acquisition Transaction Announcement” means any of the following, if and only if the Calculation Agent determines that such announcement has a material effect on the theoretical value of the Transaction, (i) the announcement of an Acquisition Transaction or an event that, if consummated, would result in an Acquisition Transaction, (ii) an announcement that Counterparty or any of its subsidiaries has entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the announcement of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, an Acquisition Transaction, (iv) any other announcement that in the reasonable judgment of the Calculation Agent may result in an Acquisition Transaction, or (v) any announcement of any change or amendment to any previous Acquisition Transaction Announcement (including any announcement of the abandonment of any such previously announced Acquisition Transaction, agreement, letter of intent, understanding or intention).  For the avoidance of doubt, announcements as used in the definition of Acquisition Transaction Announcement refer to any public announcement whether made by the Issuer or a third party.

 

(c)                                  “Acquisition Transaction” means any of (i) any Merger Event (for purposes of this definition the definition of Merger Event shall be read with the references therein to “100%” being replaced by “25%” and references to “50%” being replaced by “75%” and without reference to the clause

 

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beginning immediately following the definition of Reverse Merger therein to the end of such definition) or Tender Offer, (ii) the sale or transfer of all or substantially all of the assets of Counterparty, (iii) a recapitalization, reclassification, binding share exchange or other similar transaction with respect to Counterparty, (iv) any acquisition by Counterparty or any of its subsidiaries where the aggregate consideration transferable by Counterparty or its subsidiaries exceeds 50% of the market capitalization of Counterparty, (v) any lease, exchange, transfer, disposition (including, without limitation, by way of spin-off or distribution) of assets (including, without limitation, any capital stock or other ownership interests in subsidiaries, but, for the avoidance of doubt, not including any capital stock of Counterparty) or other similar event by Counterparty or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Counterparty or its subsidiaries exceeds 30% of the market capitalization of Counterparty and (vi) any transaction in which Counterparty or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise).

 

12.                               Acknowledgments.

 

(a)                                 The parties hereto intend for:

 

(i)                                   each Transaction to be a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and a “forward contract” as defined in Section 101(25) of the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(27), 362(o), 546(e), 546(j), 555, 556, 560 and 561 of the Bankruptcy Code;

 

(ii)                                the Agreement to be a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code;

 

(iii)                             a party’s right to liquidate, terminate or accelerate any Transaction, net out or offset termination values or payment amounts, and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement with respect to the other party or any Extraordinary Event that results in the termination or cancellation of any Transaction to constitute a “contractual right” (as defined in the Bankruptcy Code); and

 

(iv)                            all payments for, under or in connection with each Transaction, all payments for the Shares (including, for the avoidance of doubt, payment of the Prepayment Amount) and the transfer of such Shares to constitute “settlement payments” and “transfers” (as defined in the Bankruptcy Code).

 

(b)                                 Counterparty acknowledges that:

 

(i)                                   during the term of any Transaction, JPMorgan and its Affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to establish, adjust or unwind its hedge position with respect to such Transaction;

 

(ii)                                JPMorgan and its Affiliates may also be active in the market for the Shares and Share-linked transactions other than in connection with hedging activities in relation to any Transaction;

 

(iii)                             JPMorgan shall make its own determination as to whether, when or in what manner any hedging or market activities in Counterparty’s securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Forward Price and the VWAP Price;

 

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(iv)                            any market activities of JPMorgan and its Affiliates with respect to the Shares may affect the market price and volatility of the Shares, as well as the Forward Price and VWAP Price, each in a manner that may be adverse to Counterparty; and

 

(v)                               each Transaction is a derivatives transaction in which it has granted JPMorgan an option; JPMorgan may purchase shares for its own account at an average price that may be greater than, or less than, the price paid by Counterparty under the terms of the related Transaction.

 

13.                               No Collateral, Netting or Setoff.  Notwithstanding any provision of the Agreement or any other agreement between the parties to the contrary, the obligations of Counterparty hereunder are not secured by any collateral.  Obligations under any Transaction shall not be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against any other obligations of the parties, whether arising under the Agreement, this Master Confirmation or any Supplemental Confirmation, or under any other agreement between the parties hereto, by operation of law or otherwise, and no other obligations of the parties shall be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against obligations under any Transaction, whether arising under the Agreement, this Master Confirmation or any Supplemental Confirmation, or under any other agreement between the parties hereto, by operation of law or otherwise, and each party hereby waives any such right of setoff, netting or recoupment.

 

14.                               Delivery of Shares.  Notwithstanding anything to the contrary herein, JPMorgan may, by prior notice to Counterparty, satisfy its obligation to deliver any Shares or other securities on any date due (an “Original Delivery Date”) by making separate deliveries of Shares or such securities, as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery Date.

 

15.                               Alternative Termination Settlement.  In the event that (a) an Early Termination Date (whether as a result of an Event of Default or a Termination Event) occurs or is designated with respect to any Transaction or (b) any Transaction is cancelled or terminated upon the occurrence of an Extraordinary Event (except as a result of (i) a Nationalization, Insolvency or Merger Event in which the consideration to be paid to holders of Shares consists solely of cash, (ii) a Merger Event or Tender Offer that is within Counterparty’s control, or (iii) an Event of Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party other than an Event of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a Termination Event of the type described in Section 5(b) of the Agreement, in each case that resulted from an event or events outside Counterparty’s control), if either party would owe any amount to the other party pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Article 12 of the Equity Definitions (any such amount, a “Payment Amount”), then, in lieu of any payment of such Payment Amount, unless Counterparty makes an election to the contrary no later than the Early Termination Date or the date on which such Transaction is terminated or cancelled, Counterparty or JPMorgan, as the case may be, shall deliver to the other party a number of Shares (or, in the case of a Nationalization, Insolvency or Merger Event, a number of units, each comprising the number or amount of the securities or property that a hypothetical holder of one Share would receive in such Nationalization, Insolvency or Merger Event, as the case may be (each such unit, an “Alternative Delivery Unit”) with a value equal to the Payment Amount, as determined by the Calculation Agent over a commercially reasonable period of time (and the parties agree that, in making such determination of value, the Calculation Agent may take into account a number of factors, including, without limitation, the market price of the Shares or Alternative Delivery Units on the Early Termination Date or the date of early cancellation or termination, as the case may be, and, if such delivery is made by JPMorgan, the prices at which JPMorgan purchases Shares or Alternative Delivery Units to fulfill its delivery obligations under this Section 15); provided that in determining the composition of any Alternative Delivery Unit, if the relevant Nationalization, Insolvency or Merger Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash; and provided further that Counterparty may elect that the provisions of this Section 15 above providing for the delivery of Shares or Alternative Delivery Units, as the case may be, shall not apply only if Counterparty represents and warrants to JPMorgan, in writing on the date it notifies JPMorgan of such election, that, as of such date, Counterparty is not aware of any material non-public information regarding Counterparty or the Shares and is making such election in good faith and not as part

 

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of a plan or scheme to evade compliance with the federal securities laws.  If delivery of Shares or Alternative Delivery Units, as the case may be, pursuant to this Section 15 is to be made by Counterparty, paragraphs 2 through 7 of Annex A hereto shall apply as if (A) such delivery were a settlement of such Transaction to which Net Share Settlement applied, (B) the Cash Settlement Payment Date were the Early Termination Date or the date of early cancellation or termination, as the case may be, and (C) the Forward Cash Settlement Amount were equal to (x) zero minus (y) the Payment Amount owed by Counterparty.  For the avoidance of doubt, if Counterparty validly elects for the provisions of this Section 15 relating to the delivery of Shares or Alternative Delivery Units, as the case may be, not to apply to any Payment Amount, the provisions of Article 12 of the Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply.  If delivery of Shares or Alternative Delivery Units, as the case may be, is to be made by JPMorgan pursuant to this Section 15, the period during which JPMorgan purchases Shares or Alternative Delivery Units to fulfill its delivery obligations under this Section 15 shall be referred to as the “Seller Termination Purchase Period.”

 

16.                               Calculations and Payment Date upon Early Termination.  The parties acknowledge and agree that in calculating (a) the Close-Out Amount pursuant to Section 6 of the Agreement and (b) the amount due upon cancellation or termination of any Transaction (whether in whole or in part) pursuant to Article 12 of the Equity Definitions as a result of an Extraordinary Event, JPMorgan may, if commercially reasonable to do so (but need not), determine such amount based on (i) expected losses assuming a commercially reasonable (including, without limitation, with regard to reasonable legal and regulatory guidelines) risk bid were used to determine loss or (ii) the price at which one or more market participants would offer to sell to the Seller a block of shares of Common Stock equal in number to the Seller’s hedge position in relation to the Transaction.  Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement or Article 12 of the Equity Definitions, if Counterparty elects to receive or deliver Shares or Alternative Delivery Units in accordance with Section 15, such Shares or Alternative Delivery Units shall be delivered on a date selected by JPMorgan as promptly as practicable.

 

17.                               Limit on Beneficial Ownership.  Notwithstanding anything to the contrary in this Master Confirmation, Counterparty acknowledges and agrees that, on any day, JPMorgan shall not be obligated to receive from Counterparty any Shares, and Counterparty shall not be entitled to deliver to JPMorgan any Shares, to the extent (but only to the extent) that after such transactions JPMorgan, JPMorgan’s ultimate parent entity or any Affiliate thereof would directly or indirectly under any federal, state or local (including non-U.S.) laws, regulations or regulatory orders applicable to ownership of Shares, own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal at any time on such day in excess of 4% of the outstanding Shares.  Any purported receipt of Shares shall be void and have no effect to the extent (but only to the extent) that after such receipt, JPMorgan, JPMorgan’s ultimate parent entity or any Affiliate thereof would directly or indirectly under any federal, state or local (including non-U.S.) laws, regulations or regulatory orders applicable to ownership of Shares, own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal at any time on such day in excess of 4% of the outstanding Shares.  If, on any day, any receipt of Shares by JPMorgan is not effected, in whole or in part, as a result of this Section 17, Counterparty’s obligations to deliver such Shares shall not be extinguished and any such delivery shall be effected over time by Counterparty as promptly as JPMorgan determines, such that after any such delivery, would directly or indirectly funder any federal, state or local (including non-U.S.) laws, regulations or regulatory orders applicable to ownership of Shares, own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal at any time on such day in excess of 4% of the outstanding Shares.

 

18.                               Maximum Share Delivery.  Notwithstanding anything to the contrary in this Master Confirmation, in no event shall JPMorgan be required to deliver any Shares, or any Shares or other securities comprising Alternative Delivery Units, in respect of any Transaction in excess of the Maximum Number of Shares set forth in the Supplemental Confirmation for such Transaction.

 

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19.                               Additional Termination Events.

 

(a)                                 The occurrence of an event described in paragraph III of Annex B hereto will constitute an Additional Termination Event, with Counterparty as the sole Affected Party and the Transactions specified in such paragraph III as the Affected Transactions.

 

(b)                                 Notwithstanding anything to the contrary in Section 6 of the Agreement, if a Termination Price is specified in the Supplemental Confirmation for any Transaction, then an Additional Termination Event will occur without any notice or action by JPMorgan or Counterparty if the price of the Shares on the Exchange at any time falls below such Termination Price, with Counterparty as the sole Affected Party and such Transaction as the sole Affected Transaction.

 

(c)                                  Upon the occurrence of a Regulatory Event, JPMorgan may designate any Exchange Business Day as an Early Termination Date with respect to a portion of the Transaction (the “Terminated Portion”), such that following such partial termination no Regulatory Event exists.  In the event that Dealer so designates an Early Termination Date with respect to a Terminated Portion, an amount due shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction, with a Prepayment Amount and Initial Shares determined by JPMorgan to be proportionate to the portion of the Transaction which gives rise to the Regulatory Event, (2) Counterparty were the sole Affected Party with respect to such partial termination and (3) the Terminated Portion were the sole Affected Transaction.

 

“Regulatory Event” means that Dealer determines in its good faith reasonable discretion, based upon the advice of counsel, that in connection with being party to this Transaction or acquiring, establishing, reestablishing, substituting, maintaining, unwinding or disposing of any Hedge Position that Dealer or its affiliates deems necessary or appropriate to hedge Dealer’s risk in respect of this Transaction, Dealer or its affiliates could reasonably be expected to either (i) be obligated to register or make filings with or provide notification or information to any gaming authority or (ii) incur additional material risk, liability or cost as a result of having to comply with any applicable gaming laws, rules or regulations.

 

20.                               Non-confidentiality.  JPMorgan and Counterparty hereby acknowledge and agree that, subject to Section 8(e), each is authorized to disclose every aspect of this Master Confirmation, any Supplemental Confirmation and the transactions contemplated hereby and thereby to any and all persons, without limitation of any kind, and there are no express or implied agreements, arrangements or understandings to the contrary.

 

21.                               Counterparty Indemnification.  Counterparty agrees to indemnify and hold harmless JPMorgan and its officers, directors, employees, Affiliates, advisors, agents and controlling persons (each, an “Indemnified Person”) from and against any and all losses, claims, damages and liabilities, joint or several (collectively, “Obligations”), to which an Indemnified Person may become subject arising out of or in connection with any violation of applicable gaming law, rule or regulation in any jurisdiction in connection with entry into or performance of this Transaction or JPMorgan’s hedging of its obligations hereunder, including, without limitation, a breach by Counterparty of its representations, warranties or covenants under Section 6(b)(xvii) of this Master Confirmation, or any claim, litigation, investigation or proceeding relating thereto, regardless of whether any of such Indemnified Person is a party thereto, and to reimburse, within 30 days, upon written request, each such Indemnified Person for any reasonable legal or other expenses incurred in connection with investigating, preparation for, providing evidence for or defending any of the foregoing; provided, however, that Counterparty shall not have any liability to any Indemnified Person to the extent that such Obligations (a) are finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Person (and in such case, such Indemnified Person shall promptly return to Counterparty any amounts previously expended by Counterparty hereunder) or (b) are trading losses incurred by JPMorgan as part of its purchases or sales of Shares pursuant to this Master Confirmation or any Supplemental Confirmation (unless such trading losses are related to the breach of any agreement, term or covenant herein).

 

19

 

22.                               Designation of Affiliates.  Notwithstanding any other provision in this Master Confirmation to the contrary requiring or allowing JPMorgan to purchase, sell, receive or deliver any Shares or other securities to or from Counterparty, JPMorgan may designate any of its Affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform JPMorgan’s obligations in respect of any Transaction and any such designee may assume such obligations.  JPMorgan may assign the right to receive Settlement Shares to any third party who may legally receive Settlement Shares.  JPMorgan shall be discharged of its obligations to Counterparty only to the extent of any such performance.  For the avoidance of doubt, JPMorgan hereby acknowledges that notwithstanding any such designation hereunder, to the extent any of JPMorgan’s obligations in respect of any Transaction are not completed by its designee, JPMorgan shall be obligated to continue to perform or to cause any other of its designees to perform in respect of such obligations.

 

23.                               Amendments to the Equity Definitions.

 

(a)                                 Section 11.2(a) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing them with the words “a material”; and adding the phrase “or such Transaction” at the end of the sentence.

 

(b)                                 Section 11.2(c) of the Equity Definitions is hereby amended by (i) replacing the words “a diluting or concentrative” with “a material” in the fifth line thereof, (ii) adding the phrase “or such Transaction” after the words “the relevant Shares” in the same sentence, (iii) deleting the words “dilutive or concentrative” in the sixth to last line thereof, and (iv) deleting the phrase “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing it with the phrase “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares).”

 

(c)                                  Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing them with the word “a material”; and adding the phrase “or the relevant Transaction” at the end of the sentence.

 

(d)                                 Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (i) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (ii) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at JPMorgan’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to that Issuer.”

 

(e)                                  Section 12.9(b)(iv) of the Equity Definitions is hereby amended by:

 

(i)                                   deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); and

 

(ii)                                replacing the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares” with the phrase “such Lending Party does not lend Shares” in the penultimate sentence.

 

(f)                                   Section 12.9(b)(v) of the Equity Definitions is hereby amended by:

 

(i)                                   adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and

 

(ii)                                (1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) deleting the penultimate sentence in its entirety and replacing it with the sentence “The Hedging Party will determine the Cancellation Amount payable by one party to the other” and (4) deleting clause (X) in the final sentence

 

20

 

24.                               Extraordinary Dividend.  If Counterparty declares any Extraordinary Dividend that has a record date during the period commencing on the Trade Date for any Transaction and ending of the last day of the Relevant Period or, if applicable, the later of the last day of the Settlement Valuation Period and the last day of the Seller Termination Purchase Period, for such Transaction, then prior to or on the date on which such Extraordinary Dividend is paid by Counterparty to holders of record, Counterparty shall pay to JPMorgan, for each Transaction under this Master Confirmation, an amount in cash equal to the product of (i) the amount of such Extraordinary Dividend and (ii) the theoretical short delta number of shares as of the opening of business on the related ex-dividend date, as determined by the Calculation Agent, required for JPMorgan to hedge its exposure to such Transaction.

 

25.                               Status of Claims in Bankruptcy.  JPMorgan acknowledges and agrees that neither this Master Confirmation nor any Supplemental Confirmation is intended to convey to JPMorgan rights against Counterparty with respect to any Transaction that are senior to the claims of common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or shall be deemed to limit JPMorgan’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to any Transaction; provided further that nothing herein shall limit or shall be deemed to limit JPMorgan’s rights in respect of any transactions other than any Transaction.

 

26.                               Wall Street Transparency and Accountability Act.  In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 (“WSTAA”), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement under WSTAA or an amendment made by WSTAA, nor any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after the date of this Master Confirmation, shall limit or otherwise impair either party’s otherwise applicable rights to terminate, renegotiate, modify, amend or supplement any Supplemental Confirmation, this Master Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under any Supplemental Confirmation, this Master Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, without limitation, rights arising from Change in Law, Loss of Stock Borrow, Increased Cost of Stock Borrow, Hedging Disruption, Increased Cost of Hedging, or Illegality).

 

27.                               Role of Agent.  Each party agrees and acknowledges that (a) JPMS, an Affiliate of JPMorgan, has acted solely as agent and not as principal with respect to this Master Confirmation and each Transaction and (b) JPMS has no obligation or liability, by way of guaranty, endorsement or otherwise, in any manner in respect of any Transaction (including, if applicable, in respect of the settlement thereof).  Each party agrees it will look solely to the other party (or any guarantor in respect thereof) for performance of such other party’s obligations under any Transaction.  JPMS is authorized to act as agent for JPMorgan.

 

28.                               Waiver of Jury Trial.  EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THE AGREEMENT, THIS MASTER CONFIRMATION, EACH SUPPLEMENTAL CONFIRMATION, THE TRANSACTIONS HEREUNDER AND ALL MATTERS ARISING IN CONNECTION WITH THE AGREEMENT, THIS MASTER CONFIRMATION AND ANY SUPPLEMENTAL CONFIRMATION AND THE TRANSACTIONS HEREUNDER.  EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.

 

29.                               Counterparts.  This Master Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Master Confirmation by signing and delivering one or more counterparts.

 

30.                               Delivery or Receipt of Cash.  For the avoidance of doubt, other than payment of the Prepayment Amount by Counterparty, nothing in this Master Confirmation shall be interpreted as requiring Counterparty to cash

 

21

 

settle any Transaction, except in circumstances where cash settlement is within Counterparty’s control (including, without limitation, where the Counterparty fails timely to elect to deliver Shares in accordance with the Counterparty Settlement Provisions or deliver or receive Alternative Delivery Units in accordance with Section 15) or in those circumstances in which holders of Shares would also receive cash.

 

22

 

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Master Confirmation and returning it to us.

 

Very truly yours,

 

 

	
 
    	
J.P. MORGAN SECURITIES LLC, as agent for JPMorgan Chase   Bank, National Association
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/Sudheer R. Tegulapalle
    
	
 
    	
Authorized Signatory
    
	
 
    	
Name: Sudheer R. Tegulapalle
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Accepted and confirmed
    	
 
    	
 
    
	
as of the date first set
    	
 
    	
 
    
	
forth above:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
BALLY TECHNOLOGIES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Neil P. Davidson
    	
 
    	
 
    
	
Authorized Signatory
    	
 
    	
 
    
	
Name:           Neil Davidson
    	
 
    	
 
    
				

 

JPMorgan Chase Bank, National Association
 Organised under the laws of the United States as a National Banking Association.
 Main Office 1111 Polaris Parkway, Columbus, Ohio 43240
 Registered as a branch in England & Wales branch No. BR000746
 Registered Branch Office 25 Bank Street, Canary Wharf, London, E14 5JP
 Authorised and regulated by the Financial Services Authority

 

 

 

SCHEDULE A

 

FORM OF SUPPLEMENTAL CONFIRMATION

 

JPMorgan Chase Bank, National Association
 P.O.  Box 161
 60 Victoria Embankment
 London EC4Y 0JP
 England

 

	
 
    	
[                    ]
    

 

To:                             Bally Technologies, Inc.
 6601 S. Bermuda Rd.
 Las Vegas, Nevada 89119
 Attention:                                         Chief Financial Officer
 Telephone No.:             (702) 584-7700

 

Re:                             Supplemental Confirmation—Uncollared Accelerated Share Repurchase

 

The purpose of this Supplemental Confirmation is to confirm the terms and conditions of the Transaction entered into between J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (“JPMorgan”), and Bally Technologies, Inc., a Nevada corporation (“Counterparty”) on the Trade Date specified below.  This Supplemental Confirmation is a binding contract between JPMorgan and Counterparty as of the relevant Trade Date for the Transaction referenced below.

 

1.                                      This Supplemental Confirmation supplements, forms part of, and is subject to the Master Confirmation, dated as of [                    ], 2013 (the “Master Confirmation”), between JPMorgan and Counterparty, as amended and supplemented from time to time.  All provisions contained in the Master Confirmation govern this Supplemental Confirmation except as expressly modified below.

 

2.                                      The terms of the Transaction to which this Supplemental Confirmation relates are as follows:

 

	
Trade Date:
    	
 
    	
[                    ]
    
	
 
    	
 
    	
 
    
	
Forward Price Adjustment Amount:
    	
 
    	
USD   [      ]
    
	
 
    	
 
    	
 
    
	
Calculation Period Start Date:
    	
 
    	
The   [    ]th Exchange Business Day immediately following the   Trade Date.
    
	
 
    	
 
    	
 
    
	
Scheduled Termination Date:
    	
 
    	
The   [    ]th Exchange Business Day immediately following the   Trade Date.
    
	
 
    	
 
    	
 
    
	
First Acceleration Date:
    	
 
    	
The   [    ]th Exchange Business Day immediately following the   Trade Date.
    
	
 
    	
 
    	
 
    
	
Prepayment Amount:
    	
 
    	
USD   [      ]
    
	
 
    	
 
    	
 
    
	
Prepayment Date:
    	
 
    	
[                    ]
    
	
 
    	
 
    	
 
    
	
Initial Shares:
    	
 
    	
[      ]   Shares; provided that if, in connection with   the Transaction, JPMorgan is unable, after using its good
    

 

JPMorgan Chase Bank, National Association
 Organised under the laws of the United States as a National Banking Association.
 Main Office 1111 Polaris Parkway, Columbus, Ohio 43240
 Registered as a branch in England & Wales branch No. BR000746
 Registered Branch Office 25 Bank Street, Canary Wharf, London, E14 5JP
 Authorised and regulated by the Financial Services Authority

 

A-1

 

	
 
    	
 
    	
faith   commercially reasonable efforts, to borrow or otherwise acquire a number of   Shares equal to the Initial Shares for delivery to Counterparty on the   Initial Share Delivery Date, the Initial Shares delivered on the Initial   Share Delivery Date shall be reduced to such number of Shares that JPMorgan   is able to so borrow or otherwise acquire, and JPMorgan shall use reasonable   good faith efforts to borrow or otherwise acquire a number of Shares equal to   the shortfall in the Initial Share Delivery and to deliver such additional   Shares as soon as reasonably practicable. The aggregate of all Shares   delivered to Counterparty in respect of the Transaction pursuant to this   paragraph shall be the “Initial Shares” for purposes of “Number of Shares to   be Delivered” in the Master Confirmation.
    
	
 
    	
 
    	
 
    
	
Initial Share Delivery Date:
    	
 
    	
[                    ],   20[    ]
    
	
 
    	
 
    	
 
    
	
Maximum Stock Loan Rate:
    	
 
    	
[    ]   basis points per annum
    
	
 
    	
 
    	
 
    
	
Initial Stock Loan Rate:
    	
 
    	
[    ]   basis points per annum
    
	
 
    	
 
    	
 
    
	
Maximum Number of Shares:
    	
 
    	
[      ](1) Shares
    
	
 
    	
 
    	
 
    
	
Floor Price:
    	
 
    	
USD   0.01 per Share
    
	
 
    	
 
    	
 
    
	
Contract Fee:
    	
 
    	
USD   [      ]
    
	
 
    	
 
    	
 
    
	
Termination Price:
    	
 
    	
USD   [      ] per Share
    
	
 
    	
 
    	
 
    
	
Additional Relevant Days:
    	
 
    	
The   [      ] Exchange Business Days immediately   following the Calculation Period.
    
	
 
    	
 
    	
 
    
	
Reserved Shares:
    	
 
    	
Notwithstanding   anything to the contrary in the Master Confirmation, as of the date of this   Supplemental Confirmation, the Reserved Shares shall be equal to   [      ] Shares.
    

 

3.                                      Counterparty represents and warrants to JPMorgan that neither it nor any “affiliated purchaser” (as defined in Rule 10b-18 under the Exchange Act) has made any purchases of blocks pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during either (i) the four full calendar weeks immediately preceding the Trade Date or (ii) during the calendar week in which the Trade Date occurs.

 

4.                                      This Supplemental Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Supplemental Confirmation by signing and delivering one or more counterparts.

 

(1)  To be approximately 50% of the total number of Shares outstanding on the Trade Date.

 

A-2

 

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Supplemental Confirmation and returning it to us.

 

Very truly yours,

 

 

	
 
    	
J.P. MORGAN SECURITIES LLC, as agent for JPMorgan Chase   Bank, National Association
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Authorized Signatory
    
	
 
    	
Name: 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Accepted and confirmed
    	
 
    	
 
    
	
as of the Trade Date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
BALLY TECHNOLOGIES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Authorized Signatory
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
				

 

JPMorgan Chase Bank, National Association
 Organised under the laws of the United States as a National Banking Association.
 Main Office 1111 Polaris Parkway, Columbus, Ohio 43240
 Registered as a branch in England & Wales branch No. BR000746
 Registered Branch Office 25 Bank Street, Canary Wharf, London, E14 5JP
 Authorised and regulated by the Financial Services Authority

 

A-3

 

SCHEDULE B

 

FORM OF CERTIFICATE OF RULE 10B-18 PURCHASES

 

[Letterhead of Counterparty]

 

JPMorgan Chase Bank, National Association

c/o J.P. Morgan Securities LLC

383 Madison Avenue

5th Floor

New York, New York 10172

 

Re:                             Uncollared Accelerated Share Repurchase

 

Ladies and Gentlemen:

 

In connection with our entry into the Master Confirmation, dated as of April 24, 2013, between J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch, and Bally Technologies, Inc., a Nevada corporation, as amended and supplemented from time to time (the “Master Confirmation”), we hereby represent that set forth below is the total number of shares of our common stock purchased by or for us or any of our affiliated purchasers in Rule 10b-18 purchases of blocks (all as defined in Rule 10b-18 under the Securities Exchange Act of 1934) pursuant to the once-a-week block exception set forth in Rule 10b-18(b)(4) during the four full calendar weeks immediately preceding the first day of the [Calculation Period][Settlement Valuation Period][Seller Termination Purchase Period] (as defined in the Master Confirmation) and the week during which the first day of such [Calculation Period][Settlement Valuation Period][Seller Termination Purchase Period] occurs.

 

Number of Shares:

 

We understand that you will use this information in calculating trading volume for purposes of Rule 10b-18.

 

Very truly yours,

 

	
BALLY TECHNOLOGIES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Authorized Signatory
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
				

 

B-1

 

ANNEX A

 

COUNTERPARTY SETTLEMENT PROVISIONS

 

1.                                      The following Counterparty Settlement Provisions shall apply to any Transaction to the extent indicated under the Master Confirmation:

 

	
Settlement Currency:
    	
 
    	
USD
    
	
 
    	
 
    	
 
    
	
Settlement Method Election:
    	
 
    	
Applicable;   provided that   (i) Section 7.1 of the Equity Definitions is hereby amended by   deleting the word “Physical” in the sixth line thereof and replacing it with   the words “Net Share” and (ii) the Electing Party may make a settlement   method election only if the Electing Party represents and warrants to   JPMorgan in writing on the date it notifies JPMorgan of its election that, as   of such date, the Electing Party is not aware of any material non-public   information regarding Counterparty or the Shares and is electing the   settlement method in good faith and not as part of a plan or scheme to evade   compliance with the federal securities laws.
    
	
 
    	
 
    	
 
    
	
Electing Party:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Settlement Method Election Date:
    	
 
    	
The   earlier of (i) the Scheduled Termination Date and (ii) the second   Exchange Business Day immediately following the Accelerated Termination Date   (in which case the election under Section 7.1 of the Equity Definitions   shall be made no later than 10 minutes prior to the open of trading on the   Exchange on such second Exchange Business Day), as the case may be.
    
	
 
    	
 
    	
 
    
	
Default Settlement Method:
    	
 
    	
Cash   Settlement
    
	
 
    	
 
    	
 
    
	
Forward Cash Settlement Amount:
    	
 
    	
An   amount equal to (a) the Number of Shares to be Delivered, multiplied by (b) the Settlement Price.
    
	
 
    	
 
    	
 
    
	
Settlement Price:
    	
 
    	
An   amount equal to the sum of the average of the VWAP Prices for the Exchange   Business Days in the Settlement Valuation Period, plus   USD 0.05, subject to Valuation Disruption as specified in the Master   Confirmation (in each case, plus interest   on such amount during the Settlement Averaging Period at the rate of interest   for Counterparty’s long   term, unsecured and unsubordinated indebtedness, as determined by the   Calculation Agent).
    
	
 
    	
 
    	
 
    
	
Settlement Valuation Period:
    	
 
    	
A   number of Exchange Business Days selected by JPMorgan in its reasonable   discretion, beginning on the Exchange Business Day immediately following the   Exchange Business Day immediately following the Termination Date.
    
	
 
    	
 
    	
 
    
	
Cash Settlement:
    	
 
    	
If   Cash Settlement is applicable, then Buyer shall pay to JPMorgan the absolute   value of the Forward Cash Settlement Amount on the Cash Settlement Payment   Date.
    
	
 
    	
 
    	
 
    
	
Cash Settlement Payment Date:
    	
 
    	
The   Exchange Business Day immediately following the last day of the Settlement   Valuation Period.
    

 

Annex A-1

 

	
Net   Share Settlement Procedures:
    	
 
    	
If   Net Share Settlement is applicable, Net Share Settlement shall be made in   accordance with paragraphs 2 through 7 below.
    

 

2.                                      Net Share Settlement shall be made by delivery on the Cash Settlement Payment Date of a number of Shares satisfying the conditions set forth in paragraph 3 below (the “Registered Settlement Shares”), or a number of Shares not satisfying such conditions (the “Unregistered Settlement Shares”), in either case with a value equal to the absolute value of the Forward Cash Settlement Amount, with such Shares’ value based on the value thereof to JPMorgan (which value shall, in the case of Unregistered Settlement Shares, take into account a commercially reasonable illiquidity discount), in each case as determined by the Calculation Agent.  If all of the conditions for delivery of either Registered Settlement Shares or Unregistered Settlement Shares have not been satisfied, Cash Settlement shall be applicable in accordance with paragraph 1 above notwithstanding Counterparty’s election of Net Share Settlement.

 

3.                                      Counterparty may only deliver Registered Settlement Shares pursuant to paragraph 2 above if:

 

(a)                                 a registration statement covering public resale of the Registered Settlement Shares by JPMorgan (the “Registration Statement”) shall have been filed with the Securities and Exchange Commission under the Securities Act and been declared or otherwise become effective on or prior to the date of delivery, and no stop order shall be in effect with respect to the Registration Statement; a printed prospectus relating to the Registered Settlement Shares (including, without limitation, any prospectus supplement thereto, the “Prospectus”) shall have been delivered to JPMorgan, in such quantities as JPMorgan shall reasonably have requested, on or prior to the date of delivery;

 

(b)                                 the form and content of the Registration Statement and the Prospectus (including, without limitation, any sections describing the plan of distribution) shall be satisfactory to JPMorgan;

 

(c)                                  as of or prior to the date of delivery, JPMorgan and its agents shall have been afforded a reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities and the results of such investigation are satisfactory to JPMorgan, in its discretion; and

 

(d)                                 as of the date of delivery, an agreement (the “Underwriting Agreement”) shall have been entered into with JPMorgan in connection with the public resale of the Registered Settlement Shares by JPMorgan substantially similar to underwriting agreements customary for underwritten offerings of equity securities of similar size by similar companies, in form and substance satisfactory to JPMorgan, which Underwriting Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, JPMorgan and its Affiliates and the provision of customary opinions, accountants’ comfort letters and lawyers’ negative assurance letters.

 

4.                                      If Counterparty delivers Unregistered Settlement Shares pursuant to paragraph 2 above:

 

(a)                             all Unregistered Settlement Shares shall be delivered to JPMorgan (or any Affiliate of JPMorgan designated by JPMorgan) pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof;

 

(b)                                 as of or prior to the date of delivery, JPMorgan and any potential purchaser of any such shares from JPMorgan (or any Affiliate of JPMorgan designated by JPMorgan) identified by JPMorgan shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for private placements of equity securities of similar size by similar companies (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them); provided that any such potential purchaser may be required by Counterparty to enter into a customary nondisclosure agreement with Counterparty in respect of any such due diligence investigation;

 

(c)                                  as of the date of delivery, Counterparty shall enter into an agreement (a “Private Placement Agreement”) with JPMorgan (or any Affiliate of JPMorgan designated by JPMorgan) in connection with the private

 

Annex A-2

 

placement of such shares by Counterparty to JPMorgan (or any such Affiliate) and the private resale of such shares by JPMorgan (or any such Affiliate), substantially similar to private placement purchase agreements customary for private placements of equity securities of similar size by similar companies, in form and substance commercially reasonably satisfactory to JPMorgan, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, JPMorgan and its Affiliates and the provision of customary opinions, accountants’ comfort letters and lawyers’ negative assurance letters, and shall provide for the payment by Counterparty of all fees and expenses of JPMorgan (and any such Affiliate) in connection with such resale, including reasonable fees and documented out-of-pocket expenses of counsel for JPMorgan, and shall contain representations, warranties, covenants and agreements of Counterparty reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales; and

 

(d)                                 in connection with the private placement of such shares by Counterparty to JPMorgan (or any such Affiliate) and the private resale of such shares by JPMorgan (or any such Affiliate), Counterparty shall, if so requested by JPMorgan, prepare, in cooperation with JPMorgan, a private placement memorandum in form and substance reasonably satisfactory to JPMorgan and customary for private placements of equity securities of similar companies.

 

5.                                      JPMorgan, itself or through an Affiliate (the “Selling Agent”) or any underwriter(s), will sell all, or such lesser portion as may be required hereunder, of the Registered Settlement Shares or Unregistered Settlement Shares and any Makewhole Shares (as defined below) (together, the “Settlement Shares”) delivered by Counterparty to JPMorgan pursuant to paragraph 6 below commencing on the Cash Settlement Payment Date and continuing until the date on which the aggregate Net Proceeds (as such term is defined below) of such sales, as determined by JPMorgan, is equal to the absolute value of the Forward Cash Settlement Amount (such date, the “Final Resale Date”).  If the proceeds of any sale(s) made by JPMorgan, the Selling Agent or any underwriter(s), net of any fees and commissions (including, without limitation, underwriting or placement fees) customary for similar transactions under the circumstances at the time of the offering, together with carrying charges and expenses incurred in connection with the offer and sale of the Shares (including, without limitation, the covering of any over-allotment or short position (syndicate or otherwise)) (the “Net Proceeds”) exceed the absolute value of the Forward Cash Settlement Amount, JPMorgan will refund, in USD, such excess to Counterparty on the date that is three (3) Currency Business Days following the Final Resale Date, and, if any portion of the Settlement Shares remains unsold, JPMorgan shall return to Counterparty on that date such unsold Shares.

 

6.                                      If the Calculation Agent determines that the Net Proceeds received from the sale of the Registered Settlement Shares or Unregistered Settlement Shares or any Makewhole Shares, if any, pursuant to this paragraph 6 are less than the absolute value of the Forward Cash Settlement Amount (the amount in USD by which the Net Proceeds are less than the absolute value of the Forward Cash Settlement Amount being the “Shortfall” and the date on which such determination is made, the “Deficiency Determination Date”), Counterparty shall on the Exchange Business Day next succeeding the Deficiency Determination Date (the “Makewhole Notice Date”) deliver to JPMorgan, through the Selling Agent, a notice of Counterparty’s election that Counterparty shall either (i) pay an amount in cash equal to the Shortfall on the day that is one Currency Business Day after the Makewhole Notice Date, or (ii) deliver additional Shares.  If Counterparty elects to deliver to JPMorgan additional Shares, then Counterparty shall deliver additional Shares in compliance with the terms and conditions of paragraph 3 or paragraph 4 above, as the case may be (the “Makewhole Shares”), on the first Clearance System Business Day which is also an Exchange Business Day following the Makewhole Notice Date in such number as the Calculation Agent reasonably believes would have a market value on that Exchange Business Day equal to the Shortfall.  Such Makewhole Shares shall be sold by JPMorgan in accordance with the provisions above; provided that if the sum of the Net Proceeds from the sale of the originally delivered Shares and the Net Proceeds from the sale of any Makewhole Shares is less than the absolute value of the Forward Cash Settlement Amount then Counterparty shall, at its election, either make such cash payment or deliver to JPMorgan further Makewhole Shares until such Shortfall has been reduced to zero.

 

7.                                      Notwithstanding the foregoing, in no event shall the aggregate number of Settlement Shares for any Transaction be greater than the Reserved Shares minus the amount of any Shares actually delivered by Counterparty under any other Transaction under this Master Confirmation (the result of such calculation, the “Capped Number”).  Counterparty represents and warrants (which shall be deemed to be repeated on each day that a Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:

 

Annex A-3

 

A – B

 

Where             A  =                          the number of authorized but unissued shares of Counterparty that are not reserved for future issuance on the date of the determination of the Capped Number; and

 

B  =                          the maximum number of Shares required to be delivered to third parties if Counterparty elected Net Share Settlement of all transactions in the Shares (other than Transactions in the Shares under this Master Confirmation) with all third parties that are then currently outstanding and unexercised.

 

“Reserved Shares” means initially, 7,000,000 Shares.  The Reserved Shares may be increased or decreased in a Supplemental Confirmation.

 

If at any time, as a result of this paragraph 7, Counterparty fails to deliver to JPMorgan any Settlement Shares, Counterparty shall, to the extent that Counterparty has at such time authorized but unissued Shares not reserved for other purposes, promptly notify JPMorgan thereof and deliver to JPMorgan a number of Shares not previously delivered as a result of this paragraph 7.  Counterparty agrees to use its best efforts to cause the number of authorized but unissued Shares to be increased, if necessary, to an amount sufficient to permit Counterparty to fulfill its obligation to deliver any Settlement Shares.

 

Annex A-4

 

ANNEX B

 

COMMUNICATIONS PROCEDURES

 

	
 
    	
April 24, 2013
    

 

I.                                        Introduction

 

Bally Technologies, Inc. (“Counterparty”) and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (“JPMorgan”), have adopted these communications procedures (the “Communications Procedures”) in connection with entering into the Master Confirmation (the “Master Confirmation”), dated as of April 24, 2013, between JPMorgan and Counterparty relating to Uncollared Accelerated Share Repurchase transactions.  These Communications Procedures supplement, form part of, and are subject to the Master Confirmation.

 

II.                                   Communications Rules

 

For each Transaction, from the Trade Date for such Transaction until the date all payments or deliveries of Shares have been made with respect to such Transaction, Counterparty and its Employees and Designees shall not engage in any Program-Related Communication with, or disclose any Material Non-Public Information to, any EDG Trading Personnel.  Except as set forth in the preceding sentence, the Master Confirmation shall not limit Counterparty and its Employees and Designees in their communication with Affiliates and Employees of JPMorgan, including, without limitation, Employees who are EDG Permitted Contacts.

 

III.                              Termination

 

If, in the sole judgment of any EDG Trading Personnel or any Affiliate or Employee of JPMorgan participating in any Communication with Counterparty or any Employee or Designee of Counterparty, such Communication would not be permitted by these Communications Procedures, such EDG Trading Personnel or Affiliate or Employee of JPMorgan shall immediately terminate such Communication.  In such case, or if such EDG Trading Personnel or Affiliate or Employee of JPMorgan determines following completion of any Communication with Counterparty or any Employee or Designee of Counterparty that such Communication was not permitted by these Communications Procedures, such EDG Trading Personnel or such Affiliate or Employee of JPMorgan shall promptly consult with his or her supervisors and with counsel for JPMorgan regarding such Communication.  If, in the reasonable judgment of JPMorgan’s counsel following such consultation, there is more than an insignificant risk that such Communication could materially jeopardize the availability of the affirmative defenses provided in Rule 10b5-1 under the Exchange Act with respect to any ongoing or contemplated activities of JPMorgan or its Affiliates in respect of any Transaction pursuant to the Master Confirmation, it shall be an Additional Termination Event pursuant to Section 19(a) of the Master Confirmation, with Counterparty as the sole Affected Party and all Transactions under the Master Confirmation as Affected Transactions.

 

IV.                               Definitions

 

Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Master Confirmation.  As used herein, the following words and phrases shall have the following meanings:

 

“Communication” means any contact or communication (whether written, electronic, oral or otherwise) between Counterparty or any of its Employees or Designees, on the one hand, and JPMorgan or any of its Affiliates or Employees, on the other hand.

 

“Designee” means a person designated, in writing or orally, by Counterparty to communicate with JPMorgan on behalf of Counterparty.

 

“EDG Permitted Contact” means any of Mr. David Aidelson, Mr. Gregory Batista, Mr. Elliot Chalom, Mr. Steven Seltzer, Mr. James F. Smith, Mr. Sudheer R. Tegulapalle and Ms. Angela B. Terra or any of their designees; provided that JPMorgan may amend the list of EDG Permitted Contacts by delivering a revised list of EDG Permitted Contacts to Counterparty.

 

Annex B-1

 

“EDG Trading Personnel” means Mr. Graham Orton, Mr. Michael Tatro and any other Employee of the public side of the Equity Derivatives Group or the Special Equities Group of J.P. Morgan Chase & Co.; provided that JPMorgan may amend the list of EDG Trading Personnel by delivering a revised list of EDG Trading Personnel to Counterparty; and provided further that, for the avoidance of doubt, the persons listed as EDG Permitted Contacts are not EDG Trading Personnel.

 

“Employee” means, with respect to any entity, any owner, principal, officer, director, employee or other agent or representative of such entity, and any Affiliate of any of such owner, principal, officer, director, employee, agent or representative.

 

“Material Non-Public Information” means information relating to Counterparty or the Shares that (a) has not been widely disseminated by wire service, in one or more newspapers of general circulation, by communication from Counterparty to its shareholders or in a press release, or contained in a public filing made by Counterparty with the Securities and Exchange Commission and (b) a reasonable investor might consider to be of importance in making an investment decision to buy, sell or hold Shares.  For the avoidance of doubt and solely by way of illustration, information should be presumed “material” if it relates to such matters as dividend increases or decreases, earnings estimates, changes in previously released earnings estimates, significant expansion or curtailment of operations, a significant increase or decline of orders, significant merger or acquisition proposals or agreements, significant new products or discoveries, extraordinary borrowing, major litigation, liquidity problems, extraordinary management developments, purchase or sale of substantial assets and similar matters.

 

“Program-Related Communication” means any Communication the subject matter of which relates to the Master Confirmation or any Transaction under the Master Confirmation or any activities of JPMorgan (or any of its Affiliates) in respect of the Master Confirmation or any Transaction under the Master Confirmation.

 

Annex B-2Exhibit 10.1

 

LIMITED WAIVER OF OWNERSHIP LIMITATION

 

In consideration of the representations, warranties, covenants and agreements contained herein, this Limited Waiver of Ownership Limitation (this “Waiver”) is granted as of May 3, 2013 by CUBESMART, a Maryland real estate investment trust (the “Company”), to INVESCO ADVISERS, INC., a Delaware corporation ( “Shareholder”), on behalf of itself and on behalf of any Designated Investment Entity owned by Invesco Ltd., a company organized under the laws of Bermuda, that would be treated as Beneficially Owning or Constructively Owning shares in excess of the Common Share Ownership Limit (as defined below) by reason of attribution of Common Shares of the Company held by the Shareholder (the “Invesco Group”).  Terms used herein as defined terms and not defined herein have the meanings given to them in the Articles of Amendment and Restatement of Declaration of Trust of the Company, as amended and supplemented (the “Declaration”).

 

WHEREAS, Section 7.2.1(a)(i)(1) of the Declaration provides that no Designated Investment Entity shall Beneficially Own or Constructively Own Common Shares in excess of 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding Common Shares of the Company (the “Common Share Ownership Limit);

 

WHEREAS, Section 7.2.7 of the Declaration authorizes the Board to grant to Persons meeting the conditions imposed by Section 7.2.7 of the Declaration and by the Board in its discretion exemptions from the Common Share Ownership Limit, provided, however, that such Person provides undertakings, representations and evidence to the Board that the qualification of the Company as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder; for federal income tax purposes would not be jeopardized thereby;

 

WHEREAS, the Board has determined that the execution of this Waiver is advisable and in the best interests of the Company and its shareholders and has directed that the Company grant to the Invesco Group a limited waiver from the Common Share Ownership Limit and the Board has approved acquisition of Common Shares by Shareholder, subject to the limits and other provisions contained herein, pursuant to Section 3-601(j)(3) and (4) of the Maryland General Corporation Law; and

 

WHEREAS, the parties desire to enter into this Limited Waiver of Ownership Limitation to establish the scope of the limited waiver from the Common Share Ownership Limit.

 

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                    Defined Terms.  For purposes of this Waiver, except as otherwise indicated herein, capitalized terms shall have the meaning ascribed to such terms in the Declaration.

 

2.                                    Grant of Limited Waiver.  Pursuant to Section 7.2.7 of the Declaration, the Board has directed that the Company grant, and the Company does hereby grant, to the members of the Invesco Group a limited waiver from the Common Share Ownership Limit effective as of May 3, 2013 on the following bases:

 

 

a.                                     The members of the Invesco Group may Beneficially or Constructively Own (as determined pursuant to the Declaration), in the aggregate, up to 15% shares of the total issued and outstanding Common Shares.

 

b.                                    If the Shareholder or any other member of the Invesco Group (i)  violates any term of this Waiver or breaches any of the representations and undertakings herein and (ii) if the Company reasonably determines in consultation with its accountants and legal counsel that its qualification as a REIT for federal income tax purposes is jeopardized solely because of this Waiver, the Company shall have the right to treat that number of Common Shares acquired by Shareholder or any other member of the Invesco Group that in the absence of this Waiver would be owned by a Person (as determined pursuant to the Declaration) in excess of the ownership limit applicable to such Person under Section 7.2.1(a)(i)(1) of the Declaration (if any) as in violation of Section 7.2.1(a)(i)(1) to the extent that such treatment is reasonably necessary to preserve the Company’s status as a REIT for federal income tax purposes.

 

c.                                     The grant of the limited waiver described herein shall not be effective if and to the extent that, as a result of the Invesco Group’s ownership of Common Shares permitted by reason of the limited waiver, any “individual” (within the meaning of Sections 542(a)(2) and 856(h) of the Code) would be considered to “own” (within the meaning of Section 856(h) of the Code) more than 5% (by value or number of shares, whichever is more restrictive) of the total outstanding Common Shares (whether or not such ownership causes the Company to be “closely held” under Section 856(h) of the Code).

 

3.                                    Representations and Undertakings of Shareholder. Shareholder, on behalf of itself and the other members of the Invesco Group, hereby certifies, represents, warrants and agrees as to the following for the benefit of the Company and its shareholders:

 

a.                                     Shareholder is a corporation organized under the laws of the state of Delaware and is not an individual for purposes of Section 542(a)(2) of the Code (determined after taking into account Section 856(h)(3)(A) of the Code.

 

b.                                    Shareholder is indirectly wholly-owned by Invesco Ltd., a company organized under the laws of Bermuda.  Invesco Ltd. is not an individual for purposes of Section 542(a)(2) of the Code (determined after taking into account Section 856(h)(3)(A) of the Code).

 

c.                                     The stock of Invesco Ltd. is publicly traded, and, to the best knowledge of Shareholder, as of February 15, 2013, T. Rowe Price Associates, Inc., JPMorgan Chase & Co. and BlackRock, Inc. beneficially owned 12.5%, 6.1% and 5.4%, respectively, of the common stock of Invesco Ltd.

 

d.                                   The ownership of Common Shares by Shareholder and any other member of the Invesco Group will not result in any Person who is an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) being considered to Beneficially Own Common Shares in excess of the Common Share Ownership Limit.

 

-2-

 

To the extent not publicly disclosed in a filing made with the Securities and Exchange Commission, Shareholder shall inform the Company if the Shareholder becomes informed that any individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) owns more than 5% (by value) of the outstanding shares of Invesco Ltd.

 

e.                                     The members of the Invesco Group will not dispose of any Common Shares in violation of the Common Share Ownership Limit or in any manner that would cause a Person to be in violation of the Common Share Ownership Limit.

 

f.                                      Shareholder represents that it has had no communication with, nor has it acted in concert with, any Excepted Holder as defined in Section 7.1 of the Declaration for purposes of procuring this Limited Waiver of Ownership Limitation or for any other purpose related to the matters covered hereby.

 

g.                                    The acquisition of the Common Shares by Shareholder and any other member of the Invesco Group shall be in the ordinary course of business and not with the purpose or effect of changing or influencing control of the Company and such securities will not be acquired in connection with or as a participant in any transaction having such purpose or effect nor will Shareholder or any other member of the Invesco Group in the future take any action in concert with any other Person for such purpose or effect so long as this Waiver is in effect.

 

4.                                    Shareholder Cooperation.  Shareholder, on behalf of itself and each member of the Invesco Group, agrees to cooperate with the Company, if the Company, at any time in the future, requests information from Shareholder regarding the number of Common Shares of the Company then owned by Shareholder and members of the Invesco Group and the Beneficial or Constructive Ownership of such Common Shares.

 

5.                                    Company Reliance. Shareholder understands that the Company will rely on the truth and accuracy of the statements contained in this letter in granting the Waiver.

 

6.                                    Limited Waiver.  Shareholder acknowledges its understanding that the foregoing waiver of the Common Share Ownership Limit is only being granted to Shareholder and the other members of the Invesco Group and not to T. Rowe Price Associates, Inc., Viking Global Investors LP, Wellington Management Company, LLP or any other person, and such waiver shall not apply to any transferee or assignee of the Common Shares.

 

7.                                    Termination.  If after the date that Shareholder acquires Common Shares, the members of the Invesco Group cease to own Common Shares in excess of the Common Share Ownership Limit then the waiver from the Common Share Ownership Limit granted in this Waiver shall automatically terminate.

 

8.                                    Notice.  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed, delivered by hand delivery or overnight courier, or transmitted by any standard form of telecommunication.

 

-3-

 

Written notices to the Company shall be directed to:

 

CubeSmart
 460 East Swedesford Road
 Suite 3000
 Wayne, PA 19087
 Attention: Chief Legal Officer

 

Written notices to Shareholder shall be directed to:

 

Invesco
 1555 Peachtree Street, NE
 Atlanta, GA 30309

 

Attention: Legal Department

 

9.                                    Counterparts.  This Waiver may be executed in two counterparts, both of which taken together will be deemed to constitute a single document.

 

[Remainder of Page Intentionally Blank]

 

-4-

 

IN WITNESS WHEREOF, the parties have entered into this Waiver as of the date and year first written above, intending to be legally bound.

 

CUBESMART

 

 

By: /s/ Jeffrey P. Foster

Name: Jeffrey P. Foster

Title: Senior Vice President, Chief Legal Officer & Secretary

 

 

INVESCO ADVISERS, INC.

 

 

By: /s/ Mark D. Blackburn

Name: Mark D. Blackburn

Title:   Assistant Vice-President

 

-5-

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