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Form 20-F
P3YP3Y2.33P2YP2YP2YP2YP2Yfalse2019FY0001381640--12-31E90000000000As of December 31, 2019 and 2018, the unamortized deferred financing costs related to the 2015 Revolving Credit Facility of the 2015 Credit Facilities of $3,097 and nil are included in prepaid expenses and other current assets, and nil and $10,031 are included in long-term prepayments, deposits and other assets, in the accompanying consolidated balance sheets, respectively.As of December 31, 2019 and 2018, the unamortized deferred financing costs related to the 2016 SC Revolving Credit Facility of the 2016 Studio City Credit Facilities of $885 and $1,299 are included in long-term prepayments, deposits and other assets in the accompanying consolidated balance sheets, respectively.“Adjusted property EBITDA” is earnings before interest, taxes, depreciation, amortization, pre-opening costs, development costs, property charges and other, share-based compensation, payments to the Philippine Parties, land rent to Belle, Corporate and Other expenses, and other non-operating income and expenses. The Company uses Adjusted property EBITDA to measure the operating performance of Mocha Clubs, Altira Macau, City of Dreams, Studio City, City of Dreams Manila and Cyprus Operations and to compare the operating performance of its properties with those of its competitors.The amount represents goodwill arose from the acquisition of Mocha Slot Group Limited and its subsidiaries by the Company in 2006. The changes in carrying amounts represented the exchange differences arising from foreign currency translation at the balance sheet date.The amount represents goodwill arose from the acquisition of Japan Ski Resort on November 28, 2019 amounted to $13,731 as described in Note 25 and the exchange differences arising from foreign currency translation at the balance sheet date.The amount mainly represents management fee income for services provided by the Company to Melco International for management and operation for the project in Cyprus, and such amount was further recharged with mark-up by a subsidiary of Melco International to ICR Cyprus Group. The amount represents the transactions for the period up to the completion of the Acquisition of ICR Cyprus as described in Note 25.The amount mainly represents management fee expenses for the services provided by the senior management of Melco International and for the operation of the office of Melco’s Chief Executive Officer.The amount mainly included Melco’s reimbursement to Melco International’s subsidiary for service fees incurred on its behalf for the operation of the office of Melco’s Chief Executive Officer.The amount represents the share-based compensation expenses related to the grant of certain share-based awards under Melco International Share Incentive Plan to an employee of the Company. Further information on the share-based compensation arrangements is included in Note 17.A company in which Mr. Lawrence Yau Lung Ho, Melco’s Chief Executive Officer, had beneficial interest of approximately 20% until December 10, 2019, the date on which Mr. Lawrence Yau Lung Ho disposed his entire beneficial interest in MECOM. The amount in 2019 represents the transaction with a joint venture and a subsidiary of MECOM during the period from January 1, 2019 to December 10, 2019.In July 2018, the Company entered into a term contract with EHY Construction and Engineering Company Limited (“EHY Construction”), a subsidiary of MECOM, pursuant to which EHY Construction agreed to provide certain services to the Company, including but not limited to structural steelworks, civil engineering construction and fitting out and renovation work for a term of three years. The performance by EHY Construction of these services under the term contract is subject to (i) individual work orders as may be issued to EHY Construction from time to time; and (ii) the maximum aggregate contract amount of HK$600,000,000 (equivalent to $77,032). 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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM
 
20-F
 
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the fiscal year ended December 31, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from
            
to
            
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report
Commission file number
 
001-33178
 
MELCO RESORTS & ENTERTAINMENT LIMITED
(Exact name of Registrant as specified in its charter)
 
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
36th Floor, The Centrium, 60 Wyndham Street
,
Central
,
Hong Kong
(Address of principal executive offices)
Heather Rollo, Senior Vice President, Chief Accounting Officer
Tel
+852
2598 3600
, Fax
+852 2537 3618
36th Floor, The Centrium, 60 Wyndham Street
,
Central
,
Hong Kong
(Name, Telephone,
 E-mail
 and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered
pursuant
to Section 12(b) of
the
Act:
         
Title of Each Class
  
Trading Symbol
  
Name of Each Exchange on Which Registered
American depositary shares
each representing three ordinary shares
 
MLCO
 
The Nasdaq Stock Market LLC
(The Nasdaq Global Select Market)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None.
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None.
(Title of Class)
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
1,456,547,942 ordinary shares outstanding as of December 31, 2019
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    
Yes
 
 
☒
    No  
☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  
☐
    
No
  
☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes
  
☒
    No  
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
c
hapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Yes
  
☒
    No  
☐
I
ndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer
  
☒
  
Accelerated filer  
☐
  
Non-accelerated filer  
☐
  
  Emerging growth company  
☐
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
         
U.S. GAAP
 
 
☒
  
International Financial Reporting Standards as issued
by the International Accounting Standards Board 
 
☐
  
Other 
 
☐
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  
☐
    Item 18  
☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes 
 
☐
    No 
 
☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  
☐
    No  
☐
 
 
 
Table of Contents
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1
  
 
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Table of Contents
INTRODUCTION
In this annual report on Form
 20-F,
 unless otherwise indicated:
  • “2012 Studio City Notes” refers to the US$825.0 million aggregate principal amount of 8.50% senior notes due 2020 issued by Studio City Finance on November 26, 2012 and as to which no amount remains outstanding following the redemption of all remaining outstanding amounts in March 2019;
  • “2012 Studio City Notes Tender Offer” refers to the conditional tender offer by Studio City Finance to purchase for cash any and all of its outstanding 2012 Studio City Notes which commenced on January 22, 2019 and settled on February 11, 2019;
  • “2013 Senior Notes” refers to the US$1.0 billion aggregate principal amount of 5.00% senior notes due 2021 issued by Melco Resorts Finance on February 7, 2013 and fully redeemed on June 14, 2017;
  • “2015 Credit Facilities” refers to the credit facilities entered into pursuant to an amendment and restatement agreement dated June 19, 2015, as amended from time to time, between, among others, Melco Resorts Macau, Deutsche Bank AG, Hong Kong Branch as agent and DB Trustees (Hong Kong) Limited as security agent, in a total amount of HK$13.65 billion (equivalent to approximately US$1.75 billion), comprising a HK$3.90 billion (equivalent to approximately US$500 million) term loan facility and a HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility;
  • “2016 Studio City Notes” refers to the US$350.0 million aggregate principal amount of 5.875% senior secured notes due 2019 (“2016 Studio City Notes due 2019”) and as to which no amount remains outstanding following the full repayment on the maturity date on November 30, 2019, and the US$850.0 million aggregate principal amount of 7.250% senior secured notes due 2021 (“2016 Studio City Notes due 2021”), each issued by Studio City Company on November 30, 2016;
  • “2017 Senior Notes” refers to the US$1.0 billion aggregate principal amount of 4.875% senior notes due 2025 issued by Melco Resorts Finance, of which US$650.0 million in aggregate principal amount was issued on June 6, 2017 and US$350.0 million in aggregate principal amount was issued on July 3, 2017;
  • “2019 Studio City Notes” refers to the US$600.0 million aggregate principal amount of 7.25% senior notes due 2024 issued by Studio City Finance on February 11, 2019;
  • “2019 Senior Notes due 2026” refers to the US$500.0 million aggregate principal amount of 5.250% senior notes due 2026 issued by Melco Resorts Finance on April 26, 2019;
  • “2019 Senior Notes due 2027” refers to the US$600.0 million aggregate principal amount of 5.625% senior notes due 2027 issued by Melco Resorts Finance on July 17, 2019;
  • “2019 Senior Notes due 2029” refers to the US$900.0 million aggregate principal amount of 5.375% senior notes due 2029 issued by Melco Resorts Finance on December 4, 2019;
  • “2021 Studio City Senior Secured Credit Facility” refers to the facility agreement dated November 23, 2016 with, among others, Bank of China Limited, Macau Branch, to amend, restate and extend the Studio City Project Facility to provide for senior secured credit facilities in an aggregate amount of HK$234.0 million, which consist of a HK$233.0 million (equivalent to approximately US$29.9 million) revolving credit facility and a HK$1.0 million (equivalent to approximately US$128,000) term loan facility;
  • “ADSs” refers to our American depositary shares, each of which represents three ordinary shares;
  • “Aircraft Term Loan” refers to the US$43.0 million term loan credit facility entered into by our subsidiary, MCE Transportation Limited, a company incorporated under the laws of the British Virgin Islands, in June 2012 for the purpose of funding the acquisition of an aircraft and as to which no
1
Table of Contents
  amount remains outstanding following the repayment of all remaining outstanding amounts in June 2019;
  • “Altira Hotel” refers to our former subsidiary, Altira Hotel Limited, a Macau company through which we operated hotel and certain other
 non-gaming
 businesses at Altira Macau and which has been merged with Altira Resorts;
  • “Altira Macau” refers to an integrated casino and hotel development located in Taipa, Macau, that caters to Asian VIP rolling chip customers;
  • “Altira Resorts” refers to our subsidiary, Altira Resorts Limited (formerly known as Altira Developments Limited), a Macau company through which we hold the land and building for Altira Macau and operate hotel and certain other
 non-gaming
 businesses at Altira Macau;
  • “AUD” and “Australian dollar(s)” refer to the legal currency of Australia;
  • “board” and “board of directors” refer to the board of directors of our Company or a duly constituted committee thereof;
  • “CGC” means the Cyprus Gaming and Casino Supervision Commission, also known as the Cyprus Gaming Commission;
  • “China” and “PRC” refer to the People’s Republic of China, excluding the Hong Kong Special Administrative Region of the PRC (Hong Kong), the Macau Special Administrative Region of the PRC (Macau) and Taiwan from a geographical point of view;
  • “City of Dreams” refers to a casino, hotel, retail and entertainment integrated resort located in Cotai, Macau, which currently features casino areas and four luxury hotels, including a collection of retail brands, a wet stage performance theater and other entertainment venues;
  • “City of Dreams Manila” refers to a casino, hotel, retail and entertainment integrated resort located within Entertainment City, Manila;
  • “City of Dreams Mediterranean” refers to the integrated resort project in Cyprus, which is currently under development and is expected to be the largest and premier integrated resort in Europe upon its opening;
  • “COD Resorts” refers to our subsidiary, COD Resorts Limited (formerly known as Melco Crown (COD) Developments Limited), a Macau company through which we hold the land and buildings for City of Dreams, operate hotel and certain other
 non-gaming
 businesses at City of Dreams and provide shared services within the Company;
  • “Crown Resorts” refers to Crown Resorts Limited, a company listed on the Australian Securities Exchange; 
  • “Cyprus Acquisition” refers to our acquisition of a 75% equity interest in ICR Cyprus from Melco International with the issuance of 55.5 million ordinary shares as consideration pursuant to the definitive agreement entered into between us and Melco International on June 24, 2019 and completed on July 31, 2019;
  • “Cyprus License” refers to the gaming license granted by the government of Cyprus to Integrated Casino Resorts on June 26, 2017 to develop, operate and maintain an integrated casino resort in Limassol, Cyprus (and until the operation of such integrated casino resort, the operation of a temporary casino in Limassol) and up to four satellite casino premises in Cyprus, for a term of 30 years from the date of grant and with the right for exclusivity in Cyprus for the first 15 years of the term;
  • “DICJ” refers to the Direcção de Inspecção e Coordenação de Jogos (the Gaming Inspection and Coordination Bureau), a department of the Public Administration of Macau;
  • “EUR” and “Euro(s)” refer to the legal currency of the European Union;
2
Table of Contents
  • “Greater China” refers to mainland China, Hong Kong and Macau, collectively;
  • “HIBOR” refers to the Hong Kong Interbank Offered Rate;
  • “HK$” and “H.K. dollar(s)” refer to the legal currency of Hong Kong;
  • “HKSE” refers to The Stock Exchange of Hong Kong Limited;
  • “ICR Cyprus” refers to ICR Cyprus Holdings Limited, a company incorporated under the laws of Cyprus, and which we acquired a 75% equity interest upon the completion of the Cyprus Acquisition;
  • “Integrated Casino Resorts” refers to Integrated Casino Resorts Cyprus Limited, a company incorporated under the laws of Cyprus and which became our subsidiary upon the completion of the Cyprus Acquisition;
  • “LIBOR” refers to the London Interbank Offered Rate;
  • “MCO Investments” refers to our subsidiary, MCO (Philippines) Investments Limited, a company incorporated under the laws of the British Virgin Islands;
  • “Melco International” refers to Melco International Development Limited, a Hong Kong-listed company;
  • “Melco Leisure” refers to Melco Leisure and Entertainment Group Limited, a company incorporated under the laws of the British Virgin Islands and a wholly-owned subsidiary of Melco International;
  • “Melco Philippine Parties” refers to Melco Resorts Leisure, MPHIL Holdings No. 1 and MPHIL Holdings No. 2;
  • “Melco Resorts Finance” refers to our subsidiary, Melco Resorts Finance Limited (formerly known as MCE Finance Limited), a Cayman Islands exempted company with limited liability;
  • “Melco Resorts Finance Notes” refers to, collectively, the 2017 Senior Notes, the 2019 Senior Notes due 2026, the 2019 Senior Notes due 2027 and the 2019 Senior Notes due 2029;
  • “Melco Resorts Leisure” refers to our subsidiary, Melco Resorts Leisure (PHP) Corporation (formerly known as MCE Leisure (Philippines) Corporation), a corporation incorporated in the Philippines and one of the Philippine Licensees holding the Philippine License;
  • “Melco Resorts Macau” refers to our subsidiary, Melco Resorts (Macau) Limited (formerly known as Melco Crown (Macau) Limited), a Macau company and the holder of our gaming subconcession;
  • “Mocha Clubs” refer to, collectively, our clubs with gaming machines, which are now the largest
 non-casino
 based operations of electronic gaming machines in Macau;
  • “MPHIL Holdings No. 1” refers to our subsidiary, MPHIL Holdings No. 1 Corporation (formerly known as MCE Holdings (Philippines) Corporation), a corporation incorporated in the Philippines and one of the Philippine Licensees holding the Philippine License;
  • “MPHIL Holdings No. 2” refers to our subsidiary, MPHIL Holdings No. 2 Corporation (formerly known as MCE Holdings No. 2 (Philippines) Corporation), a corporation incorporated in the Philippines and one of the Philippine Licensees holding the Philippine License;
  • “MRP” refers to our subsidiary, Melco Resorts and Entertainment (Philippines) Corporation (formerly known as Melco Crown (Philippines) Resorts Corporation), the shares of which have been delisted from the Philippine Stock Exchange since June 11, 2019 due to MRP’s public ownership having fallen below the minimum requirement of the Philippine Stock Exchange for more than six months;
  • “Nobu Manila” refers to the hotel development located in City of Dreams Manila branded as Nobu Hotel Manila;
3
Table of Contents
  • “Nüwa Manila” refers to the hotel development located in City of Dreams Manila branded as Nüwa Hotel Manila, formerly branded as the Crown Towers hotel;
  • “our subconcession” and “our gaming subconcession” refers to the Macau gaming subconcession held by Melco Resorts Macau;
  • “PAGCOR” refers to the Philippines Amusement and Gaming Corporation, the Philippines regulatory body with jurisdiction over all gaming activities in the Philippines except for lottery, sweepstakes, cockfighting, horse racing and gaming inside the Cagayan Export Zone;
  • “PAGCOR Charter” refers to the Presidential Decree No. 1869, of the Philippines;
  • “Pataca(s)” or “MOP” refer to the legal currency of Macau;
  • “Philippine License” refers to the regular gaming license dated April 29, 2015 issued by PAGCOR to the Philippine Licensees in replacement of the Provisional License for the operation of City of Dreams Manila;
  • “Philippine Licensees” refers to holders of the Philippine License, which include the Melco Philippine Parties and the Philippine Parties;
  • “Philippine Notes” refers to the PHP15 billion aggregate principal amount of 5.00% senior notes due 2019 issued by Melco Resorts Leisure on January 24, 2014 and guaranteed by our Company and fully redeemed by December 28, 2018;
  • “Philippine Parties” refers to SM Investments Corporation, Belle Corporation and PremiumLeisure and Amusement, Inc.;
  • “Philippine peso(s)” and “PHP” refer to the legal currency of the Philippines;
  • “Renminbi” and “RMB” refer to the legal currency of China;
  • “SC ADSs” refers to the American depositary shares of SCI, each of which represents four Class A ordinary shares of SCI;
  • “SCI” refers to our subsidiary, Studio City International Holdings Limited, an exempted company registered by way of continuation in the Cayman Islands, the American depositary receipts of which are listed on the New York Stock Exchange;
  • “share(s)” and “ordinary share(s)” refer to our ordinary share(s), par value of US$0.01 each;
  • “Studio City” refers to a cinematically-themed integrated entertainment, retail and gaming resort in Cotai, an area of reclaimed land located between the islands of Taipa and Coloane in Macau;
  • “Studio City Casino” refers to the gaming areas being operated within Studio City;
  • “Studio City Company” refers to our subsidiary, Studio City Company Limited, which is a company incorporated in the British Virgin Islands with limited liability and which is also an indirect subsidiary of SCI;
  • “Studio City Finance” refers to our subsidiary, Studio City Finance Limited, which is a company incorporated in the British Virgin Islands with limited liability and which is also an indirect subsidiary of SCI;
  • “Studio City Hotels” refers to our subsidiary, Studio City Hotels Limited, which is a company incorporated in Macau with limited liability and which is also an indirect subsidiary of SCI;
  • “Studio City Investments” refers to our subsidiary, Studio City Investments Limited, which is a company incorporated in the British Virgin Islands with limited liability and which is also an indirect subsidiary of SCI;
  • “Studio City IPO” refers to the initial public offering of a total of 33,062,500 SC ADSs, comprising the 28,750,000 SC ADSs sold initially and the 4,312,500 SC ADSs sold pursuant to the over-allotment option, at the price of US$12.50 per SC ADS;
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  • “Studio City Notes” refer to, collectively, the 2016 Studio City Notes and the 2019 Studio City Notes;
  • “Studio City Project Facility” refers to the senior secured project facility, dated January 28, 2013 and as amended from time to time, entered into between, among others, Studio City Company as borrower and certain subsidiaries as guarantors, comprising a term loan facility of HK$10,080,460,000 (equivalent to approximately US$1.3 billion) and revolving credit facility of HK$775,420,000 (equivalent to approximately US$100.0 million), and which has been amended, restated and extended by the 2021 Studio City Senior Secured Credit Facility;
  • “the Philippines” refers to the Republic of the Philippines;
  • “TWD” and “New Taiwan dollar(s)” refer to the legal currency of Taiwan;
  • “US$” and “U.S. dollar(s)” refer to the legal currency of the United States;
  • “U.S. GAAP” refers to the U.S. generally accepted accounting principles; and
  • “we”, “us”, “our”, “our Company”, “the Company” and “Melco” refer to Melco Resorts & Entertainment Limited and, as the context requires, its predecessor entities and its consolidated subsidiaries.
This annual report on Form
 20-F
 includes our audited consolidated financial statements for the years ended December 31, 2019, 2018 and 2017 and as of December 31, 2019 and 2018.
Any discrepancies in any table between totals and sums of amounts listed therein are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.
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GLOSSARY
     
“average daily rate”
 
calculated by dividing total room revenues including complimentary rooms (less service charges, if any) by total rooms occupied, including complimentary rooms, i.e., average price of occupied rooms per day
     
“cage”
 
a secure room within a casino with a facility that allows patrons to carry out transactions required to participate in gaming activities, such as exchange of cash for chips and exchange of chips for cash or other chips
     
“chip”
 
round token that is used on casino gaming tables in lieu of cash
     
“concession”
 
a government grant for the operation of games of fortune and chance in casinos in Macau under an administrative contract pursuant to which a concessionaire, or the entity holding the concession, is authorized to operate games of fortune and chance in casinos in Macau
     
“dealer”
 
a casino employee who takes and pays out wagers or otherwise oversees a gaming table
     
“drop”
 
the amount of cash to purchase gaming chips and promotional vouchers that is deposited in a gaming table’s drop box, plus gaming chips purchased at the casino cage
     
“drop box”
 
a box or container that serves as a repository for cash, chip purchase vouchers, credit markers and forms used to record movements in the chip inventory on each table game
     
“electronic gaming table”
 
table with an electronic or computerized wagering and payment system that allow players to place bets from multiple-player gaming seats
     
“gaming machine”
 
slot machine and/or electronic gaming table
     
“gaming machine handle”
 
the total amount wagered in gaming machines
     
“gaming machine win rate”
 
gaming machine win (calculated before
 non-discretionary
 incentives (including our point-loyalty programs) and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis) expressed as a percentage of gaming machine handle
     
“gaming promoter”
 
an individual or corporate entity who, for the purpose of promoting rolling chip and other gaming activities, arranges customer transportation and accommodation, provides credit in its sole discretion if authorized by a gaming operator and arranges food and beverage services and entertainment in exchange for commissions or other compensation from a gaming concessionaire or subconcessionaire
     
“integrated resort”
 
a resort which provides customers with a combination of hotel accommodations, casinos or gaming areas, retail and dining facilities, MICE space, entertainment venues and spas
     
“junket player”
 
a player sourced by gaming promoters to play in the VIP gaming rooms or areas
     
“marker”
 
evidence of indebtedness by a player to the casino or gaming operator
     
“mass market patron”
 
a customer who plays in the mass market segment
     
“mass market segment”
 
consists of both table games and gaming machines played by mass market players primarily for cash stakes
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Table of Contents
     
     
“mass market table games drop”
 
the amount of table games drop in the mass market table games segment
     
“mass market table games hold percentage”
 
mass market table games win (calculated before discounts, commissions,
non-discretionary
incentives (including our point-loyalty programs) and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis) as a percentage of mass market table games drop
     
“mass market table games segment”
 
the mass market segment consisting of mass market patrons who play table games
     
“MICE”
 
Meetings, Incentives, Conventions and Exhibitions, an acronym commonly used to refer to tourism involving large groups brought together for an event or specific purpose
     
“net rolling”
 
net turnover in a
 non-negotiable
 chip game
     
“non-negotiable
 chip”
  
promotional casino chip that is not to be exchanged for cash
     
“non-rolling
 chip”
  
chip that can be exchanged for cash, used by mass market patrons to make wagers
     
“occupancy rate”
 
the average percentage of available hotel rooms occupied, including complimentary rooms, during a period
     
“premium direct player”
 
a rolling chip player who is a direct customer of the concessionaires or subconcessionaires and is attracted to the casino through direct marketing efforts and relationships with the gaming operator
     
“progressive jackpot”
 
a jackpot for a gaming machine or table game where the value of the jackpot increases as wagers are made; multiple gaming machines or table games may be linked together to establish one progressive jackpot
     
“revenue per available room” or “REVPAR”
 
calculated by dividing total room revenues including complimentary rooms (less service charges, if any) by total rooms available, thereby representing a combination of hotel average daily room rates and occupancy
     
“rolling chip” or “VIP rolling chip”
 
non-negotiable
 chip primarily used by rolling chip patrons to make wagers
     
“rolling chip patron”
 
a player who primarily plays on a rolling chip or VIP rolling chip tables and typically plays for higher stakes than mass market gaming patrons
     
“rolling chip segment”
 
consists of table games played in private VIP gaming rooms or areas by rolling chip patrons who are either premium direct players or junket players
     
“rolling chip volume”
 
the amount of
 non-negotiable
 chips wagered and lost by the rolling chip market segment
     
“rolling chip win rate”
 
rolling chip table games win (calculated before discounts, commissions,
 non-discretionary
incentives (including our point-loyalty programs) and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis) as a percentage of rolling chip volume
     
“slot machine”
 
traditional slot or electronic gaming machine operated by a single player
     
“subconcession”
 
an agreement for the operation of games of fortune and chance in casinos between the entity holding the concession, or the concessionaire, and a subconcessionaire, pursuant to which the subconcessionaire is authorized to operate games of fortune and chance in casinos in Macau
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“table games win”
 
the amount of wagers won net of wagers lost on gaming tables that is retained and recorded as casino revenues. Table games win is calculated before discounts, commissions,
non-discretionary
incentives (including our point-loyalty programs) and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis
     
“VIP gaming room”
 
gaming rooms or areas that have restricted access to rolling chip patrons and typically offer more personalized service than the general mass market gaming areas
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form
 20-F
 contains forward-looking statements that relate to future events, including our future operating results and conditions, our prospects and our future financial performance and condition, all of which are largely based on our current expectations and projections. The forward-looking statements are contained principally in the sections entitled “Item 3. Key Information — D. Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects.” Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. See “Item 3. Key Information — D. Risk Factors” for a discussion of some risk factors that may affect our business and results of operations. Moreover, because we operate in a heavily regulated and evolving industry, may become highly leveraged and operate in Macau, a growth market with intense competition, the Philippines, a market that is expected to experience growth over the next several years, and Cyprus, a new market with significant potential, new risk factors may emerge from time to time. It is not possible for our management to predict all risk factors, nor can we assess the impact of these factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed or implied in any forward-looking statement.
In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. We have based the forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
  • our ability to raise additional financing;
  • our future business development, results of operations and financial condition;
  • growth of the gaming market in and visitation to Macau, the Philippines and Cyprus;
  • our anticipated growth strategies;
  • the liberalization of travel restrictions on PRC citizens and convertibility of the Renminbi;
  • the availability of credit for gaming patrons;
  • the uncertainty of tourist behavior related to spending and vacationing at casino resorts in Macau and the Philippines;
  • fluctuations in occupancy rates and average daily room rates in Macau and the Philippines;
  • increased competition and other planned casino hotel and resort projects in Macau and elsewhere in Asia, including in Macau from Sociedade de Jogos de Macau, S.A., or SJM, Venetian Macau, S.A., or VML, Wynn Resorts (Macau) S.A., or Wynn Macau, Galaxy Casino, S.A., or Galaxy, and MGM Grand Paradise, S.A., or MGM Grand Paradise;
  • our ability to develop the additional land on which Studio City is located in accordance with Studio City land concession requirements, our business plan, completion time and within budget;
  • our development of City of Dreams Mediterranean and our entering into new development and construction projects and new ventures in or outside of Macau, the Philippines or Cyprus;
  • construction cost estimates for our development projects, including projected variances from budgeted costs;
  • government regulation of the casino industry, including gaming table allocations, gaming license approvals in Macau, the Philippines and Cyprus and the legalization of gaming in other jurisdictions;
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  • the completion of infrastructure projects in Macau, the Philippines and Cyprus;
  • the outcome of any current and future litigation; and
  • other factors described under “Item 3. Key Information — D. Risk Factors.”
The forward-looking statements made in this annual report on Form
 20-F
 relate only to events or information as of the date on which the statements are made in this annual report on Form
 20-F.
 Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report on Form
 20-F
 and the documents that we referenced in this annual report on Form
 20-F
 and have filed as exhibits with the U.S. Securities and Exchange Commission, or the SEC, completely and with the understanding that our actual future results may be materially different from what we expect.
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
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ITEM 3.
KEY INFORMATION
A. SELECTED FINANCIAL DATA
The following selected consolidated statement of operations data for the years ended December 31, 2019, 2018 and 2017 and balance sheet data as of December 31, 2019 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this annual report beginning on page
 F-1.
The Company adopted Accounting Standards Codification 842,
Leases (Topic 842)
(“New Leases Standard”) on January 1, 2019 under the modified retrospective method. Results for the periods beginning on or after January 1, 2019 are presented under the New Leases Standard, while prior year amounts are not adjusted and continue to be reported in accordance with the previous basis. The Company adopted a new revenue recognition standard issued by the Financial Accounting Standards Board (the “New Revenue Standard”) on January 1, 2018 under the modified retrospective method. Results for the periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior year amounts are not adjusted and continue to be reported in accordance with the previous basis.
In connection with the Cyprus Acquisition pursuant to which we acquired a 75% equity interest in ICR Cyprus from Melco International on July 31, 2019, the comparative information for 2018 and 2017 has been adjusted to include the assets and liabilities of ICR Cyprus and its subsidiaries that were acquired by the Company at historical carrying amounts, and the financial results of ICR Cyprus and its subsidiaries, as if the Cyprus Acquisition had been in effect since the inception of common control resulting from the acquisition of ICR Cyprus and its subsidiaries by Melco International in September 2017 in accordance with Accounting Standards Codification
805-50
,
Business Combinations – Related Issues
.
The selected consolidated statement of operations data for the years ended December 31, 2016 and 2015 and the balance sheet data as of December 31, 2017, 2016 and 2015 have been derived from our consolidated financial statements not included in this annual report. The consolidated balance sheet data as of December 31, 2015 reflect our retrospective adoption in 2016 of the new guidance on simplifying the presentation of debt issuance costs issued by the Financial Accounting Standards Board.
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Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. You should read the selected consolidated financial data in conjunction with our consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. The historical results are not necessarily indicative of the results of operations to be expected in the future.
                                         
 
Year Ended December 31,
 
 
2019
(1)
 
  
2018
(2)
(As adjusted)
 
  
2017
(As adjusted)
 
  
2016
 
  
2015
 
 
(In thousands of US$, except share and per share data and operating data)
 
Consolidated Statements of Operations Data:
   
     
     
     
     
 
Net revenues
  $
5,736,801
    $
5,188,942
    $
5,284,823
    $
4,519,396
    $
3,974,800
 
Total operating costs and expenses
  $
(4,989,123
 )   $
(4,575,495
 )   $
(4,680,283
 )   $
(4,156,280
 )   $
(3,876,385
 )
Operating income
  $
747,678
    $
613,447
    $
604,540
    $
363,116
    $
98,415
 
Net income (loss)
  $
394,228
    $
338,896
    $
312,220
    $
66,918
    $
(60,808
 )
Net (income) loss attributable to noncontrolling interests
  $
(21,055
 )   $
1,403
    $
32,608
    $
108,988
    $
166,555
 
Net income attributable to Melco Resorts & Entertainment Limited
  $
373,173
    $
340,299
    $
344,828
    $
175,906
    $
105,747
 
Net income attributable to Melco Resorts & Entertainment Limited per share
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
— Basic
  $
0.260
    $
0.226
    $
0.232
    $
0.116
    $
0.065
 
— Diluted
  $
0.258
    $
0.224
    $
0.230
    $
0.115
    $
0.065
 
Net income attributable to Melco Resorts & Entertainment Limited per ADS
(3)
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
— Basic
  $
0.779
    $
0.678
    $
0.697
    $
0.348
    $
0.196
 
— Diluted
  $
0.775
    $
0.673
    $
0.691
    $
0.346
    $
0.195
 
Weighted average shares outstanding used in net income attributable to Melco Resorts & Entertainment Limited per share calculation
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
— Basic
   
1,436,569,083
     
1,506,551,789
     
1,484,379,459
     
1,516,714,277
     
1,617,263,041
 
— Diluted
   
1,443,447,422
     
1,516,410,062
     
1,496,068,459
     
1,525,284,272
     
1,627,108,770
 
Dividends declared per share
  $
0.2135
    $
0.1867
    $
0.5604
    $
0.2408
    $
0.0389
 
                                         
 
December 31,
 
 
2019
 
  
2018
(As adjusted)
 
  
2017
(As adjusted)
 
  
2016
 
  
2015
 
 
(In thousands of US$)
 
Consolidated Balance Sheets Data:
 
 
 
  
 
 
  
 
 
  
 
 
Cash and cash equivalents
  $
1,394,982
    $
1,472,423
    $
1,436,940
    $
1,702,310
    $
1,611,026
 
Investment securities
   
618,305
     
91,598
     
89,874
     
—  
      
—  
  
Bank deposits with original maturities over three months
   
—  
      
—  
      
9,884
     
210,840
     
724,736
 
Restricted cash
   
37,520
     
48,166
     
45,542
     
39,282
     
317,118
 
Total assets
(5)(6)
   
9,488,422
     
9,121,996
     
9,150,822
     
9,340,341
     
10,262,309
 
Total current liabilities
(5)(6)
   
1,525,460
     
2,146,928
     
1,685,689
     
1,479,140
     
1,211,017
 
Long-term debt, net
(4)(5)
   
4,394,131
     
4,060,917
     
3,557,562
     
3,720,275
     
3,815,232
 
Total liabilities
(5)(6)
   
6,345,194
     
6,149,704
     
5,561,135
     
5,516,927
     
5,330,450
 
Noncontrolling interests
(7)
   
704,260
     
675,015
     
511,451
     
479,544
     
592,226
 
Total equity
(7)
   
3,143,228
     
2,972,292
     
3,589,687
     
3,823,414
     
4,931,859
 
Ordinary shares
   
14,565
     
15,385
     
15,339
     
14,759
     
16,309
 
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(1) We adopted the New Leases Standard on January 1, 2019 under the modified retrospective method. There was no material impact on our results of operations for the year ended December 31, 2019 as a result of the adoption of the New Leases Standard.
(2) We adopted the New Revenue Standard on January 1, 2018 under the modified retrospective method. Results for the periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior year amounts are not adjusted and continue to be reported in accordance with the previous basis.
(3) Each ADS represents three ordinary shares.
(4) Includes current and
non-current
portion of long-term debt, net of debt issuance costs.
(5) The amounts have been adjusted for the retrospective application of the authoritative guidance on the presentation of debt issuance costs, which we adopted on January 1, 2016.
(6) We adopted the New Leases Standard on January 1, 2019 under the modified retrospective method and recognized US$154.5 million of operating lease right-of-use assets (including the reclassification of deferred rent assets, prepaid rent, deferred rent liabilities and accrued rent to operating lease right-of-use assets) and US$170.8 million of operating lease liabilities as of January 1, 2019. As of December 31, 2019, operating lease
right-of-use
assets and operating lease liabilities were US$111.0 million and US$121.4 million, respectively.
(7) We adopted the New Revenue Standard on January 1, 2018 under the modified retrospective method and recognized an increase to the opening balance of accumulated losses and noncontrolling interests of US$11.3 million and US$1.7 million, respectively, due to the cumulative effect of adopting the New Revenue Standard.
The following events/transactions affect the
 year-to-year
 comparability of the selected financial data presented above:
  • In June 2015, we completed an amendment to the agreement for our credit facilities (which was previously amended on June 22, 2011), known as the 2015 Credit Facilities, and drew down the entire term loan facility under the 2015 Credit Facilities
  • On October 27, 2015, Studio City commenced operations with its grand opening on the same date
  • On November 18, 2015, we completed an amendment to the Studio City Project Facility
  • On November 23, 2015, MRP completed the placing of 693,500,000 common shares to MCO Investments, our subsidiary, at a subscription price of PHP3.90 per share, which increased our equity interest in MRP from 68.3% to 72.2%
  • In May 2016, we repurchased 155,000,000 ordinary shares (equivalent to 51,666,666 ADSs) from Crown Asia Investments Pty, Ltd. for the aggregate purchase price of US$800.8 million, and such shares were subsequently cancelled by us
  • On November 30, 2016 (December 1, 2016, Hong Kong time), we repaid the Studio City Project Facility (other than the HK$1.0 million rolled over into the term loan facility of the 2021 Studio City Senior Secured Credit Facility, which was entered into on November 23, 2016) as funded by the net proceeds from the offering of 2016 Studio City Notes issued by Studio City Company on November 30, 2016 and cash on hand
  • In May 2017, we issued and sold 27,769,248 ADSs (equivalent to 83,307,744 ordinary shares) and 81,995,799 ordinary shares and also repurchased 165,303,544 ordinary shares from Crown Asia Investments Pty, Ltd. for the aggregate purchase price of US$1.2 billion, and such repurchased shares were subsequently cancelled by us
  • On June 6, 2017, Melco Resorts Finance issued US$650.0 million in aggregate principal amount of the 2017 Senior Notes
  • On June 14, 2017, together with the net proceeds from the issuance of US$650.0 million in aggregate principal amount of the 2017 Senior Notes along with the proceeds in the amount of US$350.0 million from a partial drawdown of the revolving credit facility under the 2015 Credit Facilities and cash on hand, Melco Resorts Finance redeemed all of our outstanding 2013 Senior Notes
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  • On July 3, 2017, Melco Resorts Finance issued US$350.0 million in aggregate principal amount of the 2017 Senior Notes, the net proceeds from which were used to repay in full the US$350.0 million drawdown from the revolving credit facility under the 2015 Credit Facilities
  • On October 9, 2017, Melco Resorts Leisure partially redeemed the Philippine Notes in an aggregate principal amount of PHP7.5 billion, together with accrued interest
  • On June 15, 2018, Morpheus commenced operations with its grand opening on the same date
  • On August 31, 2018, Melco Resorts Leisure partially redeemed the Philippine Notes in an aggregate principal amount of PHP5.5 billion, together with accrued interest
  • In October 2018, SCI completed its initial public offering of 28,750,000 SC ADSs (equivalent to 115,000,000 Class A ordinary shares of SCI)
  • In November 2018, SCI completed the exercise by the underwriters of their over-allotment option in full to purchase an additional 4,312,500 SC ADSs from SCI
  • On December 13, 2018, MCO Investments completed its tender offer for the common shares of MRP and, together with an additional of 107,475,300 common shares of MRP acquired by MCO Investments on or after December 6, 2018, increased the Company’s equity interest in MRP from approximately 72.8% immediately prior to the announcement of the tender offer to approximately 97.9%
  • On December 28, 2018, Melco Resorts Leisure redeemed all of the Philippine Notes which remained outstanding
  • On December 31, 2018, Studio City Finance partially redeemed the 2012 Studio City Notes in an aggregate principal amount of US$400.0 million, together with accrued interest
  • On January 22, 2019, Studio City Finance commenced the 2012 Studio City Notes Tender Offer, which expired on February 4, 2019. The aggregate principal amount of valid tenders received and not validly withdrawn under the 2012 Studio City Notes Tender Offer amounted to US$216.5 million
  • On February 11, 2019, Studio City Finance issued US$600.0 million in aggregate principal amount of 2019 Studio City Notes, the net proceeds of which were used to pay the tendering noteholders from the 2012 Studio City Notes Tender Offer and, on March 13, 2019, to redeem, together with accrued interest, all remaining outstanding amounts of the 2012 Studio City Notes
  • On April 26, 2019, Melco Resorts Finance issued US$500.0 million in aggregate principal amount of the 2019 Senior Notes due 2026, the net proceeds from which were used to partially repay the principal amount outstanding under the revolving credit facility under the 2015 Credit Facilities
  • On May 30, 2019, we agreed to purchase an approximately 19.99% ownership interest in Crown Resorts from CPH Crown Holdings Pty Limited in two equal tranches under a definitive purchase agreement entered into on the same date. On June 6, 2019, we acquired the first tranche of an approximately 9.99% ownership interest in Crown Resorts for which we paid the purchase price of AUD879.8 million (equivalent to approximately US$617.8 million). On February 6, 2020, we agreed with CPH Crown Holdings Pty Limited to terminate the obligation to purchase the second tranche of the remaining approximately 9.99% ownership interest in Crown Resorts as originally contemplated under the definitive purchase agreement dated May 30, 2019 (as amended by an amendment agreement dated August 28, 2019)
  • On July 17, 2019, Melco Resorts Finance issued US$600.0 million in aggregate principal amount of the 2019 Senior Notes due 2027, the net proceeds from which were used to partially repay the principal amount outstanding under the revolving credit facility under the 2015 Credit Facilities
  • On July 31, 2019, we acquired a 75% equity interest in ICR Cyprus, whose subsidiaries are operating our temporary casino in Limassol and two satellite casinos in Nicosia and Larnaca since 2018, a satellite casino in Ayia Napa since July 2019 and a satellite casino in Paphos since 2020, as well as developing City of Dreams Mediterranean
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  • On November 30, 2019, Studio City Company fully repaid the 2016 Studio City Notes due 2019 upon its maturity with cash on hand
  • On December 4, 2019, Melco Resorts Finance issued US$900.0 million in aggregate principal amount of the 2019 Senior Notes due 2029, the net proceeds from which were used to fully repay the principal amount outstanding under the revolving credit facility and to partially prepay the principal amount outstanding under the term loan facility under the 2015 Credit Facilities
Exchange Rate Information
The majority of our current revenues are denominated in H.K. dollars, whereas our current expenses are denominated predominantly in Patacas, H.K. dollars, the Philippine peso and Euros. Unless otherwise noted, all translations from H.K. dollars to U.S. dollars and from U.S. dollars to H.K. dollars in this annual report on Form
 20-F
 were made at a rate of HK$7.7890 to US$1.00.
The H.K. dollar is freely convertible into other currencies (including the U.S. dollar). Since October 17, 1983, the H.K. dollar has been officially linked to the U.S. dollar at the rate of HK$7.80 to US$1.00. The market exchange rate has not deviated materially from the level of HK$7.80 to US$1.00 since the peg was first established. However, in May 2005, the Hong Kong Monetary Authority broadened the trading band from the original rate of HK$7.80 per U.S. dollar to a rate range of HK$7.75 to HK$7.85 per U.S. dollar. The Hong Kong government has stated its intention to maintain the link at that rate and, acting through the Hong Kong Monetary Authority, has a number of means by which it may act to maintain exchange rate stability. However, no assurance can be given that the Hong Kong government will maintain the link at HK$7.75 to HK$7.85 per U.S. dollar or at all.
The noon buying rate on December 31, 2019 in New York City for cable transfers in H.K. dollars per U.S. dollar, provided in the H.10 weekly statistical release of the Federal Reserve Board of the United States as certified for customs purposes by the Federal Reserve Bank of New York, was HK$7.7894 to US$1.00. On March 20, 2020, the noon buying rate was HK$7.7554 to US$1.00. We make no representation that any H.K. dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or H.K. dollars, as the case may be, at any particular rate, the rates stated below, or at all.
The following table sets forth information concerning the noon buying rate for H.K. dollars for the period indicated.
                                 
 
Noon Buying Rate
 
Period
 
Period End
 
  
Average
 (1)
 
  
High
 
  
Low
 
 
(H.K. dollar per US$1.00)
 
March 2020 (through March 20, 2020)
   
7.7554
      
7.7707
      
7.7863
      
7.7554
  
February 2020
   
7.7927
     
7.7757
     
7.7951
     
7.7630
 
January 2020
   
7.7665
     
7.7725
     
7.7889
     
7.7661
 
December 2019
   
7.7894
     
7.8045
     
7.8289
     
7.7850
 
November 2019
   
7.8267
     
7.8279
     
7.8365
     
7.8208
 
October 2019
   
7.8376
     
7.8421
     
7.8454
     
7.8371
 
September 2019
   
7.8401
     
7.8350
     
7.8425
     
7.8177
 
2019
   
7.7894
     
7.8351
     
7.8499
     
7.7850
 
2018
   
7.8305
     
7.8376
     
7.8499
     
7.8043
 
2017
   
7.8128
     
7.7926
     
7.8267
     
7.7540
 
2016
   
7.7534
     
7.7620
     
7.8270
     
7.7505
 
2015
   
7.7507
     
7.7524
     
7.7686
     
7.7495
 
                                 
(1) Annual averages are calculated from
month-end
rates. Monthly averages are calculated using the average of the daily rates during the relevant period.
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The Pataca is pegged to the H.K. dollar at a rate of HK$1.00 = MOP1.03. All translations from Patacas to U.S. dollars in this annual report on Form
 20-F
 were made at the exchange rate of MOP8.0227 = US$1.00. The Federal Reserve Bank of New York does not certify for customs purposes a noon buying rate for cable transfers in Patacas. This annual report on Form
 20-F
 also contains translations of certain Renminbi, New Taiwan dollars, the Philippine peso, Euro and Australian dollar amounts into U.S. dollars. Unless otherwise stated, all translations from Renminbi, New Taiwan dollars, Euros and Australian dollars to U.S. dollars in this annual report on Form
 20-F
 were made at the noon buying rate on December 31, 2019 for cable transfers in RMB, New Taiwan dollars, Euros and Australian dollars per U.S. dollar, as certified for customs purposes by the Federal Reserve Bank of New York, which were RMB6.9618 to US$1.00, TWD29.91 to US$1.00, EUR0.8907 to US$1.00 and AUD1.4225 to US$1.00, respectively. Unless otherwise stated, all conversions from the Philippine peso to U.S. dollars in this annual report on Form
 20-F
 were made based on the volume weighted average exchange rate quoted through the Bangko Sentral ng Pilipinas (BSP), which was PHP50.802 to US$1.00 on December 27, 2019.
We make no representation that any RMB, TWD, PHP, EUR, AUD or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB or TWD or PHP or EUR or AUD, as the case may be, at any particular rate or at all. On March 20, 2020, the noon buying rate was RMB7.0950 to US$1.00, TWD30.30 to US$1.00, EUR0.9362 to US$1.00 and AUD1.7120 to US$1.00. The exchange rate as of March 20, 2020 as provided by Bangko Sentral ng Pilipinas (BSP) was PHP50.947 to US$1.00.
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
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D. RISK FACTORS
Our business, financial condition and results of operations can be affected materially and adversely by any of the following risk factors.
Risks Relating to Our Business and Operations
Our operating history may not serve as an adequate basis to judge our future operating results and prospects. We have significant projects in various phases of development and therefore are subject to significant risks and uncertainties.
Our business operating history is shorter than some of our competitors and therefore may not serve as an adequate basis for your evaluation of our business and prospects. City of Dreams commenced operations in June 2009 and Morpheus, the third phase of City of Dreams, opened in June 2018. In addition, City of Dreams Manila commenced operations in December 2014 and Studio City commenced operations in October 2015. We also operate a temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos and are developing City of Dreams Mediterranean in Cyprus, a project in which we acquired a 75% equity interest in July 2019. Furthermore, we have significant projects, such as the additional development of the land on which Studio City is located and City of Dreams Mediterranean, which are in various phases of design or development.
We face certain risks, expenses and challenges in operating gaming businesses in intensely competitive markets. Some of the risks relate to our ability to:
  • fulfill conditions precedent to draw down or roll over funds from current and future credit facilities;
  • respond to economic uncertainties, including the higher prospect of a global recession and a severe contraction of liquidity in the global credit markets as a result of the recent coronavirus (Covid-19) pandemic and recent decline in oil prices;
  • comply with covenants under our debt issuances and credit facilities;
  • raise additional capital, as required;
  • respond to changing financing requirements;
  • operate, support, expand and develop our operations and our facilities;
  • attract and retain customers and qualified employees;
  • maintain effective control of our operating costs and expenses;
  • maintain internal personnel, systems, controls and procedures to assure compliance with the extensive regulatory requirements applicable to the gaming business as well as regulatory compliance as a public company;
  • respond to competitive and/or deteriorating market conditions;
  • respond to changes in our regulatory environment and government policies;
  • identify suitable locations and enter into new leases or right to use agreements for new Mocha Clubs or existing Mocha Clubs which we may relocate; and
  • renew or extend lease agreements or right to use agreements for existing Mocha Clubs.
If we are unable to complete any of these tasks or successfully manage one or more of the risks, we may be unable to operate our businesses in the manner we contemplate and generate revenues from such projects in the amounts and by the times we anticipate. We may also be unable to meet the conditions to draw on our existing or future financing facilities in order to fund various activities, which may result in a default under our
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existing or future financing facilities. If any of these events were to occur, it would cause a material adverse effect on our business and prospects, financial condition, results of operations and cash flows.
We generate a substantial portion of our cash flow from our properties in Macau and the Philippines and, as a result, are subject to greater risks than a gaming company which operates in more geographical regions.
We are a parent company with limited business operations of our own. We conduct most of our business operations through our direct and indirect subsidiaries. Our primary sources of cash are dividends and distributions with respect to our ownership interests in our subsidiaries that are derived from the earnings and cash flow generated by our operating properties.
While we recently commenced operation of our temporary casino and satellite casinos in Cyprus, we primarily depend on our properties in Macau and City of Dreams Manila for our cash flow. Given that our operations are and will be primarily conducted based on our principal properties in Macau and one property in Manila prior to the opening of City of Dreams Mediterranean, we are and will be subject to greater risks resulting from limited diversification of our businesses and sources of revenues as compared to gaming companies with more operating properties in various geographic regions. These risks include, but are not limited to:
  • dependence on the gaming and leisure market in Macau and the Philippines and limited diversification of businesses and sources of revenues;
  • a decline in air, land or ferry passenger traffic to Macau or the Philippines due to fears concerning travel, travel restrictions or otherwise, including as a result of the outbreak of widespread health epidemics or pandemics, such as the recent outbreak of the
Covid-19,
austerity measures imposed now or in the future by China or social unrest in Hong Kong;
  • a decline in market, economic, competitive and political conditions in Macau, China, the Philippines or generally in Asia;
  • inaccessibility to Macau or the Philippines due to inclement weather, road construction or closure of primary access routes;
  • tightened control of cross-border fund transfers and/or foreign exchange regulations or policies effected by the Chinese, Macau and/or Philippine governments;
  • changes in Macau, China and Philippine laws and regulations, or interpretations thereof, including gaming laws and regulations, anti-smoking legislation, as well as China travel and visa policies;
  • any enforcement or legal measures taken by the Chinese government to deter gaming activities and/or marketing thereof;
  • natural and other disasters, including typhoons, earthquakes, volcano eruptions, terrorism, violent criminal activities or disruption affecting Macau or the Philippines;
  • lower than expected rate of increase or decrease in the number of visitors to Macau or the Philippines;
  • relaxation of regulations on gaming laws in other regional economies that could compete with the Macau and the Philippine markets;
  • a decrease in gaming activities and other spending at our properties; and
  • government restrictions on growth of gaming markets, including those in the form of policies on gaming table allocation and caps.
Any of these developments or events could have a material adverse effect on our business, cash flows, financial condition, results of operations and prospects.
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All our current and future construction projects are and will be subject to significant development and construction risks, which could have a material adverse impact on related project timetables, costs and our ability to complete the projects.
All our current and future construction projects are and will be subject to a number of risks, including:
  • changes to plans and specifications;
  • engineering problems, including defective plans and specifications;
  • disruptions to key supply markets, including shortages of, and price increases in, energy, materials and skilled and unskilled labor, and inflation, including any disruptions resulting from the
Covid-19
outbreak;
  • delays in obtaining or inability to obtain necessary permits, licenses and approvals;
  • lack of sufficient, or delays in availability of, financing;
  • changes in laws and regulations, or in the interpretation and enforcement of laws and regulations, applicable to gaming, leisure, residential, real estate development or construction projects;
  • labor disputes or work stoppages;
  • shortage of qualified contractors and suppliers or inability to enter into definitive contracts with contractors with sufficient skills, financial resources and experience on commercially reasonable terms, or at all;
  • disputes with, and defaults by, contractors and subcontractors and other counter-parties;
  • personal injuries to workers and other persons;
  • environmental, health and safety issues, including site accidents and the spread or outbreak of infectious diseases;
  • weather interferences or delays;
  • fires, typhoons and other natural disasters;
  • geological, construction, excavation, regulatory and equipment problems; and
  • other unanticipated circumstances or cost increases.
The occurrence of any of these events could increase the total costs, delay or prevent the construction or opening or otherwise affect the design and features of any existing or future construction projects which we might undertake. We cannot guarantee that our construction costs or total project costs for existing or future projects will not increase beyond amounts initially budgeted.
We could encounter substantial cost increases or delays in the development of our projects, which could prevent or delay the opening of such projects.
We have certain projects under development or intended to be developed pursuant to our expansion plan. The completion of these projects is subject to a number of contingencies, including adverse developments in applicable legislation, delays or failures in obtaining necessary government licenses, permits or approvals, disruptions to key supply markets, including shortages of, and price increases in energy, materials and skilled and unskilled labor, and inflation, including any disruptions resulting from the
Covid-19
outbreak. The occurrence of any of these developments could increase the total costs or delay or prevent the construction or opening of new projects, which could materially and adversely affect our business, financial condition and results of operations. For example, construction work at our City of Dreams Mediterranean project has been suspended from March 24, 2020 to April 13, 2020 as required by the Cyprus government under the restrictions imposed to restrict non-essential business activities due to the Covid-19 outbreak and the restriction dates are subject to further
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review and change by the Cyprus government. There is no assurance that the Cyprus government will not impose additional restrictions due to the Covid-19 outbreak, including a further suspension of construction work at City of Dreams Mediterranean beyond April 13, 2020, which could cause further significant disruptions to the construction work at City of Dreams Mediterranean. We may also require additional financing to develop our projects. Our ability to obtain such financing depends on a number of factors beyond our control, including market conditions such as the higher prospect of a global recession and a severe contraction of liquidity in the global credit markets caused by the effect of the recent large-scale global
Covid-19
pandemic and recent decline in oil prices, investors’ and lenders’ perceptions of, and demand for, debt and equity securities of gaming companies and interest rates. In particular, the development of the City of Dreams Mediterranean project is still ongoing and in the early stages and therefore still requires significant additional capital investments. See
 “
Item 3. Key Information — D. Risk Factors — Risks Relating to Operating in the Gaming Industry in Cyprus — Our operations in Cyprus, particularly the development of City of Dreams Mediterranean, face significant risks and uncertainties which may materially and adversely affect our business, financial condition and results of operations” for a discussion of the risks relating to the financing of the development of the City of Dreams Mediterranean project.
There is no assurance that the actual construction costs related to our projects will not exceed the costs we have projected and budgeted. In addition, construction costs, particularly labor costs, are increasing in Macau and in Cyprus, where we are developing the remaining project for Studio City in Macau and City of Dreams Mediterranean in Cyprus, respectively, and we believe that they are likely to continue to increase due to the significant building activity and the ongoing labor shortage in Macau and the increase in building activity and labor shortage in Cyprus, respectively. In addition, immigration and labor regulations as well as travel restrictions imposed as a result of the
Covid-19
outbreak in Macau or China may limit or restrict our contractors’ ability to obtain sufficient laborers from China to make up for any shortages in available labor in Macau and help reduce construction costs and in the case for Cyprus, our contractors may have to make up for any shortages in available labor from other European countries which could increase our labor costs and which may also be impacted by the travel restrictions imposed as a result of the
Covid-19
outbreak. Continuing increases in construction costs in Macau and Cyprus will increase the risk that construction will not be completed on time, within budget or at all, which could materially and adversely affect our business, cash flow, financial condition, results of operations and prospects.
Construction is subject to hazards that may cause personal injury or loss of life, thereby subjecting us to liabilities and possible losses, which may not be covered by insurance.
The construction of large scale properties, including the types of projects we are or may be involved in, can be dangerous. Construction workers at such sites are subject to hazards that may cause personal injury or loss of life, thereby subjecting the contractors and us to liabilities, possible losses, delays in completion of the projects and negative publicity. We believe, and require, our contractors take safety precautions that are consistent with industry practice, but these safety precautions may not be adequate to prevent serious personal injuries or loss of life, damage to property or delays. If accidents occur during the construction of any of our projects, we may be subject to delays, including delays imposed by regulators, liabilities and possible losses, which may not be covered by insurance, and our business, prospects and reputation may be materially and adversely affected.
We are developing the remaining project for Studio City under the terms of a land concession which currently require us to fully develop the land on which Studio City is located by May 31, 2022. If we do not complete development by that time and the Macau government does not grant us an extension of the development period, we could be forced to forfeit all or part of our investment in Studio City, along with our interest in the land on which Studio City is located and the building and structures on such land.
Land concessions in Macau are issued by the Macau government and generally have terms of 25 years and are renewable for further consecutive periods of ten years. Land concessions further stipulate a period within which the development of the land must be completed. In accordance with the Studio City land concession and
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the extension granted by the Macau government, the land on which Studio City is located must be fully developed by May 31, 2022.
While we opened Studio City in October 2015, development for the remaining land of Studio City is still ongoing and in the early stages. Although we have already made significant capital investments for the development for the remaining land of Studio City, we expect to require significant additional capital investments to complete the development. As of December 31, 2019, we had incurred approximately US$80.7 million aggregate costs relating to the development of our remaining project, primarily related to the initial design and planning costs. Based on our current plan for the remaining project, we currently expect a project budget of approximately US$1.35 billion to US$1.40 billion for the development of the remaining project (exclusive of any
pre-opening
costs and financing costs). Such development for the remaining project of Studio City may be funded through various sources, including cash on hand, operating free cash flow as well as debt and/or equity financing. Our ability to obtain any debt financing also depends on a number of factors beyond our control, including market conditions such as the higher prospect of a global recession and fear for a severe contraction of liquidity in the global credit markets caused by the effect of the recent large-scale global
Covid-19
pandemic and recent decline in oil prices and lenders’ perceptions of, and demand for the debt financing for, the remaining project of Studio City. There is no guarantee that we can secure the necessary additional capital investments, including any debt financing, required for the development of the remaining project of Studio City in a timely manner or at all.
There is also no guarantee that we will complete the development of the remaining project for the land of Studio City by the deadline. Prior to the Covid-19 outbreak, we estimated a construction period of approximately 32 months for the remaining project. With the disruptions from the Covid-19 outbreak, the construction period may be delayed and extend beyond the estimated approximately 32 months. In the event that additional time is required to complete the development of the remaining land of Studio City, we will have to apply for an extension of the relevant development period which shall be subject to Macau government review and approval at its discretion. While the Macau government may grant extensions if we meet certain legal requirements and the application for the extension is made in accordance with the relevant rules and regulations, there can be no assurance that the Macau government will grant us any necessary extension of the development period or not exercise its rights to terminate the Studio City land concession. In the event that no further extension is granted or the Studio City land concession is terminated, we could lose all or substantially all of our investment in Studio City, including our interest in the land and building and may not be able to continue to operate Studio City as planned, which will materially and adversely affect our business and prospects, results of operations and financial condition.
We are developing the City of Dreams Mediterranean project in Cyprus and we are required under the Cyprus License to open the integrated casino resort by December 31, 2021. If we do not open City of Dreams Mediterranean by that time and the government of Cyprus does not grant us an extension of the opening date, we would be required to pay a penalty to the Cyprus government or even have the Cyprus License terminated if such delay continues beyond a grace period.
Our subsidiary, Integrated Casino Resorts, was granted the Cyprus License by the government of Cyprus on June 26, 2017 to develop, operate and maintain an integrated casino resort in Limassol, Cyprus (and until the operation of such integrated casino resort, the operation of a temporary casino in Limassol) and up to four satellite casino premises in Cyprus, for a term of 30 years from the date of grant and with the right for exclusivity in Cyprus for the first 15 years of the term. The Cyprus License requires us to open the integrated casino resort in Limassol, namely City of Dreams Mediterranean, by December 31, 2021, and if we fail to meet such timeline, Integrated Casino Resorts is required to pay the government of Cyprus EUR10,000 (equivalent to approximately US$11,227) for each day of delay and up to a maximum of EUR1.0 million (equivalent to approximately US$1.1 million). If such delay continues for 100 business days, the government of Cyprus has the right to terminate the Cyprus License immediately without any obligation to offer any compensation to us. The development of City of Dreams Mediterranean is still ongoing and in the early stages and there is no guarantee
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that we will complete the development of the City of Dreams Mediterranean project and open by the deadline. The recent Covid-19 outbreak has also caused significant disruptions to the construction work at City of Dreams Mediterranean. For example, construction work at City of Dreams Mediterranean has been suspended from March 24, 2020 to April 13, 2020 as required by the Cyprus government under the restrictions imposed to restrict non-essential business activities due to the Covid-19 outbreak and the restriction dates are subject to further review and change by the Cyprus government. There is no assurance that the Cyprus government will not impose additional restrictions due to the Covid-19 outbreak, including a further suspension of construction work at City of Dreams Mediterranean beyond April 13, 2020, which could cause further significant disruptions to the construction work at City of Dreams Mediterranean. Prior to the Covid-19 outbreak, we estimated that City of Dreams Mediterranean would open at the end of 2021. With the disruptions from the Covid-19 outbreak, including the suspension of construction work which commenced from March 24, 2020, the scheduled opening date of City of Dreams Mediterranean may be delayed and extended beyond the original estimated date, in which case we will likely have to apply for an extension of the relevant period. Any application for an extension of the relevant period shall be subject to the review and approval of the government of Cyprus at its discretion and there can be no assurance that the government of Cyprus will grant us any necessary extension or not exercise its right to terminate the Cyprus License in the circumstances highlighted above. In the event that no extension is granted by the government of Cyprus and the Cyprus License is terminated, we could lose all or substantially all of our investment in Cyprus and may not be able to continue to operate our operations in Cyprus as planned, which will materially and adversely affect our business and prospects, results of operations and financial condition.
Inadequate transportation infrastructure in the Philippines, Macau or Cyprus may hinder increases in visitation to the Philippines, Macau or Cyprus.
City of Dreams Manila is located within Entertainment City, Manila, an area in the city of Manila which is currently under development. Other than Solaire and Okada Manila, there are currently no other integrated tourism resorts which have begun operations in Entertainment City, Manila. It is unlikely that Manila’s existing transportation infrastructure is capable of handling the increased number of tourist arrivals that may be necessary to support visitor traffic to large scale integrated resorts within Entertainment City, such as City of Dreams Manila. Although the newly constructed NAIA Expressway helped alleviate the traffic congestion within the area surrounding Entertainment City and the Philippine government continues to examine viable alternatives to ease traffic congestion in Manila, there is no guarantee that these measures will succeed, or that they will sufficiently eliminate the traffic problem or other deficiencies in Manila’s transportation infrastructure. Traffic congestion and other problems in Manila’s transportation infrastructure could adversely affect the tourism industry in the Philippines and reduce the number of potential visitors to City of Dreams Manila, which could, in turn, adversely affect our business and prospects, financial condition and results of our operations.
Macau consists of a peninsula and two islands and is connected to China by two border crossings. Macau has an international airport and connections to China and Hong Kong by road, ferry and helicopter. To support Macau’s planned future development as a gaming and leisure destination, the frequency of bus, car, air and ferry services to Macau will need to increase. While various projects are under development to improve Macau’s internal and external transportation links, including the Macau Light Rapid Transit and capacity expansion of border crossings, these projects may not be approved, financed or constructed in time to handle the projected increase in demand for transportation or at all, which could impede the expected increase in visitation to Macau and adversely affect our projects in Macau. For example, there has been a delay in the commencement of operation of the Macau Light Rapid Transit, which occurred in December 2019. Any further delays or termination of Macau’s transportation infrastructure projects may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.
Furthermore, the expected benefits from the completion of the Hong Kong-Zhuhai-Macau Bridge, which opened to traffic on October 23, 2018, may not fully materialize, and may not result in significantly increased traffic to Macau and to our Macau properties.
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Cyprus is an island in the Eastern Basin of the Mediterranean Sea. It is the third largest island in the Mediterranean after the Italian islands of Sicily and Sardinia. Cyprus has two international airports with flights to other European countries as well as outside of Europe such as Russia, the Middle East and Africa. Cyprus existing transportation infrastructure will be incapable of handling the increased number of tourist arrivals that may be necessary to support visitor traffic to our temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos or City of Dreams Mediterranean (which is currently under development). There is no guarantee that any measures taken by the government of Cyprus will successfully increase air traffic into Cyprus or sufficiently eliminate the traffic problem or other deficiencies in Cyprus’ transportation infrastructure.
Our business in Macau, the Philippines and Cyprus is subject to certain regional and global political and economic risks, as well as natural disasters, that may significantly affect visitation to our properties and have a material adverse effect on our results of operations.
The strength and profitability of our business will depend on consumer demand for integrated resorts and leisure travel in general. Terrorist and violent criminal activities in Europe, the United States, Southeast Asia and elsewhere, military conflicts in the Middle East, social events, natural disasters such as typhoons, tsunamis and earthquakes, and outbreaks of widespread health epidemics or pandemics, including the recent
Covid-19
outbreak, have and may continue to negatively affect travel and leisure expenditures, including lodging, gaming and tourism. We cannot predict the extent to which such acts or events may affect us, directly or indirectly, in the future.
We derive a significant majority of our revenues from our Macau gaming business
and a significant number of our gaming customers come from, and are expected to continue to come from, mainland China. Accordingly, our business development plans, results of operations and financial condition may be materially and adversely affected by significant political, social and economic developments in Macau and China and our business is sensitive to the willingness of our customers to travel. In particular, our operating results may be adversely affected by:
  • changes in Macau’s and China’s political, economic and social conditions, including any slowdown in economic growth in China;
  • tightening of travel or visa restrictions to Macau or from China, including due to the outbreak of infectious disease, such as the recent
Covid-19
outbreak, or austerity measures which may be imposed by the Chinese government;
  • measures that may be introduced to control inflation, such as interest rate increases or bank account withdrawal controls; and
  • changes in the tax laws and regulations.
For example, our business and operations are affected by the travel or visa restrictions imposed by China on its citizens from time to time. The Chinese government imposes restrictions on exit visas granted to resident citizens of mainland China for travel to Macau. The government further restricts the number of days that resident citizens of mainland China may spend in Macau for certain types of travel. Such travel and visa restrictions, and any changes imposed by the Chinese government from time to time, could disrupt the number of visitors from mainland China to our properties. For example, since December 2019, there have been reported cases of
Covid-19
in Macau, the Philippines, Hong Kong, China, Singapore, South Korea, Japan, Iran, Europe, the U.S. and other parts of the world. On January 31, 2020, the
Covid-19
outbreak was declared a global emergency by the World Health Organization. As a result of the
Covid-19
outbreak, the PRC government suspended the issuance of group and individual travel visas from China to Macau and the Hong Kong SAR government suspended all ferry and helicopter services between Hong Kong and Macau. In addition, the Macau government required all casinos in Macau to be closed for a
15-day
period in February 2020. Upon resumption of operations, casinos in Macau were required to implement health-related precautionary measures, including
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temperature checks, mask protection, health declarations and requirements that gaming patrons be stopped from congregating together, that the number of players and spectators at tables limited to three to four, that gaming patrons be prohibited from sitting in adjacent seats at gaming tables and that gaming patrons and casino employees maintain minimum physical distances. Such factors and events have had, and will likely continue to have, material adverse effect on the Macau gaming market, including our business and operations in Macau. According to the Macao Government Tourism Office, visitor arrivals to Macau during the Chinese New Year in 2020 decreased by approximately 78.3% on a year-over-year basis while, according to the DICJ, gross gaming revenues in Macau declined by 49.9% on a year-over-year basis in the first two months of 2020 as compared to the first two months of 2019. On March 11, 2020, the
Covid-19
outbreak was declared a pandemic by the World Health Organization. As the Covid-19 outbreak continues to spread, Macau, China and other countries or regions have imposed new or modified existing travel restrictions and/or quarantine measures to further restrict or discourage individuals from traveling into or out of these countries or regions. For example, in March 2020, the Macau government announced the prohibition of all foreigners from entering Macau other than residents of Hong Kong and Taiwan, provided such residents undergo a mandatory 14-day quarantine upon entry into Macau and have not otherwise been to other areas in the preceding 14 days. The PRC government in March 2020 also announced further measures significantly reducing the movement of individuals between Macau and the province of Guangdong, including general requirements for those entering Guangdong province returning from Macau to be subject to a mandatory 14-day quarantine.
The
Covid-19
outbreak has also caused severe interruption of economic activities in China and a severe drop in tourism in Asia to Integrated Resort (IR) facilities in the region, including City of Dreams Manila. On February 5, 2020, the Philippine government announced restrictions on inbound travel from mainland China, Hong Kong, Macau and Taiwan as a measure to control the
Covid-19
outbreak. Further, on March 8, 2020, the President of the Philippines declared a state of public health emergency throughout the Philippines due to the
Covid-19
outbreak, which was subsequently raised to “Code Red
Sublevel-2
,” the highest alert level. As a result, the entire island of Luzon, including Metro Manila, has been placed under enhanced community quarantine from March 16, 2020 to April 14, 2020 and the measures imposed include strict home quarantine, suspension of land, domestic air and domestic sea travel to and from Luzon, limitation on inbound travel particularly from countries with Covid-19 cases, prohibition of mass gatherings and suspension of work at various
non-essential
government offices and private offices. In addition, PAGCOR ordered the suspension of all casinos and other gaming operations in Metro Manila, which includes City of Dreams Manila, for the duration of the enhanced community quarantine and, as a further attempt to restrict inbound tourists, the Philippine government has temporarily suspended the issuance of new visas and certain visa-free entries into the country from March 22, 2020. On March 23, 2020, the Philippine congress passed a new law known as the “Bayanihan We Heal As One Act,” declaring a state of national emergency over the entire country and granting the President of the Philippines emergency powers that include, among others, the authority to require privately-owned medical and health facilities and other establishments to house health workers, serve as quarantine facilities and for other medical relief purposes. The law also grants the President the authority to take over the relevant facility or establishment if it unjustifiably refuses to cooperate with such request from the President. There is no assurance that the Philippine President will not invoke this law or the Philippine government will not implement additional measures due to the Covid-19 outbreak. Such measures have had, and will likely continue to have, a material adverse effect on the business and operations of City of Dreams Manila.
In Cyprus, with outbreaks of
Covid-19
occurring throughout Europe, following an earlier decree given by the Minister of Health of Cyprus on March 10, 2020 that prohibited more than 75 people from gathering in the same indoor area until March 31, 2020, on March 15, 2020 and thereafter, the Cyprus government announced a series of measures designed to contain the spread of
Covid-19
that included closures of private businesses such as shopping malls, department stores, restaurants, cafes, nightclubs, cinemas, museum, sports venues and our casino operations in Cyprus for four weeks with effect from March 16, 2020, suspension of all hotel operations from March 22, 2020 to April 30, 2020, restrictions on inbound travel into Cyprus that included the suspension of all passenger flights into Cyprus for 14 days from March 21, 2020 and further restrictions on non-essential social and business activities from March 24, 2020 to April 13, 2020 or such other date upon further review by the
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Cyprus government, such as suspension of most construction work within the country, including construction work at our City of Dreams Mediterranean project. Such measures have had, and will likely continue to have, a material adverse effect on the business and operations of our Cyprus properties.
The
Covid-19
outbreak has also caused severe disruptions to the businesses of our tenants and other business partners, which may increase the risk of them defaulting on their contractual obligations with us resulting in potential increases in our bad debts. The disruptions to our operations caused by the
Covid-19
outbreak have had a material adverse effect on the Company’s financial condition, operations and prospects during the first quarter of 2020. As such disruptions are ongoing, such material adverse effects will continue, and may worsen, beyond the first quarter of 2020. Any recovery from such disruption will depend on future developments, such as the duration of travel and visa restrictions and customer sentiment, including the length of time before customers will resume travelling and participating in entertainment and leisure activities at high-density venues, all of which are highly uncertain. Given the uncertainty around the extent and timing of the potential future spread or mitigation of
Covid-19
and around the imposition or relaxation of protective measures, we are unable to reasonably estimate the impact to our future results of operations, cash flows and financial condition.
Our operations in Macau are also exposed to the risk of changes in laws and policies that govern operations of Macau-based companies. Tax laws and regulations may also be subject to amendment or different interpretation and implementation, thereby adversely affecting our profitability after tax. Further, certain terms of our gaming subconcession may be subject to renegotiations with the Macau government in the future, including amounts we will be obligated to pay the Macau government in order to continue operations. The results of any renegotiations could have a material adverse effect on our results of operations and financial condition. In addition, the demand for gaming activities and related services and luxury amenities that we provide through our operations is dependent on discretionary consumer spending and, as with other forms of entertainment, is susceptible to downturns in global and regional economic conditions. An economic downturn may reduce consumers’ willingness to travel and reduce their spending overseas, which would adversely impact us as we depend on visitors from mainland China and other countries to generate a substantial portion of our revenues. Changes in discretionary consumer spending or consumer preferences could be driven by factors such as perceived or actual general economic conditions, high energy and food prices, the increased cost of travel, weak segments of the job market, perceived or actual disposable consumer income and wealth, fears of recession and changes in consumer confidence in the economy or fears of armed conflict or future acts of terrorism. An extended period of reduced discretionary spending and/or disruptions or declines in airline travel could materially and adversely affect our business, results of operations and financial condition.
In addition, our business and results of operations may be materially and adversely affected by any changes in China’s economy, including the decrease in the pace of economic growth. A number of measures taken by the Chinese government in recent years to control the rate of economic growth, including those designed to tighten credit and liquidity, have contributed to a slowdown of China’s economy. According to the National Bureau of Statistics of China, China’s GDP growth rate was 6.1% in 2019, which was lower than the 6.6% in 2018. Any slowdown in China’s future growth may have an adverse impact on financial markets, currency exchange rates and other economies, as well as the spending of visitors in Macau and our properties. There is no guarantee that economic downturns, whether actual or perceived, any further decrease in economic growth rates or an otherwise uncertain economic outlook in China will not occur or persist in the future, that they will not be protracted or that governments will respond adequately to control and reverse such conditions, any of which could materially and adversely affect our business, financial condition and results of operations.
City of Dreams Manila is located in the Philippines and is subject to certain economic, political and social risks within the Philippines. The Philippines has in the past experienced severe political and social instability, including acts of political violence and terrorism. Any future political or social instability in the Philippines could adversely affect the business operations and financial conditions of City of Dreams Manila. In addition, changes in the policies of the government or laws or regulations, or in the interpretation or enforcement
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of these laws and regulations, such as anti-smoking policies or legislation, may negatively impact consumption patterns of visitors to City of Dreams Manila and could adversely affect our business operations and financial condition.
In addition, demand for, and the prices of, gaming and entertainment products are directly influenced by economic conditions in the Philippines, including growth levels, interest rates, inflation, levels of business activity and consumption, and the amount of remittances received from overseas Filipino workers. Any deterioration in economic and political conditions in the Philippines or elsewhere in Asia could materially and adversely affect our Company’s business in the Philippines, as well as the prospects, financial condition and results of our operations in the Philippines.
Our business in the Philippines will also depend substantially on revenues from foreign visitors and be affected by the development of Manila and the Philippines as a tourist and gaming destination. Such revenues from foreign visitors and development of Manila and the Philippines may be disrupted by events that reduce foreigners’ willingness to travel to or create substantial disruption in Metro Manila and raise substantial concerns about visitors’ personal safety, such as power outages, civil disturbances, terrorist attacks and outbreak of widespread health epidemics or pandemics, among others. For example, in June 2017, there were multiple deaths at the Resorts World Manila entertainment complex in Pasay, Metro Manila, Philippines when a gunman caused a stampede and set fire to casino tables and slot machine chairs. The Philippines has also experienced a significant number of major catastrophes over the years, including typhoons, volcanic eruptions and earthquakes, including the recent eruption of the Taal Volcano, located approximately 60 kilometers south of Manila, which caused road closures and work stoppages in the affected areas as well as cancellation of flights. We cannot predict the extent to which our business in the Philippines and tourism in Metro Manila in general will be affected by any of the above occurrences or fears that such occurrences will take place. We cannot guarantee that any disruption to our Philippine operations will not be protracted, that City of Dreams Manila will not suffer any damages and that any such damage will be completely covered by insurance or at all. Should the Philippines fail to continue to develop as a tourist destination or should Entertainment City or Manila fail to become a widely recognized regional gaming destination, City of Dreams Manila may fail to attract a sufficient number of visitors, which would cause a material adverse effect on our business and prospects, financial condition, results of operations and cash flows.
Any of these occurrences may disrupt our operations in the Philippines.
The subtropical climate and location of both Macau and the Philippines render them susceptible to typhoons, heavy rainstorms and other natural disasters, while Cyprus is also susceptible to heavy rainstorms and other natural disasters. In the event of a major typhoon, such as Typhoon Hato and Typhoon Mangkhut in Macau in August 2017 and September 2018, respectively, or other natural disasters in Macau or the Philippines, our properties may be severely damaged, our operations may be materially and adversely affected and our properties may even be required to temporarily cease operations by regulatory authorities. Any flooding, unscheduled interruption in the technology or transportation services or interruption in the supply of public utilities is likely to result in an immediate and possibly substantial loss of revenues due to a shutdown of any of our properties and material adverse effect on our business operations and financial condition.
Our operations in Cyprus are subject to certain economic, political and social risks within Cyprus, particularly in the occupied part of Cyprus. There are ongoing political, social and economic issues in Cyprus relating to the division of the island following the Turkish invasion of Cyprus in 1974, with the occupied part of Cyprus controlled by Turkey and its military. These issues have recently been escalated due to the discovery and exploration of natural gas in the Cyprus’ economic zones as well as in the economic zones around Cyprus. Turkey has unilaterally created its own economic zones overlapping the Cyprus’ ones and has initiated exploratory drilling in the area. Any future political or social instability in Cyprus could adversely affect the business operations and financial conditions of our casinos in Cyprus, as well as the development of City of Dreams Mediterranean. In addition, changes in government policies, laws or regulations, or in the interpretation or enforcement of these laws and regulations, may negatively impact consumption patterns of visitors to our facilities in Cyprus and could adversely affect our business operations and financial condition. On the economic
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front, Cyprus has suffered badly from a financial crisis in 2013 caused partly by the wider European sovereign debt crisis since 2011. Although Cyprus has emerged from the financial crisis relatively fast after a few years of recession, its relatively small and open economy means it remains susceptible to rapid changes in economic conditions in the neighboring regions or globally.
In addition, the global macroeconomic environment is facing significant challenges, including the higher prospect of a global recession caused by the effect of a large-scale global
Covid-19
pandemic and recent decline in oil prices. These recent events have also caused significant declines in global equity and debt capital markets, further elevating the risk of an extended global economic downturn or even a global recession that could in turn trigger a severe contraction of liquidity in the global credit markets. Even prior to the recent events, the global economy was facing the end of quantitative easing by the U.S. Federal Reserve, the continuation of international trade conflicts, including the trade disputes between the United States and China and the potential further escalation of trade tariffs and related retaliatory measures between these two countries and globally. There is considerable uncertainty over the impact and duration of the
Covid-19
outbreak on the global macroeconomic environment. In addition, considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China, remains. There have been concerns over conflicts, unrest and terrorist threats in the Middle East, Europe and Africa, including between the United States and Iran, which have resulted in volatility in oil and other markets, and over the conflicts involving Ukraine and Syria and potential conflicts involving the Korean peninsula. Any severe or prolonged slowdown in the global economy or increase in international trade or political conflicts may materially and adversely affect our business, results of operations and financial condition. In addition, continued turbulence in the international markets may adversely affect our ability to access capital markets to meet liquidity needs.
Policies, campaigns and measures adopted by the PRC and/or Macau governments from time to time could materially and adversely affect our operations.
A significant number of the gaming customers of our properties come from, and are expected to continue to come from, China. Any travel restrictions imposed by China could negatively affect the number of patrons visiting our properties from China. Since
 mid-2003,
 under the Individual Visit Scheme, or IVS, Chinese citizens from certain cities have been able to travel to Macau individually instead of as part of a tour group. The Chinese government has in the past restricted and loosened IVS travel frequently and may continue to do so from time to time and it is unclear whether such measures will become more restrictive in the future. A decrease in the number of visitors from China would adversely affect our results of operations. See also “— Risks Relating to Operating in the Gaming Industry in Macau —An outbreak of widespread health epidemics or pandemics, contagious disease or other outbreaks may have an adverse effect on the economies of affected countries or regions and may have a material adverse effect on our business, financial condition and results of operations” for a discussion of how the recent
Covid-19
outbreak has affected the policies and measures adopted by the PRC and Macau governments.
In addition, certain policies and campaigns implemented by the Chinese government may lead to a decline in the number of patrons visiting our properties and the amount of spending by such patrons. The strength and profitability of the gaming business depends on consumer demand for integrated resorts in general and for the type of luxury amenities that a gaming operator offers. Initiatives and campaigns undertaken by the Chinese government in recent years have resulted in an overall dampening effect on the behavior of Chinese consumers and a decrease in their spending, particularly in luxury good sales and other discretionary spending. For example, the Chinese government’s ongoing anti-corruption campaign has had an overall dampening effect on the behavior of Chinese consumers and their spending patterns both domestically and abroad. In addition, the number of patrons visiting our properties may be affected by the Chinese government’s focus on deterring marketing of gaming to Chinese mainland residents by casinos and its initiatives to tighten monetary transfer regulations, increase monitoring of various transactions, including bank or credit card transactions, and reduce the amount that China-issued ATM cardholders can withdraw in each withdrawal and impose a limit on the
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annual aggregate amount that may be withdrawn. Prior convictions of staff of a foreign casino in China in relation to gaming-related activities in China have also created regulatory uncertainty on marketing activities in China.
We derive a significant majority of our revenues from our Macau gaming business and any disruptions or downturns in the Macau gaming market may have a material impact on our business.
Prior to 2014, we derived substantially all of our revenues from our business and operations in Macau. We now also generate revenues from our Philippine and Cyprus operations, but continue to derive a significant majority of our revenues from our Macau gaming business and may be materially affected by any disruptions or downturns in the Macau gaming market. While the Macau gaming market has generally improved since the third quarter of 2016 to the last quarter of 2018, the Macau gaming market, according to the DICJ, experienced a decline in gross gaming revenues from 2014 to 2016. We believe such decline was primarily driven by a deterioration in gaming demand from China, which provides a core customer base for the Macau gaming market, as well as other restrictions including the imposition of travel restrictions and the implementation of smoking restrictions in casinos. According to the DICJ, gross gaming revenues in Macau declined by 3.4% on a year-over-year basis in 2019 as compared to 2018. Our business, financial condition and results of operations may be materially and adversely affected by such decline or other disruptions in the Macau gaming market.    The recent
Covid-19
outbreak has had, and will likely to continue to have, a material adverse effect on the Macau gaming market. See “— Risks Relating to Operating in the Gaming Industry in Macau — An outbreak of widespread health epidemics or pandemics, contagious disease or other outbreaks may have an adverse effect on the economies of affected countries or regions and may have a material adverse effect on our business, financial condition and results of operations”.
The gaming industries in Macau, the Philippines and Cyprus are highly regulated.
Gaming is a highly regulated industry in Macau. Our Macau gaming business is subject to various laws and increased audits and inspections from regulators, such as those relating to licensing, tax rates and other regulatory obligations, such as anti-money laundering measures, which may change or become more stringent. Changes in laws may result in additional regulations being imposed on our gaming operations in Macau and our future projects. Our operations in Macau are also exposed to the risk of changes in the Macau government’s policies that govern operations of Macau-based companies and the Macau government’s interpretation of, or amendments to, our gaming subconcession. Any such adverse developments in the regulation of the Macau gaming industry could be difficult to comply with and could significantly increase our costs, which could cause our projects to be unsuccessful. See “— Risks Relating to Operating in the Gaming Industry in Macau — Adverse changes or developments in gaming laws or other regulations in Macau that affect our operations could be difficult to comply with or may significantly increase our costs, which could cause our projects to be unsuccessful.”
The Philippine gaming industry is also highly regulated, including the recent amendment to the existing Philippines Anti-Money Laundering Act, as amended (“Philippine AMLA”), whereby casinos are included as covered persons subject to reporting and other requirements under the Philippine AMLA. The Anti-Money Laundering Council and PAGCOR have also recently released regulations and guidelines on compliance. Currently, amendments to existing anti-money laundering regulations are being deliberated in the Philippine Senate that may have an effect on the Philippine gaming industry. While we have adjusted our anti-money laundering policies for our Philippine operations to the existing new rules and regulations, we cannot assure you that our contractors, agents or employees will continually adhere to any such current or future policies or any such current or future policies will be effective in preventing our Philippines operations from being exploited for money laundering purposes. City of Dreams Manila is also subject to increased audits and inspections from regulators, including those relating to anti-money laundering requirements and measures. City of Dreams Manila may legally operate under the Philippine License, which requires a number of periodic approvals from and reports to PAGCOR. PAGCOR may refuse to approve proposals by us and our gaming promoters, or modify
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previously approved proposals and may require us and/or our gaming promoters to perform acts with which we disagree. The Philippine License requires, among others, 95.0% of City of Dreams Manila’s total employees to be locally hired. PAGCOR could also exert a substantial influence on our human resource policies, particularly with respect to the qualifications and salary levels for gaming employees, especially in light of the fact that employees assigned to the gaming operations are required by PAGCOR to obtain a Gaming Employment License. As a result, PAGCOR could have influence over City of Dreams Manila’s gaming operations. Moreover, because PAGCOR is also an operator of casinos and gaming establishments in the Philippines, it is possible that conflicts in relation to PAGCOR’s operating and regulatory functions may exist or may arise in the future. In addition, we and our gaming promoters may not be able to obtain, or maintain, all requisite approvals, permits and licenses that various Philippine and local government agencies may require. Any of the foregoing could adversely affect our business, financial condition and results of operations in the Philippines.
Furthermore, our licenses and permits from various Philippine government agencies, such as those related to labor, public works, safety, fire, buildings, health and environmental, are required to be renewed annually. There is no guarantee that the requirements for such permits and licenses will remain the same, or that the relevant Philippine government agencies will not impose additional and more onerous requirements. This may affect our ability to renew our licenses and permits, which could adversely affect our business in the Philippines.
Gaming in Cyprus is a highly regulated new market and subject to various regulations of the European Union that are being developed and adopted in Cyprus. For example, Cyprus’ laws on anti-money laundering are expected to be amended in 2020 to incorporate the European Union’s fifth Anti-Money Laundering Directive, which is expected to have an impact on our know-your-client procedures. We will have to review and amend our anti-money laundering policies for our operations in Cyprus when these new laws and regulations come into force. The CGC also conducts business-wide anti-money laundering and counter-terrorist financing inspections at our Cyprus casinos from time to time, which may require us to make adjustments to our policies and compliance procedures. Being a new gaming regime, there are also less precedents on the interpretation of these laws and regulations. Our Cyprus License also requires us to submit periodic reports to the CGC in areas that include our operations, regulatory compliance, consumer complaints and financial and tax reporting.
Furthermore, our operations in Cyprus require various licenses and permits granted from various governmental or regulatory bodies in Cyprus, such as those related to labor, food and beverages, safety, fire, buildings, health and environmental, some of which are required to be renewed annually. There is no guarantee that the requirements for such permits and licenses will remain the same, or that the relevant Cyprus governmental or regulatory bodies will not impose additional and more onerous requirements. This may affect our ability to renew our licenses and permits or we may not be able to obtain any additional licenses or permits required to conduct our business as our business and operations expand in a timely manner or at all, which could adversely affect our business in the Cyprus.
In addition, current laws and regulations in Macau, the Philippines and Cyprus concerning gaming and gaming concessions and licenses are, for the most part, have been enacted or amended recently and there are limited precedents on the interpretation of these laws and regulations. These laws and regulations are complex, and a court or administrative or regulatory body may in the future render an interpretation of these laws and regulations, or issue new or modified regulations, that differ from our interpretation. For instance, certain decisions issued recently by the Macau courts have determined that a gaming operator is liable for the refund of patron funds deposited with a gaming promoter for various purposes while other Macau court decisions have determined that a gaming operator has no such liability. These decisions are not final. The uncertainty caused by these contradictory decisions, a final adverse determination on a gaming operator’s liability with respect to a gaming promoter’s activity or new or modified regulations
could have a material adverse effect on our business, financial condition and results of operations.
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Uncertainties in the legal systems in the PRC may expose us to risks.
Gaming-related activities in the PRC, including marketing activities, are regulated by the PRC government and subject to various PRC laws and regulations. The PRC legal system continues to rapidly evolve and the interpretations of many laws, regulations and rules are not always uniform. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all. As a result, we may not be aware of all policies and rules imposed by the PRC authorities which may affect or relate to our business and operations. There is also no assurance that our interpretation of the laws and regulations that affect our activities and operations in the PRC is or will be consistent with the interpretation and application by the PRC governmental authorities. These uncertainties may impede our ability to assess our legal rights or risks relating to our business and activities. Any changes in the laws and regulations, or in the interpretation or enforcement of these laws and regulations, that affect gaming-related activities in the PRC could have a material and adverse effect on our business and prospects, financial condition and results of operations.
In addition, PRC administrative and court authorities have significant discretion in interpreting and implementing statutory terms. Such discretion of the PRC administrative and court authorities increases the uncertainties in the PRC legal system and makes it difficult to evaluate the likely outcome of any administrative and court proceedings in the PRC. Any litigation or proceeding in the PRC may be protracted and result in substantial costs and diversion of our resources and management attention. Any such litigation or proceeding could have a material adverse effect on our business, reputation, financial condition and results of operations.
We face intense competition in Macau, the Philippines and elsewhere in Asia and Europe and may not be able to compete successfully.
The hotel, resort and gaming industries are highly competitive. The competitors of our business in Macau and the Philippines include many of the largest gaming, hospitality, leisure and resort companies in the world. Some of these current and future competitors are larger than we are and may have more diversified resources, better brand recognition and greater access to capital to support their developments and operations in Macau, the Philippines and elsewhere.
In the Philippine gaming market, we compete with hotels and resorts owned by both Philippine nationals and foreigners. PAGCOR, an entity owned and controlled by the government of the Philippines, also operates gaming facilities across the Philippines. Our operations in the Philippines face competition from gaming operators in other more established gaming centers across the region, particularly those of Macau and Singapore, and other major gaming markets located around the world, including Australia and Las Vegas, as we target similar pools of customers and tourists. A number of such other operators have a longer track record of gaming operations and such other markets have more established reputations as gaming markets. Our operations in the Philippines may not be successful in its efforts to attract foreign customers and independent gaming promoters to City of Dreams Manila, and to promote Manila as a gaming destination.
In Macau, some competitors have opened new properties, expanded operations and/or have announced intentions for further expansion and developments in Cotai, where City of Dreams and Studio City are located. For example, Galaxy Casino, S.A., or Galaxy, opened Galaxy Macau Resort in Cotai in May 2011, Phase 2 of the Galaxy Macau Resort in May 2015 and Phase 3 of the Galaxy Macau Resort is currently being developed and expected to be completed and operational in 2021, while Phase 4 is expected to be completed and operational in 2022. Sands China Ltd., a subsidiary of Las Vegas Sands Corporation, opened the Parisian Macao in Cotai in September 2016. Wynn Macau opened the Wynn Palace in Cotai in August 2016. MGM Grand Paradise opened MGM Cotai in February 2018. Sociedade de Jogos de Macau, S.A., or SJM, is currently developing its project in Cotai which is expected to open in the second half of 2020. See “Item 4. Information on the Company — B. Business Overview — Market and Competition.”
In Cyprus, we hold a
30-year
casino gaming license, which commenced from June 2017 and as to which the first 15 years are exclusive. Although we hold the exclusive license to operate casinos in the Republic
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of Cyprus until 2032, we may face competition from a large number of sports betting shops in Cyprus, online sports betting or other illegal casinos in Cyprus recently closed down by the Cyprus government, and from a large number of casinos in the occupied part of Cyprus or from casinos in nearby parts of Europe and the Middle East.
We also compete with casinos located in other countries, such as Singapore, Malaysia, South Korea, Vietnam, Cambodia, Australia, New Zealand and elsewhere in the world, including Las Vegas and Atlantic City in the United States. In addition, in December 2016, a law which conceptually enables the development of integrated resorts in Japan took effect. Certain other countries, such as Taiwan and Thailand, may also in the future legalize casino gaming and may not be subject to as stringent regulation as the Macau, Philippine and/or Cyprus markets. We also compete with both legal and illegal online gaming and sports betting websites, cruise ships operating out of Hong Kong and other areas of Asia that offer gaming. In addition, certain of our gaming promoters may become our competitors by operating their own gaming operations, which may result in the diversion of their junket players to their gaming operations. For instance, a major gaming promoter has announced the expansion of its businesses into operating gaming activities in Vietnam, Cambodia and the Philippines. The proliferation of gaming venues in Asia could also significantly and adversely affect our business, financial condition, results of operations, cash flows and prospects.
Currently, Macau is the only region in the Greater China area offering legal casino gaming. Although the Chinese government has strictly enforced its regulations prohibiting domestic gaming operations, there may be casinos in parts of China that are operated illegally and without licenses. In addition, there is no assurance that China will not in the future permit domestic gaming operations. Competition from casinos in China, legal or illegal, could materially and adversely affect our business, results of operations, financial condition, cash flows and prospects.
Our regional competitors also include casino resorts that Melco International may develop elsewhere in Asia Pacific outside Macau or elsewhere in the world. Melco International may develop different interests and strategies for projects in Asia or elsewhere in the world which conflict with the interests of our business in Macau, the Philippines and Cyprus or otherwise compete with us for gaming and leisure customers. See “— Risks Relating to Our Corporate Structure and Ownership.”
The governments in Macau and the Philippines could grant additional rights to conduct gaming in the future, which could significantly increase competition and cause us to lose or be unable to gain market share.
In Macau, Melco Resorts Macau is one of the six companies authorized by the Macau government to operate gaming activities. Pursuant to the terms of Macau Law No. 16/2001, or the Macau Gaming Law, the Macau government is precluded from granting more than three gaming concessions. Each concessionaire was permitted to enter into a subconcession agreement with one subconcessionaire. The Macau government is currently considering the process of renewing, extending or granting gaming concessions or subconcessions for concessions and subconcessions expiring in 2022. The policies and laws of the Macau government could result in the grant of additional concessions or subconcessions, which could significantly increase the competition in Macau and cause us to lose or be unable to maintain or gain market share, and as a result, adversely affect our business.
In the Philippines, PAGCOR has issued regular gaming licenses to the Philippine Licensees and one other company and additional provisional gaming licenses to two other companies in the Philippines for the development and operation of integrated casino resorts. PAGCOR has recently granted a provisional license to a fifth operator located near the Entertainment City in
mid-2018.
PAGCOR has also licensed private casino operators in special economic zones, including four in the Clark Ecozone, one in Poro Point, La Union, one in Binangonan, Rizal and one in the Newport City CyberTourism Zone, Pasay City. The Philippine License granted by PAGCOR to the Philippine Licensees is
 non-exclusive,
 and there is no assurance that PAGCOR will not issue additional gaming licenses, or that it will limit the number of licenses it issues. Any additional gaming licenses
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issued by PAGCOR could increase competition in the Philippine gaming industry, which could diminish the value of the Philippine Licensees’ Philippine License. This could materially and adversely affect our business, financial condition and results of operations in the Philippines.
Any simultaneous planning, design, construction and development of any projects may stretch our management’s time and resources, which could lead to delays, increased costs and other inefficiencies in the development of these projects.
There may be overlap in the planning, design, development and construction periods of our projects. Members of our senior management will be involved in planning and developing our projects at the same time, in addition to overseeing our
 day-to-day
 operations. Our management may be unable to devote sufficient time and attention to such projects, as well as our operating properties, which may result in delays in the construction or opening of any of our current or future projects, cause construction cost overruns or cause the performance of our operating properties to be lower than expected, which could have a material adverse effect on our business, financial condition and results of operations.
Our business depends substantially on the continuing efforts of our senior management, and our business may be severely disrupted if we lose their services.
We place substantial reliance on the gaming, project development and hospitality industry experience and knowledge of the Macau, the Philippine and the Cyprus markets possessed by members of our board of directors, our senior management team, as well as other management personnel. We may experience changes in our key management in the future, including for reasons beyond our control. The loss of Mr. Lawrence Ho’s services or the services of the other members of our board of directors or key management personnel could hinder our ability to effectively manage our business and implement our growth and development strategies. Finding suitable replacements for members of our board of directors or key management personnel could be difficult, and competition for personnel of similar experience could be intense in Macau, the Philippines and Cyprus. In addition, we do not currently carry key person insurance on any members of our senior management team.
The success of our business depends on our ability to attract and retain an adequate number of qualified personnel. A limited labor supply, increased competition and any increase in demands from our employees could cause labor costs to increase.
The pool of experienced gaming and other skilled and unskilled personnel in Macau, the Philippines and Cyprus is limited. Our demand remains high for personnel occupying sensitive positions that require qualifications sufficient to meet gaming regulations and other requirements or skills and knowledge that would need substantial training and experience. Competitive demand for qualified gaming and other personnel is expected to be intensified by the increased number of properties recently opened and expected to open in close proximity to our properties in Macau, the Philippines and Cyprus. The limited supply and increased competition in the labor market could cause our labor costs to increase.
Macau government policy prohibits us from hiring
 non-Macau
 resident dealers and supervisors. In addition, the Macau government announced it will continue to monitor the proportion of management positions held by Macau residents and implement measures to ensure such proportion remains no less than 85% of senior and
 mid-management
 positions. Due to the increased competition in the labor market and the relevant regulatory restrictions, we cannot assure you that we will be able to attract and retain a sufficient number of qualified individuals to operate our properties, or that costs to recruit and retain such personnel will not increase significantly. In addition, we have recently been subject to certain labor demands in Macau. The inability to attract, retain and motivate qualified employees and management personnel could have a material adverse effect on our business.
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Further, the Macau government is currently enforcing a labor policy pursuant to which the ratio of local to foreign workers that may be recruited is determined on a
 case-by-case
 basis and, in relation to construction works, must be at least 1:1 unless otherwise authorized by the Macau government. Such a policy could have a material adverse effect on our ability to complete works on our properties, such as the additional development of the land on which Studio City is located. Moreover, if the Macau government enforces similar restrictive ratios in other areas, such as the gaming, hotel and entertainment sectors, or imposes additional restrictions on the hiring of foreign workers generally, including as a result of the recent
Covid-19
outbreak, this could have a material adverse effect on the operation of our properties.
In the Philippines, the Philippine License requires that at least 95.0% of City of Dreams Manila’s total employees be locally hired. Our inability to recruit a sufficient number of employees in the Philippines to meet this provision or to do so in a cost-effective manner may cause us to lower our hiring standards, which may have an adverse impact on City of Dreams Manila’s service levels, reputation and business. In January 2019, the employees of the Table Games Division of City of Dreams Manila voted to organize and become part of a labor union that will act as their collective bargaining agent with Melco Resorts Leisure, the operating company of City of Dreams Manila. On February 13, 2019, Kilusan ng Manggagawang Makabayan
(KMM-Katipunan)
Melco Resorts Leisure (PHP) Corporation — Table Games Division — Chapter, or
KMM-MELCO
[TDG], was certified by the Philippines Department of Labor to represent the
rank-and-file
employees of the Table Games Division of City of Dreams Manila as the former’s sole and exclusive bargaining agent. A collective bargaining agreement was subsequently signed between City of Dreams Manila and the
KMM-Katipunan
on February 12, 2020. Any demand or activities of such collective bargaining agent, or any additional collective bargaining agents that may be certified by the Philippines Department of Labor in the future, could have a material adverse effect on the business and operations of City of Dreams Manila or our financial condition and results of operations.
In Cyprus, there is also a risk that our employees may organize or become part of a collective bargaining agreement or trade union. There is also a shortage of experienced gaming and other skilled and unskilled personnel as Cyprus is a new gaming market and we also compete with other local hotels and resorts for
non-gaming
personnel in the hospitality sector. There is also a shortage of labor in the construction sector given the robust building activities in Cyprus and the difficulty in applying for work permits for
non-EU
citizens. As a result, our contractors may have to make up for any shortages in available labor from Greece or other European countries which could increase our labor costs.
Moreover, casino resort employers may also contest the hiring of their former employees by us. There can be no assurance that any such claim will not be successful or other similar claims will not be brought against us or any of our affiliates in the future. In the event any such claim is found to be valid, we could suffer losses and face difficulties in recruiting from competing operators. If found to have basis by courts, these allegations could also result in possible civil liabilities on us or our relevant officers if such officers are shown to have deliberately and willfully condoned a patently unlawful act.
Our insurance coverage may not be adequate to cover all losses that we may suffer from our operations. In addition, our insurance costs may increase and we may not be able to obtain the same insurance coverage in the future.
We currently have various insurance policies providing certain coverage typically required by gaming and hospitality operations in Macau. In addition, we maintain various types of insurance policies for our Philippine and Cyprus business and operations, including mainly property damage, business interruption and general liability insurance policies. In the Philippines, we also maintain a surety bond required by PAGCOR, which secures the prompt payment by Melco Resorts Leisure of the monthly licensee fees due to PAGCOR. These insurance policies provide coverage that is subject to policy terms, conditions and limits. There is no assurance that we will be able to renew such insurance coverage on equivalent premium costs, terms, conditions and limits upon their expiration. Certain events, such as typhoons and fires, may increase and have increased our
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premium costs. The cost of coverage may in the future become so high that we may be unable to obtain the insurance policies we deem necessary for the operation of our projects on commercially practicable terms, or at all, or we may need to reduce our policy limits or agree to certain exclusions from our coverage.
We cannot assure you that any such insurance policies we obtained or may obtain will be adequate to protect us from material losses. Certain acts and events, including any pandemic, epidemic of infectious diseases, earthquakes, hurricanes and floods, or terrorist acts, could expose us to significant uninsured losses that may be, or are, uninsurable or too expensive to justify obtaining insurance. As a result, we may not be successful in obtaining insurance without increases in cost or decreases in coverage levels. In addition, in the event of a substantial loss, the insurance coverage we carry may not be sufficient to pay the full market value or replacement cost of our lost investment or in some cases could result in certain losses being totally uninsured. In addition to the damages caused directly by a casualty loss (such as fire or natural disasters), infectious disease outbreaks or terrorist acts, we may suffer a disruption of our business as a result of these events or be subject to claims by third parties who may be injured or harmed. As an example, the recent
Covid-19
outbreak has resulted in many governments around the world, including in the Philippines, Macau and Cyprus where we operate, placing quarantines disallowing residents to travel into or outside of the quarantined area and other restrictions. While we intend to continue carrying business interruption insurance and general liability insurance, such insurance may not be available on commercially reasonable terms, or at all, and, in any event, may not be adequate to cover any losses that may result from such events.
There is limited available insurance in Macau, the Philippines and Cyprus and our insurers in Macau, the Philippines and Cyprus may need to secure reinsurance in order to provide adequate cover for our property and development projects. Our credit agreements, Melco Resorts Macau’s subconcession contract with Wynn Macau relating to the gaming concession in Macau (the “Subconcession Contract”), the Philippine License granted by PAGCOR and certain other material agreements require a certain level of insurance to be maintained, which must be obtained in Macau and the Philippines, respectively, unless otherwise authorized by the respective counter-parties. Failure to maintain adequate coverage could be an event of default under our credit agreements, the Subconcession Contract or the Philippine License and may have a material adverse effect on our business, financial condition, results of operations and cash flows.
The winnings of our patrons could exceed our casino winnings at particular times during our operations.
Our revenues are mainly derived from the difference between our casino winnings and the winnings of our casino patrons. Since there is an inherent element of chance in the gaming industry, we do not have full control over our winnings or the winnings of our casino patrons. If the winnings of our patrons exceed our casino winnings, we may record a loss from our gaming operations, and our business, financial condition and results of operations could be materially and adversely affected.
Win rates for our casino operations depend on a variety of factors, some beyond our control, which may, at particular times, adversely impact our results of operations.
In addition to the element of chance, theoretical win rates are also affected by other factors, including player skills and experience, the mix of games played, the financial resources of players, the spread of table limits, the volume and mix of bets placed by our players, the amount of time players spend on gambling and the number of our players — thus our actual win rates may differ greatly over short time periods, such as from quarter to quarter, and could cause our quarterly results to be volatile. Each of these factors, alone or in combination, have the potential to negatively impact our win rates, and our business, financial condition and results of operations could be materially and adversely affected.
Our gaming business is subject to the risk of cheating and counterfeiting.
All gaming activities at our table games are conducted exclusively with gaming chips which, like real currency, are subject to the risk of alteration and counterfeiting. We incorporate a variety of security and anti-
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counterfeit features to detect altered or counterfeit gaming chips. Despite such security features, unauthorized parties may try to copy our gaming chips and introduce, use and cash in altered or counterfeit gaming chips in our gaming areas. Any negative publicity arising from such incidents could also tarnish our reputation and may result in a decline in our business, financial condition and results of operation.
Gaming customers may attempt or commit fraud or cheat in order to increase their winnings, including in collusion with the casino’s staff. Internal acts of cheating could also be conducted by staff through collusion with dealers, surveillance staff, floor managers or other gaming area staff. Our existing surveillance and security systems, designed to detect cheating at our casino operations, may not be able to detect all such cheating in time or at all, particularly if patrons collude with our employees. In addition, our gaming promoters or other persons could, without our knowledge, enter into betting arrangements directly with our casino patrons on the outcomes of our games of chance, thus depriving us of revenues.
Our operations are reviewed to detect and prevent cheating. Each game has a theoretical win rate and statistics are examined with these in mind. Cheating may give rise to negative publicity and such action may materially affect our business, financial condition, operations and cash flows.
An outbreak of widespread health epidemics or pandemics, contagious disease or other outbreaks may have an adverse effect on the economies of affected countries or regions and may have a material adverse effect on our business, financial condition and results of operations.
Our business could be, and in certain cases, such as the recent
Covid-19
outbreak, has been materially and adversely affected by the outbreak of widespread health epidemics or pandemics, such as swine flu, avian influenza, severe acute respiratory syndrome (SARS), Middle East respiratory syndrome (MERS), Zika, Ebola and the recent
Covid-19
outbreak. The occurrence of such health epidemics or pandemics, prolonged outbreak of an epidemic illness or other adverse public health developments in China or elsewhere in the world could materially disrupt our business and operations. Such events could significantly impact our industry and cause severe travel restrictions in China or elsewhere in the world as well as temporary closures of the facilities we use for our operations, which would severely disrupt our operations and have a material adverse effect on our business, financial condition and results of operations. Such events may also indirectly and materially adversely impact our operations by negatively impacting the outlook, growth or business sentiment in the global, regional or local economy. The recent
Covid-19
global outbreak has resulted in volatility in global capital markets, restrictions on travel within and between countries as well as public transportation, prolonged closures of workplaces and is expected to have a material adverse effect on the global economy, which may have a material adverse effect on our business, financial condition and results of operations.
Since December 2019, there have been reported cases of
Covid-19
in Macau, the Philippines, Hong Kong, China, Singapore, South Korea, Japan, Iran, Europe, the U.S. and other parts of the world. On January 31, 2020, the
Covid-19
outbreak was declared a global emergency by the World Health Organization. As a result of the
Covid-19
outbreak, the PRC government suspended the issuance of group and individual travel visas from China to Macau and the Hong Kong SAR government suspended all ferry and helicopter services between Hong Kong and Macau. In addition, the Macau government required all casinos in Macau to be closed for a
15-day
period in February 2020. Upon resumption of operations, casinos in Macau were required to implement health-related precautionary measures, including temperature checks, mask protection, health declarations and requirements that gaming patrons be stopped from congregating together, that the number of players and spectators at tables limited to three to four, that gaming patrons be prohibited from sitting in adjacent seats at gaming tables and that gaming patrons and casino employees maintain minimum physical distances. Such factors and events have had, and will likely continue to have, material adverse effect on the Macau gaming market, including our business and operations in Macau. According to the Macao Government Tourism Office, visitor arrivals to Macau during the Chinese New Year in 2020 decreased by approximately 78.3% on a year-over-year basis while, according to the DICJ, gross gaming revenues in Macau declined by 49.9% on a year-over-year basis in the first two months of 2020 as compared to the first two months of 2019. On March 11, 2020, the
Covid-19
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outbreak was declared a pandemic by the World Health Organization. As the Covid-19 outbreak continues to spread, Macau, China and other countries or regions have imposed new or modified existing travel restrictions and/or quarantine measures to further restrict or discourage individuals from traveling into or out of these countries or regions. For example, in March 2020, the Macau government announced the prohibition of all foreigners from entering Macau other than residents of Hong Kong and Taiwan, provided such residents undergo a mandatory 14-day quarantine upon entry into Macau and have not otherwise been to other areas in the preceding 14 days. The PRC government in March 2020 also announced further measures significantly reducing the movement of individuals between Macau and the province of Guangdong, including general requirements for those entering Guangdong province returning from Macau to be subject to a mandatory 14-day quarantine.
The
Covid-19
outbreak has also caused severe interruption of economic activities in China and a severe drop in tourism in Asia to Integrated Resort (IR) facilities in the region, including City of Dreams Manila. On February 5, 2020, the Philippine government announced restrictions on inbound travel from mainland China, Hong Kong, Macau and Taiwan as a measure to control the
Covid-19
outbreak. Further, on March 8, 2020, the President of the Philippines declared a state of public health emergency throughout the Philippines due to the
Covid-19
outbreak, which was subsequently raised to “Code Red Sublevel-2,” the highest alert level. As a result, the entire island of Luzon, including Metro Manila, has been placed under enhanced community quarantine from March 16, 2020 to April 14, 2020 and the measures imposed include strict home quarantine, suspension of land, domestic air and domestic sea travel to and from Luzon, limitation on inbound travel particularly from countries with Covid-19 cases, prohibition of mass gatherings and suspension of work at various non-essential government offices and private offices. In addition, PAGCOR ordered the suspension of all casino and other gaming operations in Metro Manila, which includes City of Dreams Manila, for the duration of the enhanced community quarantine and, as a further attempt to restrict inbound tourists, the Philippine government has temporarily suspended the issuance of new visas and certain visa-free entries into the country from March 22, 2020. On March 23, 2020, the Philippine congress passed a new law known as the “Bayanihan We Heal As One Act,” declaring a state of national emergency over the entire country and granting the President of the Philippines emergency powers that include, among others, the authority to require privately-owned medical and health facilities and other establishments to house health workers, serve as quarantine facilities and for other medical relief purposes. The law also grants the President the authority to take over the relevant facility or establishment if it unjustifiably refuses to cooperate with such request from the President. There is no assurance that the Philippine President will not invoke this law or the Philippine government will not implement additional measures due to the Covid-19 outbreak. Such measures have had, and will likely continue to have, a material adverse effect on the business and operations of our City of Dreams Manila.
With outbreaks of
Covid-19
occurring throughout Europe, following an earlier decree given by the Minister of Health of Cyprus on March 10, 2020 that prohibited more than 75 people from gathering in the same indoor area until March 31, 2020, on March 15, 2020 and thereafter, the Cyprus government announced a series of measures designed to contain the spread of
Covid-19
that included closures of private businesses such as shopping malls, department stores, restaurants, cafes, nightclubs, cinemas, museum, sports venues and our casino operations in Cyprus for four weeks with effect from March 16, 2020, suspension of all hotel operations from March 22, 2020 to April 30, 2020, restrictions on inbound travel into Cyprus that included the suspension of all passenger flights into Cyprus for 14 days from March 21, 2020 and further restrictions on non-essential social and business activities from March 24, 2020 to April 13, 2020 or such other date upon further review by the Cyprus government, such as suspension of most construction work within the country, including construction work at our City of Dreams Mediterranean project. Such measures have had, and will likely continue to have, a material adverse effect on the business and operations of our Cyprus properties.
The
Covid-19
outbreak has also caused severe disruptions to the businesses of our tenants and other business partners, which may increase the risk of them defaulting on their contractual obligations with us resulting in potential increases in our bad debts. The disruptions to our operations caused by the
Covid-19
outbreak have had a material adverse effect on the Company’s financial condition, operations and prospects during the first quarter of 2020. As such disruptions are ongoing, such material adverse effects will continue, and
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may worsen, beyond the first quarter of 2020. Any recovery from such disruption will depend on future developments, such as the duration of travel and visa restrictions and customer sentiment, including the length of time before customers will resume travelling and participating in entertainment and leisure activities at high-density venues, all of which are highly uncertain. Given the uncertainty around the extent and timing of the potential future spread or mitigation of
Covid-19
and around the imposition or relaxation of protective measures, we are unable to reasonably estimate the impact to our future results of operations, cash flows and financial condition.
In addition, Guangdong Province, China, which is located across the Zhuhai Border from Macau, has confirmed several cases of avian flu. Fully effective avian flu vaccines have not been developed and there is evidence that the H5N1 virus is constantly evolving so we cannot assure you that an effective vaccine can be discovered or commercially manufactured in time to protect against the potential avian flu pandemic. In the first half of 2003, certain countries in Asia experienced an outbreak of SARS, a highly contagious form of atypical pneumonia, which seriously interrupted economic activities and caused the demand for goods and services to plummet in the affected regions.
In addition to the ongoing outbreak of
Covid-19,
there can be no assurance that an outbreak of swine flu, avian influenza, SARS, MERS, Zika, Ebola or other contagious disease or any measures taken by the governments of affected countries against such potential outbreaks will not seriously interrupt our gaming operations. The perception that an outbreak of any health epidemic or contagious disease may occur may also have an adverse effect on the economic conditions of countries in Asia. In addition, our operations could be disrupted if any of our facilities or employees or others involved in our operations were suspected of having
Covid-19,
swine flu, avian influenza, SARS, MERS, Zika or Ebola as this could require us to quarantine some or all of such employees or persons or disinfect the facilities used for our operations. Furthermore, any future outbreak may restrict economic activities in affected regions, which could result in reduced business volume and the temporary closure of our facilities or otherwise disrupt our business operations and adversely affect our results of operations. Our revenues and profitability could be materially reduced to the extent that a health epidemic or other outbreak harms the global or PRC economy in general.
Health and safety or food safety incidents at our properties may lead to reputational damage and financial exposures.
We provide goods and services to a significant number of customers on a daily basis at our properties in Macau, Manila and Cyprus. In particular, with attractions, entertainment and food and beverage offerings at our properties, there are risks of health and safety incidents or adverse food safety events. While we have a number of measures and controls in place aimed at managing such risks, we cannot guarantee that our insurance is adequate to cover all losses, which may result in us incurring additional costs or damages, and negatively impact our financial performance. Such incidents may also lead to reduced customer flow and reputational damage to our properties. See “— We are subject to risks relating to litigation, disputes and regulatory investigations which may adversely affect our profitability, financial condition and prospects.”
Unfavorable fluctuations in the currency exchange rates of the H.K. dollar, U.S. dollar, Pataca, the Philippine peso or the Euro and other risks related to foreign exchange and currencies, including restrictions on conversions and/or repatriation of foreign currencies, could adversely affect our indebtedness, expenses, profitability and financial condition.
Our exposure to foreign exchange rate risk is associated with the currency of our operations and our indebtedness and as a result of the presentation of our financial statements in U.S. dollar. The majority of our current revenues are denominated in H.K. dollar, given the H.K. dollar is the predominant currency used in gaming transactions in Macau and is often used interchangeably with the Pataca in Macau. Our current expenses are denominated predominantly in Pataca, H.K. dollar and the Philippine peso. In addition, we have revenues, assets, debt and expenses denominated in the Philippine peso and in the Euro relating to our businesses in the
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Philippines and Cyprus, respectively. We also have subsidiaries, branch offices and assets in various countries, including Taiwan, which are subject to foreign exchange fluctuations and local regulations that may impose, among others, limitations, restrictions or approval requirements on conversions and/or repatriation of foreign currencies. In addition, a significant portion of our indebtedness, including the Melco Resorts Finance Notes and Studio City Notes, and certain expenses, are or will be denominated in U.S. dollar, and the costs associated with servicing and repaying such debt will be denominated in U.S. dollar.
The value of the H.K. dollar, Pataca, the Philippine peso and the Euro against the U.S. dollar may fluctuate and may be affected by, among other things, changes in political and economic conditions. While the H.K. dollar is pegged to the U.S. dollar within a narrow range and the Pataca is in turn pegged to the H.K. dollar, and the exchange rates between these currencies has remained relatively stable over the past several years, we cannot assure you that the current peg or linkages between the U.S. dollar, H.K. dollar and Pataca will not be
de-pegged,
de-linked
 or otherwise modified and subject to fluctuations. Any significant fluctuations in exchange rates between the H.K. dollar, Pataca, the Philippine peso or the Euro to the U.S. dollar may have a material adverse effect on our revenues and financial condition. For example, to the extent that we are required to convert U.S. dollar financings into H.K. dollar or Pataca for our operations, fluctuations in exchange rates between the H.K. dollar or Pataca against the U.S. dollar could have an adverse effect on the amounts we receive from the conversion.
While we maintain a certain amount of our operating funds in the same currencies in which we have obligations in order to reduce our exposure to currency fluctuations, we have not engaged in hedging transactions with respect to foreign exchange exposure of our revenues and expenses in our
 day-to-day
 operations during the years ended December 31, 2019 and 2018. In addition, we may face regulatory, legal and other risks in connection with our assets and operations in certain jurisdictions that may impose limitations, restrictions or approval requirements on conversions and/or repatriation of foreign currencies. We will consider our overall procedure for managing our foreign exchange risk from time to time, but we cannot assure you that any such procedures will enable us to obtain and achieve effective hedging of our foreign exchange risk, which could materially and adversely affect our financial condition and operating results.
We may undertake mergers, acquisitions, strategic transactions or investments that could result in operating difficulties, distractions from our current businesses or adverse effect on our business and financial condition and subject us to regulatory and legal inquiries and proceedings or investigations.
We have made, and may in the future make, acquisitions, investments or divestments or strategic transactions in companies or projects to expand or complement our existing operations or to implement our business strategies. From time to time, we engage in discussions and negotiations with companies regarding acquisitions, investments, divestments or other strategic transactions, which may be material or significant, of interests in such companies or their projects. For example, the discussions and negotiations between us and Melco International led to our acquisition of 75% ownership interest in ICR Cyprus from Melco International, through which we expanded our operations to Cyprus. With this acquisition, our business has been expanded to the European region and includes the development of the City of Dreams Mediterranean, a new integrated casino resort project in Cyprus. Our expanded operations and developments in Cyprus require significant resources and investments and we may in the future make other acquisitions, investments or strategic transactions that require significant capital commitments and resources. 
Any integration process that would follow any of our acquisitions, investments or strategic transactions, including our acquisition of 75% equity interest in ICR Cyprus, may prove more difficult than anticipated. We may be subject to liabilities or claims that we are not aware of at the time of the investment or acquisition, and we may not realize the benefits anticipated at the time of the investment or acquisition. Any benefits anticipated at the time of the investment or acquisition may also not be realized, or may be impacted, due to factors beyond our control. For example, in February 2020, we announced our decision to not pursue the acquisition of an additional 9.99% ownership interest in Crown Resorts due to the impact of the Covid-19
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outbreak. These difficulties could disrupt our ongoing business, distract our management and employees, increase our expenses and liabilities, result in losses, including in material amounts, and adversely affect our businesses, financial condition and operating results. Even if we do identify suitable opportunities, we may not be able to make such acquisitions or investments on commercially acceptable terms or adequate financing may not be available on commercially acceptable terms, if at all, and we may not be able to consummate a proposed acquisition or investment.
We may also, from time to time, receive inquiries from regulatory and legal authorities and become subject to regulatory and legal proceedings or investigations in connection with our acquisitions, investments, divestments or strategic transactions. For example, in connection with the definitive purchase agreement we entered into with CPH Crown Holdings Pty Limited in May 2019 to acquire a total of an approximately 19.99% ownership interest in Crown Resorts for the total purchase price of AUD1,759.6 million (equivalent to approximately US$1,237.0 million) and pursuant to which we acquired an approximately 9.99% ownership interest in Crown Resorts on June 6, 2019 and were to acquire an additional 9.99% ownership interest in Crown Resorts by September 30, 2019, as a result of the relevant Australian regulatory process, we and CPH Crown Holdings Pty Limited agreed to defer our acquisition of the additional 9.99% ownership interest in Crown Resorts. For more information on our transactions in relation to Crown Resorts, see “Item 3. Key Information — A. Selected Financial Data”. Any such regulatory and legal proceedings or investigations may materially and adversely affect our business, operations, financial condition and prospects. 
We are subject to risks relating to litigation, disputes and regulatory investigations which may adversely affect our profitability, financial condition and prospects.
We are, and may in the future be, subject to legal actions, disputes and regulatory investigations in the ordinary course of our business. We are also subject to risks relating to legal and regulatory proceedings and investigations which we or our affiliates may be a party to from time to time, or which could develop in the future, as well as fines or other penalties which may be imposed on us in connection with any requisite permit, license or other approval for our business and operations. Litigation and regulatory proceedings can be costly and time-consuming and may divert management attention and resources from our operations. We could incur significant defense costs and, in the event of an adverse outcome, be required to pay damages and interest to the prevailing party and, depending on the jurisdiction of the litigation, be held responsible for the costs of the prevailing party. Our reputation may also be adversely affected by our involvement or the involvement of our affiliates in litigation and regulatory proceedings. In addition, we and our affiliates operate or have interests in a number of jurisdictions in which regulatory and government authorities have wide discretion to take procedural actions in support of their investigations and regulatory proceedings, including seizures and freezing of assets and other properties that are perceived to be connected or related to such investigations or regulatory proceedings. For example, in January 2020, Japanese authorities were investigating a Japanese politician. In that connection, the Japanese authorities obtained information and documents under a warrant from our subsidiary in Japan related to their investigative actions. Given such wide discretion, regulatory or government authorities may take actions that may affect our assets and properties in connection with any investigation or legal or regulatory proceeding involving us, any of our affiliates, or third parties, which may materially affect our business, financial condition or results of operations.
In addition, if we are unsuccessful in defending against any claims alleging that we received, misappropriated or misapplied funds, this may require further improvements to our existing anti-money laundering procedures, systems and controls and our business operations may be subject to greater scrutiny from relevant regulatory authorities, all of which may increase our compliance costs. No assurance can be provided that any provisions we have made for such matters will be sufficient. Litigation and regulatory proceedings and investigation are inherently unpredictable and our results of operations or cash flows may be adversely affected by an unfavorable resolution of any pending or future litigation, disputes and regulatory investigation.
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We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit customers.
We conduct, and expect to continue to conduct, our gaming activities at our casinos on a credit basis as well as a cash basis. Consistent with customary practice in both the Macau and the Philippines gaming markets, we grant credit to our gaming promoters and certain of our premium direct players. Gaming promoters bear the responsibility for issuing credit and subsequently collecting the credit they granted. We extend credit, often on an unsecured basis, to certain gaming promoters and VIP patrons whose level of play and financial resources warrant such an extension in our opinion.
 High-end
 patrons typically are extended more credit than patrons who wager lower amounts. Any slowdown in the economy could adversely impact our VIP patrons, which could in turn increase the risk that these clients may default on credit extended to them. In Cyprus, a new gaming market, we also grant credit to a small number of selected premium direct players.
We may not be able to collect all of our gaming receivables from our credit customers. We expect that we will be able to enforce our gaming receivables only in a limited number of jurisdictions, including Macau, the Philippines, Cyprus and under certain circumstances, Hong Kong. As most of our gaming customers in Macau are visitors from other jurisdictions, we may not have access to a forum in which we will be able to collect all of our gaming receivables because, among other reasons, courts in many jurisdictions do not enforce gaming debts. Further, we may be unable to locate assets in other jurisdictions against which recovery of gaming debts can be sought. The collectability of receivables from our credit customers, and, in particular, our international credit customers, could be negatively affected by future business or economic trends or by significant events in the jurisdictions in which these customers reside, or in which their assets are located. We may also, in certain cases, have to determine whether aggressive enforcement actions against a customer will unduly alienate the customer and cause the customer to cease playing at our casinos. We could suffer a material adverse impact on our operating results if receivables from our credit customers are deemed uncollectible. In addition, in the event a credit customer suffers losses in connection with any gaming activities at our properties and receivables from such customer are uncollectible, Macau gaming taxes, Philippines license fees or Cyprus gaming taxes (as the case may be) will still be payable on the resulting gaming revenues, notwithstanding any receivables owed by such customer to us may be uncollectible. An estimated allowance for doubtful debts is maintained to reduce our receivables to their carrying amounts, which approximate fair values.
Our business and financial plans may be negatively impacted by any contraction in the availability of credit.
Our business and financing plans may be dependent upon the completion of future financings. Any severe contraction of liquidity in the global credit markets may make it difficult and costly to obtain new lines of credit or to refinance existing debt, and may place broad limitations on the availability of credit from credit sources as well as lengthen the recovery cycle of extended credit. Any deterioration in the credit environment may cause us to have difficulty in obtaining additional financing on acceptable terms, or at all, which could adversely affect our ability to complete current and future projects. Tightening of liquidity conditions in credit markets may also constrain revenue generation and growth and could have a material adverse effect on our business, financial condition and results of operations. In particular, our revolving credit facility with an amount of HK$9.75 billion (equivalent to approximately US$1.25 billion) under the 2015 Credit Facilities matures in June 2020. Our ability to refinance the 2015 Credit Facilities or obtain new lines of credit prior to maturity of the 2015 Credit Facilities may be impacted significantly by the recent
Covid-19
outbreak and general market conditions that are beyond our control and therefore there is no assurance that we will be able to do so on acceptable terms, or at all, which could materially and adversely affect our business and prospects, results of operations and financial condition.
Rolling chip patrons and VIP gaming customers may cause significant volatility in our revenues and cash flows.
A significant proportion of our casino revenues in Macau is generated from the rolling chip segment of the gaming market. Similarly, City of Dreams Manila also attracts foreign gaming visitors, particularly VIP
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players who typically place large individual wagers. In Cyprus, we also attract a number of VIP players. The loss or a reduction in the play of the most significant of these rolling chip patrons or VIP gaming customers could have an adverse effect on our business. In addition, revenues and cash flows derived from
 high-end
 gaming of this type are typically more volatile than those from other forms of gaming primarily due to high bets and the resulting high winnings and losses. As a result, our business and results of operations and cash flows from operations may be more volatile from quarter to quarter than that of our competitors and may require higher levels of cage cash in reserve to manage this volatility.
We depend upon gaming promoters for a portion of our gaming revenues and if we are unable to establish, maintain and increase the number of successful relationships with gaming promoters or if the financial resources of our gaming promoters are insufficient to allow them to continue doing business in Macau and/or Manila, our results of operations could be adversely impacted.
Customers introduced to us by gaming promoters are responsible for a significant portion of our gaming revenues in Macau and Manila. For our operations in Cyprus, where there is currently one licensed gaming promoter approved in 2020, other gaming promoters have also submitted licensing applications to the CGC which remain subject to CGC’s approval.
For the year ended December 31, 2019, approximately 22.5% of our casino revenues were derived from customers sourced through our rolling chip gaming promoters. With the rise in casino operations in Macau, Manila and Europe, the competition for relationships with gaming promoters has increased and is expected to continue to increase. If we are unable to utilize, maintain and/or develop relationships with gaming promoters and, in the case of Cyprus, if the number of licensed gaming promoters do not significantly increase in the future, our ability to grow our gaming revenues will be hampered and we will have to seek alternative ways to develop and maintain relationships with rolling chip patrons, which may not be as profitable as relationships developed through gaming promoters. As competition intensifies, we may therefore need to offer better terms to gaming promoters, including extensions of credit, which may increase our overall credit exposure. In addition, gaming promoters may encounter difficulties in attracting patrons to come to Macau, Manila or Cyprus. Gaming promoters may also experience decreased liquidity, limiting their ability to grant credit to their patrons, resulting in decreased gaming volume in Macau, Manila or Cyprus. Credit already extended by our gaming promoters may become increasingly difficult to collect. Also, in the event the Macau government reduces the cap on the commission rates payable to gaming promoters, gaming promoters’ incentives to bring travelers to casinos in Macau would be further diminished, and certain of the gaming promoters may be forced to cease operations or divert the travelers to other regions. This inability to attract sufficient patrons, settle accounts with patrons, grant credit and collect amounts due in a timely manner may negatively affect our gaming promoters’ operations, causing them to wind up or liquidate their operations, and as a result, our ability to maintain or grow casino revenues and our ability to recover credit extended may be adversely affected. The inability of gaming promoters to settle accounts with their patrons may expose such gaming promoters to litigation proceedings initiated by affected patrons, which may also expose us to additional litigation risk.
We are impacted by the reputation and integrity of the parties with whom we engage in business activities, including gaming promoters and we cannot assure you that these parties will always maintain high standards or suitability throughout the term of our association with them. Failure to maintain such high standards or suitability may cause us and our shareholders to suffer harm to our own and our shareholders’ reputation, as well as impair relationships with, and possibly result in sanctions from, gaming regulators.
The reputation and integrity of the parties with whom we engage in business activities are important to our own reputation and our ability to continue to operate in compliance with the permits and licenses required for our businesses. These parties include, but are not limited to, those who are engaged in gaming-related activities, such as gaming promoters, developers and hotel, restaurant and night club operators with whom we have or may enter into services or other types of agreements. Under the Macau Gaming Law, Melco Resorts Macau has an obligation to supervise its gaming promoters to ensure compliance with applicable laws and regulations and serious breaches or repeated misconduct by its gaming promoters could result in the termination of its
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subconcession. For parties we deal with in gaming-related activities, where relevant, the gaming regulators also undertake their own probity checks and will reach their own suitability findings in respect of the activities and parties with which we intend to associate. In addition, we also conduct our internal due diligence and evaluation process prior to engaging such parties. Notwithstanding such regulatory probity checks and our own due diligence, we cannot assure you that the parties with whom we are associated will always maintain the high standards that gaming regulators and we require or that such parties will maintain their suitability throughout the term of our association with them. In addition, if any of our gaming promoters violate gaming laws while on our premises, the government may, in its discretion, take enforcement action against the gaming promoters and may find us jointly liable for such gaming promoter’s violations. Also, if a party associated with us falls below the gaming regulator’s suitability standard or if their probity is in doubt, this may be negatively perceived when assessed by the gaming regulators. As a result, we and our shareholders may suffer reputational harm, as well as impaired relationships with, and possibly sanctions or other measures or actions from, the relevant gaming regulators with authority over our operations.
Any violation of anti-corruption laws, including the FCPA, could have a negative impact on us.
We and our businesses in different jurisdictions are subject to a number of anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, or FCPA. Breach of these anti-corruption laws carries severe criminal and civil sanctions as well as other penalties and reputational harm. There have been increased enforcement activities in the U.S. and elsewhere in recent years and the number of FCPA cases and sanctions imposed by U.S. authorities has risen considerably. We have adopted strict rules of conduct and compliance programs for our employees, agents and contractors, requiring them to conduct all their business dealings and practices in compliance with our policies and relevant anti-corruption laws. Notwithstanding our emphasis on an ethical business culture, there is no assurance that our employees, contractors and agents will adhere fully, or at all, or continue to adhere to our rules and programs. Should they fail to adhere to our rules of conduct and compliance programs, we may be investigated or prosecuted, or be made subject to other actions or proceedings. Penalties, sanctions and administrative remedies that may result from such actions or proceedings may have a material adverse effect on our reputation and customer relationships or may lead to other adverse consequences on our business, prospects, financial condition and results of operations. As we are a U.S. listed company, certain U.S. laws and regulations apply to our operations and compliance with those laws and regulations increases our cost of doing business. We also deal in significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Any violation of anti-money laundering laws or regulations by us could have a negative effect on our results of operations.
A failure to establish and protect our intellectual property rights could have an adverse effect on our business, financial condition and results of operations.
We have applied for and/or registered certain trademarks, including “Altira,” “Mocha Club,” “City of Dreams,” “Nüwa,” “The Countdown,” “Morpheus,” “City of Dreams Manila,” “Studio City,” “Melco Resorts Philippines,” “C2” and “Melco Resorts & Entertainment” in Macau, the Philippines, Cyprus and/or other jurisdictions. We have also registered in Macau, the Philippines, Cyprus and other jurisdictions certain other trademarks and service marks used in connection with the operations of our hotel casino projects in Macau, City of Dreams Manila and Cyprus. We endeavor to establish and protect our intellectual property rights through trademarks, service marks, domain names, licenses and other contractual provisions. The brands we use in connection with our properties have gained recognition. Failure to possess, obtain or maintain adequate protection of our intellectual property rights could negatively impact our brands and have a material adverse effect on our business, financial condition and results of operations. For example, third parties may misappropriate or infringe our intellectual property, which may include but not be limited to the use of our intellectual property by offshore gaming websites, including those that may attempt to defraud members of the public. While we may take legal or other appropriate actions against these unauthorized offshore websites, such as by reporting the sites to the appropriate governmental or regulatory authorities, such actions may not be effective or significant expenses could be incurred and such unauthorized activities may draw businesses away
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from our operations and/or tarnish our reputation, all of which may adversely affect our business, financial condition and results of operations.
The infringement or alleged infringement of intellectual property rights belonging to third parties could adversely affect our business.
We face the potential risk of claims that we have infringed upon the intellectual property rights of third parties, which could be expensive and time-consuming to defend. In addition, we may be required to cease using certain intellectual property rights or selling or providing certain products or services, pay significant damages or enter into costly royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property rights (if available at all), any of which could have a negative impact on our business, financial condition and future prospects. Furthermore, if litigation were to result from such claims, our business could be interrupted.
We cannot assure you that anti-money laundering policies that we have implemented, and compliance with applicable anti-money laundering laws, will be effective to prevent our casino operations from being exploited for money laundering purposes.
The free ports, offshore financial services and free movement of capital have created an environment whereby casinos in Macau or Cyprus could be exploited for money laundering purposes. We also deal with significant amounts of cash during our regular casino operations in Macau, the Philippines and Cyprus. As our Macau, Philippine and Cyprus operations are subject to various reporting and anti-money laundering regulations and increased audits and inspections from regulators, we have implemented anti-money laundering policies to address those requirements. Philippine laws on anti-money laundering have recently been amended to include casinos as covered institutions and the Anti-Money Laundering Council and PAGCOR have also recently released corresponding regulations and guidelines on compliance. Cyprus’ laws on anti-money laundering is also expected to be amended in 2020 to incorporate the European Union’s fifth Anti-Money Laundering Directive. While we have adjusted our anti-money laundering policies for our Philippine operations to these new rules and regulations, as these laws, regulations and guidelines have only recently been enacted, their implementation or application, as well as any further changes to anti-money laundering laws and regulations in Macau, the Philippines and/or Cyprus may require us to adopt changes to our own anti-money laundering policies.
We cannot assure you that our contractors, agents or employees will continually adhere to any such current or future policies or these policies will be effective in preventing our casino operations from being exploited for money laundering purposes, including from jurisdictions outside of Macau, the Philippines or Cyprus.
There can be no assurance that, despite the anti-money laundering measures we have adopted and undertaken, we would not be subject to any accusation or investigation related to any possible money laundering activities. In addition, we expect to be required by relevant regulatory authorities from Macau, the Philippines, Cyprus and other jurisdictions that regulate our business activities to attend meetings and interviews from time to time to discuss our operations as they relate to anti-money laundering laws and regulations during which regulatory authorities may make inquiries and take other actions at their discretion. Any incident of money laundering, accusation of money laundering or regulatory investigations into possible money laundering activities involving us, our employees, our gaming promoters, our customers or others with whom we are associated could have a material adverse impact on our reputation, business, cash flow, financial condition, prospects and results of operations. Any serious incident of, or repeated violation of, laws related to money laundering or any regulatory investigation into money laundering activities may cause a revocation or suspension of the subconcession, of the Philippine License or the Cyprus License. For more information regarding anti-money laundering regulations in Macau, the Philippines and Cyprus, see “Item 4. Information on the Company — B. Business Overview — Regulations — Macau Regulations — Anti-Money Laundering Regulations in Macau”, “Item 4. Information on the Company — B. Business Overview — Regulations — Philippines
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Regulations — Anti-Money Laundering Regulations in the Philippines.” and “Item 4. Information on the Company — B. Business Overview — Regulations — Cyprus Regulations — Anti-Money Laundering Regulations in Cyprus.”
Our information technology and other systems are subject to cyber security risks, including misappropriation of customer information, other breaches of information security or other cybercrimes, as well as regulatory and other risks.
We rely on information technology and other systems (including those maintained by third-parties with whom we contract to provide data services) to maintain and transmit large volumes of customer information, credit card settlements, credit card funds transmissions, mailing lists and reservations information and other personally identifiable information. We also maintain important internal company data such as personally identifiable information about our employees and information relating to our operations. The systems and processes we have implemented to protect customers, employees and company information are subject to the rapidly changing risks of compromised security and may therefore become outdated. Despite our preventive efforts, we are subject to the risks of compromised security, including cyber and physical security breaches, system failure, computer viruses, technical malfunction, inadequate system capacity, power outages, natural disasters and inadvertent, negligent or intentional misuse, disclosure or dissemination of information or data by customers, company employees or employees of third-party vendors, ransomware attacks that encrypt, exfiltrate or otherwise render data unusable or unavailable or other forms of cybercrimes that includes fraud or extortion. These risks can also be manifested in a variety of other ways, including through methods which may not yet be known to the cyber security community, and have become increasingly difficult to anticipate and prevent.
The steps we take to deter and mitigate these risks may not be successful and our insurance coverage for protecting against cyber security risks may not be sufficient. Our third-party information system service providers face risks relating to cyber security similar to ours, and we do not directly control any of such service providers’ information security operations. A significant theft, loss or fraudulent use of customer or company data maintained by us or by a third-party service provider could have an adverse effect on our reputation, cause a material disruption to our operations and management team, and result in remediation expenses, regulatory penalties and litigation by customers and other parties whose information was subject to such attacks, all of which could have a material adverse effect on our business, prospects, results of operations and cash flows. If our information technology systems become damaged or otherwise cease to function properly, our sales and results of operations may be adversely affected and we may have to make significant investments to repair or replace them. Furthermore, any extended downtime from power supply disruptions or information technology system outages which may be caused by cyber security attacks or other reasons at our properties may lead to an adverse impact on our operating results if we are unable to deliver services to customers for an extended period of time.
Despite the security measures we currently have in place, our facilities and systems and those of our third-party service providers may be vulnerable to security breaches, acts of vandalism, phishing attacks, computer viruses, misplaced or lost data, programming or human errors, other cybercrimes and other events. Cyber-attacks are becoming increasingly more difficult to anticipate and prevent due to their rapidly evolving nature and, as a result, the technology we use to protect our systems could become outdated. The occurrence of any of the cyber incidents described above could have a material adverse effect on our business, results of operations and cash flows.
Any perceived or actual electronic or physical security breach involving the misappropriation, loss, or other unauthorized disclosure of confidential or personally identifiable information, whether by us or by a third party, could disrupt our business, damage our reputation and relationships with our customers and employees, expose us to risks of litigation, significant fines and penalties and liability, result in the deterioration of our customers’ and employees’ confidence in us, and adversely affect our business, results of operations and financial condition. Any perceived or actual unauthorized disclosure of personally identifiable information of our employees, customers or website visitors could harm our reputation and credibility and reduce our ability to
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attract and retain employees and customers. We are also subject to enactment of new laws, or amendments to existing laws with more stringent requirements, in relation to cybersecurity. For example, a new Cybersecurity Law was introduced in Macau in 2019 which also applies to our businesses in Macau. See “Item 4. Information on the Company — B. Business Overview — Regulations — Macau Regulations — Cybersecurity Regulations”. As any of the above cybersecurity threats develop and grow and our obligations under cybersecurity regulations increase, we may find it necessary to make significant further investments to protect our data and infrastructure, including the implementation of new computer systems or upgrades to existing systems, deployment of additional personnel and protection-related technologies, engagement of third-party consultants, and training of personnel.
Failure to protect the integrity and security of company employee and customer information and comply with applicable privacy regulations may result in damage to reputation and/or subject us to fines, penalties, lawsuits, restrictions on our use or transfer of data and other risks.
Our businesses collect, use and transmit large volumes of data, including credit card numbers and personal data in various information systems relating to our customers and employees, and such personal data may be collected and/or used in, and transmitted to or from, multiple jurisdictions. Our customers and employees have a high expectation that we will adequately protect their personal information. Such collection, use and/or transmission of personal data are governed by privacy laws and regulations and such laws and regulations change often, vary significantly by jurisdiction and often are newly enacted. For example, the European Union (EU)’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, requires companies to meet new and more stringent requirements regarding the handling of personal data. Established within the EU, our operations in Cyprus are subject to the GDPR requirements. In order to comply with the GDPR requirements, we have developed and implemented policies and procedures which regulate our activities and aim to protect personal data that is collected, processed and maintained by business units for our operations in Cyprus. We have also appointed a data protection officer in Cyprus and adopted a number of physical and technical safeguards to comply with the GDPR requirements applicable to our operations in Cyprus. As the GDPR also captures data processing by
non-EU
entities with no EU establishment as long as such
non-EU
entities’ processing relates to “offering goods or services” or the “monitoring” of individuals in the EU, we have also established policies to regulate our business activities outside of Cyprus. As GDPR is a newly enacted law, there is limited precedent on the interpretation and application of GDPR. In addition, we must also comply with other industry standards such as those for the credit card industry and other applicable data security standards.
Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our products, properties and services to our customers and guests. For example, these laws and regulations may restrict information sharing in ways that make it more difficult to obtain or share information concerning at risk individuals. In addition,
 non-compliance
 with applicable privacy regulations by us (or in some circumstances
 non-compliance
 by third parties engaged by us) may result in damage of reputation and/or subject us to fines, penalties, payment of damages, lawsuits, criminal liability or restrictions on our use or transfer of data. Failure to meet the GDPR requirements, for example, may result in penalties of up to four percent of worldwide revenue.
Negative press or publicity about us or our directors, officers or affiliates may lead to government investigations, result in harm to our business, brand or reputation and have a material and adverse effect on our business.
Unfavorable publicity regarding us, or our directors, officers or affiliates, whether substantiated or not, may have a material and adverse effect on our business, brand and reputation. Such negative publicity may require us to engage in a defensive media campaign, which may divert our management’s attention, result in an increase in our expenses and adversely impact our results of operations, financial condition, prospects and strategies. The continued expansion in the use of social media over recent years has compounded the potential scope of the negative publicity that could be generated. Any negative press or publicity could also lead to
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government or other regulatory investigations, including causing regulators with jurisdiction over our gaming operations in Macau, the Philippines and Cyprus to take action against us or our related licensees, including actions that could affect the ability or terms upon which our subsidiaries hold their gaming licenses and/or subconcession, our suitability to continue as a shareholder of those subsidiaries and/or the suitability of key personnel to remain with our Company. If any of these events were to occur, it would cause a material adverse effect on our business and prospects, financial condition and results of operations.
Our new branded products may not be successful.
In 2018, we launched our new property at City of Dreams under the Morpheus brand. We have also recently launched the Nüwa brand in both Macau and the Philippines and the C2 brand in Cyprus. We may continue introducing new brand names and brand identities in the future, such as City of Dreams Mediterranean in Cyprus, which may be time-consuming and expensive, or may not have the intended effect, any of which could have a material adverse effect on our business, results of operations and financial condition.
The audit reports included in this annual report have been prepared by auditors whose work may not be inspected fully by the Public Company Accounting Oversight Board and, as such, you may be deprived of the benefits of such inspection.
Our independent registered public accounting firms that issue the audit reports included in our annual reports filed with the SEC as auditors of companies that are traded publicly in the United States and firms registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their respective compliance with the laws of the United States and professional standards.
Many other clients of our auditors have substantial operations within mainland China, and the PCAOB has been unable to complete inspections of the work of our auditors, and/or their affiliated independent registered public accounting firms in mainland China
,
 without the approval of the Chinese authorities. Thus, our auditors, and/or their affiliated independent registered public accounting firms in mainland China, and their audit work are not currently inspected fully by the PCAOB. On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulation in their oversight of financial statement audits of U.S.-listed companies with significant operation in China. However, it remains unclear what further actions the SEC and PCAOB will take to address the problem.
Inspections of other firms that the PCAOB has conducted outside mainland China have identified deficiencies in those firms’ audit procedures and quality control procedures, which can be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections in mainland China prevents the PCAOB from regularly evaluating our auditors’ audit procedures and quality control procedures as they relate to their work, and/or their affiliated independent registered public accounting firms’ work, in mainland China. As a result, investors may be deprived of the benefits of such regular inspections.
The inability of the PCAOB to conduct full inspections of auditors in mainland China makes it more difficult to evaluate the effectiveness of our auditors’ audit procedures and quality control procedures as compared to auditors who primarily work in jurisdictions where the PCAOB has full inspection access. Investors may lose confidence in our reported financial information and the quality of our financial statements.
In addition, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress which, if passed, would require the SEC to maintain a list of issuers for which the PCAOB is unable to inspect or investigate an auditor report issued by a foreign public accounting firm. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges of issuers included on the SEC’s list for three consecutive years. Enactment of this
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legislation or other efforts to increase U.S. regulatory access to audit information could cause investor uncertainty for affected issuers, including us, and the market price of our ADSs and ordinary shares could be adversely affected. It is unclear if this proposed legislation will be enacted. Furthermore, there has been recent deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. If any such policies were to materialize, the resulting legislation, if it were to apply to us, would likely have a material adverse impact on our business and the price of our ADSs and ordinary shares.
Risks Relating to Operating in the Gaming Industry in Macau
Melco Resorts Macau’s Subconcession Contract expires in 2022 and if we were unable to secure an extension of its subconcession, or a new concession or subconcession, in 2022, or if the Macau government were to exercise its redemption right, we would be unable to operate casino gaming in Macau.
The Subconcession Contract expires on June 26, 2022. Unless it is extended beyond this expiration date, a new concession or subconcession is granted and/or legislation on reversion of casino premises is amended, all of our casino premises and gaming-related equipment under Melco Resorts Macau’s subconcession will automatically revert to the Macau government without compensation and we will cease to generate revenues from such operations.
We cannot assure you that Melco Resorts Macau would be able to renew or extend the Subconcession Contract, or secure any new concession or subconcession, on terms favorable to us, or at all.
In addition, under the Subconcession Contract, the Macau government has the right, beginning from 2017, to redeem the Subconcession Contract by providing us with at least one year’s prior notice. In the event the Macau government exercises this redemption right, we would be entitled to compensation. Calculation of the amount of any such compensation would be determined based on the gross revenues generated by City of Dreams during the tax year immediately prior to the exercise of the redemption, multiplied by number of years of the remaining term of the subconcession. We would not receive any further compensation (including for consideration paid to Wynn Macau for the subconcession). We cannot assure you that if Melco Resorts Macau’s subconcession were redeemed, the compensation paid would be adequate to compensate us for the loss of future revenues.
Our business and operations in Macau are dependent upon our subconcession and, if we fail to comply with the complex legal and regulatory regime in Macau, our subconcession may be subject to revocation.
Under the terms of the Subconcession Contract, we are obligated to comply with all laws, regulations, rulings and orders promulgated by the Macau government from time to time. In addition, we must comply with all the terms of the Subconcession Contract which contains various general covenants and provisions, such as general and special duties of cooperation, special duties of information and obligations in relation to the execution of our investment plan, as to which the determination of compliance is subjective and depend, in part, on our ability to maintain continuing communications and good faith negotiations with the Macau government to ensure that we are performing our obligations under the subconcession in a manner that would avoid any violations. We cannot assure you that we will perform such covenants in a way that satisfies the requirements of the Macau government.
Under Melco Resorts Macau’s subconcession, the Macau government is allowed to request various changes in the plans and specifications of our Macau properties and impose business and corporate requirements that may be binding on us. For example, the Macau Chief Executive has the right to require that we increase Melco Resorts Macau’s share capital or that we provide certain deposits or other guarantees of performance with respect to the obligations of our Macau subsidiaries. Melco Resorts Macau must also first obtain the Macau government’s approval before raising certain financing. As a result, we cannot assure you that we will be able to comply with these requirements or any other requirements of the Macau government or with the other requirements and obligations imposed by the subconcession.
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The harshest penalty that may be imposed on us for failure to comply with the complex legal and regulatory regime in Macau and the terms of the Subconcession Contract is revocation of the subconcession. Under the subconcession, the Macau government has the right to unilaterally terminate the subconcession in the event of
 non-compliance
 by Melco Resorts Macau with its basic obligations under the subconcession and applicable Macau laws. If such a termination were to occur, all of our casino premises and gaming equipment would revert to the Macau government automatically without compensation to us and Melco Resorts Macau would be unable to operate casino gaming in Macau, which would have a material adverse effect on our financial condition, results of operations and cash flows and could result in defaults under our indebtedness agreements and a partial or complete loss of our investments in our projects. We would also be unable to recover the US$900 million consideration paid to Wynn Macau for the issue of the subconcession. For a list of termination events, see “Item 4. Information on the Company — B. Business Overview — Regulations — Gaming Licenses — The Subconcession Contract in Macau.” These events could lead to the termination of Melco Resorts Macau’s subconcession without compensation to Melco Resorts Macau. In many of these instances, the Subconcession Contract does not provide for a specific cure period within which any such events may be cured and the granting of any cure period, if at all, would be at the discretion of the Macau government.
Currently, there is no precedent on how the Macau government will treat the termination of a concession or subconcession and many of the laws and regulations relating to termination of a concession or subconcession have not yet been applied by the Macau government. Accordingly, the scope and enforcement of the provisions of Macau’s gaming regulatory system cannot be fully assessed.
Studio City faces significant risks and uncertainties which may materially and adversely affect our business, financial condition and results of operations.
Studio City commenced operations in October 2015. While we have made significant capital investments for the development of Studio City, the Studio City land grant conditions, including, among others, completing the development of the land on which Studio City is located, require additional capital investments for Studio City.
Furthermore, Studio City operates in a challenging competitive environment. For example, some of our competitors in Macau have expanded operations or have announced intentions for further expansion and developments in Cotai, where Studio City is located. See “— We face intense competition in Macau, the Philippines and elsewhere in Asia and may not be able to compete successfully.” Moreover, we face risks and uncertainties related to changes to the Chinese and Macau governments’ policies and regulations relating to gaming markets, including those affecting gaming table allocation and caps, smoking restrictions, exchange control and repatriation of capital, measures to control inflation and monetary transfers and travel restrictions.
In addition, in January 2019, Melco Resorts Macau informed Studio City Entertainment Limited that it will cease VIP gaming operations at the Studio City Casino in January 2020. In January 2020, Studio City announced that Melco Resorts Macau would continue VIP rolling chip operations at the Studio City Casino until January 15, 2021, subject to early termination with 30 days’ prior notice. There is no assurance or expectation that any additional gaming tables will be allocated to Studio City Casino, including any VIP gaming tables.
In addition, Studio City may find it challenging to comply with the terms imposed under its financing arrangements, especially during periods of challenging market conditions (including changes in China’s economy). The 2021 Studio City Senior Secured Credit Facility and the indentures governing the Studio City Notes impose certain operating and financial restrictions, including limitations on the ability to pay dividends, incur additional debt, make investments, create liens on assets or issue preferred stock. If we are unable to comply with such restrictions, it could cause repayment of our debt to be accelerated. In addition, such terms may also impair our ability to obtain additional financing for developing and completing the remaining project for the land of Studio City by May 31, 2022, in which case in the event no further extension is granted to complete such development or the Studio City land concession is terminated, we could lose all or substantially all
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of our investment in Studio City, including our interest in land and building and we may not be able to continue to operate Studio City. See “— The agreements governing our credit facilities and debt instruments contain certain covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions or otherwise take actions that may be in our best interests” and “We are developing the remaining project for Studio City under the terms of a land concession which currently require us to fully develop the land on which Studio City is located by May 31, 2022. If we do not complete development by that time and the Macau government does not grant us an extension of the development period, we could be forced to forfeit all or part of our investment in Studio City, along with our interest in the land on which Studio City is located and the buildings and structures on such land.”
All of the foregoing trends, risks and uncertainties may have a material adverse impact on our business, financial condition and results of operations.
Our gaming operations in Macau could be adversely affected by restrictions on the export of the Renminbi and any unfavorable fluctuations in the currency exchange rates of the Renminbi.
Gaming operators in Macau are currently prohibited from accepting wagers in Renminbi, the currency of China. There are currently restrictions on the export of the Renminbi outside of mainland China, including to Macau. For example, a Chinese citizen traveling abroad is only allowed to take a total of RMB20,000 plus the equivalent of up to US$5,000 out of China. The annual limit of RMB100,000 (US$14,364) is the aggregate amount that can be withdrawn overseas by any person from Chinese bank accounts and it was set by the Chinese government, with effect on January 1, 2018. In addition, the Chinese government’s ongoing anti-corruption campaign has led to tighter monetary transfer regulations, including real-time monitoring of certain financial channels, reducing the amount that China-issued ATM cardholders can withdraw in each withdrawal, imposing a limit on the annual aggregate amount that may be withdrawn and the launch of facial recognition and identity card checks with respect to certain ATM users, which could disrupt the amount of money visitors can bring from mainland China to Macau. Furthermore, a law with respect to the control of cross-border transportation of cash and other negotiable instruments to the bearer was enacted and came into effect on November 1, 2017. In accordance with such law, all individuals entering Macau with an amount in cash or negotiable instrument to the bearer equal to or higher than the amount of MOP120,000 (US$14,958) as determined by the Chief Executive of Macau are required to declare such amount to the customs authorities. Restrictions on the export of the Renminbi may impede the flow of gaming customers from China to Macau, inhibit the growth of gaming in Macau and negatively impact our operations.
In addition, the value of RMB against the U.S. dollar and other currencies may fluctuate and may be affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. In 2019, the value of RMB depreciated approximately 1.2% against the U.S. dollar. It remains difficult to predict how market forces or PRC or U.S. government policy, including the ongoing trade disputes between the PRC and the US governments may further exacerbate the devaluation of RMB against the U.S. dollar and other currencies in the future. Given that we derive a significant majority of our revenues from our Macau gaming business and a significant number of our gaming customers come from, and are expected to continue to come from, mainland China, any further devaluation of the RMB against the U.S. dollar and other currencies may affect the visitation and level of spending of these gaming customers and could in turn have a material adverse effect on our revenues and financial condition.
Adverse changes or developments in gaming laws or other regulations in Macau that affect our operations could be difficult to comply with or may significantly increase our costs, which could cause our projects to be unsuccessful.
Current laws in Macau, such as licensing requirements, tax rates and other regulatory obligations, including those for anti-money laundering, could change or become more stringent resulting in additional regulations being imposed upon gaming operations in Macau. See “— The gaming industries in Macau and the Philippines are highly regulated.”
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In September 2009, the Macau government set a cap on commission payments to gaming promoters of 1.25% of net rolling. This policy may limit our ability to develop successful relationships with gaming promoters and attract VIP rolling chip players, which in turn may adversely affect the financial performance of our VIP rolling chip operations. Any failure to comply with these regulations may result in the imposition of liabilities, fines and other penalties and may materially and adversely affect our subconcession. The Macau government is currently considering amending the Macau Administrative Regulation no. 6/2002, as amended by the Administrative Regulation 27/2009. The Macau government is, among other things, proposing more stringent and restrictive licensing requirements for gaming promoters, the imposition of new penalties and the increase of the amounts of current fines. See “Item 4. Information on the Company — B. Business Overview — Regulations — Macau Regulations — Gaming Promoters Regulations.” Increased regulatory scrutiny of gaming promoters in Macau has resulted, and may continue to result, in the cessation of business of certain gaming promoters, thereby resulting in remaining gaming promoters having significant leverage and bargaining strength in negotiating agreements, including negotiating changes to existing agreements, or the loss of business to competitors or the loss of relationships with certain gaming promoters.
In addition, the Macau government imposed regulations and restrictions that affect the minimum age required for entrance into casinos in Macau, entry into casinos by
off-duty
gaming related employees, location requirements for sites with gaming machine lounges, data privacy and other matters. Any such legislation, regulation or restriction imposed by the Macau government may have a material adverse impact on our operations, business and financial performance. Furthermore, our inability to address any of these requirements or restrictions imposed by the Macau government could adversely affect our reputation and result in criminal or administrative penalties, in addition to any civil liability and other expenses. See “Item 4. Information on the Company — B. Business Overview — Regulations — Macau Regulations — Gaming Regulations.”
Also, since January 1, 2019, smoking on the premises of casinos is only permitted in authorized segregated smoking lounges with no gaming activities, and such segregated smoking lounges are required to meet certain standards determined by the Macau government. Our properties currently have a number of segregated smoking lounges. We cannot assure you that the Macau government will not enact more stringent smoking control legislations. Such limitations imposed on smoking have and may deter potential gaming patrons who are smokers from frequenting casinos in Macau, which could adversely affect our business, results of operations and financial condition. See “Item 4. Information on the Company — B. Business Overview — Regulations — Macau Regulations — Smoking Regulations.”
Furthermore, in March 2010, the Macau government announced that the number of gaming tables operating in Macau should not exceed 5,500 until the end of the first quarter of 2013. On September 19, 2011, the Secretary for Economy and Finance of the Macau government announced that for a period of ten years thereafter, the total number of gaming tables to be authorized in Macau will increase by an amount equal to an average 3% per annum for ten years. The Macau government subsequently clarified that the allocation of tables over this
 ten-year
 period does not need to be uniform and tables may be
 pre-allocated
 to new properties in Macau. There is no assurance that we will be allocated any new gaming tables authorized by the Macau government, including in connection with the expansion of any existing properties or for any new properties we may develop in Macau.
The Macau government has also determined that tables authorized by the Macau government for mass market gaming operations may not be utilized for VIP gaming operations. These restrictions are not legislated or enacted into statutes or ordinances and, as such, different policies, including in relation to the annual increase rate in the number of gaming tables, may be adopted, and existing policies amended, at any time by the relevant Macau government authorities.
Current Macau laws and regulations concerning gaming and gaming concessions and matters such as prevention of money laundering are fairly recent or there is little precedent on the interpretation of these laws and regulations. These laws and regulations are complex and a court or an administrative or regulatory body may in
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the future render an interpretation of these laws and regulations or issue new or modified regulations that differ from our interpretation, which could have a material adverse effect on the operation of our properties and on our financial condition, results of operations, cash flows and prospects.
Our activities in Macau are subject to administrative review and approval by various departments of the Macau government. For example, our business activities are subject to the administrative review and approval by the DICJ, Macau health department, Macau labor bureau, Macau public works bureau, Macau fire department, Macau finance department and Macau government tourism office. We cannot assure you that we will be able to obtain or maintain all necessary approvals, which may materially affect our business, financial condition, results of operations, cash flows and prospects. Macau law permits redress to the courts with respect to administrative actions. However, such redress is largely untested in relation to gaming regulatory issues.
The Macau government has established a maximum number of gaming tables that may be operated in Macau and may limit the number of new gaming tables at new gaming areas in Macau.
The Macau government has imposed a cap on gaming tables and restricts the number of gaming tables that may be operated in Macau. A cap of 5,500 tables up to the end of the first quarter of 2013 was implemented. In addition, for a period of ten years commencing from the second quarter of 2013, the number of gaming tables to be authorized by the Macau government will be limited to an average annual increase of 3%. According to the DICJ, the number of gaming tables in Macau as of December 31, 2019, was 6,739. The Macau government has reiterated further that it does not intend to authorize the operation of any new casino or gaming area that was not previously authorized by the government, or permit tables authorized for mass market gaming operations to be utilized for VIP gaming operations or authorize the expansion of existing casinos or gaming areas. Given such announcements by the Macau government, we may not be able to obtain Macau government’s approval to expand our existing casinos or gaming areas or operate a sufficient number of gaming tables at our properties in Macau. These restrictions may have a material impact on our gaming revenues, overall business and operations and may adversely affect our development projects and the future expansion of our business.
Melco Resorts Macau’s tax exemption from complementary tax on income from gaming operations under the subconcession tax will expire in 2021, and we may not be able to extend it.
Companies in Macau are subject to complementary tax of up to 12% of taxable income, as defined in relevant tax laws. We are also subject to a 35% special gaming tax on our gaming revenues as well as other levies of 4% imposed under the Subconcession Contract. Such other levies may be subject to change in the event the Subconcession Contract is renegotiated and as a result of any change in relevant laws. The Macau government granted to Melco Resorts Macau the benefit of a corporate tax holiday on gaming profits in Macau until 2021. In addition, the Macau government has granted to one of our subsidiaries in Macau the complementary tax exemption until 2021 on profits generated from income received from Melco Resorts Macau, to the extent that such income is derived from Studio City gaming operations and has been subject to gaming tax. The dividend distributions of such subsidiary to its shareholders continue to be subject to complementary tax. We cannot assure you that the corporate tax holiday benefits will be extended beyond their expiration dates.
For the five-year period from 2017 through 2021, an annual payment of MOP18.9 million (equivalent to approximately US$2.3 million) is payable by Melco Resorts Macau with respect to tax due for dividend distributions to the shareholders of Melco Resorts Macau from gaming profits, whether such dividends are actually distributed by Melco Resorts Macau or not, or whether Melco Resorts Macau has distributable profits in the relevant year. Upon the payment of such payment amount, the shareholders of Melco Resorts Macau will not be liable to pay any other tax in Macau for dividend distributions received from gaming profits. We cannot assure you that the same arrangement will be applied beyond 2021 or that, in the event a similar arrangement is adopted, whether we will be required to pay a higher annual sum.
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Risks Relating to Operating in the Gaming Industry in the Philippines
The land and buildings comprising the site occupied by City of Dreams Manila is leased by Melco Resorts Leisure and thus subject to risks associated with tenancy relationships.
Melco Resorts Leisure entered into a lease agreement on October 25, 2012, which became effective on March 13, 2013 (“Lease Agreement”), pursuant to which it leases from Belle Corporation the land and buildings occupied by City of Dreams Manila, which, in turn, leases part of the land from the Philippine government’s social security system (the “Social Security System”). Numerous potential issues or causes for disputes may arise from a tenancy relationship, such as with respect to the provision of utilities on the premises, rental lease payments, or any adjustments thereto, and the maintenance and normal repair of the buildings, any of which could result in an arbitrable dispute between Belle Corporation and Melco Resorts Leisure. There can be no assurance that any such dispute would be resolved or settled amicably or expediently or that Melco Resorts Leisure will not encounter any material issues with respect to its tenancy relationship with Belle Corporation. Furthermore, during the pendency of any dispute, Belle Corporation, as lessor, could discontinue essential services necessary for the operation of City of Dreams Manila, or seek relief to oust Melco Resorts Leisure from possession of the leased premises. Any prolonged or substantial dispute between Belle Corporation and Melco Resorts Leisure, or any dispute arising under the lease agreement between Belle Corporation and the Social Security System, could have a material adverse effect on the operations of City of Dreams Manila, which would in turn adversely affect our business, financial condition and results of operations. In addition, any negative publicity arising from disputes with, or
 non-compliance
 by, Belle Corporation with the Lease Agreement would have a material adverse effect on our business and prospects, financial condition and results of operations.
Furthermore, the Lease Agreement may be terminated under certain circumstances, including Melco Resorts Leisure’s
 non-payment
 of rent, or if either party fails to substantially perform any material covenants under the Lease Agreement and fails to remedy such
 non-performance
 in a timely manner, which would cause a material adverse effect on our business and prospects, financial condition, results of operations and cash flows.
If the termination of certain agreements which Belle Corporation previously entered into with another casino operator and other third parties is not effective, such operator and third parties may seek to enforce these agreements against Belle Corporation or MRP as a
 co-licensee
 of Belle Corporation, which could adversely impact City of Dreams Manila and MRP.
Melco Resorts Leisure is designated as the sole operator under the provisional gaming license issued by PAGCOR on December 12, 2008 for the development of an integrated tourism resort and to establish and operate a casino within Entertainment City in Manila, the Philippines, under which the Melco Philippine Parties and the Philippine Parties are
co-licensees
pursuant to the Amended Certificate of Affiliation and Provisional License dated January 28, 2013 (the “Provisional License”). Prior to this, Belle Corporation and the other Philippine Parties subsequently elected to terminate such contracts and the operator with whom Belle Corporation previously contracted, on behalf of itself and such third-party contractors, signed a waiver releasing the Philippine Parties from all obligations thereunder. Although Belle Corporation agreed to indemnify the Melco Philippine Parties from any loss suffered in connection with the termination of such contracts, there can be no assurance that Belle Corporation will honor such agreement. Any issues which may arise from such contracts and their counterparties, or any attempt by another operator or any other third party contractor to enforce provisions under such contracts, could interfere with MRP’s operations or cause reputational damage, which would in turn materially and adversely affect our business, financial condition and results of operations.
Compliance with the terms of the Philippine License, MRP’s ability to operate City of Dreams Manila and the success of City of Dreams Manila as a whole are dependent on the actions of the other Philippine Licensees over which MRP has no control.
Although Melco Resorts Leisure is the sole operator of City of Dreams Manila, the ability of the Melco Philippine Parties to operate City of Dreams Manila, as well as the fulfillment of the terms of the
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Philippine License granted by PAGCOR in relation to City of Dreams Manila, depends to a certain degree on the actions of the Philippine Parties. For example, the Philippine Parties, as well as the Melco Philippine Parties, are responsible for meeting a certain debt to equity ratio as specified in the Philippine License. The failure of any of the Philippine Parties to comply with these conditions would constitute a breach of the Philippine License. As the Philippine Parties are separate corporate entities over which MRP has no control, there can be no assurance that the Philippine Parties will remain in compliance with the terms of the Philippine License of their obligations and responsibilities under cooperation agreement (as amended) entered into between the Philippine Parties and the Melco Philippine Parties on October 25, 2012, which became effective on March 13, 2013. In the event of any
 non-compliance,
 there can be no assurance that the Philippine License will not be suspended or revoked. In addition, if any of the Philippine Parties fails to comply with any of the conditions to the Philippine License, MRP may be forced to take action against the Philippine Parties under the cooperation agreement between the Philippine Parties and the Melco Philippine Parties or to enter into negotiations with PAGCOR for amendments to the Philippine License. There can be no assurance that any attempt to amend the Philippine License would be successful. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.
Furthermore, under the cooperation agreement between the Philippine Parties and the Melco Philippine Parties, the Philippine Parties are required to contribute the land and building structures for City of Dreams Manila. There can be no assurance that the title to the land and building structures for City of Dreams Manila will not be challenged by third parties or the Philippine government in the future. Any such event, each of which is beyond MRP’s control, may curtail the ability of MRP to operate City of Dreams Manila in an efficient manner or at all and have a material adverse effect on our business, financial condition and results of operations.
Melco Resorts Leisure’s right to operate City of Dreams Manila is subject to certain limitations.
Melco Resorts Leisure’s right to operate City of Dreams Manila is subject to certain limitations under the operating agreement for the management and operation of City of Dreams Manila, entered into among Melco Resorts Leisure and the Philippine Parties. For example, Melco Resorts Leisure is prohibited from entering into any contract for City of Dreams Manila outside the ordinary course of the operation and management of City of Dreams Manila with an aggregate contract value exceeding US$3.0 million (such contract value to be increased by 5.0% each year on each anniversary date of the operating agreement) without the consent of the other Philippine Licensees. In addition, Melco Resorts Leisure is required to remit specified percentages of the mass market and VIP gaming earnings before interest, tax, depreciation and amortization or net revenues derived from City of Dreams Manila to PremiumLeisure and Amusement Inc.
If Melco Resorts Leisure is unable to comply with any of the provisions of the operating agreement, the other parties to the operating agreement may bring lawsuits and seek to suspend or replace Melco Resorts Leisure as the sole operator of City of Dreams Manila, or terminate the operating agreement. Moreover, the Philippine Parties may terminate the operating agreement if Melco Resorts Leisure materially breaches the operating agreement. Termination of the operating agreement, whether resulting from Melco Resorts Leisure’s or the Philippine Parties’
 non-compliance
 with the operating agreement, would cause a material adverse effect on our business and prospects, financial condition, results of operations and cash flows.
Melco Resorts Leisure may be forced to suspend VIP gaming operations at City of Dreams Manila under certain circumstances.
Under the operating agreement for City of Dreams Manila, Melco Resorts Leisure must periodically calculate, on a
 24-month
 basis, the respective amounts of VIP gaming earnings before interest, tax, depreciation and amortization derived from City of Dreams Manila (the “PLAI VIP EBITDA”) and VIP gaming net win derived from City of Dreams Manila pursuant to the operating agreement (the “PLAI VIP Net Win”) and report such amounts to the Philippine Parties. If the PLAI VIP EBITDA is less than the PLAI VIP Net Win, the Philippine Licensees must meet within ten business days to discuss and review City of Dreams Manila’s financial
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performance and agree on any changes to be made to the business operations of City of Dreams Manila and/or to the payment terms under the operating agreement. If such an agreement cannot be reached within 90 business days, Melco Resorts Leisure must suspend VIP gaming operations at City of Dreams Manila.
Any suspension of VIP gaming operations at City of Dreams Manila would materially and adversely impact gaming revenues from City of Dreams Manila. Moreover, suspension of VIP gaming operations could effectively lead Melco Resorts Leisure to limit or suspend certain
 non-gaming
 operations focusing on VIP players, such as the VIP hotel and VIP lounge, which would further reduce revenues from City of Dreams Manila. Any suspension of VIP gaming operations, even for a brief period of time, could also damage the reputation and reduce the attractiveness of City of Dreams Manila as a premium gaming destination, particularly among premium direct players and other VIP players, as well as gaming promoters, which could have a material adverse effect on our business, financial condition and results of operations.
MRP’s strategy to attract Premium Market customers to City of Dreams Manila may not be effective.
A part of MRP’s strategy for City of Dreams Manila is to capture a share of the premium gaming market in the region. Compared to general market patrons, whose typical wagers are relatively low, premium market patrons usually have higher minimum bets. Despite its targeted marketing efforts, there can be no assurance that the premium market customers will be incentivized to play in City of Dreams Manila rather than in comparable properties in Macau or elsewhere in the region, as these players may be unfamiliar with the Philippines or refuse to change their normal gaming destination. If MRP is unable to expand in the premium market as it intends, this would adversely affect its and/or our business and results of operations.
Changes in public acceptance of gaming in the Philippines may adversely affect City of Dreams Manila.
Public acceptance of gaming changes periodically in various gaming locations in the world and represents an inherent risk to the gaming industry. In addition, the Philippine Catholic Church, community groups,
non-governmental
 organizations and individual government officials have, on occasion, taken strong and explicit stands against gaming. PAGCOR has in the past been subject to lawsuits by individuals trying to halt the construction of casinos in their communities. Church leaders have on occasion called for the abolition of PAGCOR. There can be no guarantee that negative sentiments will not be expressed in the future against City of Dreams Manila or integrated casino resorts in general, which may reduce the number of visitors to City of Dreams Manila and materially and adversely affect our business, financial condition and results of operations.
MRP may be unable to successfully register City of Dreams Manila as a tourism enterprise zone with the Philippine Tourism Infrastructure and Enterprise Zone Authority, an agency of the Philippine Department of Tourism (“TIEZA”).
While Melco Resorts Leisure intends to apply for a designation as a tourism enterprise with TIEZA, there can be no assurance that TIEZA will approve the designation of Melco Resorts Leisure as a tourism enterprise. If Melco Resorts Leisure is unable to register as a tourism enterprise with TIEZA, it will not be entitled to certain fiscal incentives provided to some of Melco Resorts Leisure’s competitors that are registered as tourism enterprises under TIEZA. For example, MRP’s liability for value added tax (“VAT”) on its sales largely depends on whether it may avail itself of tax incentives under TIEZA. If tax incentives under TIEZA are not available to MRP, it will be liable for VAT, which may result in a material adverse effect on our business and prospects, financial condition, results of operations and cash flows.
In addition, if Melco Resorts Leisure is able to register as a tourism enterprise with TIEZA, it will then be required to withdraw its current registration as a tourism economic zone enterprise with the Philippine Economic Zone Authority. The process of shifting from a tourism economic zone enterprise under the Philippine Economic Zone Authority to a tourism enterprise under TIEZA is uncertain. There is also uncertainty with respect to the fiscal incentives that may be provided to a registered tourism enterprise under TIEZA. Any of the
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foregoing results could have a material adverse effect on our business, financial condition and results of operations.
However, several legislative bills were previously passed and are currently pending in the Philippine legislature with a view towards rationalizing fiscal incentives currently granted to certain enterprises and activities, including tourism enterprises. It is uncertain whether these bills will be passed into law, or what the effect, if any, will be on the incentives currently granted to qualified tourism enterprises under the Republic Act No. 9593, of the Philippines, or the Tourism Act of 2009.
MRP’s gaming operations are dependent on the Philippine License issued by PAGCOR.
PAGCOR regulates all gaming activities in the Philippines except for lottery, sweepstakes, jueteng, horse racing and gaming inside the Cagayan Export Zone. City of Dreams Manila’s gaming areas may only legally operate under the Philippine License granted by PAGCOR, which imposes certain requirements on the Melco Philippine Parties and their service providers. The Philippine License is also subject to suspension or termination upon the occurrence of certain events. The requirements imposed by the Philippine License include, among others:
  • payment of monthly license fees to PAGCOR;
  • maintenance of a
 debt-to-equity
 ratio (based on calculation as agreed with PAGCOR) for each of the Philippine Licensees of no greater than 70:30;
  • at least 95.0% of the total employees of City of Dreams Manila must be Philippine citizens;
  • 2.0% of certain casino revenues must be remitted to a foundation devoted to the restoration of cultural heritage and 5.0% of certain
 non-gaming
 revenues to PAGCOR; and
  • operation of only the authorized casino games approved by PAGCOR.
Moreover, certain provisions and requirements of the Philippine License are open to different interpretations and have not been interpreted by Philippine courts or made subject to more detailed interpretative rules. There is no guarantee that the Melco Philippine Parties’ proposed mode of compliance with these or other requirements of the Philippine License will be free from administrative or judicial scrutiny in the future. Any difference in interpretation between PAGCOR and MRP with respect to the Philippine License could result in sanctions against the Melco Philippine Parties, including fines or other penalties, such as suspension or termination of the Philippine License.
There can be no assurance that the Philippine Licensees will be able to continuously comply with all of the Philippine License’s requirements, or that the Philippine License will not be modified to contain more onerous terms or amended in such a manner that would cause the Philippine Licensees to lose interest in the operation of City of Dreams Manila. If the Philippine License is materially altered or revoked for any reason, including the failure by any of the Philippine Licensees to comply with its terms, MRP may be required to cease City of Dreams Manila’s gaming operations, which would have a material adverse effect on our business, financial condition and results of operations. In addition, a failure in the internal control systems of MRP may cause PAGCOR to adversely modify or revoke the Philippine License. Finally, the Philippine License will terminate in 2033, coinciding with the PAGCOR Charter’s termination, and there is no guarantee that the PAGCOR Charter or the Philippine License will be renewed.
In addition, City of Dreams Manila’s gaming operations is highly regulated in the Philippines. As PAGCOR is also a gaming operator, there can be no assurance that PAGCOR will not withhold certain approvals from the Melco Philippine Parties in order to favor its own gaming operations. PAGCOR may also modify or impose additional conditions on its licensees or impose restrictions or limitations on Melco Resorts Leisure’s casino operations that would interfere with Melco Resorts Leisure’s ability to provide VIP services, which could adversely affect MRP’s business, financial condition and results of operations.
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City of Dreams Manila may be required to obtain an additional legislative franchise, in addition to its Philippine License.
On August 2, 2017, House Bill No. 6111 was filed which proposed the creation of the Philippine Amusements and Gaming Authority, or PAGA, which will replace PAGCOR as the regulatory agency of gaming activities in the Philippines. Also under House Bill No. 6111, the holders of gaming licenses in the Philippines, including the Philippine Licensees, will be required to obtain from the Philippine Congress a legislative franchise to operate gambling casinos, gaming clubs and other similar gambling enterprises within one year from the date of the proposed law’s effectiveness.
 Non-compliance
 will result in the operations of holders of gaming licenses in the Philippines, including the Philippine Licensees, to be considered as illegal. On October 2, 2017, House Bill No. 6514 was filed whose provisions are essentially similar to House Bill No. 6111, particularly on the need for holders of gaming licenses in the Philippines, including the Philippine Licensees, to obtain from the Philippine Congress a legislative franchise within one year from the date of the proposed law’s effectiveness.
It is not yet known if House Bills 6111 and 6514, in their current form, will be approved by the House of Representatives, Senate or signed into law by the President. In the event that House Bills 6111 and 6514 are signed into law, City of Dreams Manila may be required to obtain an additional legislative franchise in addition to its Philippine License and there can be no assurance that such a franchise, which requires legislative approval, will be granted. In addition, the Philippine License may be subject to amendment or repeal by the Philippine Congress. In the event City of Dreams Manila is not granted any required franchise, or the Philippine License is materially amended or repealed, the operation of City of Dreams Manila may cease, which would have a material adverse effect on our business, financial condition and results of operations.
There exists uncertainty over whether holders of gaming licenses in the Philippines, including the gaming operations of our Philippine subsidiaries, will be subject to corporate income, value added or other tax assessments, in addition to the license fees paid to PAGCOR.
There exists uncertainty over whether holders of gaming licenses in the Philippines, including the gaming operations of our Philippine subsidiaries, will be subject to corporate income tax at the rate of 30%, value-added tax and other tax assessments in addition to the license fees paid to PAGCOR pursuant to the Philippine License. On March 2011, the Supreme Court of the Philippines issued an order implicitly revoking PAGCOR’s exemption from corporate income tax under the PAGCOR Charter and removing PAGCOR from the list of government-owned and controlled corporations that are exempt from paying corporate income tax. Subsequently, in April 2013, the Bureau of Internal Revenue of the Philippines (“BIR”) issued a circular indicating that PAGCOR and its licensees and contractees are subject to corporate income tax on their gambling, casino, gaming club and other similar recreation or amusement and gaming pool operations.
In connection with the 2011 Supreme Court decision described above, PAGCOR, in May 2014, issued a regulation allowing holders of gaming licenses in the Philippines and the other casino operators to reallocate ten percent (10%) of the monthly license fees to be remitted to PAGCOR. This 10% would be used to pay any corporate income tax that may be levied against such license holders and the other casino operators at the end of the fiscal year, and any remaining amount after paying such tax would be remitted to PAGCOR. On August 15, 2016, PAGCOR advised the holders of gaming licenses in the Philippines that the reallocation of the 10% of the license fees will be discontinued. In February 2015, the Supreme Court of the Philippines issued another decision stating that PAGCOR’s income from its gaming operations can only be subject to a five percent (5%) franchise tax, and not corporate income tax. In addition, the Supreme Court of the Philippines in its February 2015 decision ruled that despite amendments to the National Internal Revenue Code, the PAGCOR Charter remains in effect, and thus, income from gaming operations shall not be subject to corporate income tax. In August 2016, the Supreme Court of the Philippines accepted the petition filed by Bloomberry Resorts and Hotels, Inc., one of the four PAGCOR licensees and operator of Solaire, against the BIR to cease and desist from imposing corporate income tax on income derived from gaming operations. The BIR filed a motion for reconsideration of the August 2016 decision, which the Supreme Court of the Philippines denied in November 2016, and which denial has become final and executory.
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Notwithstanding the 2015 and 2016 Supreme Court decisions and the subsequent developments described above, BIR has taken various measures to impose corporate income, value added and other taxes on income derived from gaming operations in the Philippines. In light of the actions and positions taken by BIR, it is uncertain whether the 2015 and 2016 Supreme Court decision described above would be enforced and there is no assurance that the 2016 Supreme Court decision would be applicable to holders of gaming licenses in the Philippines, including our Philippine subsidiaries. Furthermore, there is no assurance that the gaming operations of our Philippine subsidiaries would not become subject to value added and other tax assessments imposed by BIR and other Philippine authorities. Any assessment of corporate income, value added or other taxes on the gaming operations of our Philippine subsidiaries may be significant in amount and any requirement to pay such taxes would have a material adverse effect on our business, financial condition and results of operations.
On December 19, 2017, Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act, was signed into law and took effect on January 1, 2018. The Tax Reform for Acceleration and Inclusion Act changed existing tax laws and included several provisions that will generally affect businesses on a prospective basis. Any future amendment on the Tax Reform for Acceleration and Inclusion Act, such as changes on the application of value added and corporate income taxes, as they apply to PAGCOR or the casinos, may have significant impact on our business.
The Philippine Licensees may further be subject to other forms of taxes that may be implemented by the Philippine government in the future.
MRP is exposed to risks in relation to MRP’s previous business activities and industry.
Prior to our acquisition of MRP, MRP’s primary business was the manufacture and processing of pharmaceutical products. The pharmaceuticals industry is highly regulated in the Philippines and abroad. There can be no assurance that MRP will not be involved in or subject to claims, allegations or suits with respect to its previous activities in the pharmaceutical industry for which MRP may not be insured fully or at all. Although MRP has indemnities as to certain liabilities or claims or other protections put in place, any adverse claim or liability imputed to MRP with respect to its previous business activities could have a material adverse effect on its business and prospects, financial condition, results of operations and cash flow.
Our Philippine operations may be adversely affected by policy changes in the Philippines.
Our Philippine operations may be adversely affected by changes in policies due to changes in government personnel in the Philippines, including but not limited to any changes following elections in the Philippines. There can be no assurance that newly elected or appointed officials will not modify previous policies in relation to the development and operation of integrated tourism resorts in the Philippines, tax incentives extended to their developers or operators or policies on gaming and tourism in the Philippines in general. Newly elected or appointed officials may also impose more stringent or additional conditions on gaming licenses or seek to discourage Philippine citizens from gambling by imposing restrictions. We are unable to predict whether new officials will seek to further alter or impose stricter conditions relating to gaming in the Philippines. Adverse changes in policies and regulations by the current administration or any officials elected or appointed in the future in the Philippines could disrupt the operations of our Philippine subsidiaries and materially and adversely affect our financial condition and results of operations.
Risks Relating to Operating in the Gaming Industry in Cyprus
Our operations in Cyprus, particularly the development of City of Dreams Mediterranean, face significant risks and uncertainties which may materially and adversely affect our business, financial condition and results of operations.
We recently commenced our operations in Cyprus, which include a temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos and the development of City of Dreams
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Mediterranean. In July 2019, we acquired a 75% equity interest in ICR Cyprus from Melco International, our controlling shareholder, while the remaining 25% equity interest in ICR Cyprus is held by The Cyprus Phassouri (Zakaki) Limited. We have entered into a shareholders’ agreement with The Cyprus Phassouri (Zakaki) Limited regarding certain commercial and financial arrangements pursuant to which we will, as more fully set out in additional management and service contracts, (i) provide certain corporate-level management services to ICR Cyprus and its subsidiaries for a fixed amount of EUR2 million per annum and (ii) have the right to receive an allotment of preference shares in the gaming license-holding subsidiary of ICR Cyprus, which will provide the right to a preferential dividend, among other terms.
We will require the continued partnership and cooperation of The Cyprus Phassouri (Zakaki) Limited for the operation of our Cyprus casinos which have commenced fairly recently. The temporary casino in Limassol and two satellite casinos in Nicosia and Larnaca opened in 2018, the third satellite casino opened in 2019 in Ayia Napa and our fourth satellite casino in Paphos opened in February 2020. In addition, our City of Dreams Mediterranean project, which requires significant investment of capital and other resources, is still under development and is required to open by the end of 2021 under the terms of the Cyprus License. Our operations in Cyprus are also subject to ongoing compliance with various laws, regulations, licenses, permits and renewals of those licenses and permits. Given our short operating history and limited experience in Cyprus, which also represents our first significant business venture outside of Asia, it may be difficult for us to comply with the applicable laws and regulations or to secure all necessary licenses and permits in Cyprus, which could be time-consuming and significantly increase our costs. In addition, Cyprus is a new gaming market and we may not achieve the intended results or return through our operations in Cyprus.
While we have already made significant capital investments for the development and operation of our operations in Cyprus, the ongoing development of City of Dreams Mediterranean requires further significant additional capital investments. Based on our current plan for the development of City of Dreams Mediterranean integrated resorts project, we currently expect a project budget of approximately US$550 million to US$600 million (inclusive of the land cost but exclusive of any pre-opening costs and financing costs). The development of City of Dreams Mediterranean may be funded through various sources, including equity, cash on hand, operating free cash flow as well as other financing and we currently expect a significant portion will be funded by external debt financings. We will be required to obtain approval from, or the consent of, or notify relevant government authorities, including the CGC, in order to enter into such debt financings. Given that this is the first significant integrated casino resort project to be developed in Cyprus, we may face difficulty in obtaining the necessary approvals or consents in a timely manner or at all. Our ability to obtain such debt financing also depends on a number of factors beyond our control, including market conditions such as the higher prospect of a global recession and a severe contraction of liquidity in the global credit markets caused by the effect of the recent large-scale global
Covid-19
pandemic and recent decline in oil prices and lenders’ perceptions of, and demand for the debt financing for our City of Dreams Mediterranean project. Under the shareholders’ agreement entered into between us and The Cyprus Phassouri (Zakaki) Limited regarding ICR Cyprus, the shareholders are obligated to use all commercially reasonable endeavors, subject to certain terms and conditions, to source debt financing of up to EUR437 million (equivalent to approximately US$491 million) for the development of City of Dreams Mediterranean. To the extent there is a shortfall in the amount of third-party debt available (or available on commercially-acceptable terms), we are obligated to fund the shortfall up to the full amount of EUR437 million (equivalent to approximately US$491 million) on terms which are, subject to certain terms and conditions, no less favorable to the project than any commercially-acceptable terms available in the commercial lending market. In connection therewith, a shareholder loan agreement for up to EUR275 million (equivalent to approximately US$309 million) was entered into by a subsidiary of the Company as lender, and Integrated Casino Resorts as borrower in March 2020. There is no guarantee that we can secure the necessary additional capital investments, including any debt financing, required for the ongoing development of the City of Dreams Mediterranean project in a timely manner or at all. In addition, our plan for the City of Dreams Mediterranean project may be subject to additional risks, particularly labor shortages exacerbated by the recent Covid-19 outbreak and resulting disruptions as well as further revisions and changes to certain design elements which remain subject to further refinement and development. For example, construction work at our City of Dreams
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Mediterranean project has been suspended from March 24, 2020 to April 13, 2020 as required by the Cyprus government under the restrictions imposed to restrict non-essential business activities due to the Covid-19 outbreak and the restriction dates are subject to further review and change by the Cyprus government. There is also no assurance that the Cyprus government will not impose additional restrictions due to the Covid-19 outbreak, including a further suspension of construction work at City of Dreams Mediterranean beyond April 13, 2020, which could cause further significant disruptions to the construction work at City of Dreams Mediterranean.
All of these uncertainties increase the risk that construction in Cyprus will not be completed on time and that our construction costs will increase. If we fail to commence operations of City of Dreams Mediterranean by December 31, 2021 without an extension granted by the government of Cyprus, and the government of Cyprus exercises its right to terminate the Cyprus License, we could lose all or substantially all of our investment in Cyprus and may not be able to continue our Cyprus operations as planned. In such event, we would also be required to pay a penalty to the Cyprus government and/or may have the Cyprus License terminated if such delay continues beyond a grace period of 100 business days.
All of the foregoing trends, risks and uncertainties may have a material adverse impact on our business, financial condition and results of operations.
Cyprus’ gaming operations are dependent on the Cyprus License issued by CGC and any failure to comply with the terms of the Cyprus License could have a material adverse effect on our business, financial condition and results of operations.
Our operations in Cyprus, including a temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos and the development of City of Dreams Mediterranean, are dependent on the Cyprus License granted by the government of Cyprus to Integrated Casino Resorts on June 26, 2017. Under the Cyprus License, Integrated Casino Resorts has been granted the right to develop, operate and maintain an integrated casino resort in Limassol, Cyprus (and until the operation of such integrated casino resort, the operation of a temporary casino in Limassol) and up to four satellite casino premises in Cyprus, for a term of 30 years from the date of grant with the right for exclusivity in Cyprus for the first 15 years of the term. The Cyprus License imposes certain requirements and conditions on Integrated Casino Resorts and its service providers, including the threat of suspension or termination of the Cyprus License upon the occurrence of certain events. Such requirements include, among others:
  • in connection with the operation of the temporary casino and City of Dreams Mediterranean, payment to the government of Cyprus of an annual license fee of EUR2.5 million (equivalent to approximately US$2.8 million) per year for the first four-year period commencing from June 26, 2017, the grant date of the Cyprus License, and an annual license fee of EUR5.0 million (equivalent to approximately US$5.6 million) per year for the second four-year period. Upon completion of the above eight-year period and for each four-year period thereafter, the government of Cyprus may review the annual license fee payable for each four-year term, provided that the annual license fee payable per year shall be no less than EUR 5.0 million (equivalent to approximately US$5.6 million) and subject to a maximum percentage increase;
  • in connection with the operation of the satellite casino in Nicosia, payment to the government of Cyprus of an annual license fee of EUR1.0 million (equivalent to approximately US$1.1 million) per year since its commencement of operations in 2018;
  • in connection with the operation of each of the satellite casinos in Larnaca, Ayia Napa and Paphos, payment to the government of Cyprus of an annual license fee of EUR0.5 million (equivalent to approximately US$0.6 million) per year since their operations commenced in 2018, 2019 and 2020, respectively; and
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  • payment to the government of Cyprus of a monthly casino tax of an amount equal to 15% of the gross gaming revenue, such casino tax not to be increased during the initial
15-year
exclusivity period under the Cyprus License.
In addition, we are also required under the Cyprus License to complete the City of Dreams Mediterranean project and commence operations by December 31, 2021. In the event we are not able to commence operations by December 31, 2021 without an extension granted by the government of Cyprus and the government of Cyprus exercises its right to terminate the Cyprus License, we could lose all or substantially all of our investment in Cyprus and may not be able to continue our Cyprus operations as planned. In such event, we would also be required to pay a penalty to the Cyprus government and/or may have the Cyprus License terminated if such delay continues beyond a grace period of 100 business days.
Moreover, given that the Cyprus License is the first casino license granted in Cyprus, certain provisions and requirements of the Cyprus License have not yet been interpreted by Cyprus courts and may thereby be subject to different interpretations. There is no guarantee that Integrated Casino Resorts’ proposed mode of compliance with these or other requirements of the Cyprus License will be free from administrative or judicial scrutiny in the future. Any difference in interpretation of such Cyprus License requirements between the CGC and/or the government of Cyprus on the one hand and Integrated Casino Resorts on the other could result in sanctions against Integrated Casino Resorts, including fines or other penalties such as suspension or even termination of the Cyprus License.
There can be no assurance that we will be able to continuously comply with all of the requirements under the Cyprus License, or that the Cyprus License will not be modified to contain more onerous terms or in such other manner that would cause us to lose our interest in our Cyprus operations, particularly when the initial
15-year
exclusivity period expires in 2032. If the Cyprus License is materially altered or revoked for any reason, including due to any failure by us to comply with its terms, we may be required to cease our gaming operations in Cyprus, which would have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Our Corporate Structure and Ownership
Our controlling shareholder has a substantial influence over us, and its interests in our business may be different than yours. We have had, and may continue to have, transactions with our controlling shareholder and its affiliates and such transactions may create conflicts of interest between us and our controlling shareholder.
As of March 27, 2020, Melco International’s beneficial ownership in our Company was approximately 55.80%. There are risks associated with the possibility that Melco International may: (i) have economic or business interests or goals that are inconsistent with ours; (ii) have operations and projects elsewhere in Asia or elsewhere in the world that compete with our businesses in Macau, the Philippines and in other countries and for available resources and management attention; (iii) take actions contrary to our policies or objectives; or (iv) have financial difficulties. In addition, there is no assurance that the laws and regulations relating to foreign investment in Melco International’s governing jurisdictions will not be altered in such a manner as to result in a material adverse effect on our business and operating results.
In addition, Melco International has the power, among other things, to elect or appoint all of the directors to our board, including our independent directors, appoint and change our management, affect our legal and capital structure and our
 day-to-day
 operations, approve material mergers, acquisitions, dispositions and other business combinations and approve any other material transactions and financings. These actions may be taken in many cases without the approval of other shareholders and the interests of Melco International may conflict with your interests as minority shareholders.
We have entered into various related party transactions with Melco International and its affiliates and subsidiaries. For example, we acquired a 75% equity interest in ICR Cyprus from Melco International on July 31,
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2019. Prior to this acquisition, we had entered into arrangements with Melco International to provide planning, designing, construction and other services to Melco International and its subsidiaries in connection with the City of Dreams Mediterranean project. We may, from time to time, enter into additional agreements and arrangements with Melco International or its affiliates or subsidiaries in connection with other projects. We may, from time to time, purchase, acquire or invest in other assets, companies or projects held or sponsored by Melco International or its affiliates or subsidiaries. The consideration or amount of such purchase, acquisition or investment may be material or significant. While we believe the terms of agreements and arrangements we have with Melco International or its affiliates or subsidiaries are commercially reasonable, the determination of such commercial terms are subject to judgment and estimates and we may have obtained different terms had we entered into such agreements or arrangements with independent third parties.
Melco International may pursue additional casino projects in Asia, Europe or elsewhere, which, along with its current operations, may compete with our projects in Macau, the Philippines and Cyprus, which could have material adverse consequences to us and the interests of our minority shareholders.
Melco International may take action to construct and operate new gaming projects located in other countries in the Asian region, Europe or elsewhere, which, along with its current operations, may compete with our projects in Macau, the Philippines and Cyprus and could have adverse consequences to us and the interests of our minority shareholders. We could face competition from these other gaming projects as well as competition from regional competitors. We expect to continue to receive significant support from Melco International in terms of its local experience, operating skills, international experience and high standards. Should Melco International decide to focus more attention on casino gaming projects located in other areas of Asia or elsewhere that may be expanding or commencing their gaming industries, or should economic conditions or other factors result in a significant decrease in gaming revenues and number of patrons in Macau, the Philippines and/or Cyprus, Melco International may make strategic decisions to focus on their other projects rather than us, which could adversely affect our growth.
Casinos and integrated gaming resorts are becoming increasingly popular in Asia, giving rise to more opportunities for industry participants and increasing regional competition. We cannot guarantee you that Melco International will make strategic and other decisions which do not adversely affect our business.
Changes in our share ownership, including a change of control of our subsidiaries’ shares, could result in our subsidiaries’ inability to draw loans or cause events of default under our subsidiaries’ indebtedness, or could require our subsidiaries to prepay or make offers to repurchase certain indebtedness.
Credit facility agreements relating to certain of our indebtedness contain change of control provisions, including in respect of our obligations relating to our control and/or ownership of certain of our subsidiaries and their assets. Under the terms of such credit facility agreements, the occurrence of certain change of control events, including a decline below certain thresholds in the aggregate direct or indirect shareholdings of certain of our subsidiaries held by us and/or Melco International or certain of our subsidiaries (as the case may be) may result in an event of default and/or a requirement to prepay the credit facilities in relation to such indebtedness in full. Other applicable change of control events under the credit facility agreements include the Company ceasing to be publicly listed on certain designated stock exchanges or steps being taken in connection with the liquidation or dissolution of certain of our subsidiaries.
The terms of the Studio City Notes and the Melco Resorts Finance Notes also contain change of control provisions whereby the occurrence of a relevant change of control event will require us to offer to repurchase the Studio City Notes or the Melco Resorts Finance Notes (as the case may be) (and, in the case of a change of control event under the Melco Resorts Finance Notes, which is accompanied by a ratings decline) at a price equal to 101% of their principal amount, plus accrued and unpaid interest and, if any, additional amounts and other amount specified under such indebtedness to the date of repurchase.
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Any occurrence of these events could be outside our control and could result in events of default and cross-defaults which may cause the termination and acceleration of our credit facilities, the Studio City Notes and Melco Resorts Finance Notes and potential enforcement of remedies by our lenders or note holders (as the case may be), which would have a material adverse effect on our financial condition and results of operations.
Risks Relating to Our Financing and Indebtedness
Our current, projected and potential future indebtedness could impair our financial condition, which could further exacerbate the risks associated with our significant leverage.
We have incurred and expect to incur, based on current budgets and estimates, secured and unsecured long-term indebtedness.
Our major outstanding indebtedness as of December 31, 2019 includes
  • approximately HK$9.0 million (equivalent to approximately US$1.2 million) under the 2015 Credit Facilities;
  • US$1.0 billion from Melco Resorts Finance’s issuance of the 2017 Senior Notes;
  • US$850.0 million from Studio City Company’s issuance of the 2016 Studio City Notes due 2021;
  • HK$1.0 million (equivalent to approximately US$0.1 million) under the 2021 Studio City Senior Secured Credit Facility;
  • US$600.0 million from Studio City Finance’s issuance of the 2019 Studio City Notes;
  • US$500.0 million from Melco Resorts Finance’s issuance of the 2019 Senior Notes due 2026;
  • US$600.0 million from Melco Resorts Finance’s issuance of the 2019 Senior Notes due 2027; and
  • US$900.0 million from Melco Resorts Finance’s issuance of the 2019 Senior Notes due 2029.
Our expected long-term indebtedness includes:
  • financing for a significant portion of any future projects or phases of projects. Additionally, we may incur indebtedness for the remaining project for the land on which Studio City is located and for the development of City of Dreams Mediterranean, depending upon our cash flow position during the construction period
Our significant indebtedness could have material consequences. For example, it could:
  • make it difficult for us to satisfy our debt obligations;
  • increase our vulnerability to general adverse economic and industry conditions, including the higher prospect of a global recession and a severe contraction of liquidity in the global credit markets caused by the effect of the recent large-scale global
Covid-19
pandemic and recent decline in oil prices;
  • impair our ability to obtain additional financing in the future for working capital needs, capital expenditures, acquisitions or general corporate purposes;
  • require us to dedicate a significant portion of our cash flow from operations to the payment of principal and interest on our debt, which would reduce the funds available to us for our operations or expansion of our existing operations;
  • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
  • place us at a competitive disadvantage as compared to our competitors, to the extent that they are not as leveraged;
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  • subject us to higher interest expenses in the event of increases in interest rates to the extent a portion of our indebtedness bears interest at variable rates;
  • cause us to incur additional expenses by hedging interest rate exposures of our indebtedness and exposure to hedging counterparties’ failure to pay under such hedging arrangements, which would reduce the funds available to us to fund our operations; and
  • in the event we or one of our subsidiaries were to default, result in the loss of all or a substantial portion of our and/or our subsidiaries’ assets over which our creditors have taken or will take security.
Any of these or other consequences or events could have a material adverse effect on our ability to satisfy our other obligations.
We may require additional financing to complete our investment projects, which may not be available on satisfactory terms or at all.
We have funded our capital investment projects through, among others, cash generated from our operations, credit facilities, issuance of debt securities and other debt financings. For example, we used such capital resources for our acquisition of a 9.99% ownership interest in Crown Resorts for which we paid a purchase price of AUD879.8 million (equivalent to approximately US$617.8 million) on June 6, 2019. We may require additional financing in the future for our capital investment projects, which we may raise through debt or equity financing. We may be required to obtain approval from, or consent of, or notify relevant government authorities or third parties in order to enter into such financings. There is no assurance that we would be able to obtain any required approval or consent from the relevant government authorities or third parties with respect to such financing in a timely manner or at all.
Any financing related to our capital investment projects may also be subject to, among others, the terms of credit facilities, the Melco Resorts Finance Notes and the Studio City Notes and any future financings. In addition, our ability to obtain debt or equity financing on acceptable terms depends on a variety of factors that are beyond our control, including market conditions such as the higher prospect of a global recession and a severe contraction of liquidity in the global credit markets caused by the effect of the recent large-scale global
Covid-19
pandemic and recent decline in oil prices, investors’ and lenders’ perceptions of, and demand for, debt and equity securities of gaming companies and interest rates. For example, changes in ratings outlooks may subject us to rating agency downgrades, which could make it more difficult for us to obtain financing on acceptable terms. As a result, we cannot assure you that we will be able to obtain sufficient financing on terms satisfactory to us, or at all, to finance our capital investment projects. If we are unable to obtain such funding, our business, cash flow, financial condition, results of operations and prospects could be materially and adversely affected. We may, from time to time, seek to obtain new financings or refinance our outstanding debt through the international markets. Any such financing or refinancing, and our evaluation thereof, will depend on the prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
We may not be able to generate sufficient cash flow to meet our debt service obligations.
Our ability to make scheduled payments due on our existing and anticipated indebtedness obligations, including our credit facilities, the Melco Resorts Finance Notes and Studio City Notes, to refinance and to fund working capital needs, planned capital expenditures and development efforts will depend on our ability to generate cash. We will require generation of sufficient operating cash flow from our projects to service our current and future projected indebtedness. Our ability to obtain cash to service our existing and projected debt is subject to a range of economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control, including:
  • our future operating performance;
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  • the demand for services that we provide;
  • general economic conditions and economic conditions affecting Macau, the Philippines, Cyprus or the gaming industry in particular, including market conditions such as the higher prospect of a global recession and a severe contraction of liquidity in the global credit markets caused by the effect of the recent large-scale global
Covid-19
pandemic and recent decline in oil prices;
  • our ability to hire and retain employees and management at a reasonable cost;
  • competition; and
  • legislative and regulatory factors affecting our operations and business.
We may not be able to generate sufficient cash flow from operations to satisfy our existing and projected indebtedness obligations or our other liquidity needs, in which case we may have to seek additional borrowings or undertake alternative financing plans, such as refinancing or restructuring our indebtedness, selling assets, reducing or delaying capital investments or seek to raise additional capital on terms that may be onerous or highly dilutive, any of which could have a material adverse effect on our operations.
Our ability to incur additional borrowings or refinance our indebtedness, including our credit facilities, the Melco Resorts Finance Notes and Studio City Notes, will depend on the condition of the financing and capital markets, our financial condition at such time and potentially governmental approval. We cannot assure you that any additional borrowing, refinancing or restructuring would be possible or that any assets could be sold or, if sold, the timing of any sale or the amount of proceeds that would be realized from any such sale. We cannot assure you that additional financing could be obtained on acceptable terms, if at all, or would be permitted under the terms of our various debt instruments then in effect, including the indentures governing the Melco Resorts Finance Notes and Studio City Notes.
In particular, our revolving credit facility with an amount of HK$9.75 billion (equivalent to approximately US$1.25 billion) under the 2015 Credit Facilities will mature in June 2020. Our ability to refinance the 2015 Credit Facilities or obtain new lines of credit before the maturity of the 2015 Credit Facilities may be impacted significantly by recent market events such as the higher prospect of a global recession and a severe contraction of liquidity in the global credit markets caused by the effect of the recent large-scale global
Covid-19
pandemic and recent decline in oil prices that are beyond our control and therefore there is no guarantee that we will be able to do so on acceptable terms, or at all, which could materially and adversely affect our business and prospects, results of operations and financial condition. In addition, any failure to make scheduled payments of interest or principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which would harm our ability to incur additional indebtedness on commercially reasonable terms or at all. Our failure to generate sufficient cash flow to satisfy our existing and projected indebtedness obligations or other liquidity needs, or to refinance our obligations on commercially acceptable terms or at all, could have a material adverse effect on our business, financial condition and results of operations.
The agreements governing our credit facilities and debt instruments contain certain covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions or otherwise take actions that may be in our best interests.
The agreements governing our credit facilities and debt instruments contain restrictions on our ability to engage in certain transactions and may limit our ability to respond to changing business and economic conditions or otherwise take actions that may be in our best interests. These restrictions include, among other things, limitations on our ability and the ability of our restricted subsidiaries or other members of our obligor group to:
  • pay dividends or distributions or repurchase equity;
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  • make loans, payments on certain indebtedness, distributions and other restricted payments or apply revenues earned in one part of our operations to fund development costs or cover operating losses in another part of our operations;
  • incur additional debt, including guarantees;
  • make certain investments;
  • create liens on assets to secure debt;
  • enter into transactions with affiliates;
  • issue shares of subsidiaries;
  • enter into sale-leaseback transactions;
  • engage in other businesses;
  • merge or consolidate with another company;
  • undergo a change of control;
  • transfer, sell or otherwise dispose of assets;
  • issue disqualified stock;
  • create dividend and other payment restrictions affecting subsidiaries;
  • designate restricted and unrestricted subsidiaries; and
  • vary Melco Resorts Macau’s Subconcession Contract or Melco Resorts Macau’s and certain of its subsidiaries’ land concessions and certain other contracts.
Certain of our credit facilities and debt instruments also require us to satisfy various financial covenants, which include requirements for minimum interest coverage ratio and leverage ratios. For more information on financial covenants we are subject to under our credit facilities and debt instruments, see note 12 to the consolidated financial statements included elsewhere in this annual report. Future indebtedness or other agreements may contain covenants more restrictive than those contained in our existing credit facilities and debt instruments.
In addition, certain of our credit facilities and debt instruments are secured by mortgages, assignment of land use rights, leases or equivalents, security over shares, charges over bank accounts, security over assets and other customary security over the assets of our Macau subsidiaries. In the event of a default under such credit facilities and debt instruments, the holders of such secured indebtedness would first be entitled to payment from their collateral security, and only then would holders of our Macau subsidiaries’ unsecured debt be entitled to payment from their remaining assets.
Our ability to comply with the terms of our outstanding credit facilities and debt instruments may be affected by general economic conditions, industry conditions and other events outside of our control. As a result, we may not be able to maintain compliance with these covenants. In addition, if our properties’ operations fail to generate adequate cash flow, we may breach these covenants, causing a default under our agreements, upon which creditors could terminate their commitments to lend to us, accelerate repayment of the debt and declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, our credit facilities and debt instruments contain cross-acceleration or cross-default provisions, as a result of which our default under one facility or instrument may cause the acceleration of repayment of debt or result in a default under our other facilities or instruments. If any of these events occur, we cannot assure you that our assets and cash flow would be sufficient to repay in full all of our indebtedness, or that we would be able to find alternative financing. Even if we do obtain alternative financing, we cannot assure you that it would be on terms that are favorable or acceptable to us.
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Drawdown or rollover of advances under our credit facilities involve satisfaction of extensive conditions precedent and our failure to satisfy such conditions precedent will result in our inability to utilize or roll over loan advances under such facilities. There is no assurance that we will be able to satisfy all conditions precedent under our current or future credit facilities.
Our current and future credit facilities, including the 2015 Credit Facilities and the 2021 Studio City Senior Secured Credit Facility, require and will require satisfaction of extensive conditions precedent prior to the advance or rollover of loans under such facilities. If there is a breach of any terms or conditions of our credit facilities or other obligations and the breach is not cured or capable of being cured, or if we are unable to make certain representations, then such conditions precedent will not be satisfied. Our ability to satisfy such conditions precedent may also be affected by the actions of third parties and/or matters outside of our control, such as government consents and approvals and market conditions, and thus also result in our inability to satisfy any conditions precedent. The inability to draw down or roll over loan advances under any credit facility may result in a funding shortfall in our operations and we may not be able to fulfill our obligations as planned. Such events may also result in an event of default under the respective credit facility and may also trigger cross-defaults under our other indebtedness obligations. There can be no assurance that all conditions precedent to draw down or roll over loan advances under our credit facilities will be satisfied in a timely manner or at all. If we are unable to draw down or roll over loan advances under any current or future facility, we may have to find a new group of lenders and negotiate new financing terms or consider other financing alternatives. If required, it is possible that new financing would not be available or would have to be procured on substantially less attractive terms, which could harm the economic viability of the relevant development project. The need to arrange such alternative financing would likely also delay the construction and/or operations of our future projects or existing properties, which would affect our cash flows, results of operations and financial condition.
Any inability to maintain current financing or obtain future financing could result in delays in our project development schedule and could impact our ability to generate revenues from operations at our present and future projects.
If we are unable to maintain our current financing arrangements or obtain suitable financing for our operations and our current or future projects (including any acquisitions we may make), such failure could adversely impact our existing operations, or cause delays in, or prevent completion of, the development of the remaining land for Studio City, the development of the City of Dreams Mediterranean project and any other future projects. In addition, such failure may also limit our ability to operate and expand our business and may adversely impact our ability to generate revenue. Furthermore, the costs incurred by any new financing may be greater than anticipated due to unfavorable market conditions. Any such increase in funding costs may have a negative impact on our revenue and financial condition.
Risks Relating to Our Shares and ADSs
The trading price of our ADSs has been volatile since our ADSs began trading on Nasdaq and may be subject to fluctuations in the future, which could result in substantial losses to investors.
The trading price of our ADSs has been and may continue to be subject to wide fluctuations. Our ADSs were first quoted on the Nasdaq Global Market, or Nasdaq, beginning on December 19, 2006, and were upgraded to trade on the Nasdaq Global Select Market since January 2, 2009. During the period from December 19, 2006 to March 27, 2020, the trading prices of our ADSs ranged from US$2.27 to US$45.70 per ADS and the closing sale price on March 27, 2020 was US$12.26 per ADS. The market price for our shares and ADSs may continue to be volatile and subject to wide fluctuations in response to factors, including the following:
  • uncertainties or delays relating to the financing, completion and successful operation of our projects;
  • developments in the Macau market, the Philippine market, the Cyprus market or other Asian or European gaming markets, including disruptions caused by widespread health epidemics or pandemics, such as the
Covid-19
outbreak, and the announcement or completion of major new projects by our competitors;
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  • general economic, political or other factors that affect the region where our properties are located and/or the macroeconomic environment, including the
Covid-19
outbreak or any other global pandemic or crisis;
  • regulatory developments affecting us or our competitors;
  • actual or anticipated fluctuations in our quarterly operating results;
  • announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;
  • changes in performance and value of our investments, including our investment in Crown Resorts;
  • changes in financial estimates by securities research analysts;
  • changes in the economic performance or market valuations of other gaming and leisure industry companies;
  • changes in our market share of the Macau, Philippine and/or Cyprus gaming markets;
  • detrimental adverse publicity about us, our properties or our industries;
  • addition or departure of our executive officers and key personnel;
  • fluctuations in the exchange rates between the U.S. dollar, H.K. dollar, Pataca, Renminbi, Euro and the Philippine peso;
  • release or expiration of
 lock-up
 or other transfer restrictions on our outstanding shares or ADSs;
  • sales or perceived sales of additional shares or ADSs or securities convertible or exchangeable or exercisable for shares or ADSs;
  • potential litigation or regulatory investigations; and
  • rumors related to any of the above, irrespective of their veracity.
In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. For example, in connection with the Covid-19 outbreak, securities markets across the globe have experienced significant volatility. These market fluctuations may also have a material adverse effect on the market price of our ADSs.
In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations. In addition, as a company listed on Nasdaq, we are subject to certain rules and requirements implemented by Nasdaq. The rules of Nasdaq impose various continued listing requirements. We cannot assure you that we can or will continually adhere to all of such requirements, including those required to maintain our listing on Nasdaq. Any failure to adhere to the applicable requirements could result in costs, penalties, administrative remedies or other consequences, any of which may result in a material adverse effect on our business, prospects, results of operations and financial condition.
We cannot assure you that we will make dividend payments in the future.
On January 12, 2017, we announced a special dividend of approximately US$650 million. On February 8, 2018, we announced a quarterly dividend policy targeting to distribute quarterly cash dividends of
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US$0.045 per ordinary share of the Company (equivalent to US$0.135 per ADS). On July 24, 2018, February 19, 2019 and July 24, 2019, we further announced an amendment to our quarterly dividend policy targeting to distribute quarterly cash dividends of US$0.04835 per ordinary share of the Company (equivalent to US$0.14505 per ADS), US$0.0517 per ordinary share of the Company (equivalent to US$0.1551 per ADS) and US$0.05504 per ordinary share of the Company (equivalent to US$0.16512 per ADS), respectively, subject to our ability to pay dividends from our accumulated and future earnings, cash availability and future commitments. On October 30, 2019 and February 20, 2020, we also declared the distribution of a quarterly cash dividends of US$0.05504 per ordinary share of the Company (equivalent to US$0.16512 per ADS). We cannot assure you that we will make any dividend payments on our shares in the future. Dividend payments will depend upon a number of factors, including our results of operations, earnings, capital requirements and surplus, general financial conditions, contractual restrictions and other factors considered relevant by our board. Except as permitted under the Companies Law, as amended, of the Cayman Islands, or the Companies Law, and the common law of the Cayman Islands, we are not permitted to distribute dividends unless we have a profit, realized or unrealized, or a reserve set aside from profits which our directors determine is no longer needed. Our ability, or the ability of our subsidiaries, to pay dividends is further subject to restrictive covenants contained in the 2015 Credit Facilities, Studio City Notes, 2021 Studio City Senior Secured Credit Facility and other agreements governing indebtedness we and our subsidiaries may incur. Such restrictive covenants contained in the 2015 Credit Facilities include satisfaction of certain financial tests and conditions such as continued compliance with specified interest cover, cash cover and leverage ratios. The Studio City Notes and 2021 Studio City Senior Secured Credit Facility also contain certain covenants restricting payment of dividends by Studio City Finance (under the 2019 Studio City Notes) and Studio City Investments (under the 2016 Studio City Notes and 2021 Studio City Senior Secured Credit Facility) and their respective subsidiaries, respectively. For more details, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Indebtedness.”
Substantial sales or perceived sales of our shares or ADSs in the public market could cause the price of our ADSs and shares to decline.
Sales of our ADSs or shares in the public market, or the perception that these sales could occur, could cause the market price of our shares and ADSs to decline. There is no assurance that Melco International will not sell all or a part of its ownership interest in us. Any sale of their interest may be subject to volume and other restrictions, as applicable, under Rule 144 under the Securities Act of 1933, or the Securities Act. To the extent these or other shares are sold into the market, the market price of our shares and ADSs could decline. The ADSs represent interests in our shares. We would, subject to market forces, expect there to be a close correlation in the price of our ADSs and the price of the shares and any factors contributing to a decline in one market is likely to result to a similar decline in another.
In addition, Melco International has the right to cause us to register the sale of their shares under the Securities Act, subject to the terms of the registration rights agreement. Registration of these shares under the Securities Act would result in these shares becoming eligible for deposit in exchange for freely tradable ADSs without restriction under the Securities Act immediately upon the effectiveness of the registration statement. Sales of these registered shares in the public market could cause the price of our share and ADSs to decline.
Any decision by us to issue or raise further equity, which would result in dilution to existing shareholders, could cause the price of our ADSs and shares to decline.
If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs depends in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our ADSs or publishes inaccurate or
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unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.
Techniques employed by short sellers may drive down the market price of our ADSs.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.
Public companies that have substantially all of their operations in Greater China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.
It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and any investment in our ADSs could be greatly reduced or even rendered worthless.
Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise those rights.
Holders of ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares of the depositary and in accordance with the provisions of the deposit agreement. Advance notice of at least seven days is required for the convening of our annual general meeting and other shareholders meetings. When a general meeting is convened, you may not receive sufficient notice of a shareholders’ meeting to permit you to withdraw ordinary shares represented by your ADSs to allow you to cast your vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ADSs. The depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ADSs are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to convene a shareholder meeting.
You may be subject to limitations on transfers of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of
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its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we deem or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings, and you may not receive cash dividends if it is unlawful or impractical to make them available to you.
We may, from time to time, distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act of 1933, or the Securities Act, or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary bank will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act, or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.
In addition, the depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that it is unlawful, inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property and you will not receive such distribution.
We are a Cayman Islands exempted company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than that under U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Law (as amended) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of association) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for
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you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as shareholders of a U.S. public company. For a discussion of significant differences between the provisions of the Companies Law (as amended) of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Item 10. Additional Information — B. Memorandum and Articles of Association — Differences in Corporate Law.”
You may have difficulty enforcing judgments obtained against us.
We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. All of our current operations, and administrative and corporate functions are conducted in Macau, Hong Kong, the Philippines, Cyprus and Japan. In addition, substantially all of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in the Cayman Islands, Macau, Hong Kong, Philippines, Cyprus or Japan courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands, Macau, Hong Kong, the Philippines, Cyprus or Japan would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, it is uncertain whether such Cayman Islands, Macau, Hong Kong, the Philippine, Cyprus or Japan courts would be competent to hear original actions brought in the Cayman Islands, Macau, Hong Kong, the Philippines, Cyprus or Japan against us or such persons predicated upon the securities laws of the United States or any state.
We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares.
Based on the current market price of our ADSs and ordinary shares, and the composition of our income, assets and operations, we do not believe we were a passive foreign investment company, or PFIC, for our taxable year ended December 31, 2019. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you that we will not be a PFIC for any taxable year. A
non-U.S.
corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (generally based on a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs and ordinary shares, a significant decrease in the market price of the ADSs and ordinary shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information — E. Taxation — United States Federal Income Taxation”) holds an ADS or ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. For example, such U.S. Holder may incur a significantly increased U.S. federal income tax liability on the receipt of certain distributions on our ADSs or ordinary shares or on any gain recognized from a sale or other disposition of our ADSs or ordinary shares, and will become subject to burdensome reporting requirements. See “Item 10. Additional Information — E. Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.”
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ITEM 4.
INFORMATION ON THE COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY
Our Company was incorporated in December 2004 as an exempted company with limited liability under the Companies Law (as amended) of the Cayman Islands. Our subsidiary Melco Resorts Macau is one of six companies licensed, through concession or subconcession, to operate casinos in Macau. For more information on our corporate structure, see “— C. Organizational Structure.”
In December 2006, we completed the initial public offering of our ADSs, each of which represents three ordinary shares, and listed our ADSs on the Nasdaq under the symbol “MPEL.”
In May 2008, we changed our name from Melco PBL Entertainment (Macau) Limited to Melco Crown Entertainment Limited.
In January 2009, we were upgraded to trade on the Nasdaq Global Select Market.
On July 27, 2011, we acquired a 60% equity interest in SCI, the developer of Studio City. Studio City is a large-scale cinematically-themed integrated entertainment, retail and gaming resort developed in Macau.
On December 19, 2012, we completed the acquisition of a majority interest in the issued share capital of MRP, a company then listed on The Philippine Stock Exchange, Inc. (the “Philippine Stock Exchange”). Following the completion of our acquisition of MRP, we transferred our 100% equity interest in Melco Resorts Leisure to MRP in March 2013. Melco Resorts Leisure has been granted the exclusive right to manage, operate and control our Philippines integrated casino resort project, City of Dreams Manila.
In May 2016, we repurchased 155 million ordinary shares from Crown Asia Investments Pty, Ltd.. Following completion of the repurchase with cancelation of such shares and certain changes in the composition of our board of directors, Melco International became our single largest shareholder and we were thereafter treated as a subsidiary of Melco International.
In February 2017, the privately-negotiated sale by Crown Asia Investments Pty, Ltd. to Melco Leisure, through which Melco Leisure purchased 198,000,000 of our ordinary shares from Crown Asia Investments Pty, Ltd., closed and Melco International became our sole majority shareholder.
In March 2017, our name change from Melco Crown Entertainment Limited to Melco Resorts & Entertainment Limited became effective.
In April 2017, our Nasdaq ticker symbol changed from “MPEL” to “MLCO.”
In May 2017, we issued and sold 27,769,248 ADSs (equivalent to 83,307,744 ordinary shares) and 81,995,799 ordinary shares and also repurchased 165,303,544 ordinary shares from Crown Asia Investments Pty, Ltd. for the aggregate purchase price of US$1.2 billion, and such repurchased shares were subsequently canceled by us.
In October 2018, SCI completed its initial public offering of 28,750,000 SC ADSs (equivalent to 115,000,000 Class A ordinary shares of SCI), of which 15,330,000 SC ADSs were purchased by our subsidiary, MCO Cotai Investments Limited. In November 2018, the underwriters exercised their over-allotment option in full to purchase an additional 4,312,500 SC ADSs from SCI. After giving effect to the exercise of the over-allotment option, the total number of SC ADSs sold in the Studio City IPO was 33,062,500 SC ADSs, which raised net proceeds of approximately US$406.7 million from the SC ADSs sold in the Studio City IPO and aggregate gross proceeds of approximately US$2.5 million from the concurrent private placement to Melco
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International in connection with Melco International’s “assured entitlement” distribution to its shareholders, after deducting underwriting discounts and commissions and a structuring fee, but before deducting offering expenses payable by SCI.
In December 2018, we completed the voluntary tender offer to acquire a total of 1,338,477,668 common shares of MRP from other minority shareholders of MRP and, together with an additional 107,475,300 shares acquired on or after December 6, 2018, increased our equity interest in MRP from approximately 72.8% immediately prior to the announcement of the tender offer to approximately 97.9%. MRP was involuntarily delisted from the Philippine Stock Exchange in June 2019 as its public ownership has fallen below the minimum requirement of the Philippine Stock Exchange for more than six months.
In June 2019, we acquired an approximately 9.99% ownership interest in Crown Resorts.
On July 31, 2019, we acquired a 75% equity interest in ICR Cyprus, whose subsidiaries are operating a temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos, as well as developing City of Dreams Mediterranean. For more information on the Cyprus Acquisition, see “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions.”
For a description of our principal capital expenditures for the years ended December 31, 2019, 2018 and 2017, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”
Our principal executive offices are located at 36th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong. Our telephone number at this address is
 852-2598-3600
 and our fax number is
 852-2537-3618.
Our website is www.melco-resorts.com. The information contained on our website is not part of this annual report on Form
 20-F.
The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
B. BUSINESS OVERVIEW
Overview
We are a developer, owner and operator of casino gaming and entertainment casino resort facilities in Asia and Europe. We currently have three major casino-based operations in Macau, namely, City of Dreams, Altira Macau and Studio City, and
 non-casino
 based operations in Macau at our Mocha Clubs. In June 2018, we opened Morpheus, the third phase of City of Dreams in Cotai, Macau. With 1.0 million square feet of hotel space and 0.3 million square feet of podium space, Morpheus houses approximately 770 rooms, suites and villas. In Macau, we are also developing the remaining project for the land of Studio City. We also have a casino-based operation in the Philippines, City of Dreams Manila. In 2019, we expanded our footprint outside of Asia and into Europe following our acquisition of a 75% equity interest in ICR Cyprus, which owns the City of Dreams Mediterranean development and operates other casinos in Cyprus.
Our current and future operations are designed to cater to a broad spectrum of gaming patrons, from high-stakes rolling chip gaming patrons to gaming patrons seeking a broader entertainment experience. We currently own and operate five Forbes Travel Guide Five-Star hotels in Asia — Altira Macau, Studio City’s Star Tower, Morpheus and Nüwa in both Macau and Manila — and received 19 Forbes Travel Guide Five-Star and three Forbes Travel Guide Four-Star recognitions across our properties in 2020. We seek to attract patrons throughout Asia, Europe and, in particular, from Greater China.
In the Philippines, Melco Resorts Leisure, a subsidiary of MRP, currently operates and manages City of Dreams Manila, a casino, hotel, retail and entertainment integrated resort in the Entertainment City complex in Manila.
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In Cyprus, Integrated Casino Resorts, a wholly-owned subsidiary of ICR Cyprus, currently operates and manages our Cyprus casinos.
We received the “Integrated Resort of the Year” award at the International Gaming Awards in 2020, and we also received the “Gaming Operator of the Year, Australia & Asia” award and the “Socially Responsible Operator of the Year” award in 2018 and 2019, respectively. In 2020, we were named “2019 Best First Time Performer” by the global environmental disclosure organization CDP and received an
A-
score from CDP, attaining one of the highest ratings among companies in the Greater China region that publishes environmental disclosure. In 2019, we also garnered the “Best Environmental Responsibility” award for seven consecutive years at the Asian Excellence Awards by Corporate Governance Asia magazine and the “Best Corporate Social Responsibility Contribution” award at Global Gaming Expo (G2E) Asia Awards.
We generated a significant majority of the total revenues for each of the years ended December 31, 2019, 2018 and 2017 from our operations in Macau, the principal market in which we compete. For further information on the Macau gaming market, see “— Market and Competition — Macau Gaming Market.”
Our Major Existing Operations
City of Dreams
City of Dreams is an integrated casino resort in Cotai, Macau, which opened in June 2009. City of Dreams is a premium-focused property, targeting
 high-end
 customers and rolling chip players from regional markets across Asia. In 2019, City of Dreams had an average of approximately 516 gaming tables and approximately 822 gaming machines. In January 2019, the Macau government authorized Melco to operate 40 additional gaming tables at City of Dreams.
The resort brings together a collection of brands to create an experience that appeals to a broad spectrum of visitors from around Asia. Morpheus offers approximately 770 rooms, suites and villas. Nüwa and The Countdown each offers approximately 300 guest rooms and the Grand Hyatt Macau hotel offers approximately 800 guest rooms. In addition, City of Dreams includes approximately 25 restaurants and bars, approximately 165 retail outlets, a wet stage performance theater, recreation and leisure facilities, including health and fitness clubs, three swimming pools, spas and salons and banquet and meeting facilities. The Club Cubic nightclub offers approximately 2,395 square meters (equivalent to approximately 25,780 square feet) of live entertainment space. SOHO, a lifestyle entertainment and dining precinct located on the second floor of City of Dreams, offers customers a wide selection of food and beverage and other
 non-gaming
 offerings. The opening of Morpheus in June 2018 provides an additional pool, spa and salon, fitness club, executive lounge and four restaurants. The wet stage performance theater with approximately 2,000 seats features The House of Dancing Water created by Franco Dragone.
Due to its outstanding customer service and diverse range of unique world-class entertainment experiences, City of Dreams has garnered numerous awards in the prestigious International Gaming Awards over the years. City of Dreams was honored as “Casino VIP Room of the Year” in 2014, “Integrated Resort of the Year” in 2013, “Customer Experience of the Year” in 2012 and received “Casino VIP Room” and “Casino Interior Design” awards in 2011. It also received the “Best Leisure Development in Asia Pacific” award in the International Property Awards in 2010, which recognizes distinctive innovation and outstanding success in leisure development. City of Dreams’ Nüwa (then branded as Crown Towers) was the first hotel brand in Macau to receive the Forbes Travel Guide Five-Star recognition for its hotel, spa and every restaurant in January 2014. It was recognized as a Forbes Travel Guide Five-Star hotel for the eighth consecutive year in 2020, and its spa and the Cantonese culinary masterpiece, Jade Dragon, were awarded Forbes Travel Guide Five-Star recognition as well. Nüwa and Nüwa Spa were also named one of the “2018 World’s Most Luxurious Hotels” and “2018 World’s Most Luxurious Spas” by Forbes Travel Guide, respectively. In addition, the ultimate French culinary experience provided by Alain Ducasse at Morpheus received its first Forbes Travel Guide Five-Star recognition
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in 2020 and attained two Michelin stars in the Michelin Guide Hong Kong Macau 2020 for the second year running. The renowned Cantonese culinary masterpiece Jade Dragon maintained its three-star Michelin rating for the second consecutive year in the Michelin Guide Hong Kong Macau 2020, and was also included in the 2019 list of Asia’s 50 Best Restaurants, a gastronomic guide judged by Asia’s 50 Best Restaurants Academy, for the third consecutive year. Moreover, Yi at Morpheus was honored with Forbes Travel Guide Five-Star recognition in 2020. Yi at Morpheus has also been included in the list of The Top 20 Best Restaurants in Hong Kong and Macau 2019 by Hong Kong Tatler, and was recommended by Michelin Guide Hong Kong Macau 2020 together with the contemporary French cuisine Voyages at Morpheus. Morpheus has earned numerous global acclaims since its grand opening in June 2018. In 2020, Morpheus was honored as the world’s first and only establishment to attain Forbes Travel Guide Five-Star recognition across its entire hotel, spa and dining facilities, approximately a year after its grand opening. The Morpheus Spa also won the Forbes Spa of the Year Award, attaining the highest score among the world’s most outstanding spa establishments. Morpheus was the first in Macau to win an architecture and design accolade at Prix Versailles 2019 for Central and Northeast Asia in the Hotels category, and was the winner of the Design Den category in the Big Sleep Awards 2019 by National Geographic Traveller (UK) magazine. It has been named “Building of the Year Award” by ArchDaily, the world’s most visited architecture website, and was honored “Best Hotel Architecture” and “Best New Hotel Construction & Design in Macau” at Asia Pacific Property Awards in 2019. In 2018, Morpheus was hailed as one of the “World’s Greatest Places” in 2018 by TIME magazine, as the only Macau entry on the list. It has also won the Most Valuable Brand Gold Award in the 2018 Business Awards of Macau and ArchDaily’s 2019 Building of the Year Award in the Hospitality Architecture Category.
The Dancing Water Theater, a wet stage performance theater with approximately 2,000 seats, features the internationally acclaimed and award winning water-based extravaganza, The House of Dancing Water. The House of Dancing Water is the live entertainment centerpiece of the overall leisure and entertainment offering at City of Dreams and highlights City of Dreams as an innovative entertainment-focused destination, strengthening the overall diversity of Macau as a
 multi-day
 stay market and one of Asia’s premier leisure and entertainment destinations. The House of Dancing Water incorporates costumes, sets and audio-visual special effects and showcases an international cast of performance artists. The HK$2.0 billion world-class production was honored by the Global Gaming Expo (G2E) Asia Awards 2019 for Best Integrated Resorts
Non-Gaming
Attraction. In addition, it received the 2019 Certificate of Excellence and the 2019 Hall of Fame from Trip Advisor for its consistent achievement of high ratings from travelers, and was awarded the Excellence Award as the “Most Valuable Brand Award” by Business Awards of Macau in 2015. The show also garnered the “Culture, Entertainment & Sporting Events Award” in the Effie China Awards in 2012 and the prestigious “International THEA Award for Outstanding Achievement” from the Themed Entertainment Association and was named the “Best Entertainment of Macau” in the 2011 Hurun Report.
Altira Macau
Altira Macau is designed to provide a casino and hotel experience that caters to Asian rolling chip customers and players sourced primarily through gaming promoters.
In 2019, Altira Macau had an average of approximately 103 gaming tables and 178 gaming machines operated as a Mocha Club at Altira Macau. Altira Macau’s multi-floor layout comprises primarily designated gaming areas and private gaming rooms for rolling chip players, together with a general gaming area for the mass market that offers various table limits to cater to a wide range of mass market patrons. Our multi-floor layout allows us the flexibility to reconfigure Altira Macau’s gaming areas to meet the changing demands of our patrons and target specific customer segments.
We consider Altira hotel, located within the
 38-story
 Altira Macau, to be one of the leading hotels in Macau as evidenced by its long-standing Forbes Travel Guide Five-Star recognition. The top floor of the Altira hotel serves as the hotel lobby and reception area, providing guests with views of the surrounding area. The Altira hotel comprises approximately 230 guest rooms, including suites and villas, as of December 31, 2019. A
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number of restaurants and dining facilities are available at Altira Macau, including a leading Mediterranean cuisine restaurant, Aurora, several Chinese and international restaurants and several bars. Altira hotel also offers several
non-gaming
amenities, including a spa, gymnasium, outdoor garden podium and sky terrace lounge.
Altira Macau offers a luxurious hotel experience with its internationally acclaimed accommodation and guest services. It has been awarded Forbes Travel Guide Five-Star recognition in lodging and spa categories by Forbes Travel Guide for 11 consecutive years in 2020. It was also named one of the “World’s Most Luxurious Hotels” by Forbes Travel Guide. Altira Spa was selected as the Regional Winner in the “Luxury Urban Escape” category at the 2019 World Luxury Spa Awards. It was also honored as the Regional Winner in the “Luxury Fitness Spa” category and Country Winner in the “Luxury Wellness Spa” category at the 2018 World Luxury Spa Awards, and was honored as the Global Winner in the “Best Luxury Fitness Spa” category in 2014. Altira Macau’s swimming pool was named by US Forbes Traveler as one of the ten best hotel pools in the world and one of eight outstanding indoor hotel pools by CNN.com.
Altira Macau houses several award-winning restaurants. Its Mediterranean cuisine restaurant Aurora has earned Forbes Travel Guide Five-Star recognition for the seventh consecutive year in 2020, while its Japanese tempura specialist Tenmasa has also received Forbes Travel Guide Five-Star recognition for the sixth consecutive year in 2020 and was recommended by Michelin Guide Hong Kong Macau 2020. Its Cantonese restaurant, Ying, celebrated its first Forbes Travel Guide Five-Star recognition in 2020 and was awarded a Michelin star in the Michelin Guide Hong Kong Macau 2020 for the fourth consecutive year. In addition, Aurora, Tenmasa and Ying were winners of the “Best of Award Excellence of Wine Spectator” in 2015.
In recognition of their outstanding service and service management, Ying and Tenmasa also respectively received the Service Star Award in the “Deluxe Restaurant” and “First Class Restaurant” categories in the “Quality Tourism Services Accreditation Scheme 2017” organized by the Macau Government Tourism Office.
Studio City
Studio City is a large-scale cinematically-themed integrated entertainment, retail and gaming resort which opened in October 2015. In 2019, Studio City had an average of approximately 293 gaming tables and 947 gaming machines. The gaming operations of Studio City are focused on the mass market and target all ranges of mass market patrons. While Studio City focuses on the mass market segment for gaming, VIP rolling chip operations, including both junket and premium direct VIP offerings, were introduced at Studio City in early November 2016 and a VIP rolling chip area has been built at Studio City with up to 45 VIP tables authorized for VIP rolling chip operations as of December 31, 2019. Such VIP rolling chip operations are operated by us, through Melco Resorts Macau. In January 2019, Melco Resorts Macau informed Studio City Entertainment Limited that it will cease VIP gaming operations at the Studio City Casino in January 2020. In January 2020, Studio City announced that Melco Resorts Macau would continue VIP rolling chip operations at the Studio City Casino until January 15, 2021, subject to early termination with 30 days’ prior notice. Studio City also includes luxury hotel offerings and various entertainment, retail and food and beverage outlets to attract a diverse range of customers. Designed to focus on the mass market segment, Studio City offers cinematically-themed, unique and innovative interactive attractions, including the world’s first
figure-8
and Asia’s highest Ferris wheel, a
4-D
Batman flight simulator, an exclusive night club and a
5,000-seat
multi-purpose live performance arena, as well as approximately 1,600 luxury hotel rooms, various food and beverage outlets and approximately 30,000 square meters of themed and innovative retail space.
In recognition of Studio City’s facilities, games, customer service, atmosphere, style and design, Studio City was awarded the International Five Star Standard, Best Large Hotel Macau, Best City Hotel Macau, Best Resort Hotel Macau and Best Convention Hotel Macau in the International Hotel Awards
 2017-18.
 In addition, Studio City was the Global Winner in the “Luxury Casino Hotel” category and the Regional Winner (East Asia) in the “Luxury Family Hotel” category of the 2017 World Luxury Hotel Awards. The Studio City property was also awarded the “Casino/Integrated Resort of the Year” in the International Gaming Awards in 2016 and
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honored as “Asia’s Leading New Resort” in World Travel Awards in 2016. Moreover, Studio City’s Star Tower received the Forbes Travel Guide Five-Star recognition for three consecutive years in 2020, while Zensa Spa was awarded the Forbes Travel Guide Five-Star recognition for the second time in 2020 and was named “World’s Most Luxurious Spa” by the Guide in 2018. Studio City’s signature Cantonese restaurant,
 Pearl Dragon
, received its second Forbes Travel Guide Five-Star recognition in 2020 and
one-Michelin-starred
 establishment rank for the fourth consecutive year in the Michelin Guide Hong Kong Macau 2020, while Bi Ying has been once again been recommended in the guidebook.
Studio City is located in Cotai, Macau. In addition to its diverse range of gaming and
non-gaming
offerings, Studio City’s location in the fast growing Cotai region of Macau, directly adjacent to the Lotus Bridge immigration checkpoint and a light rail station, is a major competitive advantage, particularly as it relates to the mass market segment.
We are currently developing the remaining land for Studio City. Our plan for the remaining project may be subject to further revision and change and detailed design elements remain subject to further refinement and development. See
 “
Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations — We are developing the remaining project for Studio City under the terms of a land concession which currently require us to fully develop the land on which Studio City is located by May 31, 2022. If we do not complete development by that time and the Macau government does not grant us an extension of the development period, we could be forced to forfeit all or part of our investment in Studio City, along with our interest in the land on which Studio City is located and the buildings and structures on such land,” “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations —
All our current and future construction projects are and will be subject to significant development and construction risks, which could have a material adverse impact on related project timetables, costs and our ability to complete the projects,” and “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations —
We could encounter substantial cost increases or delays in the development of our projects, which could prevent or delay the opening of such projects.”
Our subsidiary Melco Resorts Macau operates the gaming areas of Studio City pursuant to a services agreement it entered into in May 2007, as amended in June 2012, with Studio City Entertainment Limited, together with other agreements or arrangements entered into between the parties from time to time, which may amend, supplement or relate to the aforementioned agreement. Melco Resorts Macau is reimbursed for the costs incurred in connection with its operation of Studio City’s gaming areas.
Mocha Clubs
Mocha Clubs comprise the largest
 non-casino
 based operations of electronic gaming machines in Macau. In 2019, Mocha Clubs had eight clubs with an average of approximately 1,478 gaming machines in operation (including approximately 178 gaming machines at Altira Macau). According to the DICJ, there was a total of 17,009 slot machines in the Macau market as of December 31, 2019. Mocha Clubs focus on general mass market players, including day trip customers, outside the conventional casino setting. We operate Mocha Clubs at leased or
sub-leased
premises or under
 right-to-use
 agreements.
The Mocha Club gaming facilities include what we believe is the latest technology for gaming machines and offer both electronic gaming machines, including stand-alone machines, stand-alone progressive jackpot machines and linked progressive jackpot machines with a variety of games, and electronic table games which feature fully-automated multi-player machines with roulette, baccarat and
 sic-bo,
 a traditional Chinese dice game.
City of Dreams Manila
City of Dreams Manila is one of the leading integrated tourism resorts in the Philippines. The property is located on an approximately
 6.2-hectare
 site at the gateway of Entertainment City, Manila, close to Metro
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Manila’s international airport and central business district. City of Dreams Manila opened in December 2014 and represents our first entry into an entertainment and gaming market outside of Macau and an incremental source of earnings and cash flow outside of Macau.
The property’s total gross floor area is approximately 300,100 square meters (equivalent to approximately 3.2 million square feet). We are authorized by PAGCOR to operate up to approximately 2,300 slot machines, 1,200 electronic gaming tables and 380 gaming tables. In 2019, City of Dreams Manila had an average of approximately 2,265 gaming machines and 311 gaming tables.
City of Dreams Manila has three hotels comprising Nüwa Manila, Nobu Manila and Hyatt Regency, City of Dreams Manila, with approximately 950 rooms in aggregate. City of Dreams Manila also has exciting entertainment venues: DreamPlay, a DreamWorks animation inspired interactive play space, which officially opened in June 2015; CenterPlay, a live performance central lounge within the casino; The Garage, featuring a VR Zone with
top-of-class
Virtual Reality technology situated inside a food park with a carefully curated selection of food and beverage trucks and trailers set in a comfortable,
air-conditioned
space; and
K-Golf,
an indoor golf simulator with state of the art technology that brings some of the most popular golf courses around the world in 3D graphics. City of Dreams Manila also has a retail boulevard, The Shops at the Boulevard, which is a retail strip interspersed within the food and beverage areas to provide customers with a broad range of shopping opportunities.
City of Dreams Manila is the first integrated resort in the country to harness solar energy. City of Dreams Manila has also been recognized for its efforts to tackle climate change and its employee development. The resort was recognized in the 2019 Sustainable Business Awards (SBA) Philippines presented to Melco. Internationally, three of our colleagues received awards in 2017 and 2019 at the BMW Hotelier Awards which was recently rebranded as the Stelliers Awards. The resort’s talented young chefs also received the silver award at the 2019 FHC China International Young Chefs Challenge.
The integrated resort has been conferred with various distinctions for exemplary performance by the Parañaque City government and in the civic and business circles for its contributions to business, creation of jobs and promotion of Philippine’s tourism. For its philanthropy, the Philippine Red Cross has presented City of Dreams with a Platinum Award for its colleagues’ continuing blood donations. Globally, the resort was cited in 2017 as one of the “23 Fanciest Casinos in the World” in townandcountry.com and in 2015 as “Casino/Integrated Resort of the Year” at the 8th International Gaming Awards.
Creating exceptional experiences for guests with its warm hospitality, impressive dining options and luxurious spaces, City of Dreams Manila’s three luxury hotel brands have garnered Forbes Travel Guide awards. Nüwa Manila has been consistently awarded with Forbes Travel Guide Five-Star recognition for three years running since 2018 and was also named as one of the World’s Most Luxurious Hotels. Nobu Manila and Hyatt Regency, City of Dreams Manila has been recognized with Forbes Travel Guide Four-Star ratings, while Nüwa Spa’s rating was upgraded to Forbes Travel Guide Five-Star this year — setting a milestone as the first and only spa in the country with this accolade.
TripAdvisor likewise listed the three hotels, namely Nüwa Manila, Nobu Manila and Hyatt Regency, City of Dreams Manila, last year and in 2016 in the “Top 25 Luxury Hotels in the Philippines Travelers Choice Awards.” Nüwa Manila was also awarded the 2016 International Hotel and Property Award for “Best Lobby/Public Area/Lounge” in the Global category, and “Best Hotel Design in Asia Pacific” in the over-200 Rooms category, by Design et al, an international design magazine in Italy.
With more than 20 dining outlets located on property, signature restaurants and other dining outlets have maintained the prestige of being recognized in prominent luxury magazines’ best restaurants list. Crystal
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Dragon restaurant was awarded for the fourth time as one of the Top 20 restaurants among approximately 200 listed in the Philippine Tatler’s Best Restaurants Guide 2020. Nobu Manila and Red Ginger are consistently on the coveted list, as well as Hide Yamamoto and Ruby Jack’s Steakhouse and Bar. Town and Country Philippines, in its annual Fabulous Dine Around Best Restaurants for food connoisseurs and influencers in 2017 and 2018, recognized Nobu Manila and Crystal Dragon in its roster of select restaurants that it considered the best to offer an exclusive dining experience. Nobu Manila was also commended in 2017 as “One of the 7 Premier Restaurants Putting Manila in the World’s Gastronomic Map” in the online edition of Conde Nast Traveler.
Melco Resorts Leisure operates the casino business of City of Dreams Manila in accordance with the terms of the Philippine License and the operating agreement between Melco Resorts Leisure and the Philippine Parties dated March 13, 2013. Under the operating agreement, PremiumLeisure and Amusement, Inc. (a member of the Philippine Parties) has the right to receive monthly payments from Melco Resorts Leisure, based on the performance of gaming operations of City of Dreams Manila, and Melco Resorts Leisure has the right to retain all revenues from
 non-gaming
 operations of City of Dreams Manila.
Having met the minimum investment levels and other requirements under our Provisional License, the Philippine License dated April 29, 2015 was issued by PAGCOR to the Philippine Licensees. The Philippine License has the same terms and conditions as the Provisional License and is valid until July 11, 2033.
For a breakdown of total revenues by category of activity and geographic market for each of the last three financial years, see “Item 5. Operating and Financial Review and Prospects — A. Operating Results.”
Cyprus Operations
We currently operate and manage a temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos in Cyprus. The temporary casino, with a gaming area of approximately 4,600 square meters (equivalent to approximately 49,500 square feet), was the first licensed casino in Cyprus when it opened in June 2018. We are also developing City of Dreams Mediterranean, an integrated resort project in Cyprus which, upon opening, is expected to be the largest and premier integrated resort in Europe. We expect to (and are required to, pursuant to the terms of the Cyprus License) cease operations of the temporary casino when the City of Dreams Mediterranean project is launched while the four satellite casinos are expected to continue to operate. Our operations in Cyprus represent our first entry into an entertainment and gaming market in Europe. Under the terms of the Cyprus License, we have been granted the right to develop, operate and maintain an integrated casino resort in Limassol, Cyprus (and until the operation of such integrated casino resort, the operation of a temporary casino in Limassol) and up to four satellite casino premises in Cyprus, for a term of 30 years from the date of grant on June 26, 2017 and with the right for exclusivity in Cyprus for the first 15 years of the term. In 2019, our facilities in Cyprus had an average of approximately 388 gaming machines and 38 gaming tables.
We acquired a 75% equity interest in ICR Cyprus from Melco International, our parent company, in July 2019. The remaining 25% equity interest in ICR Cyprus is owned by The Cyprus Phassouri (Zakaki) Limited. On July 31, 2019, we entered into a shareholders’ agreement with The Cyprus Phassouri (Zakaki) Limited regarding certain commercial and financial arrangements pursuant to which we will, as more fully set out in additional management and service contracts, (i) provide certain corporate-level management services to ICR Cyprus and its subsidiaries for a fixed amount of EUR2 million per annum and (ii) have the right to receive an allotment of preference shares in the gaming license-holding subsidiary of ICR Cyprus which will provide the right to a preferential dividend, among other terms.
Our Development Projects
We are developing the remaining project of Studio City, which is currently expected to consist of two hotel towers with a total of approximately 900 rooms and suites and a gaming area. In addition, we currently envision the remaining project to also contain a waterpark with indoor and outdoor areas. Other
non-gaming
attractions expected to be part of the remaining project include MICE space, retail and food and beverage outlets and a cineplex. As of December 31, 2019, we had incurred approximately US$80.7 million aggregate costs
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relating to the development of our remaining project, primarily related to the initial design and planning costs. Based on our current plan for the remaining project, we currently expect a project budget of approximately US$1.35 billion to US$1.40 billion for the development of the remaining project (exclusive of any
pre-opening
costs and financing costs). Such development for the remaining project of Studio City may be funded through various sources, including cash on hand, operating free cash flow as well as debt and/or equity financing. Prior to the
Covid-19
outbreak, we estimated a construction period of approximately 32 months for the remaining project. With the disruptions from the
Covid-19
outbreak, the construction period may be delayed and extend beyond the estimated approximately 32 months. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations — We are developing the remaining project for Studio City under the terms of a land concession which currently require us to fully develop the land on which Studio City is located by May 31, 2022. If we do not complete development by that time and the Macau government does not grant us an extension of the development period, we could be forced to forfeit all or part of our investment in Studio City, along with our interest in the land on which Studio City is located and the buildings and structures on such land.”
In Cyprus, we are also developing the City of Dreams Mediterranean project. Under our current plan, the project is expected to consist of a five-star hotel tower with approximately 500 rooms and a gaming area of approximately 7,500 square meters (equivalent to approximately 80,700 square feet) with approximately 100 gaming tables and 1,000 slot machines. Other
non-gaming
attractions and facilities expected to be part of the project include a
1,500-seat
outdoor Amphitheatre, MICE space of approximately 9,600 square meters (equivalent to approximately 103,300 square feet) and retail and food and beverage outlets. As of December 31, 2019, we have incurred approximately US$121 million of aggregate costs (including the land cost) relating to the development of City of Dreams Mediterranean, primarily related to the initial design and construction cost. Based on our current plan for the development of City of Dreams Mediterranean integrated resorts project, we currently expect a project budget of approximately US$550 million to US$600 million (inclusive of the land cost but exclusive of any pre-opening costs and financing costs). We are required under the Cyprus License to open the integrated casino resort by December 31, 2021. The development of City of Dreams Mediterranean may be funded through various sources, including equity, cash on hand, operating free cash flow as well as other financing. Under the shareholders’ agreement entered into between us and The Cyprus Phassouri (Zakaki) Limited regarding ICR Cyprus, the shareholders are obligated to use all commercially reasonable endeavours, subject to certain terms and conditions, to source debt financing of up to EUR437 million (equivalent to approximately US$491 million) for the development of City of Dreams Mediterranean. To the extent there is a shortfall in the amount of third-party debt available (or available on commercially-acceptable terms), we are obligated to fund the shortfall up to the full amount of EUR437 million (equivalent to approximately US$491 million) on terms which are, subject to certain terms and conditions, no less favorable to the project than any commercially-acceptable terms available in the commercial lending market. In connection therewith, a shareholder loan agreement for up to EUR275 million (equivalent to approximately US$309 million) was entered into by a subsidiary of the Company as lender, and Integrated Casino Resorts as borrower in March 2020. Our plan for the City of Dreams Mediterranean project may be subject to further revision and change and detailed design elements remain subject to further refinement and development. The completion of the City of Dreams Mediterranean project is also subject to a number of contingencies, including any disruptions resulting from the Covid-19 outbreak. For example, construction work at our City of Dreams Mediterranean project has been suspended from March 24, 2020 to April 13, 2020 as required by the Cyprus government under the restrictions imposed to restrict non-essential business activities due to the Covid-19 outbreak and the restriction dates are subject to further review and change by the Cyprus government. Prior to the Covid-19 outbreak, we estimated that City of Dreams Mediterranean would open at the end of 2021. With the disruptions from the Covid-19 outbreak, including the suspension of construction work which commenced from March 24, 2020, the scheduled opening date of City of Dreams Mediterranean may be delayed and extended beyond the original estimated date. See
 “
Item 3. Key Information — D. Risk Factors — Risks Relating to Operating in the Gaming Industry in Cyprus — Our operations in Cyprus, particularly the development of City of Dreams Mediterranean, face significant risks and uncertainties which may materially and adversely affect our business, financial condition and results of operations” and “We are developing the City of Dreams Mediterranean project in Cyprus and we are required under the Cyprus License to open the integrated casino resort by December 31, 2021. If we do not open City of Dreams Mediterranean by that time and the
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government of Cyprus does not grant us an extension of the opening date, we would be required to pay a penalty to the Cyprus government or even have the Cyprus License terminated if such delay continues beyond a grace period.”
Further, we continually seek new opportunities for additional gaming or related businesses in Macau and in other countries and will continue to target the development of a project pipeline in order to expand our footprint in countries which offer legalized casino gaming, including Japan where we have a strong interest in developing integrated resorts. In defining and setting the timing, form and structure for any future development, we focus on evaluating alternative available financing, market conditions and market demand. In order to pursue these opportunities and such development, we have incurred and will continue to incur capital expenditures at our properties and for our projects.
Our Land and Premises
We operate our gaming business at our operating properties in Macau in accordance with the terms and conditions of our gaming subconcession. In addition, our existing operating properties and development projects in Macau are subject to the terms and conditions of land concession contracts. See “— Regulations — Macau Regulations — Land Regulations.” Through MRP, we also operate our gaming business in the Philippines through the Philippine License issued by PAGCOR on a property which Melco Resorts Leisure leases from Belle Corporation under the Lease Agreement.
City of Dreams
City of Dreams is located in Cotai, Macau, with a land area of 113,325 square meters (equivalent to approximately 1.2 million square feet). In August 2008, the Macau government granted the land on which City of Dreams is located to COD Resorts and Melco Resorts Macau for a period of 25 years, renewable for further consecutive periods of ten years, subject to applicable legislation in Macau. The land grant has been amended in September 2010 and January 2014, respectively. Under the terms of the revised land concession, the development period was extended to January 28, 2018, the hotel to be developed was changed to a five-star hotel and the total developable gross floor area on the land was increased to 692,619 square meters (equivalent to approximately 7.5 million square feet). Total land premium required for the land is in the amount of approximately MOP1,286.6 million (equivalent to approximately US$160 million), which was paid in full in January 2016. In January 2018, the Macau government approved the extension of the development period to June 11, 2018.
Under the current terms of the land concession, the annual government land use fees payable during the development are approximately MOP9.5 million (equivalent to approximately US$1.2 million) and the annual government land use fees payable after completion of development are approximately MOP9.9 million (equivalent to approximately US$1.2 million). The government land use fee amounts may be adjusted every five years as agreed between the Macau government and the land concessionaire using the applicable rates in effect at the time of the rent adjustment.
The equipment utilized by City of Dreams in the casino and hotel is owned by us and held for use at City of Dreams, including the main gaming equipment and software to support its table games and gaming machine operations, cage equipment, security and surveillance equipment, casino and hotel furniture, fittings and equipment.
Altira Macau
Altira Macau is located in Taipa, Macau with a land area of approximately 5,230 square meters (equivalent to approximately 56,295 square feet) under a
 25-year
 land lease agreement with the Macau government that is renewable for further consecutive periods of ten years, subject to applicable legislation in
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Macau. In March 2006, the Macau government granted the land on which Altira Macau is located to Altira Resorts. The land grant was amended in December 2013. The total gross floor area of Altira Macau is approximately 104,000 square meters (equivalent to approximately 1,119,000 square feet). Total land premium required is in the amount of MOP169.3 million (equivalent to approximately US$21 million) which was paid in full in 2013. According to the current terms of the land concession, the annual government land use fees payable are approximately MOP1.5 million (equivalent to approximately US$190,000). This amount may be adjusted every five years as agreed between the Macau government and the land concessionaire using the applicable rates in effect at the time of the rent adjustment.
The equipment utilized by Altira Macau in the casino and hotel is owned by us and held for use at Altira Macau, including the main gaming equipment and software, to support its table games and gaming machine operations, cage equipment, security and surveillance equipment and casino, hotel furniture, fittings and equipment.
Mocha Clubs
Mocha Clubs operate at premises with a total floor area of approximately 133,700 square feet at the following locations in Macau:
                 
Mocha Club
 
Opening Month
 
Location
 
Total Floor Area
 
 
 
 
(In square feet)
 
Royal
 
September 2003
 
G/F and 1/F of Hotel Royal
   
19,000
 
Taipa Square
 
January 2005
 
G/F, 1/F and 2/F of Grand Dragon Hotel
   
26,500
 
Sintra
 
November 2005
 
G/F and 1/F of Hotel Sintra
   
11,000
 
Macau Tower
 
September 2011
 
LG/F and G/F of Macau Tower
   
19,600
 
Golden Dragon
 
January 2012
 
G/F, 1/F and 2/F of Hotel Golden Dragon
   
20,500
 
Inner Harbor
 
December 2013
 
No
 286-312
 Seaside New Street
    
12,800
 
Kuong Fat
 
June 2014
 
Macau, Rua de Pequim No. 174., Centro Comercial Kuong Fat Cave A
   
13,800
 
Mocha Altira
 
November 2017
 
Avenida De Kwong Tung, No. 786, 798, 816 e 840, Taipa, Macau
   
10,500
 
                 
Total
 
 
 
 
133,700
 
                 
Premises are being operated under leases, subleases or right to use agreements that expire at various dates through June 2022, which are renewable upon reaching agreements with the owners.
In addition to leasehold improvements to Mocha Club premises, the onsite equipment utilized at the Mocha Clubs is owned and held for use to support the gaming machine operations.
Studio City
Studio City is located in Cotai, Macau and has a land area of 130,789 square meters (equivalent to approximately 1.4 million square feet) held under a
 25-year
 land lease agreement with the Macau government that is renewable for further consecutive periods of ten years, subject to applicable legislation in Macau. In October 2001, the Macau government granted the land on which Studio City is located to Studio City Developments Limited, which is a company incorporated in Macau with limited liability and which is also an indirect subsidiary of SCI. The Studio City land concession contract was amended in July 2012 and September 2015 to permit Studio City Developments Limited to build a complex comprising a four-star hotel, a facility for cinematographic industry, including supporting facilities for entertainment and tourism, parking and free area.
The gross construction area of the Studio City site is approximately 707,078 square meters (equivalent to approximately 7.6 million square feet). The gross construction area completed in the first phase was
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approximately 477,110 square meters (equivalent to approximately 5.1 million square feet). The land premium of approximately MOP1,402.0 million (equivalent to approximately US$175 million) was paid in full in January 2015. In November 2019, the development period under the Studio City land concession was extended to May 31, 2022. Government land use fees of approximately MOP3.9 million (equivalent to approximately US$490,000) per annum are payable during the development stage. The annual government land use fees payable after completion of development will be MOP9.1 million (equivalent to approximately US$1.1 million). The amounts may be adjusted every five years as agreed between the Macau government and the land concessionaire using the applicable rates in effect at the time of the rent adjustment.
As part of the security provided in relation to the 2016 Studio City Notes and the 2021 Studio City Senior Secured Credit Facility, we assigned certain leases and right to use agreements and granted a mortgage over our rights under the Studio City land concession.
City of Dreams Manila
The City of Dreams Manila site is located on reclaimed land (“Project Reclaimed Land”). The Project Reclaimed Land was originally acquired by an entity known as R 1 Consortium from the Philippine Public Estates Authority. This acquisition occurred in 1995 as part of the R 1 Consortium’s compensation for the construction of the Philippine Public Estates Authority’s Manila-Cavite Coastal Road project. R 1 Consortium conveyed all its interest to the Project Reclaimed Land in favor of two entities in 1995. These two entities later merged with Belle Bay City Corporation, which is 34.9% owned by Belle Corporation, being one of the Philippine Parties, with Belle Bay City Corporation becoming the surviving entity and owner of the Project Reclaimed Land. Belle Bay City Corporation was dissolved in 2005 and is still undergoing liquidation. The Project Reclaimed Land was allocated to Belle Corporation as part of Belle Bay City Corporation’s plan of dissolution. Belle Corporation has exercised possession and other rights over the Project Reclaimed Land since this allocation. In 2005, Belle Corporation transferred a portion of the Project Reclaimed Land to the Philippine Social Security System. In 2010, Belle Corporation and the Philippine Social Security System entered into a lease agreement for that land portion.
Melco Resorts Leisure does not own the land or the buildings comprising the site for City of Dreams Manila. Rather, Melco Resorts Leisure leases the Project Reclaimed Land and buildings from Belle Corporation under the Lease Agreement. Part of the land covered under the Lease Agreement is leased by Belle Corporation from the Philippine Social Security System under a lease agreement entered into between Belle Corporation and the Social Security System in 2010.
Cyprus Casinos
We currently have the following casinos in operation with the total floor area of approximately 88,000 square feet at various locations in Cyprus:
                 
Cyprus Casinos
 
Opening Month
 
Location
 
Total Floor Area
 
 
 
 
(In square feet)
 
Limassol (temporary casino)
 
June 2018
 
271 Franklin Roosevelt Ave.
3046 Limassol, Cyprus
   
67,270
 
Nicosia
 
December 2018
 
Neas Engomis Street No.35, Engomi, 2409 Nicosia, Cyprus.
   
10,600
 
Larnaca (Airport)
 
December 2018
 
Larnaca International Airport
6650 Larnaca, Cyprus
   
1,690
 
Ayia Napa
 
July 2019
 
Archiepiscopou Makariou III, 34 Ayia Napa, Cyprus
   
3,970
 
Paphos
 
February 2020
 
9 Theas Aphroditis 8204 Paphos, Cyprus
   
4,470
 
                 
Total
 
 
 
 
88,000
 
                 
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Premises are being operated under leases that expire at various dates. The lease of our temporary casino in Limassol is expiring in November 2020 and can be automatically renewed for two
one-year
terms unless we elect for a shorter term as provided under the lease agreement. Apart from the lease of our Larnaca satellite casino, which is expiring in 2020 and is renewable upon reaching agreement with the owner, we have leases for our other three satellite casinos up to 2023 to 2024, which are renewable for two five-year terms unless we elect not to renew those leases.                
City of Dreams Mediterranean
The site of City of Dreams Mediterranean, which is currently under development, is located at Zakaki, in western Limassol, Cyprus (“Cyprus Project Land”). Prior to our acquisition of Melco International’s 75% equity interest in ICR Cyprus on July 31, 2019, The Cyprus Phassouri (Zakaki) Limited, the current owner of a 25% equity interest in ICR Cyprus, acquired such 25% equity interest in ICR Cyprus by contributing its freehold interest over the Cyprus Project Land and as a result, a subsidiary of ICR Cyprus became owner of the freehold interest over the Cyprus Project Land. The Cyprus Project land has a total site area of 367,000 square meters (equivalent to approximately 3.95 million square feet) and a total gross floor area of 86,000 square meters (equivalent to approximately 925,700 square feet).
Other Premises
Grand Dragon Casino (formerly known as Taipa Square Casino) premises, including the
fit-out
and gaming-related equipment, are located on the ground floor and level one within Grand Dragon Hotel (formerly, the Hotel Taipa Square) in Macau and occupy a floor area of approximately 1,700 square meters (equivalent to approximately 18,300 square feet). We operate Grand Dragon Casino under a
 right-to-use
 agreement. We also own a ski resort in Nagano, Japan. The ski resort has a site area of approximately 2.0 million square meters (equivalent to approximately 21.5 square feet).
Apart from the aforesaid property sites, we maintain various offices and storage locations in Macau, Hong Kong, Cyprus and Japan. We lease all of our office and storage premises.
Advertising and Marketing
We seek to attract customers to our properties and to grow our customer base over time by undertaking several types of advertising, sales and marketing activities and plans. We utilize local and regional media to publicize our projects and operations. We have built a public relations and advertising team that cultivates media relationships, promotes our brands and explores media opportunities in various markets. Advertising uses a variety of media platforms that include digital, print, television, online, outdoor, on property (as permitted by Macau, PRC and other regional laws), collateral and direct mail pieces. A sales team has been established that directly liaises with current and potential customers within target Asian and other countries in order to grow and retain
 high-end
 customers. In order to be competitive in the Macau gaming environment, we hold various promotions and special events, operate loyalty programs with our patrons and have developed a series of commission and other incentive-based programs. In Macau, the Philippines and Cyprus, we employ a tiered loyalty program at our properties to ensure that each customer segment is specifically recognized and incentivized in accordance with their expected revenue contributions. Dedicated customer hosting programs provide personalized service to our most valuable customers. In addition, we utilize sophisticated analytical programs and capabilities to track the gaming behavior and spending patterns of our patrons. We believe these tools help deepen our understanding of our customers to optimize yields and make continued improvements to our properties. As our advertising, sales and marketing activities occur in various jurisdictions, we aim to ensure we are in compliance with all applicable laws in relation to our advertising and marketing activities.
Customers
We seek to cater to a broad range of customers through our diverse gaming and
non-gaming
facilities and amenities across our major existing operating properties.
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Non-Gaming
 Patrons
In addition to its mass market and rolling chip gaming offerings, City of Dreams offers visitors to Macau an array of multi-dimensional entertainment amenities, four hotels, as well as a selection of restaurants, bars and retail outlets. Altira Macau is designed to provide a
 high-end
 casino and hotel experience, tailored to meet the cultural preferences and expectations of Asian rolling chip patrons. Mocha Clubs are targeted to deliver a relaxed, café-style
 non-casino
 based electronic gaming experience. Studio City is designated to primarily target mass market guests through its vast array of
 non-gaming
 amenities and entertainment attractions.
City of Dreams Manila features different entertainment venues: DreamPlay, a family entertainment center which features a children’s concierge and supervision service and activities catering to children aged four and above; Centerplay, a live performance central lounge within the casino; and the two facilities introduced in November 2018: the VR Zone and
K-Golf.
With these diverse entertainment venues and attractions, we believe City of Dreams Manila will be able to leverage on the experiences of City of Dreams in Macau, which has developed world-class attractions such as The House of Dancing Water and the Club Cubic nightclub.
Our Cyprus casinos offer a wide selection of food and beverage options at the premises.
Gaming Patrons
Our gaming patrons include rolling chip players and mass market players.
Mass market players are
 non-rolling
 chip players and they come to our properties for a variety of reasons, including our direct marketing efforts, brand recognition, the quality and comfort of our mass market gaming floors and our
 non-gaming
 offerings. Mass market players are further classified as general mass market and premium mass market players.
Rolling chip players at our casinos are patrons who participate in our
 in-house
 rolling chip programs or in the rolling chip programs of our gaming promoters, also known as junket operators. Our rolling chip players play mostly in our dedicated VIP rooms or designated gaming areas.
Our
 in-house
 rolling chip programs consist of rolling chip players sourced through our direct marketing efforts and relationships, whom we refer to as premium direct players. Premium direct players can earn a variety of gaming-related rebates, such as cash, rooms, food and beverage and other complimentary products or services.
Gaming Promoters
A portion of our rolling chip play is brought to us by gaming promoters, also known as junket operators. While rolling chip players sourced by gaming promoters do not earn direct gaming-related rebates from us, we pay commissions and provide other complimentary services to gaming promoters.
In both Macau and Manila, we engage gaming promoters to promote our VIP gaming rooms primarily due to the gaming promoters’ knowledge of and experience within the regional gaming market, in particular with sourcing and attracting rolling chip patrons and arranging for their transportation and accommodation, and gaming promoters’ extensive rolling chip patron network. Under standard arrangements utilized in Macau and Manila, we provide gaming promoters with exclusive or casual access to one or more of our VIP gaming rooms and support from our staff while gaming promoters source rolling chip patrons for our casinos or gaming areas to generate an expected minimum amount of rolling chip volume per month. Gaming promoters in Macau are independent third parties that include both individuals and corporate entities and are officially licensed by the DICJ. We have procedures to screen prospective gaming promoters prior to their engagement and conduct periodic checks that are designed to ensure that the gaming promoters with whom we associate meet suitability standards. We believe we have strong relationships with some of the top gaming promoters in Macau and have a
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solid network of gaming promoters who help us market our properties and source and assist in managing rolling chip patrons at our properties. For City of Dreams Manila, we leverage our extensive sales reach within Asia to the extent permissible by applicable laws, particularly to the sizable international customer base largely developed through our Macau operations and our strong relationships with gaming promoters in Macau and the rest of Asia. Melco Resorts Leisure works with Melco Resorts Macau to develop cross promotional marketing campaigns that position the Philippines as an additional gaming and tourist destination to guests at our properties and our gaming promoter networks. We expect to continue to evaluate and selectively add or remove gaming promoters going forward. In Cyprus, where there is currently one licensed gaming promoter approved in 2020, other gaming promoters have also submitted licensing applications to the CGC which remain subject to CGC’s approval.
In Macau, we typically enter into gaming promoter agreements for a
 one-year
 term that are automatically renewed in subsequent years unless otherwise terminated. The gaming promoter agreements may be terminated (i) by either party without cause upon 15 days advance written notice, (ii) upon advice from the DICJ or any other gaming regulator to cease having dealings with the gaming promoter or if the DICJ cancels or fails to renew the gaming promoter’s license, (iii) if the gaming promoter fails to meet the minimum rolling chip volume it agreed to with us, (iv) if the gaming promoter enters or is placed in receivership or provisional liquidation or liquidation, an application is made for the winding up of the gaming promoter, the gaming promoter becomes insolvent or makes an assignment for the benefit of its creditors or an encumbrancer takes possession of any of the gaming promoter’s assets or (v) if any party to the agreement is in material breach of any of the terms of the agreement and fails to remedy such breach within the timeframe outlined in the agreement. Our gaming promoters are compensated through commission arrangements that are calculated on a monthly or a per trip basis. We generally offer commission payment structures that are calculated by reference to revenue share or monthly rolling chip volume. Under the revenue share-based arrangements, the gaming promoter participates in our gaming wins or losses from the rolling chip patrons brought in by the gaming promoter. To encourage gaming promoters to use our VIP gaming rooms for rolling chip patrons, our gaming promoters may receive complimentary allowances for food and beverage, hotel accommodation and transportation. Under the Administrative Regulation 27/2009 governing gaming promotion activity as promulgated by the Macau government, these allowances must be included in the 1.25% regulatory cap on gaming promoter commissions on rolling chip volume-based arrangements.
We conduct, and expect to continue to conduct, our table gaming activities at our casinos on a credit basis as well as a cash basis. As a customary practice in both Macau and Manila gaming markets, we grant credit to our gaming promoters and certain of our premium direct players. The gaming promoters bear the responsibility for issuing to and, subsequently collecting credit, from their players. In Cyprus, a new gaming market, we also grant credit to a small number of selected premium direct players.
We extend interest-free credit to a significant portion of our gaming promoters for short-term, renewable periods under credit agreements that are separate from the gaming promoter agreements. Credit is also granted to certain gaming promoters on a revolving basis. All gaming promoter credit lines are generally subject to monthly review and various settlement procedures, including our credit committee review and other checks performed by our cage, count and credit department, to evaluate the liquidity and financial health of gaming promoters to whom we grant such credit. These procedures allow us to calculate the commissions payable to a gaming promoter and to determine the amount which can be offset, together with any other values held by us from the gaming promoter, against the outstanding credit balances owed by a gaming promoter. Credit is granted to a gaming promoter based on the performance and financial background of the gaming promoter and, if applicable, the gaming promoter’s guarantor. If we determine that a gaming promoter has good credit history and a track record of large business volumes, we may extend credit exceeding one month of commissions payable. This credit is typically unsecured. Although the amount of such credit may exceed the amount of accrued commissions payable to, and any other amounts of value held by us from, the gaming promoters, we generally obtain personal checks and/or promissory notes from guarantors or other forms of collateral. We have in place internal controls and credit policies and procedures to manage such credit risks.
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We aim to pursue overdue debts from gaming promoters and premium direct players. This collection activity includes, as applicable, frequent personal contact with the debtor, notices of delinquency and litigation. However, we may not be able to collect all of our gaming receivables from our credit customers and gaming promoters. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations — We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit customers.”
Our allowance for doubtful accounts may fluctuate significantly from period to period as a result of having significant individual customer account balances where changes in their status of collectability cause significant changes in our allowance. For information regarding allowances for doubtful accounts, see “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Critical Accounting Policies and Estimates — Accounts Receivable and Credit Risk.”
Market and Competition
We believe that the gaming markets in Macau and the Philippines are and will continue to be intensely competitive. Our competitors in Macau and elsewhere in Asia include all the current concession and subconcession holders, other PAGCOR license holders and many of the largest gaming, hospitality, leisure and property development companies in the world. Some of these current and future competitors are larger than us and have significantly longer track records in the operation of major hotel casino resort properties. Compared to Macau and the Philippines, the competitive environment in Cyprus is more favorable with our exclusive license to operate casinos in the Republic of Cyprus until 2032, but we may face competition from casinos in the occupied part of Cyprus or from casinos in nearby parts of Europe and the Middle East.
Macau Gaming Market
In 2019, 2018 and 2017, Macau generated approximately US$36.5 billion, US$37.7 billion and US$33.1 billion of gaming revenue, respectively, according to the DICJ. Macau is currently the only market in Greater China, and one of only several in Asia, to offer legalized casino gaming.
Gross gaming revenues in Macau expanded 13.5% in 2012 and 18.6% in 2013, according to the DICJ. The DICJ figures show that the Macau gaming market has been through a challenging period since 2014, with a decline in gross gaming revenues of 2.6% in 2014 and 34.3% in 2015 and 3.3% in 2016, primarily driven by a deteriorating demand environment from our key feeder market, China, as well as other restrictive policies including changes to travel and visa policies and the implementation of further smoking restrictions on the main gaming floor. According to the DICJ, the rolling chip segment underperformed the broader market, declining 10.9% year-over-year in 2014 and 39.9% year-over-year in 2015 and 6.9% in 2016, while the higher margin mass market table games segment increased 15.5% in 2014 and declined 26.7% in 2015 and increased 1.8% in 2016. The operating environment improved in 2017, with gross gaming revenues in Macau increasing 19.1% on a year-over-year basis and continued to improve in 2018 with gross gaming revenues in Macau increasing 14.0% on a year-over-year basis according to the DICJ. According to the DICJ, gross gaming revenues in Macau declined by 3.4% on a year-over-year basis in 2019 as compared to 2018. We believe such year-over-year decline in 2019 was mainly driven by a decline in VIP gaming revenues in Macau and the slowdown in the Chinese economy.
The mass market table games segment accounted for 48.6% of market-wide gross gaming revenues in 2019, compared to 40.2% of market-wide gross gaming revenues in 2018 and 38.3% in 2017, according to the DICJ. With our large exposure to the mass market table games segment in the fast growing Cotai region, we believe we are well positioned to cater to this increasingly important, and more profitable, segment of the market.
While industry trends in Macau improved between the third quarter of 2016 to the last quarter of 2018, according to the DICJ, the Macau gaming market experienced a decline in gross gaming revenues from 2014 to
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2016 and the gross gaming revenues in Macau also declined by 3.4% on a year-over-year basis in 2019 as compared to 2018. Macau continues to be impacted by a range of external factors, including the slowdown in the Chinese economy and government policies that may adversely affect the Macau gaming market. For example, the Chinese government has taken measures to deter marketing of gaming activities to mainland Chinese residents by foreign casinos and to reduce capital outflow. Such measures include reducing the amount that China-issued ATM cardholders can withdraw in each withdrawal, setting a limit for annual withdrawals and the launch of facial recognition and identity card checks with respect to certain ATM users. More recently, the Macau gaming market has been significantly impacted by the Covid-19 outbreak. According to the DICJ, gross gaming revenues in Macau declined by 49.9% on a year-over-year basis in the first two months of 2020 as compared to the first two months of 2019.
We believe the long-term growth in gaming and
 non-gaming
 revenues in Macau are supported by, among other things, the continuing emergence of a wealthier demographic in China, a robust regulatory framework and significant new infrastructure developments in Macau and China, as well as by the anticipated new supply of gaming and
 non-gaming
 facilities in Macau, which is predominantly focused on the Cotai region. Visitation to Macau totaled more than 39.4 million in 2019, increasing by 10.1% compared to 2018. While visitors from China represented 70.9%, increasing by 10.5% compared to 2018, visitors from Hong Kong and Taiwan represented 18.7% and 2.7%, of all visitors to Macau in 2019, respectively.
Gaming in Macau is administered through government-sanctioned concessions awarded to three different concessionaires: SJM, in which family members of Mr. Lawrence Ho, our chairman and chief executive officer, have shareholding interests; Wynn Macau, a subsidiary of Wynn Resorts Ltd.; and Galaxy. SJM granted a subconcession to MGM Grand Paradise, which was originally formed as a joint venture by
MGM-Mirage
and Ms. Pansy Ho, sister of Mr. Lawrence Ho. Galaxy granted a subconcession to VML, a subsidiary of Sands China Ltd and Las Vegas Sands Corporation. Melco Resorts Macau obtained its subconcession under the concession of Wynn Macau.
SJM currently operates multiple casinos throughout Macau. SJM (through its predecessor, Tourism and Entertainment Company of Macau Limited) commenced its gaming operations in Macau in 1962 and is currently developing its project in Cotai which is expected to open in the second half of 2020.
Wynn Macau opened the Wynn Macau in September 2006 on the Macau peninsula and an extension called Encore in 2010. In August 2016, Wynn Macau opened Wynn Palace, in Cotai.
Galaxy currently operates multiple casinos in Macau, including StarWorld, a hotel and casino resort in Macau’s central business and tourism district. The Galaxy Macau Resort opened in Cotai in May 2011 and the opening of Phase 2 of the Galaxy Macau Resort took place in May 2015. Galaxy is currently developing Phase 3 of the Galaxy Macau Resort, which is currently expected to be completed and operational in 2021, while Phase 4 is expected to be completed and operational in 2022.
VML operates Sands Macao on the Macau peninsula, The Venetian Macao, the Plaza Casino at The Four Seasons Hotel Macao, the Sands Cotai Central and the Parisian Macao and has announced the
re-branding
and redevelopment of Sands Cotai Central into The Londoner Macao.
MGM Grand Paradise opened its MGM Macau in December 2007, which is located next to Wynn Macau on the Macau peninsula, and its MGM Cotai in February 2018.
The existing concessions and subconcessions do not place any limit on the number of gaming facilities that may be operated. In addition to facing competition from existing operations of these concessionaires and subconcessionaires, we will face increased competition when any of them constructs new, or renovates
pre-existing,
casinos in Macau or enters into leasing, services or other arrangements with hotel owners, developers or other parties for the operation of casinos and gaming activities in new or renovated properties.
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Each of these concessionaires was permitted to grant one subconcession. The Macau government is currently considering the process of renewal, extension or grant of gaming concessions or subconcessions expiring in 2022. The Macau government further announced that the number of gaming tables in Macau should not exceed 5,500 until the end of the first quarter of 2013 and that, thereafter, for a period of ten years, the total number of gaming tables to be authorized will be limited to an average annual increase of 3%. These restrictions are not legislated or enacted into laws or regulations and, as such, different policies, including on the annual rate of increase in the number of gaming tables, may be adopted at any time by the relevant Macau government authorities. According to the DICJ, the number of gaming tables operating in Macau as of December 31, 2019 was 6,739. The Macau government has reiterated further that it does not intend to authorize the operation of any new casino or gaming area that was not previously authorized by the government, or permit tables authorized for mass market gaming operations to be utilized for VIP gaming operations or authorize the expansion of existing casinos or gaming areas. However, the policies and laws of the Macau government could change and permit the Macau government to grant additional gaming concessions or subconcessions. Such change in policies may also result in a change in the number of gaming tables and casinos that the Macau government is prepared to authorize for operation.
Philippine Gaming Market
We expect City of Dreams Manila to benefit from growth in the local and regional gaming demand, supported by improved infrastructure and strong growth in tourism to the Philippines. The Philippine economy is one of the fastest growing economies in the region, with favorable demographics and an expected increase in consumer spending, which we believe will benefit the Philippine gaming market. City of Dreams Manila, however, presently faces stronger competition in the Philippine market from hotels and resorts owned by both Philippine nationals and foreigners, including many of the largest gaming, hospitality, leisure and resort companies in the world, such as Travellers International Hotel Group, Inc., Bloomberry Resorts Corporation and Tiger Resorts Leisure and Entertainment Inc. as well as the Philippine Amusement and Gaming Corporation, an entity owned and controlled by the government of the Philippines, which operates certain gaming facilities across the Philippines.
Cyprus Gaming Market
We currently operate one temporary casino and four satellite casinos in Cyprus. The temporary casino opened in Limassol in June 2018 as the first licensed casino in Cyprus. We opened two satellite casinos in Nicosia and Larnaca in December 2018 and one satellite casino in Ayia Napa in July 2019 and the fourth satellite casino in Paphos in February 2020. We expect to (and are required to, pursuant to the terms of the Cyprus License) cease operations of the temporary casino when City of Dreams Mediterranean is launched and to continue operation of the four satellite casinos after the launch of City of Dreams Mediterranean. Although we have an exclusive license to operate casinos in the Republic of Cyprus until 2032, we may face competition from casinos in the occupied part of Cyprus or from casinos in nearby parts of Europe and the Middle East.
Other Regional Markets
We may also face competition from casinos and gaming resorts located in other Asian or European destinations together with cruise ships. Casinos and integrated gaming resorts are becoming increasingly popular in Asia, giving rise to more opportunities for industry participants and increasing regional competition. There are major gaming facilities in Australia located in Melbourne, Perth, Sydney and the Gold Coast. Genting Highlands is a popular international gaming resort in Malaysia, approximately a
 one-hour
 drive from Kuala Lumpur. South Korea has allowed gaming for some time but these offerings are available primarily to foreign visitors. Kangwon Land operates the only casino in the country that is open to accept Korean nationals. There are also casinos in Vietnam and Cambodia, although they are relatively small compared to those in Macau.
Singapore legalized casino gaming in 2006. Genting Singapore PLC opened its resort in Sentosa, Singapore, in February 2010 and Las Vegas Sands Corporation opened its casino in Marina Bay, Singapore, in
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April 2010. In December 2016, a law which conceptually enables the development of integrated resorts in Japan took effect. In addition, several other Asian countries are considering or are in the process of legalizing gambling and establishing casino-based entertainment complexes.
Seasonality
Macau, our principal market of operation, experiences many peaks and seasonal effects. The “Golden Week” and “Chinese New Year” holidays are in general the key periods where business and visitation increase considerably in Macau. In the Philippines, business considerably slows down during the “Holy Week,” as well as during the “Chinese New Year” and the “Chinese Ghost Month.” In Cyprus, summer is generally the key period where business and visitation experience significant increase, while business considerably slows down during winter. While we may experience fluctuations in revenues and cash flows from month to month, we do not believe that our business is materially impacted by seasonality.
Intellectual Property
We have applied for and/or registered certain trademarks, including “Morpheus”, “Altira”, “Mocha Club”, “City of Dreams”, “Nüwa”, “The Countdown”, “City of Dreams Manila”, “Studio City”, “Melco Resorts Philippines” and “Melco Resorts & Entertainment” in Macau, the Philippines, Cyprus and/or other jurisdictions. We have also applied for or registered in Macau, the Philippines, Cyprus and other jurisdictions certain other trademarks and service marks used or to be used in connection with the operations of our hotel casino projects in Macau, City of Dreams Manila and Cyprus.
For our license or hotel management agreements that are required for our operations, see “Item 5. Operating and Financial Review and Prospects — C. Research and Development, Patents and Licenses, etc.”
Regulations
Macau Regulations
Gaming Regulations
The ownership and operation of casino gaming facilities in Macau are subject to the general civil and commercial laws and to specific gaming laws, in particular, Law no. 16/2001, or the Macau Gaming Law. Macau’s gaming operations are also subject to the grant of a concession or subconcession by, and regulatory control of, the Macau government. See “— Gaming Licenses” below for more details.
The DICJ is the supervisory authority and regulator of the gaming industry in Macau. The core functions of the DICJ are:
  • to collaborate in the definition of gaming policies;
  • to supervise and monitor the activities of the concessionaires and subconcessionaires;
  • to investigate and monitor the continuing suitability and financial capacity requirements of concessionaires, subconcessionaires and gaming promoters;
  • to issue licenses to gaming promoters;
  • to license and certify gaming equipment; and
  • to issue directives and recommend practices with respect to the ordinary operation of casinos.
Below are the main features of the Macau Gaming Law, as supplemented by Administrative Regulation no. 26/2001, that are applicable to our business.
  • If we violate the Macau Gaming Law, Melco Resorts Macau’s subconcession could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory
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 procedures. In addition, we, and the persons involved, could be subject to substantial fines for each separate violation of Macau Gaming Law or of the Subconcession Contract at the discretion of the Macau government. Further, if we terminate or suspend the operation of all or a part of our gaming operations without permission for reasons not due to
 force majeure
, or in the event of insufficiency of our facilities and equipment which may affect the normal operation of our gaming business, the Macau government would be entitled to replace Melco Resorts Macau during such disruption and to ensure the continued operation of the gaming business. Under such circumstances, we would bear the expenses required for maintaining the normal operation of the gaming business.
  • The Macau government also has the power to supervise concessionaires and subconcessionaires in order to assure financial stability and capability. See “— Gaming Licenses — The Subconcession Contract in Macau.”
  • Any person who fails or refuses to apply for a finding of suitability after being ordered to do so by the Macau government may be found unsuitable. Any shareholder of a concessionaire or subconcessionaire holding shares equal to or in excess of 5% of such concessionaire’s or subconcessionaire’s share capital who is found unsuitable will be required to dispose of such shares by a certain time (the transfer itself being subject to the Macau government’s authorization). If a disposal has not taken place by the time so designated, such shares must be acquired by the concessionaire or subconcessionaire. Melco Resorts Macau will be subject to disciplinary action if, after it receives notice that a person is unsuitable to be a shareholder or to have any other relationship with it, Melco Resorts Macau:
  • pays that person any dividend or interest upon its shares;
  • allows that person to exercise, directly or indirectly, any voting right conferred through shares held by that person;
  • pays remuneration in any form to that person for services rendered or otherwise; or
  • fails to pursue all lawful efforts to require that unsuitable person to relinquish his or her shares.
  • The Macau government also requires prior approval for the creation of a lien over shares or property comprising a casino and gaming equipment and utensils of a concession or subconcession holder. In addition, the creation of restrictions on its shares in respect of any public offering requires the approval of the Macau government to be effective.
  • The Macau government must give its prior approval to changes in control through a merger, consolidation, shares acquisition, or any act or conduct by any person whereby such person obtains control. Entities seeking to acquire control of a concessionaire or subconcessionaire must satisfy the Macau government with regards to a variety of stringent standards prior to assuming control. The Macau government may also require controlling shareholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated for suitability as part of the approval process of the transaction.
Non-compliance
 with these obligations could lead to the revocation of Melco Resorts Macau’s subconcession and could materially and adversely affect our gaming operations.
The Macau government has also enacted other gaming legislation, rules and policies. Further, it imposed policies, regulations and restrictions that affect the minimum age required for entrance into casinos in Macau, the number of gaming tables that may be operated in Macau, location requirements for sites with gaming machine lounges, supply and requirements of gaming machines, equipment and systems, instruction on responsible gaming, restrictions on the utilization of mass market gaming tables for VIP gaming operations and other matters. In addition, the Macau government may consider enacting new regulations that may adversely affect our gaming operations. Our inability to address the requirements or restrictions imposed by the Macau government under such legislation or rules could adversely affect our gaming operations.
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Gaming Promoters Regulations
Macau Administrative Regulation no. 6/2002, as amended pursuant to Administrative Regulation no. 27/2009, or the Gaming Promoters Regulation, regulates licensing of gaming promoters and the operations of gaming promotion business by gaming promoters. Applications to the DICJ by those seeking to become licensed gaming promoters must be sponsored by a concessionaire or subconcessionaire. Such concessionaire or subconcessionaire must confirm that it may contract the applicant’s services subject to the latter being licensed. Licenses are subject to annual renewal and a list of licensed gaming promoters is published every year in the Macau Official Gazette. The DICJ monitors each gaming promoter and its staff and collaborators. In October 2015, the DICJ issued specific accounting related instructions applicable to gaming promoters and their operations. Any failure by the gaming promoters to comply with such instructions may impact their license and ability to operate in Macau.
In addition, concessionaires and subconcessionaires are jointly liable for the activities of their gaming promoters and collaborators within their casinos. In addition to the licensing and suitability assessment process performed by the DICJ, all of our gaming promoters undergo a thorough internal vetting procedures. We conduct background checks and also conduct periodic reviews of the activities of each gaming promoter, its employees and its collaborators for possible
 non-compliance
 with Macau legal and regulatory requirements. Such reviews generally include investigations into compliance with applicable anti-money laundering laws and regulations as well as tax withholding requirements.
Concessionaires and subconcessionaires are required to report periodically on commissions and other remunerations paid to their gaming promoters. A 5% tax must be withheld on commissions and other remunerations paid by a concessionaire or subconcessionaire to its gaming promoters. Under the Gaming Promoters Regulation and in accordance with the Secretary for Economy and Finance Dispatch no. 83/2009, effective as of September 11, 2009, a commission cap of 1.25% of net rolling has been in effect. Any bonuses, gifts, services or other advantages which are subject to monetary valuation and which are granted, directly or indirectly, inside or outside of Macau by any concessionaire or subconcessionaires or any company of their respective group to any gaming promoter shall be considered a commission. The commission cap regulations impose fines, ranging from MOP100,000 (equivalent to approximately US$12,465) up to MOP500,000 (equivalent to approximately US$62,323) on gaming operators that do not comply with the cap and other fines, ranging from MOP50,000 (equivalent to approximately US$6,232) up to MOP250,000 (equivalent to approximately US$31,162) on gaming operators that do not comply with their reporting obligations regarding commission payments. If breached, the legislation on commission caps has a sanction enabling the relevant government authority to make public a government decision imposing a fine on a concessionaire and subconcessionaire, by publishing such decision on the DICJ website and in two Macau newspapers (in Chinese and Portuguese respectively). We believe we have implemented the necessary internal control systems to ensure compliance with the commission cap and reporting obligations in accordance with applicable rules and regulations.
The Macau government is currently considering amending the Macau Administrative Regulation no. 6/2002. The Macau government is, among other things, proposing that the licensing requirements for gaming promoters be more stringent and restrictive, the imposition of new penalties and the increase of the amounts of current fines.
Gaming Credit Regulations
Macau Law no. 5/2004 has legalized the extension of gaming credit to patrons or gaming promoters by concessionaires and subconcessionaires. Gaming promoters may also extend credit to patrons upon obtaining an authorization by a concessionaire or subconcessionaire to carry out such activity. Assigning or transferring one’s authorization to extend gaming credit is not permitted. This statute sets forth filing obligations for those extending credit and the supervising role of the DICJ in this activity. Gaming debts contracted pursuant to this statute are a source of civil obligations and may be enforced in court.
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Access to Casinos and Gaming Areas Regulations
Under Law no. 10/2012, as amended pursuant to Law no. 17/2018, the minimum age required for entrance into casinos in Macau is 21 years of age. The director of the DICJ may authorize employees under 21 years of age to temporarily enter casinos or gaming areas, after considering their special technical qualifications. In addition,
off-duty
 gaming related employees of gaming operators and gaming promoters may not, starting from December 2019, access any casinos or gaming areas, except during the Chinese New Year festive season or under specific circumstances.
Smoking Regulations
Under the Smoking Prevention and Tobacco Control Law, as amended pursuant to Law no. 9/2017, from January 1, 2019, smoking on casino premises is only permitted in authorized segregated smoking lounges with no gaming activities and such smoking lounges are required to meet certain standards determined by the Macau government.
Anti-Money Laundering and Terrorism Financing Regulations in Macau
In conjunction with current gaming laws and regulations, we are required to comply with the laws and regulations relating to anti-money laundering activities in Macau. Law 2/2006 (as amended pursuant to Law 3/2017), the Administrative Regulation 7/2006 (as amended pursuant to Administrative Regulation no. 17/2017) and the DICJ Instruction 1/2016 in effect from May 13, 2016 (as amended pursuant to DICJ Instruction no. 1/2019), govern our compliance requirements with respect to identifying, reporting and preventing anti-money laundering and terrorism financing crimes at our casinos in Macau. Under these laws and regulations, we are required to:
  • implement internal procedures and rules governing the prevention of anti-money laundering and terrorism financing crimes which are subject to prior approval from DICJ;
  • identify and evaluate the money laundering and terrorism financing risk inherent to gaming activities;
  • identify any customer who is in a stable business relationship with Melco Resorts Macau, who is a politically exposed person or any customer or transaction where there is a sign of money laundering or financing of terrorism or which involves significant sums of money in the context of the transaction, even if any sign of money laundering is absent;
  • refuse to deal with any of our customers who fail to provide any information requested by us;
  • keep records on the identification of a customer for a period of five years;
  • establish a regime for electronic transfers;
  • keep individual records of all transactions related to gaming which involve credit securities;
  • keep records of all electronic transactions for amounts equal to or exceeding MOP8,000 (equivalent to approximately US$997) in cases of occasional transactions and MOP120,000 (equivalent to approximately US$14,958) in cases of transactions that arose in the context of a continuous business relationship;
  • notify the Finance Information Bureau if there is any sign of money laundering or financing of terrorism;
  • adopt as compliance function and appoint compliance officers; and
  • cooperate with the Macau government by providing all required information and documentation requested in relation to anti-money laundering activities.
Under Article 2 of Administrative Regulation no. 7/2006 (as amended pursuant to Administrative Regulation no. 17/2017) and the DICJ Instruction no. 1/2016 (as amended pursuant to DICJ Instruction
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no.1/2019), we are required to track and report transactions and granting of credit that are of MOP500,000 (equivalent to approximately US$62,323) or above. Pursuant to the legal requirements above, if the customer provides all required information, after submitting the reports, we may continue to deal with those customers that were reported to the DICJ and, in case of suspicious transactions, to the Finance Information Bureau.
We employ internal controls and procedures designed to help ensure that our gaming and other operations are conducted in a professional manner and in compliance with internal control requirements issued by the DICJ set forth in its instruction on anti-money laundering, the applicable laws and regulations in Macau, as well as the requirements set forth in the Subconcession Contract.
We have developed a comprehensive anti-money laundering policy and related procedures covering our anti-money laundering responsibilities, which have been approved by the DICJ, and have training programs in place to ensure that all relevant employees understand such anti-money laundering policy and procedures. We also use an integrated IT system to track and automatically generate significant cash transaction reports and, if permitted by the DICJ and the Finance Information Bureau, to submit those reports electronically.
Responsible Gaming Regulations
On October 18, 2019, the DICJ issued Instruction no. 4/2019, which came into effect on December 27, 2019, setting out measures for the implementation of responsible gaming principles. Under this instruction, concessionaires and subconcessionaires are required to implement certain measures to promote responsible gambling, including: making information available on the risks of gambling, responsible gambling and odds, both inside and outside the casinos and gaming areas and through electronic means; creation of information and counseling kiosks and a hotline; adequate regulation of lighting inside casinos and gaming areas; self-exclusion and exclusion at third party request procedures,
off-duty
gaming related employees entry restriction procedures, physical entry requirements, preventive measures for restricted access by persons under 21 years of age; public exhibition of time; and creation and training of teams and a coordinator responsible for promoting responsible gambling.
Control of Cross-border Transportation of Cash Regulations
On June 12, 2017, Law no. 6/2017 with respect to the control of cross-border transportation of cash and other negotiable instruments to the bearer, was enacted. Such law came into effect on November 1, 2017. In accordance with such law, all individuals entering Macau with an amount in cash or negotiable instrument to the bearer equal to or higher than the amount determined by the order of the Chief Executive of Macau at MOP120,000 (equivalent to approximately US$14,958) will be required to declare such amount to the customs authorities. The customs authorities may also request an individual exiting Macau to declare if such individual is carrying an amount in cash or negotiable instruments to the bearer equal to or higher to such amount. Individuals that fail to duly complete the required declaration may be subject to a fine (ranging from 1% to 5% of the amount that exceeds the amount determined by the order of the Chief Executive of Macau for declaration purposes, such fine being at least MOP1,000 (equivalent to approximately US$125) and not exceeding MOP500,000 (equivalent to approximately US$62,323)). In the event the relevant customs authorities find that the cash or negotiable instrument to the bearer carried by an individual while entering or exiting Macau may be associated with or result from any criminal activity, such incident shall be notified to the relevant criminal authorities and the relevant amounts shall be seized pending investigation. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Operating in the Gaming Industry in Macau — Our gaming operations in Macau could be adversely affected by restrictions on the export of the Renminbi and any unfavorable fluctuations in the currency exchange rates of the Renminbi.”
Prevention and Suppression of Corruption in External Trade Regulations
In addition to the general criminal laws regarding corrupt practices in the public and private sector that are in force in Macau, on January 1, 2015, Law no. 10/2014, criminalizing corruption acts in external trade and
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providing for a system for prevention and suppression of such criminal acts came into effect in Macau. Our internal policies, address this issue.
Asset Freezing Enforcement Regulations
On August 29, 2016, Law no. 6/2016 with respect to the framework for the enforcement of asset freezing orders, which comprised of United Nations Security Council sanctions resolutions for the fight against terrorism and proliferation of weapons of mass destruction, was enacted. Under this law, the Chief Executive of Macau is the competent authority to enforce freezing orders and the Asset Freeze Coordination Commission must assist the Chief Executive in all technical aspects of such enforcement. Among other entities, gaming operators are subject to certain obligations and duties regarding the freezing of assets ordered by the United Nations Security Council sanctions resolutions, including reporting and cooperation obligations.
Foreign Exchange Regulations
Gaming operators in Macau may be authorized to open foreign exchange counters at their casinos and gaming areas subject to compliance with the Foreign Exchange Agencies Constitution and Operation Law
(Decree-Law
 no. 38/97/M), the Exchange Rate Regime
 (Decree-Law
 no. 39/97/M) and the specific requirements determined by the Monetary Authority of Macau. The transaction permitted to be performed in such counters is limited to buying and selling bank bills and coins in foreign currency, and to buying travelers checks.
Intellectual Property Rights Regulations
Our subsidiaries incorporated in Macau are subject to local intellectual property regulations. Intellectual property protection in Macau is supervised by the Intellectual Property Department of the Economic Services Bureau of the Macau government.
The applicable regime in Macau with regard to intellectual property rights is defined by two main laws. The Industrial Property Code
 (Decree-Law
 no. 97/99/M, as amended pursuant to Law no. 11/2001), covers (i) inventions meeting the patentability requirements; (ii) semiconductor topography products; (iii) trademarks; (iv) designations of origin and geographical indications; and (v) awards. The Regime of Copyright and Related Rights
 (Decree-Law
 no. 43/99/M, as amended by Law no. 5/2012), protects intellectual works and creations in the literary, scientific and artistic fields, by copyright and related rights. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations —
A failure to establish and protect our intellectual property rights could have an adverse effect on our business, financial condition and results of operations.”
Personal Data Regulations
Processing of personal data by our subsidiaries in Macau is subject to compliance with the Personal Data Protection Act (Law no. 8/2005) and, in the case of Melco Resorts Macau, any instructions issued by DICJ from time to time. The Office for Personal Data Protection, or GPDP, is the regulatory authority in Macau in charge of supervising and enforcing the Personal Data Protection Act. Breaches are subject to civil liability, administrative and criminal sanctions.
The legal framework and the instructions issued by DICJ require that certain procedures must be adopted before collecting, processing and/or transferring personal data, including obtaining consent from the data subject and/or notifying or requesting authorization from the GPDP and/or DICJ, as applicable, prior to processing personal data.
Cybersecurity Regulations
Law no. 13/2019, the Cybersecurity Law came into effect on December 21, 2019 and is intended to protect networks, systems and data of public and private operators of critical infra-structures, among which operators of games of fortune and chance or other games in casinos are included.
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The cybersecurity system will be composed of a Cybersecurity Commission, a Cybersecurity Alert and Response Incident Centre and cybersecurity supervisory entities.
Among other duties, private infra-structures operators shall be required to appoint a suitable and experienced person to be responsible for handling its cybersecurity and to be permanently reachable by the Cybersecurity Alert and Response Incident Centre, create a cybersecurity department, implement adequate internal cybersecurity procedures, conduct evaluations of its networks’ security and risks, submit annual reports to their supervisory entity and inform the Cybersecurity Alert and Response Incident Centre and the respective supervisory entity of any cybersecurity incidents.
It is expected that additional regulations will be enacted to further determine and detail how the above mentioned obligations are to be fulfilled.
Labor Quotas Regulations
All businesses in Macau must apply to the Labor Affairs Bureau for labor quotas to import
non-resident
unskilled workers from China and other regions or countries.
Non-resident
skilled workers are also subject to the issuance of a work permit by the Macau government, which is given individually on a
case-by-case
basis. Businesses are free to employ Macau residents in any position, as by definition all Macau residents have the right to work in Macau. We have, through our subsidiaries, two main groups of labor quotas in Macau, one to import
non-skilled
workers from China and the other to import
 non-skilled
 workers from all other countries. Melco Resorts Macau is not currently allowed to hire
non-Macau
resident dealers and supervisors under Macau government’s policy.
Pursuant to Macau social security laws, Macau employers must register their employees under a mandatory social security fund and make social security contributions for each of its resident employees and pay a special duty for each of its
 non-resident
 employees on a quarterly basis. Employers must also buy insurance to cover employment accidents and occupational illness for all employees.
Land Regulations
Land in Macau is legally divided into plots. In most cases, private interests in real property located in Macau are obtained through long-term leases from the Macau government.
Our subsidiaries have entered into land concession contracts for the land on which our Altira Macau, City of Dreams and Studio City properties are located. Each contract has a term of 25 years and is renewable for further consecutive periods of ten years and imposes, among other conditions, a development period, a land premium payment, a nominal annual government land use fee, which may be adjusted every five years, and a guarantee deposit upon acceptance of the land lease terms, which are subject to adjustments from time to time in line with the amounts paid as annual land use fees.
The land is initially granted on a provisional basis and registered as such with the Macau Real Property Registry and only upon completion of the development is the land concession converted into definitive status and so registered with the Macau Real Property Registry.
Restrictions on Distribution of Profits
All subsidiaries incorporated in Macau are required to set aside a minimum of 10% to 25% of the entity’s profit after tax to the legal reserve until the balance of the legal reserve reaches a level equivalent to 25% to 50% of the entity’s share capital in accordance with the provisions of the Macau Commercial Code. The legal reserve sets aside an amount from the subsidiaries’ statements of operations and is not available for distribution to the shareholders of the subsidiaries. The appropriation of legal reserve is recorded in the subsidiaries’ financial
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statements in the year in which it is approved by the boards of directors of the relevant subsidiaries. As of December 31, 2019, the aggregate balance of the reserves of all our Macau subsidiaries amounted to US$31.5 million.
Philippines Regulations
Gaming Regulations
Melco Philippine Parties and Philippine Parties are
 co-licensees
 of the Philippine License dated April 29, 2015 issued by PAGCOR (previously the Provisional License) for the development of an integrated casino, hotel, retail and entertainment complex within the Entertainment City, Manila. As one of the Philippine Licensees, Melco Resorts Leisure has been named as the special purpose entity to operate the casino business and act as the sole and exclusive representative of the Philippine Licensees for the purposes of the Philippine License. The Philippine License is one of the four licenses granted to various parties to develop integrated tourism resorts and establish and operate casinos in Entertainment City.
The Casino Regulatory Manual (CRM) was originally issued in January 2013 by PAGCOR for the guidance of the Entertainment City licensees. It was developed to meet the following objectives of PAGCOR: (a) to ensure a level playing field among industry proponents; (b) maintain the orderly and predictable environment; (c) enforce license terms and conditions; (d) promote fairness and integrity in the conduct of games; (e) provide an underlying platform for responsible gaming; (f) disallow access to gaming venues by minors and financially vulnerable persons; and (g) prevent licensed gaming venues from being used for illegal activities.
The CRM contains regulations and standards that the Entertainment City licensees, including City of Dreams Manila, should adhere to and observe. It should be read in conjunction with the Philippine License. It contains regulations on areas such as, but not limited to: casino layout, table games and electronic gaming machines, casino management system, surveillance, gaming chips and plaques, procurement of gaming equipment and gaming paraphernalia as well as the accreditation of suppliers thereof; casino operational rules and guidelines; conduct of gaming; casino player incentives; marketing and promotions; chipwashing and junket operations; banned personalities; determination of gross gaming revenues for table games, electronic gaming machines and other fees; and determination, collection and remittance of PAGCOR license fees. The CRM is annually revised to incorporate changes and revisions to the CRM proposed by any of the Entertainment City licensees and approved by PAGCOR. To date, the CRM is now on its fourth (4
th
) version.
The ownership and operation of casino gaming facilities in the Philippines are subject to the regulatory supervision of PAGCOR. See “— Gaming Licenses — PAGCOR Licenses in the Philippines” below for more details.
Anti-Money Laundering Regulations in the Philippines
The Philippine AMLA criminalized money laundering and imposed certain requirements on customer identification, record keeping, and reporting of covered and suspicious transactions by covered persons as defined under the law.
Previously, City of Dreams Manila was covered by the Philippine AMLA only to a limited extent and was only required to report its foreign exchange transactions/money changer activities. However, with the new amendment to the existing Philippine AMLA, casinos are now included as covered persons subject to reporting and other requirements. Therefore, City of Dreams Manila, both in relation to its foreign exchange transactions/money changer activities, as well as its casino operations, is now required to report (i) transactions in cash or other equivalent monetary instrument involving a total amount in excess of PHP500,000 within one (1) banking day, with respect to its foreign exchange transactions/money changer activities, and (ii) single casino cash
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transaction involving an amount in excess of PHP5,000,000 or its equivalent in any other currency, with respect to its casino operations. Suspicious transactions, regardless of amount, are also required to be reported in connection with both its foreign exchange transactions/money changer activities and casino operations.
The Anti-Money Laundering Council and PAGCOR have also recently released regulations and guidelines on compliance and we have adjusted our anti-money laundering policies for our Philippine operations to these new rules and regulations.
Environmental Laws
Development projects that are classified by law as Environmentally Critical Projects within statutorily defined Environmentally Critical Areas are required to obtain an Environmental Compliance Certificate (“ECC”) prior to commencement.
The Environmental Management Bureau of the Department of Environment and Natural Resources issued an ECC to Belle Corporation for City of Dreams Manila. Under the terms of its Philippine Economic Zone Authority registration, Melco Resorts Leisure is required, prior to the start of commercial operations of City of Dreams Manila, to either: (a) apply for an ECC with the Environmental Management Bureau of the Department of Environment and Natural Resources and submit an approved copy of the ECC to the Philippine Economic Zone Authority within 15 days from its issuance, or (b) submit the ECC issued to Belle Corporation, as the same may be amended to reflect any changes made to City of Dreams Manila, for the review and approval by the Philippine Economic Zone Authority. Accordingly, Belle Corporation applied for an Amended ECC to reflect the changes made to City of Dreams Manila. The Environmental Management Bureau of the Department of Environment and Natural Resources issued the Amended ECC to Belle Corporation on July 31, 2014.
Cyprus Regulations
Gaming Law and Regulations    
The Cyprus Casino Operations and Control Law 2015 and Casino Operations and Control Law (General)
Regulations 2016 provide the main regulatory framework for the establishment, operation, function, supervision and control of casinos operating in Cyprus. The Law established The Cyprus Gaming and Casino Supervision Commission, known as the Cyprus Gaming Commission, in 2015. The Law also provided for a gaming license to be granted to a single operator, which was granted to Integrated Casino Resorts on June 26, 2017, to develop, operate and maintain an integrated casino resort in Limassol, Cyprus (and until the operation of such integrated casino resort, the operation of a temporary casino in Limassol) and up to four satellite casino premises in Cyprus, for a term of 30 years from the date of grant and with the right for exclusivity in Cyprus for the first 15 years of the term. These are the only lawful and regulated casino operations in Cyprus. The Cyprus Gaming Commission also issues binding directions to Integrated Casino Resorts concerning its operations from time to time. Such directions issued by the Cyprus Gaming Commission in the past cover anti-money laundering and combating the financing of terrorism, casino layout, casino surveillance and the gaming equipment technical standards.
Anti-Money Laundering Law and Regulations
The Prevention and Suppression of Money Laundering Activities Laws of 2007 to 2019 (188(I)/2007) (“Cyprus AML Law”) transposed the European Union’s Fourth AML Directive into national law of Cyprus. The principal objectives of the Cyprus AML Law are to prevent the laundering of proceeds of serious criminal offences (“predicate offences”), including terrorist financing and related activities, to detect and prosecute money laundering activities and to provide for the restraint and confiscation of illicit funds. The law makes money laundering or assisting in it a criminal offense and establishes a Unit for Combating Money Laundering (MOKAS).
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Casino operators are an obliged entity under the Cyprus AML Law given that gaming activity poses a high risk of money laundering. Integrated Casino Resorts is therefore required to have procedures in place for customer due diligence, recordkeeping and internal reporting and to appoint an appropriate person as money laundering compliance officer. The Cyprus AML Law also contains powers of MOKAS to confiscate the assets of persons who are convicted of a predicate offence and to restrain the assets of such persons and of persons who are reasonably suspected of involvement in money laundering activities. In addition, there are a number of regulations related to anti-corruption, anti-bribery, anti-money laundering and sanctions. The CGC also has supervisory powers for anti-money laundering and combating the financing of terrorism.
The European Union’s Fifth AML Directive is due to be transposed into national law of Cyprus in 2020, building on the existing regulatory regime and reinforcing the European Union’s Fourth AML Directive.
European Union (EU)’s General Data Protection Regulation
The European Union’s (“EU”) General Data Protection Regulation 2016/679 (“GDPR”), which came into force on May 25, 2018, is the EU’s new data protection regulation which aims primarily to give control to individuals over their personal data and imposes strict requirements on organizations’ processing individuals’ personal data. It also addresses the transfer of personal data outside the EU and European Economic Area. Established within the EU, our operations in Cyprus are subject to the GDPR requirements. In order to comply with the GDPR requirements, Integrated Casino Resorts has developed and implemented policies and procedures which regulate the organization’s activities and aim to protect all personal data that is collected, processed and maintained by all business units. Integrated Casino Resorts has appointed a Data Protection Officer in line with the GDPR and adopted a number of physical and technical safeguards in order to ensure the protection of all personal data it maintains.
Environmental Laws
The European Union’s Directive on the Assessment of the Effects of Certain Plans and Programmes on the Environment provides for a high level of protection of the environment with a view to contributing to the integration of environmental considerations for the preparation and adoption of plans and programmes promoting sustainable development. This aims to ensure that an Environmental Impact Assessment is carried out of certain plans and programmes which are likely to have significant effects on the environment., including those in the tourism sector. The Directive was transposed into Cyprus law in 2005 by the Environmental Impact Assessment from Certain Plans and/or Programmes Law 102(I)/2005, which is enforced by the Cyprus Department of Environment. To comply with the requirements of the environmental law, an Environmental Impact Assessment was carried out for our development of the City of Dreams Mediterranean project and a further Environmental Impact Assessment has also been carried out to further study the impacts to nearby environment.
Other Applicable Laws
Foreign Corrupt Practices Act
The FCPA prohibits our Company and our employees and agents from offering or giving money or any other item of value to win or retain business or to influence any act or decision of any foreign official. The Code of Business Conduct and Ethics includes specific FCPA related provisions in Section IV and VIII B. To further supplement the Code of Business Conduct and Ethics, our Company implemented a FCPA Compliance Program in 2007, which was revised and expanded in scope in December 2013 as the Ethical Business Practices Program. This covers the activities of the shareholders, directors, officers, employees and counterparties of our Company.
Gaming Licenses
The Concession Regime in Macau
The Macau government conducted an international tender process for gaming concessions in Macau in 2001, and granted three gaming concessions to SJM, Galaxy and Wynn Macau, respectively. Upon authorization
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by the Macau government, each of SJM, Galaxy and Wynn Macau subsequently entered into subconcession contracts with their respective subconcessionaires to operate casino games and other games of chance in Macau. No further granting of subconcessions is permitted unless specifically authorized by the Macau government.
Though there are no restrictions on the number of casinos or gaming areas that may be operated under each concession or subconcession, Macau government approval is required for the commencement of operations of any casino or gaming area.
The subconcessionaires that entered into subconcession contracts with Wynn Macau, SJM and Galaxy are Melco Resorts Macau, MGM Grand Paradise and VML, respectively. Our subsidiary, Melco Resorts Macau, executed the Subconcession Contract with Wynn Macau on September 8, 2006. Wynn Macau will continue to develop and run hotel operations and casino projects independent of ours.
All concessionaires and subconcessionaires must pay a special gaming tax of 35% of gross gaming revenues, defined as all gaming revenues derived from casino or gaming areas, plus an annual gaming premium of:
  • MOP30 million (equivalent to approximately US$3.7 million) per annum fixed premium;
  • MOP300,000 (equivalent to approximately US$37,394) per annum per VIP gaming table;
  • MOP150,000 (equivalent to approximately US$18,697) per annum per mass market gaming table; and
  • MOP1,000 (equivalent to approximately US$125) per annum per electric or mechanical gaming.
The Macau government has been considering the extension, renewal or grant of new concessions and subconcessions. As part of such efforts, in May 2016, the Macau government conducted a
 mid-term
 review to analyze the impact of the gaming industry on the local economy, business environment of small and medium enterprises, local population and gaming and
 non-gaming
 business sectors and the current status of the gaming promoters.
The Subconcession Contract in Macau
The Subconcession Contract in Macau provides for the terms and conditions of the subconcession granted to Melco Resorts Macau by Wynn Macau. Melco Resorts Macau does not have the right to further grant a subconcession or transfer the operation to third parties.
Melco Resorts Macau paid a consideration of US$900 million to Wynn Macau. On September 8, 2006, Melco Resorts Macau was granted the right to operate games of fortune and chance or other games in casinos in Macau until the expiration of the subconcession on June 26, 2022. No further payments need to be made to Wynn Macau in future operations during the concession period.
The Macau government has confirmed that the subconcession is independent of Wynn Macau’s concession and that Melco Resorts Macau does not have any obligations to Wynn Macau pursuant to the Subconcession Contract. It is thus not affected by any modification, suspension, redemption, termination or rescission of Wynn Macau’s concession. In addition, an early termination of Wynn Macau’s concession before June 26, 2022, would not result in the termination of the subconcession. The subconcession was authorized and approved by the Macau government. Absent any change to Melco Resorts Macau’s legal status, rights, duties and obligations towards the Macau government or any change in applicable law, Melco Resorts Macau will continue to be validly entitled to operate independently under and pursuant to the subconcession, notwithstanding the termination or rescission of Wynn Macau’s concession, the insolvency of Wynn Macau and/or the replacement of Wynn Macau as concessionaire in the Subconcession Contract. The Macau government has a contractual obligation to the effect that, should Wynn Macau cease to hold the concession prior to June 26, 2022, the Macau government would replace Wynn Macau with another entity so as to ensure that Melco Resorts Macau may
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continue to operate games of chance and other games in casinos in Macau and the subconcession would at all times be under a concession. Both the Macau government and Wynn Macau have undertaken to cooperate with Melco Resorts Macau to ensure all the legal and contractual obligations are met.
A summary of the key terms of the Subconcession Contract is as follows.
Development of Gaming Projects/Financial Obligations.
 The Subconcession Contract requires us to make a minimum investment in Macau of MOP4.0 billion (equivalent to approximately US$498.6 million), including investment in fully developing Altira Macau and the City of Dreams, by December 2010. In June 2010, we obtained confirmation from the Macau government that as of the date of the confirmation, we had invested over MOP4.0 billion (equivalent to approximately US$498.6 million) in our projects in Macau.
Payments.
 Subconcession premiums and taxes, computed in various ways depending upon the type of gaming or activity involved, are payable to the Macau government. The method for computing these fees and taxes may be changed from time to time by the Macau government. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly or annually and are based upon either a percentage of the gross revenues or the number and type of gaming devices operated. In addition to special gaming taxes of 35% of gross gaming revenues, we are also required to contribute to the Macau government an amount equivalent to 1.6% of the gross revenues of our gaming business. Such contribution must be delivered to a public foundation designated by the Macau government whose goal is to promote, develop or study culture, society, economy, education and science and engage in academic and charitable activities. Furthermore, we are also obligated to contribute to Macau an amount equivalent to 2.4% of the gross revenues of the gaming business for urban development, tourism promotion and the social security of Macau. We are required to collect and pay, through withholding, statutory taxes on commissions or other remunerations paid to gaming promoters.
Termination Rights.
 The Macau government has the right, after notifying Wynn Macau, to unilaterally terminate Melco Resorts Macau’s subconcession in the event of
 non-compliance
 by us with our basic obligations under the subconcession and applicable Macau laws. Upon termination, all of our casino premises and gaming equipment would revert to the Macau government automatically without compensation to us and we would cease to generate any revenues from these operations. In many of these instances, the Subconcession Contract does not provide a specific cure period within which any such events may be cured and, instead, we may be dependent on consultations and negotiations with the Macau government to give us an opportunity to remedy any such default. Neither Melco Resorts Macau nor Wynn Macau is granted explicit rights of veto, or of prior consultation. The Macau government may be able to unilaterally rescind the Subconcession Contract upon the following termination events:
  • the operation of gaming without permission or operation of business which does not fall within the business scope of the subconcession;
  • abandonment of approved business or suspension of operations of our gaming business in Macau without reasonable grounds for more than seven consecutive days or more than 14
non-consecutive
days within one calendar year;
  • transfer of all or part of Melco Resorts Macau’s operation in Macau in violation of the relevant laws and administrative regulations governing the operation of games of fortune or chance and other casino games in Macau and without Macau government approval;
  • failure to pay taxes, premiums, levies or other amounts payable to the Macau government;
  • refusal or failure to resume operations following the temporary assumption of operations by the Macau government;
  • repeated opposition to the supervision and inspection by the Macau government and failure to comply with decisions and recommendations of the Macau government, especially those of the DICJ, applicable to us;
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  • failure to provide or supplement the guarantee deposit or the guarantees specified in the subconcession within the prescribed period;
  • bankruptcy or insolvency of Melco Resorts Macau;
  • fraudulent activity harming public interest;
  • serious and repeated violation of the applicable rules for carrying out casino games of chance or games of other forms or damage to the fairness of casino games of chance or games of other forms;
  • systematic
 non-compliance
 with the Macau Gaming Law’s basic obligations;
  • the grant to any other person of any managing power over the gaming business of Melco Resorts Macau or the grant of a subconcession or entering into any agreement to the same effect; or
  • failure by a controlling shareholder in Melco Resorts Macau to dispose of its interest in Melco Resorts Macau, within 90 days from the date of the authorization given by the Macau government for such disposal, pursuant to written instructions received from the regulatory authority of a jurisdiction where the said shareholder is licensed to operate, which have had the effect that such controlling shareholder now wishes to dispose of the shares it owns in Melco Resorts Macau.
Ownership and Capitalization.
 Set out below are the key terms in relation to ownership and capitalization under the Subconcession Contract:
  • any person who directly acquires voting rights in Melco Resorts Macau will be subject to authorization from the Macau government;
  • Melco Resorts Macau will be required to take the necessary measures to ensure that any person who directly or indirectly acquires more than 5% of the shares in Melco Resorts Macau would be subject to authorization from the Macau government, except when such acquisition is wholly made through the shares of publicly-listed companies tradable at a stock exchange;
  • any person who directly or indirectly acquires more than 5% of the shares in Melco Resorts Macau will be required to report the acquisition to the Macau government (except when such acquisition is wholly made through shares tradable on a stock exchange as a publicly-listed company);
  • the Macau government’s prior approval would be required for any recapitalization plan of Melco Resorts Macau; and
  • the Chief Executive of Macau could require the increase of Melco Resorts Macau’s share capital, if deemed necessary.
Redemption.
 Under the Subconcession Contract, from 2017, the Macau government has the right to redeem the Subconcession Contract by providing us with at least one year’s prior notice. In the event the Macau government exercises this redemption right, we would be entitled to compensation. The standards for the calculation of the amount of such compensation would be determined based on the gross revenues generated by City of Dreams during the tax year immediately prior to the redemption, multiplied by the remaining years of the term of the subconcession. We would not receive any further compensation (including for consideration paid to Wynn Macau for the subconcession).
Others.
 In addition, the Subconcession Contract contains various general covenants and obligations and other provisions, including special duties of cooperation, special duties of information, and execution of our investment obligations.
See “Item 3. Key Information — D. Risk Factors — Risks Relating to Operating in the Gaming Industry in Macau — Melco Resorts Macau’s Subconcession Contract expires in 2022 and if we were unable to secure an extension of its subconcession, or a new concession or subconcession, in 2022, or if the Macau government were to exercise its redemption right, we would be unable to operate casino gaming in Macau.”
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PAGCOR Licenses in the Philippines
The Philippine License issued by PAGCOR authorizes the Philippine Licensees, through Melco Resorts Leisure, to establish and operate a casino in the Philippines for both local and foreign patrons who are at least
twenty-one
years of age.
In general, the Philippine License imposes certain obligations such as, but not limited to, the following:
  • payment of monthly license fees to PAGCOR;
  • maintenance of a
 debt-to-equity
 ratio (based on calculation as agreed with PAGCOR) for each of the Philippine Licensees of no greater than 70:30;
  • at least 95.0% of the total employees of City of Dreams Manila must be Philippine citizens;
  • 2.0% of certain casino revenues must be remitted to a foundation devoted to the restoration of cultural heritage and 5.0% of certain
 non-gaming
 revenues to PAGCOR; and
  • operation of only the authorized casino games approved by PAGCOR.
See “Item 3. Key Information — D. Risk Factors — Risks Relating to Operating in the Gaming Industry in the Philippines — MRP’s gaming operations are dependent on the Philippine License issued by PAGCOR.”
Gaming License in Cyprus
Under the Cyprus License, Integrated Casino Resorts is granted the right to develop, operate and maintain an integrated casino resort in Limassol, Cyprus (and until the operation of such integrated casino resort, the operation of a temporary casino in Limassol) and up to four satellite casino premises in Cyprus, for a term of 30 years from the date of grant and with the right for exclusivity in Cyprus for the first 15 years of the term. The Cyprus License imposes certain requirements on Integrated Casino Resorts and their service providers.
The Cyprus License is also subject to suspension or termination upon the occurrence of certain events. The requirements imposed by the Cyprus License include, among others:
  • payment of an annual license fee of EUR2.5 million (equivalent to approximately US$2.8 million) per year for the first four-year period commencing from the date of grant of the Cyprus License on June 26, 2017 and an annual license fee of EUR5.0 million (equivalent to approximately US$5.6 million) per year for the second four-year period as annual license fees for the operation of the temporary casino and City of Dreams Mediterranean to the government of Cyprus. Upon completion of the above eight-year period and for each four-year period thereafter, the government of Cyprus may review the annual license fee payable for each four-year term, provided that the annual license fee payable per year shall be no less than EUR5.0 million (equivalent to approximately US$5.6 million) and subject to a maximum percentage increase.
  • payment of annual license fee of EUR1.0 million (equivalent to approximately US$1.1 million) per year for the satellite casino in Nicosia since its commencement of operations in 2018 and annual license fee of EUR0.5 million (equivalent to approximately US$0.6 million) per year for each of the satellite casinos in Larnaca, Ayia Napa and Paphos since their operations commenced in 2018, 2019 and 2020, respectively.
  • payment of a monthly casino tax of an amount equal to 15% of the gross gaming revenue, such percentage not to be increased during the initial
15-year
exclusivity period under the Cyprus License.
In addition, we are also required under the Cyprus License to complete the City of Dreams Mediterranean project and commence operations by December 31, 2021. If we are unable to do so, and if we are
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unable to commence operations by December 31, 2021 with no extension granted by the government of Cyprus and the government of Cyprus exercises its right to terminate the Cyprus License, we could lose all or substantially all of our investment in Cyprus and may not be able to continue our operations in Cyprus as planned. See
“
Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations — We are developing the City of Dreams Mediterranean project in Cyprus and we are required under the Cyprus License to open the integrated casino resort by December 31, 2021. If we do not open City of Dreams Mediterranean by that time and the government of Cyprus does not grant us an extension of the opening date, we would be required to pay a penalty to the Cyprus government or even have the Cyprus License terminated if such delay continues beyond a grace period.”
See “Item 3. Key Information — D. Risk Factors — Risks Relating to Operating in the Gaming Industry in Cyprus — Cyprus’s gaming operations are dependent on the Cyprus License issued by CGC.”
Tax
We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we and our subsidiaries incorporated in the Cayman Islands are not subject to Cayman Islands income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the Cayman Islands. However, we are subject to Hong Kong profits tax on profits arising from our activities conducted in Hong Kong.
Our subsidiaries incorporated in the British Virgin Islands are not subject to tax in the British Virgin Islands, but certain subsidiaries incorporated in the British Virgin Islands are subject to Macau complementary tax of 12% on profits earned in or derived from its activities conducted in Macau.
Our subsidiaries incorporated in Macau are subject to Macau complementary tax of up to 12% on profits earned in or derived from their activities conducted in Macau. Melco Resorts Macau applied for and was granted the benefit of a corporate tax holiday on Macau complementary tax (but not gaming tax) from 2017 through 2021. In addition, the Macau government granted one of our subsidiaries in Macau the complementary tax exemption until 2021 on profits generated from income received from Melco Resorts Macau, to the extent that such income is derived from Studio City gaming operations and has been subject to gaming tax. The dividend distributions of such subsidiary to its shareholders continue to be subject to complementary tax. We remain subject to Macau complementary tax on our
 non-gaming
 profits.
For the five-year period from 2017 through 2021, an annual payment of MOP18.9 million (equivalent to approximately US$2.3 million) is payable by Melco Resorts Macau, with respect to tax due for dividend distributions to the shareholders of Melco Resorts Macau from gaming profits, whether such dividends are actually distributions by Melco Resorts Macau or not, or whether Melco Resorts Macau has distributable profits in the relevant year. Upon the payment of such payment amount, the shareholders of Melco Resorts Macau will not be liable to pay any other tax in Macau for dividend distributions received from gaming profits. However, we cannot assure you that the same arrangement will be applied beyond 2021 or that, in the event a similar arrangement is adopted, whether we will be required to pay a higher annual sum.
Melco Resorts Macau is subject to Macau gaming tax based on gross gaming revenue in Macau. These gaming taxes are an assessment on Melco Resorts Macau’s gaming revenue and are recorded as casino expense.
The Macau government granted to Altira Resorts (formerly, Altira Hotel), in 2007, and COD Resorts, in 2011 and 2013, the declaration of utility purposes benefit in respect of Altira Macau, The Countdown, Nüwa and Grand Hyatt Macau hotel, pursuant to which they are entitled to a property tax holiday, for a period of 12 years, on any immovable property that they own or is operated by them. Under such declaration of utility purposes benefit, they will also be allowed to double the maximum rates applicable regarding depreciation and reintegration for the purposes of assessing the Macau complementary tax. The transfer of the declaration of utility purpose to COD Resorts and Altira Resorts was requested on November 8, 2017 and was duly approved by the Macau government.
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In September 2017, the Macau government granted Studio City Hotels the declaration of touristic utility purpose pursuant to which Studio City Hotels is entitled to a property tax holiday for a period of twelve years on the immovable property to which the touristic utility was granted, owned or operated by Studio City Hotels. Under such tax holiday, Studio City Hotels is allowed to double the maximum rates applicable to depreciation and reintegration for the purposes of assessment of the Macau complementary tax. Although the Studio City property is owned by Studio City Developments Limited, we believe Studio City Hotels is entitled to such property tax holiday; however, there is no assurance that the Macau government will extend such benefit to Studio City Hotels.
Our subsidiaries incorporated in Hong Kong are subject to Hong Kong profits tax of 16.5% on any profits arising in or derived from Hong Kong. One of our subsidiaries incorporated in Hong Kong is also subject to Macau complementary tax on profits earned in or derived from its activities conducted in Macau and another one is subject to corporate tax on profits in a number of other Asian jurisdictions through its activities conducted in these jurisdictions.
Our subsidiaries incorporated in the Philippines are subject to Philippine corporate income tax of 30% on profits and other local taxes. Some of the subsidiaries are liable for VAT on certain transactions. On gaming related transactions, Melco Resorts Leisure enjoys exemption from national, local, direct and indirect (i.e. VAT) taxes pursuant to the PAGCOR charter and is subject to license fees which are inclusive of the 5% franchise tax payable to PAGCOR based on gross gaming revenue in the Philippines, in lieu of all other taxes. The franchise tax and license fees are an assessment on Melco Resorts Leisure’s gaming revenue and are recorded as casino expense in the consolidated statements of operations. Further, Melco Resorts Leisure, by virtue of its being registered with the Philippine Economic Zone Authority as a Tourism Economic Zone Enterprise, enjoys a tax and duty exemption on importation and VAT
 zero-rating
 on its local purchases of certain capital equipment used in registered activities.
Our subsidiaries incorporated in Cyprus are subject to Cyprus corporate income tax of 12.5% on income earned in or derived from Cyprus and abroad. Our gaming revenues in Cyprus are exempt from VAT while our subsidiaries are liable for VAT on certain
non-gaming
transactions. Pursuant to the Cyprus License, a casino tax of 15% is imposed on gross gaming revenues in Cyprus. These casino taxes are recorded as a casino expense in the consolidated statements of operations.
C. ORGANIZATIONAL STRUCTURE
We are a holding company for the following principal businesses and developments: (1) 100% economic interest in our Macau gaming subconcession holder, Melco Resorts Macau, which, directly or indirectly through its subsidiary, is the operator of our gaming and
 non-gaming
 businesses in various properties in Macau; (2) a majority equity and economic interest in SCI, the holding company of Studio City; (3) a majority equity and economic interest in MRP, the holding company of City of Dreams Manila; and (4) a majority equity and economic interest in ICR Cyprus, the holding company of our operations in Cyprus including a temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos and the City of Dreams Mediterranean in development.
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The following diagram illustrates our organizational structure, including the place of formation, ownership interest and affiliation of our significant subsidiaries, as of March 27, 2020:
 
Notes:
(1) Based on 1,456,547,942 shares outstanding as of March 27, 2020. The 1,456,547,942 shares outstanding include shares held by our depositary bank to facilitate the administration and operation of our share incentive plans. Such shares represent approximately 1.31% of the Company’s outstanding shares as of March 27, 2020. For a description of our share incentive plans, see “Item 6. Directors, Senior Management and Employees – E. Share Ownership – Share Incentive Plans”.
(2) The remaining 50% of the equity interests of these companies are owned by Studio City Holdings Five Limited, a wholly-owned subsidiary of SCI. The 50% interest held by Studio City Holdings Five Limited in various Studio City companies incorporated in the British Virgin Islands is non-voting.
(3) 3.96% and 1% of the equity interests are owned by Studio City Holdings Four Limited and Studio City Holdings Five Limited, respectively. Studio City Holdings Four Limited is a wholly-owned subsidiary of SCI.
(4) 3.06% of the equity interests are owned by MPHIL Corporation, a wholly-owned subsidiary of MCO Investments.
(5) 34.99% and 34.99% of the equity interests are owned by SCP One Limited and SCP Two Limited, respectively. SCP One Limited and SCP Two Limited are wholly-owned subsidiaries of SCI.
(6) 0.02% of the equity interests are owned by Studio City Holdings Five Limited.
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(7) The remaining 5% of the equity interests are owned by MCO Nominee Two Limited.
(8) Five shares (representing less than 0.01% of the issued share capital) are owned by five nominee directors of each relevant company.
(9) New Cotai, LLC owns 72,511,760 Class B ordinary shares of SCI. In addition, as of February 26, 2020, certain affiliates of New Cotai, LLC beneficially own SC ADSs representing 41,622,800 Class A ordinary shares of SCI.
See “Item 7. Major Shareholders and Related Party Transactions — A. Major Shareholders” for more information regarding the beneficial ownership of Melco International in our Company and “Exhibit 8.1 — List of Significant Subsidiaries.”
D. PROPERTY, PLANT AND EQUIPMENT
See “Item 4. Information on the Company — B. Business Overview” and “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Investing Activities” and “— Other Financing and Liquidity Matters” for information regarding our material tangible property, plant and equipment.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion should be read in conjunction with, and is qualified in its entirety by, the audited consolidated financial statements and the notes thereto in this Annual Report on Form
 20-F.
The comparative information for 2018 and 2017 has been adjusted to include the assets and liabilities of ICR Cyprus and its subsidiaries that were acquired by the Company at historical carrying amounts, and the financial results of ICR Cyprus and its subsidiaries, as if the Cyprus Acquisition had been in effect since the inception of common control resulting from the acquisition of ICR Cyprus and its subsidiaries by Melco International in September 2017 in accordance with Accounting Standards Codification
805-50,
Business Combinations – Related Issues
. Certain statements in this “Operating and Financial Review and Prospects” are forward-looking statements. See “Special Note Regarding Forward-Looking Statements” regarding these statements.
Overview
We are a holding company and, through our subsidiaries, develop, own and operate casino gaming and entertainment casino resort facilities in Asia and Europe. Our future operating results are subject to significant business, economic, regulatory and competitive uncertainties and risks, many of which are beyond our control. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations.” For detailed information regarding our operations and development projects, see “Item 4. Information on the Company — B. Business Overview.”
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A. OPERATING RESULTS
Operations
Our primary business segments consist of:
Macau
City of Dreams
In 2019, City of Dreams had an average of approximately 516 gaming tables and approximately 822 gaming machines. In January 2019, the Macau government authorized Melco to operate 40 additional gaming tables at City of Dreams. As of December 31, 2019, City of Dreams offered approximately 2,170 hotel rooms, suites and villas (inclusive of the approximately 770 rooms, suites and villas offered by Morpheus following its opening in June 2018), approximately 25 restaurants and bars, approximately 165 retail outlets, a wet stage performance theater, recreation and leisure facilities, including health and fitness clubs, three swimming pools, spas and salons and banquet and meeting facilities. The opening of Morpheus in June 2018 also provides an additional pool, spa and salon, fitness club, executive lounge and four restaurants. The wet stage performance theater with approximately 2,000 seats features The House of Dancing Water produced by Franco Dragone. The Club Cubic nightclub features approximately 2,395 square meters (equivalent to approximately 25,780 square feet) of live entertainment space. City of Dreams targets premium market and rolling chip players from regional markets across Asia.
We opened Morpheus, the third phase of City of Dreams, in June 2018.
For the years ended December 31, 2019, 2018 and 2017, net revenues generated from City of Dreams amounted to US$3,050.5 million, US$2,543.6 million and US$2,666.3 million, representing 53.2%, 49.0% and 50.5% of our total net revenues, respectively.
Altira Macau
In 2019, Altira Macau had an average of approximately 103 gaming tables and 178 gaming machines operated as a Mocha Club at Altira Macau. In addition, Altira Macau had approximately 230 hotel rooms as of December 31, 2019 and features several fine dining and casual restaurants and recreation and leisure facilities. Altira Macau is designed to provide a casino and hotel experience that caters to Asian rolling chip players sourced primarily through gaming promoters. For the years ended December 31, 2019, 2018 and 2017, net revenues generated from Altira Macau amounted to US$465.1 million, US$471.3 million and US$446.1 million, representing 8.1%, 9.1% and 8.4% of our total net revenues, respectively.
Studio City
Studio City is a large-scale cinematically-themed integrated entertainment, retail and gaming resort located in Cotai, with gaming facilities, luxury hotel offerings and various entertainment, retail and food and beverage outlets to attract a diverse range of customers, with a current focus on the mass market segment and complemented with junket and premium direct VIP rolling chip operations in Asia and, in particular, from Greater China. In January 2019, Melco Resorts Macau informed Studio City Entertainment Limited that it will cease VIP gaming operations at the Studio City Casino in January 2020. In January 2020, Studio City announced that Melco Resorts Macau would continue VIP rolling chip operations at the Studio City Casino until January 15, 2021, subject to early termination with 30 days’ prior notice. Studio City opened its doors to customers in October 2015. In October 2018, Studio City listed its SC ADS on the New York Stock Exchange, following which we continued to retain a majority equity interest in SCI. In 2019, Studio City had an average of approximately 293 gaming tables and 947 gaming machines. For the years ended December 31, 2019, 2018 and 2017, net revenues generated from Studio City amounted to US$1,355.3 million, US$1,368.4 million and US$1,363.4 million, representing 23.6%, 26.4% and 25.8% of our total net revenues, respectively.
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Mocha Clubs
In 2019, Mocha Clubs had eight clubs with an average of approximately 1,478 gaming machines in operation (including approximately 178 gaming machines at Altira Macau). Mocha Clubs focus primarily on general mass market players, including
 day-trip
 customers, outside the conventional casino setting. For the years ended December 31, 2019, 2018 and 2017, net revenues generated from Mocha Clubs amounted to US$117.5 million, US$113.4 million and US$121.3 million, representing 2.0%, 2.2% and 2.3% of our total net revenues, respectively. The source of revenues was substantially all from gaming machines. For the years ended December 31, 2019, 2018 and 2017, gaming machine revenues represented 96.6%, 97.7% and 97.3% of net revenues generated from Mocha Clubs, respectively.
Corporate and Other
Corporate and Other primarily includes Grand Dragon Casino (formerly known as Taipa Square Casino), a casino on Taipa Island, Macau, operating within Grand Dragon Hotel (formerly known as Hotel Taipa Square), which we operate under a
 right-to-use
 agreement, our development projects in Japan and other corporate costs. For the years ended December 31, 2019, 2018 and 2017, net revenues generated from Corporate and Other amounted to US$51.3 million, US$46.3 million and US$38.5 million, representing 0.9%, 0.9% and 0.7% of our total net revenues, respectively.
Philippines
City of Dreams Manila
City of Dreams Manila opened its doors to customers in December 2014, with a grand opening in the first quarter of 2015. In 2019, City of Dreams Manila had an average of approximately 2,265 gaming machines and 311 gaming tables. City of Dreams Manila also includes three branded hotel towers, several entertainment venues and features a wide selection of regional and international food and beverage offerings as well as extended retail shops. For the years ended December 31, 2019, 2018 and 2017, net revenues generated from City of Dreams Manila amounted to US$602.5 million, US$612.9 million and US$649.3 million, representing 10.5%, 11.8% and 12.3% of our total net revenues, respectively.
Cyprus
We currently operate and manage a temporary casino in Limassol and four satellite casinos in Nicosia, Larnaca, Ayia Napa and Paphos in Cyprus. In 2019, our facilities in Cyprus had an average of approximately 388 gaming machines and 38 gaming tables. For the years ended December 31, 2019 and 2018, net revenues generated from our operations in Cyprus amounted to US$94.7 million and US$33.0 million, representing 1.7% and 0.6% of our total net revenues, respectively.
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Summary of Financial Results
For the year ended December 31, 2019, our total net revenues for the year ended December 31, 2019 were US$5.74 billion, an increase of 10.6% from US$5.19 billion for the year ended December 31, 2018. Net income attributable to Melco Resorts and Entertainment Limited for the year ended December 31, 2019 was US$373.2 million, as compared to net income of US$340.3 million for the year ended December 31, 2018. Our improvement in profitability was primarily a result of the improvement in our gaming operations performance, particularly from the mass market table games segment, partially offset by higher depreciation and amortization expenses, higher interest expenses and fair value loss on investment securities.
                         
 
Year Ended December 31,
 
 
2019
 
  
2018
(As adjusted)
 
  
2017
(As adjusted)
 
 
(in thousands of US$)
 
Net revenues
  $
5,736,801
    $
5,188,942
    $
5,284,823
 
Total operating costs and expenses
   
(4,989,123
 )    
(4,575,495
 )    
(4,680,283
 )
Operating income
   
747,678
     
613,447
     
604,540
 
Net income attributable to Melco Resorts & Entertainment Limited
  $
373,173
    $
340,299
    $
344,828
 
Our results of operations and financial position for the years presented are not fully comparable for the following reasons:
  • In May 2017, we issued and sold 27,769,248 ADSs (equivalent to 83,307,744 ordinary shares) and 81,995,799 ordinary shares and also repurchased 165,303,544 ordinary shares from Crown Asia Investments Pty, Ltd. for the aggregate purchase price of US$1.2 billion, and such repurchased shares were subsequently cancelled by us
  • On June 6, 2017, Melco Resorts Finance issued US$650.0 million in aggregate principal amount of the 2017 Senior Notes
  • On June 14, 2017, together with the net proceeds from the issuance of US$650.0 million in aggregate principal amount of the 2017 Senior Notes along with the proceeds in the amount of US$350.0 million from a partial drawdown of the revolving credit facility under the 2015 Credit Facilities and cash on hand, Melco Resorts Finance redeemed all of our outstanding 2013 Senior Notes
  • On July 3, 2017, Melco Resorts Finance issued US$350.0 million in aggregate principal amount of the 2017 Senior Notes, the net proceeds from which were used to repay in full the US$350.0 million drawdown from the revolving credit facility under the 2015 Credit Facilities
  • On October 9, 2017, Melco Resorts Leisure partially redeemed the Philippine Notes in an aggregate principal amount of PHP7.5 billion, together with accrued interest
  • On June 15, 2018, Morpheus commenced operations with its grand opening on the same date
  • On August 31, 2018, Melco Resorts Leisure partially redeemed the Philippine Notes in an aggregate principal amount of PHP5.5 billion, together with accrued interest
  • In October 2018, SCI completed its initial public offering of 28,750,000 SC ADSs (equivalent to 115,000,000 Class A ordinary shares of SCI)
  • In November 2018, SCI completed the exercise by the underwriters of their over-allotment option in full to purchase an additional 4,312,500 SC ADSs from SCI
  • On December 13, 2018, MCO Investments completed the tender offer for common shares of MRP and, together with an additional of 107,475,300 shares acquired by MCO Investments on or after December 6, 2018, increased the Company’s equity interest in MRP from approximately 72.8% immediately prior to the announcement of the tender offer to approximately 97.9%
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  • On December 28, 2018, Melco Resorts Leisure redeemed all of the Philippine Notes which remained outstanding
  • On December 31, 2018, Studio City Finance partially redeemed the 2012 Studio City Notes in an aggregate principal amount of US$400.0 million, together with accrued interest
  • On January 22, 2019, Studio City Finance commenced the 2012 Studio City Notes Tender Offer, which expired on February 4, 2019. The aggregate principal amount of valid tenders received and not validly withdrawn under the 2012 Studio City Notes Tender Offer amounted to US$216.5 million
  • On February 11, 2019, Studio City Finance issued US$600.0 million in aggregate principal amount of 2019 Studio City Notes, the net proceeds of which were used to pay the tendering noteholders from the 2012 Studio City Notes Tender Offer and, on March 13, 2019, to redeem, together with accrued interest, all remaining outstanding amounts of the 2012 Studio City Notes
  • On April 26, 2019, Melco Resorts Finance issued US$500.0 million in aggregate principal amount of the 2019 Senior Notes due 2026, the net proceeds from which were used to partially repay the principal amount outstanding under the revolving credit facility under the 2015 Credit Facilities
  • On June 6, 2019, we acquired an approximately 9.99% ownership interest in Crown Resorts for which we paid the purchase price of AUD879.8 million (equivalent to approximately US$617.8 million)
  • On July 17, 2019, Melco Resorts Finance issued US$600.0 million in aggregate principal amount of the 2019 Senior Notes due 2027, the net proceeds from which were used to partially repay the principal amount outstanding under the revolving credit facility under the 2015 Credit Facilities
  • On July 31, 2019, we acquired a 75% equity interest in ICR Cyprus, whose subsidiaries are operating a temporary casino in Limassol and two satellite casinos in Nicosia and Larnaca since 2018, a satellite casino in Ayia Napa since July 2019 and a satellite casino in Paphos since 2020, as well as developing City of Dreams Mediterranean
  • On November 30, 2019, Studio City Finance fully repaid the 2016 Studio City Notes due 2019 upon its maturity
  • On December 4, 2019, Melco Resorts Finance issued US$900.0 million in aggregate principal amount of the 2019 Senior Notes due 2029, the net proceeds from which were used to fully repay the principal amount outstanding under the revolving credit facility and to partially repay the principal amount outstanding under the term loan facility under the 2015 Credit Facilities
Since December 2019, there have been reported cases of Covid-19 in Macau, the Philippines, Hong Kong, China, Singapore, South Korea, Japan, Iran, Europe, the U.S. and other parts of the world. On January 31, 2020, the Covid-19 outbreak was declared a global emergency by the World Health Organization. As a result of the Covid-19 outbreak, the PRC government suspended the issuance of group and individual travel visas from China to Macau and the Hong Kong SAR government suspended all ferry and helicopter services between Hong Kong and Macau. In addition, the Macau government required all casinos in Macau to be closed for a 15-day period in February 2020. Upon resumption of operations, casinos in Macau were required to implement health-related precautionary measures, including temperature checks, mask protection, health declarations and requirements that gaming patrons be stopped from congregating together, that the number of players and spectators at tables be limited to three to four, that gaming patrons be prohibited from sitting in adjacent seats at gaming tables and that gaming patrons and casino employees maintain minimum physical distances. According to the Macao Government Tourism Office, visitor arrivals to Macau during the Chinese New Year in 2020 decreased by approximately 78.3% on a year-over-year basis while, according to the DICJ, gross gaming revenues in Macau declined by 49.9% on a year-over-year basis in the first two months of 2020 as compared to the first two months of 2019. On March 11, 2020, the Covid-19 outbreak was declared a pandemic by the World Health Organization. As the Covid-19 outbreak continues to spread, Macau, China and other countries or regions have imposed new or modified existing travel restrictions and/or quarantine measures to further restrict or
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discourage individuals from traveling into or out of these countries or regions. For example, in March 2020, the Macau government announced the prohibition of all foreigners from entering Macau other than residents of Hong Kong and Taiwan, provided such residents undergo a mandatory 14-day quarantine upon entry into Macau and have not otherwise been to other areas in the preceding 14 days. The PRC government in March 2020 also announced further measures significantly reducing the movement of individuals between Macau and the province of Guangdong, including general requirements for those entering Guangdong province returning from Macau to be subject to a mandatory 14-day quarantine.
The Covid-19 outbreak has also caused a severe drop in tourism in Asia to Integrated Resort (IR) facilities in the region, including City of Dreams Manila. The Philippine government has also announced a series of measures restricting inbound travel and the entire island of Luzon, including Metro Manila, has been placed under enhanced community quarantine from March 16, 2020 to April 14, 2020. In addition, PAGCOR has ordered the suspension of all casinos and other gaming operations in Metro Manila, which includes City of Dreams Manila, for the duration of the enhanced community quarantine.
In Cyprus, the Cyprus government has announced a series of measures designed to contain the spread of Covid-19 that has resulted in closures of our casino operations in Cyprus for four weeks with effect from March 16, 2020 and further restrictions on non-essential social and business activities from March 24, 2020 to April 13, 2020 or such other date upon further review by the Cyprus government, such as suspension of most construction works within the country, including construction work at our City of Dreams Mediterranean project.
The disruptions to our operations caused by the Covid-19 outbreak have had a material effect on the Company’s financial condition, operations and prospects during the first quarter of 2020. As such disruptions are ongoing, such material adverse effects will continue, and may worsen, beyond the first quarter of 2020. Any recovery from such disruptions will depend on future developments, such as the duration of travel and visa restrictions and customer sentiment, including the length of time before customers will resume travelling and participating in entertainment and leisure activities at high-density venues, all of which are highly uncertain. Given the uncertainty around the extent and timing of the potential future spread or mitigation of Covid-19 and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows and financial condition. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations — Our business in Macau, the Philippines and Cyprus is subject to certain regional and global political and economic risks, as well as natural disasters, that may significantly affect visitation to our properties and have a material adverse effect on our results of operations” and “— An outbreak of widespread health epidemics or pandemics, contagious disease or other outbreaks may have an adverse effect on the economies of affected countries or regions and may have a material adverse effect on our business, financial condition and results of operations.”
Key Performance Indicators (KPIs)
We use the following KPIs to evaluate our casino operations, including table games and gaming machines:
  •
Rolling chip volume:
 the amount of
 non-negotiable
 chips wagered and lost by the rolling chip market segment.
  •
Rolling chip win rate:
 rolling chip table games win (calculated before discounts, commissions,
 non-discretionary
incentives (including our point-loyalty programs) and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis) as a percentage of rolling chip volume.
  •
Mass market table games drop:
 the amount of table games drop in the mass market table games segment.
  •
Mass market table games hold percentage:
 mass market table games win (calculated before discounts, commissions,
non-discretionary
incentives (including our point-loyalty programs) and allocating casino
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  revenues related to goods and services provided to gaming patrons on a complimentary basis) as a percentage of mass market table games drop.
  •
Table games win:
 the amount of wagers won net of wagers lost on gaming tables that is retained and recorded as casino revenues. Table games win is calculated before discounts, commissions,
non-discretionary
incentives (including our point-loyalty programs) and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis.
  •
Gaming machine handle:
 the total amount wagered in gaming machines.
  •
Gaming machine win rate:
 gaming machine win (calculated before
 non-discretionary
 incentives (including our point-loyalty programs) and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis) expressed as a percentage of gaming machine handle.
In the rolling chip market segment, customers purchase identifiable chips known as
non-negotiable
chips, or rolling chips, from the casino cage, and there is no deposit into a gaming table’s drop box for rolling chips purchased from the cage. Rolling chip volume and mass market table games drop are not equivalent. Rolling chip volume is a measure of amounts wagered and lost. Mass market table games drop measures buy in. Rolling chip volume is generally substantially higher than mass market table games drop. As these volumes are the denominator used in calculating win rate or hold percentage, with the same use of gaming win as the numerator, the win rate is generally lower in the rolling chip market segment than the hold percentage in the mass market table games segment.
Our combined expected rolling chip win rate across our properties is in the range of 2.85% to 3.15%.
We use the following KPIs to evaluate our hotel operations:
  •
Average daily rate:
 calculated by dividing total room revenues including complimentary rooms (less service charges, if any) by total rooms occupied, including complimentary rooms, i.e., average price of occupied rooms per day.
  •
Occupancy rate:
 the average percentage of available hotel rooms occupied, including complimentary rooms, during a period.
  •
Revenue per available room, or REVPAR:
 calculated by dividing total room revenues including complimentary rooms (less service charges, if any) by total rooms available, thereby representing a combination of hotel average daily room rates and occupancy.
Complimentary rooms are included in the calculation of the above room-related KPIs. The average daily rate of complimentary rooms is typically lower than the average daily rate for cash rooms. The occupancy rate and REVPAR would be lower if complimentary rooms were excluded from the calculation. As not all available rooms are occupied, average daily room rates are normally higher than revenue per available room.
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Revenues
Our total net revenues for the year ended December 31, 2019 were US$5.74 billion, an increase of US$0.55 billion, or 10.6%, from US$5.19 billion for the year ended December 31, 2018. The increase in total net revenues was primarily attributable to better performance in mass market table games segment.
Our total net revenues for the year ended December 31, 2019 consisted of US$4.98 billion of casino revenues, representing 86.8% of our total net revenues, and US$760.1 million of
non-casino
revenues. Our total net revenues for the year ended December 31, 2018 consisted of US$4.50 billion of casino revenues, representing 86.7% of our total net revenues, and US$692.3 million of
non-casino
revenues.
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Casino.
Casino revenues for the year ended December 31, 2019 were US$4.98 billion, representing a US$0.48 billion, or 10.7%, increase from casino revenues of US$4.50 billion for the year ended December 31, 2018, primarily due to better performance in mass market table games segment.
Altira Macau.
Altira Macau’s rolling chip volume for the year ended December 31, 2019 was US$17.58 billion, representing a decrease of US$4.79 billion, or 21.4%, from US$22.37 billion for the year ended December 31, 2018. The rolling chip win rate was 3.45% for the year ended December 31, 2019, and increased from 3.03% for the year ended December 31, 2018. Our expected range was 2.85% to 3.15%. In the mass market table games segment, drop was US$611.0 million for the year ended December 31, 2019, representing an increase of 15.5% from US$529.1 million for the year ended December 31, 2018. The mass market table games hold percentage was 21.7% for the year ended December 31, 2019, increasing from 19.3% for the year ended December 31, 2018. Average net win per gaming machine per day was US$195 for the year ended December 31, 2019, an increase of US$57, or 41.8%, from US$137 for the year ended December 31, 2018.
City of Dreams.
City of Dreams’ rolling chip volume for the year ended December 31, 2019 of US$58.29 billion represented an increase of US$12.9 billion, or 28.5%, from US$45.36 billion for the year ended December 31, 2018. The rolling chip win rate was 2.93% for the year ended December 31, 2019, and increased from 2.88% for the year ended December 31, 2018. Our expected range was 2.85% to 3.15%. In the mass market table games segment, drop was US$5.51 billion for the year ended December 31, 2019 which represented an increase of US$0.50 billion, or 10.0%, from US$5.01 billion for the year ended December 31, 2018. The mass market table games hold percentage was 32.3% for the year ended December 31, 2019, increasing from 30.3% for the year ended December 31, 2018. Average net win per gaming machine per day was US$562 for the year ended December 31, 2019, a decrease of US$175, or 23.7%, from US$737 for the year ended December 31, 2018.
Mocha Clubs.
Mocha Clubs’ average net win per gaming machine per day for the year ended December 31, 2019 was US$249, a decrease of US$8, or 3.3%, from US$258 for the year ended December 31, 2018.
Studio City.
Studio City Casino’s rolling chip volume was US$10.99 billion for the year ended December 31, 2019, and decreased from US$21.24 billion for the year ended December 31, 2018. The rolling chip win rate was 3.08% for the year ended December 31, 2019, and increased from 2.97% for the year ended December 31, 2018. Our expected range was 2.85% to 3.15%. In the mass market table games segment, drop was US$3.49 billion for the year ended December 31, 2019, and increased from US$3.27 billion for the year ended December 31, 2018. The mass market table games hold percentage was 29.1% for the year ended December 31, 2019, representing an increase from 26.5% for the year ended December 31, 2018. Average net win per gaming machine per day was US$230 for the year ended December 31, 2019, a decrease of US$10, or 4.3%, from US$240 for the year ended December 31, 2018.
City of Dreams Manila.
With increased competition in and around Entertainment City, City of Dreams Manila’s rolling chip volume for the year ended December 31, 2019 was US$8.64 billion, representing a decrease of US$2.46 billion, or 22.1%, from US$11.10 billion for the year ended December 31, 2018. The rolling chip win rate was 2.94% for the year ended December 31, 2019, and decreased from 3.21% for the year ended December 31, 2018. Our expected range was 2.85% to 3.15%. In the mass market table games segment, drop was US$795.4 million for the year ended December 31, 2019, representing an increase of US$8.2 million, or 1.0%, from US$787.3 million for the year ended December 31, 2018. The mass market table games hold percentage was 31.0% for the year ended December 31, 2019, representing a decrease from 31.7% for the year ended December 31, 2018. Average net win per gaming machine per day was US$259 for the year ended December 31, 2019, a decrease of US$19, or 6.8%, from US$278 for the year ended December 31, 2018.
Cyprus operations.
Cyprus operations’ rolling chip volume for the year ended December 31, 2019 was US$61.9 million. The rolling chip win rate was 6.68% for the year ended December 31, 2019. Our expected
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range was 2.85% to 3.15%. In the mass market table games segment, drop was US$143.7 million for the year ended December 31, 2019, representing an increase of US$69.9 million, or 94.6%, from US$73.8 million for the year ended December 31, 2018. The mass market table games hold percentage was 20.8% for the year ended December 31, 2019, representing an increase from 18.7% for the year ended December 31, 2018. Average net win per gaming machine per day was US$431 for the year ended December 31, 2019, an increase of US$43, or 11.0%, from US$388 for the year ended December 31, 2018.
Rooms.
Room revenues (including complimentary rooms) for the year ended December 31, 2019 were US$349.9 million, representing an increase of US$38.9 million, or 12.5%, from room revenues (including complimentary rooms) of US$311.0 million for the year ended December 31, 2018. The increase was primarily due to increase in room revenues at City of Dreams as a result of the opening of Morpheus in June 2018.
The average daily rate, occupancy rate and REVPAR of each property are as follows:
                                                 
 
Year Ended December 31,
 
 
2019
 
  
2018
 
  
2019
 
  
2018
 
  
2019
 
  
2018
 
 
Average daily rate (US$)
   
Occupancy rate
   
REVPAR (US$)
 
Altira Macau
   
179
     
189
     
99
 %    
99
 %    
177
     
188
 
City of Dreams
   
209
     
212
     
98
 %    
97
 %    
205
     
206
 
Studio City
   
135
     
138
     
100
 %    
100
 %    
135
     
138
 
City of Dreams Manila
   
176
     
159
     
98
 %    
98
 %    
173
     
156
 
Food, beverage and others.
Food, beverage and other revenues (including complimentary food and beverage and entertainment services) for the year ended December 31, 2019 included food and beverage revenues of US$235.1 million and entertainment, retail and other revenues of US$175.1 million. Food, beverage and other revenues (including complimentary food and beverage and entertainment services) for the year ended December 31, 2018 included food and beverage revenues of US$204.2 million and entertainment, retail and other revenues of US$177.1 million. The increase of US$28.9 million in food, beverage and other revenues from the year ended December 31, 2018 to the year ended December 31, 2019 was primarily due to higher food and beverage revenues at City of Dreams as a result of the opening of new restaurants in Morpheus.
Operating costs and expenses
Total operating costs and expenses were US$4.99 billion for the year ended December 31, 2019, representing an increase of US$0.41 billion, or 9.0%, from US$4.58 billion for the year ended December 31, 2018.
Casino.
Casino expenses increased by US$0.27 billion, or 8.8%, to US$3.27 billion for the year ended December 31, 2019 from US$3.00 billion for the year ended December 31, 2018 primarily due to an increase in gaming tax as a result of increased gaming volumes and associated higher group-wide revenues, a higher provision for doubtful debt as well as higher payroll expenses.
Rooms.
Room expenses, which represent the costs of operating the hotel facilities were US$89.8 million and US$78.4 million for the years ended December 31, 2019 and 2018, respectively. The increase was primarily due to the opening of Morpheus in June 2018.
Food, beverage and others.
Food, beverage and other expenses were US$281.4 million and US$253.6 million for the years ended December 31, 2019 and 2018, respectively. The increase was primarily due to the higher food and beverage expenses and payroll expenses at City of Dreams primarily due to the opening of Morpheus in June 2018 and show operating costs for Elēkrŏn in Studio City.
General and administrative.
General and administrative expenses increased by US$53.6 million, or 10.6%, to US$559.5 million for the year ended December 31, 2019 from US$505.9 million for the year ended
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December 31, 2018, primarily due to an increase in payroll expenses, aircraft expenses, maintenance costs and other general and administrative expenses to support continuing and expanding operations in 2019.
Payments to the Philippine Parties.
Payments to the Philippine Parties decreased to US$57.4 million for the year ended December 31, 2019 from US$60.8 million for the year ended December 31, 2018, due to the softer performance in gaming operations and resulting decrease in revenues from gaming operations in City of Dreams Manila.
Pre-opening costs.
Pre-opening
costs were US$4.8 million and US$55.4 million for the years ended December 31, 2019 and 2018, respectively. Such costs relate primarily to personnel training, rental, marketing, advertising and administrative costs in connection with new or
start-up
operations. Higher
pre-opening
costs in the year ended December 31, 2018 was mainly related to the marketing and opening event of Morpheus, the marketing of the stunt show Elēkron at Studio City and the opening of the temporary casinos in Cyprus.
Development costs.
Development costs were US$57.4 million and US$23.0 million for the years ended December 31, 2019 and 2018, respectively, which predominantly related to marketing and promotion costs as well as professional and consultancy fees for corporate business development, including our Japan related developments.
Amortization of gaming subconcession.
Amortization expenses for our gaming subconcession continued to be recognized on a straight-line basis and were US$56.8 million for both the years ended December 31, 2019 and 2018.
Amortization of land use rights.
Amortization expenses for the land use rights continued to be recognized on a straight-line basis and were US$22.7 million and US$22.6 million for the years ended December 31, 2019 and 2018, respectively.
Depreciation and amortization.
Depreciation and amortization expenses increased by US$83.3 million, or 17.0%, to US$571.7 million for the year ended December 31, 2019 from US$488.4 million for the year ended December 31, 2018. The increase was primarily due to the opening of Morpheus in June 2018, partially offset by the decrease due to certain assets becoming fully depreciated during the year ended December 31, 2019.
Property charges and other.
Property charges and other for the year ended December 31, 2019 were US$20.8 million, which primarily included assets
write-off
and other costs as a result of the remodeling of
non-gaming
attractions of US$14.6 million and termination costs as a result of departmental restructuring of US$3.8 million. Property charges and other for the year ended December 31, 2018 were US$29.1 million, which primarily included repairs and maintenance costs incurred for our Macau properties as a result Typhoon Hato and Typhoon Mangkhut of US$10.6 million, which is net of the insurance recovery received in 2018, labor remuneration adjustments in City of Dreams Manila resulting from increased business volumes and general wage inflation of US$7.2 million and termination costs for a lease agreement of US$4.2 million.
Non-operating
expenses, net
Net
non-operating
expenses consist of interest income, interest expenses, net of capitalized interest, loan commitment and other finance fees, foreign exchange losses, net, loss on extinguishment of debt, costs associated with debt modification and other
non-operating
(expenses) income, net.
Interest income was US$9.3 million for the year ended December 31, 2019, as compared to US$5.5 million for the year ended December 31, 2018.
Interest expenses were US$310.1 million for the year ended December 31, 2019, compared to US$264.9 million (net of capitalized interest of US$21.1 million) for the year ended December 31, 2018. The
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increase in interest expenses (net of interest capitalization) of US$45.2 million was primarily due to lower interest capitalization of US$21.1 million associated with the cessation of interest capitalization for Morpheus since its opening in June 2018 and higher interest expenses arisen from the issuances of notes during the year ended December 31, 2019, partially offset by lower interest expenses due to the refinancing of the 2012 Studio City Notes by the 2019 Studio City Notes.
Loan commitment and other finance fees for the year ended December 31, 2019 amounted to US$2.7 million, compared to US$4.6 million for the year ended December 31, 2018.
Other expenses, net for the year ended December 31, 2019 amounted to US$23.9 million, compared to other income, net of US$3.7 million for the year ended December 31, 2018. The change was primarily due to the fair value loss on our investment of approximately 9.99% of ownership interest in Crown Resorts, partially offset by the dividend income from our investment in Crown Resorts and gain on disposals of investments in mutual funds.
Loss on extinguishment of debt for the year ended December 31, 2019 was US$6.3 million, was associated with the early redemption of all remaining outstanding 2012 Studio City Notes which was refinanced by the issuance of the 2019 Studio City Notes and the partial prepayment of the term loan under the 2015 Credit Facilities. Loss on extinguishment of debt for the year ended December 31, 2018 was US$3.5 million, represented the
write-off
of unamortized deferred financing costs as a result of partial redemption of 2012 Studio City Notes and full redemption of the remaining Philippine Notes.
Costs associated with debt modification for the year ended December 31, 2019 were US$0.6 million, which was associated with the early redemption of all remaining outstanding 2012 Studio City Notes which were refinanced by the issuance of the 2019 Studio City Notes. No costs associated with debt modification were incurred for the year ended December 31, 2018.
Income tax expense
Income tax expense for the year ended December 31, 2019 was primarily attributable to a lump sum tax payable of US$2.3 million in lieu of Macau Complementary Tax otherwise due by Melco Resorts Macau’s shareholders on dividends distributable to them by Melco Resorts Macau, Macau Complimentary Tax of US$1.1 million and income tax in other jurisdictions of US$3.6 million. The effective tax rate for the year ended December 31, 2019 was 2.07%, as compared to 0.07% for the year ended December 31, 2018. Such rates differ from the statutory Macau Complementary Tax rate of 12% primarily due to the effect of profits generated by gaming operations being exempted from Macau Complementary Tax and Philippine Corporate Income Tax, the effect of expired tax losses, the effect of changes in valuation allowances, the effect of expenses for which no income tax benefits is receivable, the effect of income for which no income tax expense is payable and the effect of different tax rates of subsidiaries operating in other jurisdictions for the years ended December 31, 2019 and 2018. Our management currently does not expect to realize significant income tax benefits associated with net operating loss carryforwards and other deferred tax assets generated by our Macau and Philippine operations. However, to the extent that the financial results of our Macau and Philippine operations improve and it becomes more likely than not that the deferred tax assets are realizable, we will be able to reduce the valuation allowance related to the net operating losses and other deferred tax assets.
Net (income) loss attributable to noncontrolling interests
Our net income attributable to noncontrolling interests of US$21.1 million for the year ended December 31, 2019, compared to a net loss attributable to noncontrolling interests of US$1.4 million for the year ended December 31, 2018, represented the share of City of Dreams Manila’s income of US$16.8 million, Cyprus operations’ income of US$3.5 million and Studio City’s income of US$0.7 million, respectively, by the respective minority shareholders for the year ended December 31, 2019. The change was primarily attributable to
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the share of net revenues generated by City of Dreams Manila, Studio City and our operations in Cyprus, partially offset by the respective increase in the share of operating costs during the year ended December 31, 2018.
Net income attributable to Melco Resorts & Entertainment Limited
As a result of the foregoing, we had net income attributable to Melco Resorts & Entertainment Limited of US$373.2 million for the year ended December 31, 2019, compared to US$340.3 million for the year ended December 31, 2018.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Revenues
Our total net revenues for the year ended December 31, 2018 were US$5.19 billion, a decrease of US$0.10 billion, or 1.8%, from US$5.28 billion for the year ended December 31, 2017. The decrease in total net revenues was primarily attributable to higher commissions reported as a reduction in revenue upon the Company’s adoption of the New Revenue Standard, partially offset by higher gross gaming revenues in all gaming segments. The Company adopted the New Revenue Standard on January 1, 2018 under the modified retrospective method. Results for the periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior year amounts are not adjusted and continue to be reported in accordance with the previous basis. Under the previous basis, before the adoption of the New Revenue Standard, total net revenues for the year ended December 31, 2018 would have been US$5.59 billion, which would have represented an increase of US$0.31 billion, or 5.8%, from US$5.28 billion for the year ended December 31, 2017.
Our total net revenues for the year ended December 31, 2018 consisted of US$4.50 billion of casino revenues, representing 86.7% of our total net revenues, and US$692.3 million of
non-casino
revenues. Our total net revenues for the year ended December 31, 2017 consisted of US$4.94 billion of casino revenues, representing 93.4% of our total net revenues, and US$347.2 million of net
non-casino
revenues (total
non-casino
revenues after deduction of promotional allowances).
Casino.
Casino revenues for the year ended December 31, 2018 were US$4.50 billion, representing a US$0.44 billion, or 8.9%, decrease from casino revenues of US$4.94 billion for the year ended December 31, 2017, primarily due to higher commissions reported as a reduction in casino revenues and promotional allowances netted against casino revenues upon the Company’s adoption of the New Revenue Standard, partially offset by higher gross gaming revenues in all gaming segments.
Altira Macau.
Altira Macau’s rolling chip volume for the year ended December 31, 2018 was US$22.37 billion, representing an increase of US$5.15 billion, or 29.9%, from US$17.22 billion for the year ended December 31, 2017. The rolling chip win rate was 3.03% for the year ended December 31, 2018, and decreased from 3.06% for the year ended December 31, 2017. Our expected range was 2.7% to 3.0%. In the mass market table games segment, drop was US$529.1 million for the year ended December 31, 2018, representing an increase of 23.3% from US$429.2 million for the year ended December 31, 2017. The mass market table games hold percentage was 19.3% for the year ended December 31, 2018, increasing from 17.5% for the year ended December 31, 2017. Average net win per gaming machine per day was US$137 for the year ended December 31, 2018, an increase of US$31, or 29.0%, from US$106 for the year ended December 31, 2017.
City of Dreams.
City of Dreams’ rolling chip volume for the year ended December 31, 2018 of US$45.36 billion represented a decrease of US$2.07 billion, or 4.4%, from US$47.43 billion for the year ended December 31, 2017. The rolling chip win rate was 2.88% for the year ended December 31, 2018 and was in line with our expected range of 2.7% to 3.0%, but decreased from 2.97% for the year ended December 31, 2017. In the mass market table games segment, drop was US$5.01 billion for the year ended December 31, 2018 which
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represented an increase of US$0.51 billion, or 11.2%, from US$4.50 billion for the year ended December 31, 2017. The mass market table games hold percentage was 30.3% for the year ended December 31, 2018, decreasing from 32.4% for the year ended December 31, 2017. Average net win per gaming machine per day was US$737 for the year ended December 31, 2018, an increase of US$180, or 32.3%, from US$557 for the year ended December 31, 2017.
Mocha Clubs.
Mocha Clubs’ average net win per gaming machine per day for the year ended December 31, 2018 was US$258, a decrease of US$14, or 5.2%, from US$272 for the year ended December 31, 2017.
Studio City.
Studio City Casino’s rolling chip volume was US$21.24 billion for the year ended December 31, 2018, and increased from US$19.00 billion for the year ended December 31, 2017. The rolling chip win rate was 2.97% for the year ended December 31, 2018, and decreased from 3.16% for the year ended December 31, 2017. Our expected range was 2.7% to 3.0%. In the mass market table games segment, drop was US$3.27 billion for the year ended December 31, 2018, and increased from US$2.91 billion for the year ended December 31, 2017. The mass market table games hold percentage was 26.5% for the year ended December 31, 2018, representing an increase from 26.1% for the year ended December 31, 2017. Average net win per gaming machine per day was US$240 for the year ended December 31, 2018, an increase of US$15, or 6.7%, from US$225 for the year ended December 31, 2017.
City of Dreams Manila.
City of Dreams Manila’s rolling chip volume for the year ended December 31, 2018 was US$11.10 billion, representing a decrease of US$0.41 billion, or 3.6%, from US$11.51 billion for the year ended December 31, 2017. The rolling chip win rate was 3.21% for the year ended December 31, 2018, and increased from 3.10% for the year ended December 31, 2017. Our expected range was 2.7% to 3.0%. In the mass market table games segment, drop was US$787.3 million for the year ended December 31, 2018, representing an increase of US$100.3 million, or 14.6%, from US$686.9 million for the year ended December 31, 2017. The mass market table games hold percentage was 31.7% for the year ended December 31, 2018, representing an increase from 29.6% for the year ended December 31, 2017. Average net win per gaming machine per day was US$278 for the year ended December 31, 2018, an increase of US$7, or 2.6%, from US$271 for the year ended December 31, 2017.
Cyprus operations.
The Company operated a temporary casino, the first casino in the Republic of Cyprus, and two satellite casinos during the year ended December 31, 2018. In the mass market table games segment, drop was US$73.8 million for the year ended December 31, 2018 and the mass market table games hold percentage was 18.7% for the year ended December 31, 2018. Average net win per gaming machine per day was US$388 for the year ended December 31, 2018.
Rooms.
Room revenues (including complimentary rooms) for the year ended December 31, 2018 were US$311.0 million, representing an increase of US$39.5 million, or 14.6%, from room revenues (including complimentary rooms) of US$271.5 million for the year ended December 31, 2017. The increase was primarily due to increase in room revenues at City of Dreams as a result of the opening of Morpheus in June 2018.
The average daily rate, occupancy rate and REVPAR of each property are as follows:
                                                 
 
Year Ended December 31,
 
 
2018
 
  
2017
 
  
2018
 
  
2017
 
  
2018
 
  
2017
 
 
Average daily rate (US$)
   
Occupancy rate
   
REVPAR (US$)
 
Altira Macau
   
189
     
204
     
99
 %    
96
 %    
188
     
196
 
City of Dreams
   
212
     
202
     
97
 %    
97
 %    
206
     
196
 
Studio City
   
138
     
140
     
100
 %    
99
 %    
138
     
138
 
City of Dreams Manila
   
159
     
158
     
98
 %    
96
 %    
156
     
152
 
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Food, beverage and others.
Food, beverage and other revenues (including complimentary food and beverage and entertainment services) for the year ended December 31, 2018 included food and beverage revenues of US$204.2 million and entertainment, retail and other revenues of US$177.1 million. Food, beverage and other revenues (including complimentary food and beverage and entertainment services) for the year ended December 31, 2017 included food and beverage revenues of US$185.0 million and entertainment, retail and other revenues of US$203.8 million. The slight decrease of US$7.5 million in food, beverage and other revenues from the year ended December 31, 2017 to the year ended December 31, 2018 was primarily due to lower entertainment, retail and other revenues in Studio City as a result of closure of a
non-gaming
attraction for remodeling in late 2017 and closure of certain retail shops for expansion of the northeast entrance of Studio City in
mid-2017,
partially offset by higher food and beverage revenues at City of Dreams as a result of the opening of new restaurants in Morpheus.
Operating costs and expenses
Total operating costs and expenses were US$4.58 billion for the year ended December 31, 2018, representing a decrease of US$0.10 billion, or 2.2%, from US$4.68 billion for the year ended December 31, 2017.
Casino.
Casino expenses decreased by US$0.37 billion, or 11.0%, to US$3.00 billion for the year ended December 31, 2018 from US$3.37 billion for the year ended December 31, 2017 primarily due to the decrease in commissions as all commissions were reported as a reduction in revenue upon the Company’s adoption of the New Revenue Standard and a decrease in casino expenses resulted from the adoption of the New Revenue Standard since the costs of providing complimentary services were no longer included in casino expenses, partially offset by an increase in gaming tax as a result of increased gaming volumes and associated higher revenues.
Rooms.
Room expenses, which represent the costs of operating the hotel facilities were US$78.4 million and US$32.6 million for the years ended December 31, 2018 and 2017, respectively. The increase was primarily due to the opening of Morpheus in June 2018 and the costs of providing complimentary rooms were included in room expenses instead of casino expenses upon the Company’s adoption of the New Revenue Standard on January 1, 2018 under the modified retrospective method.
Food, beverage and others.
Food, beverage and other expenses were US$253.6 million and US$146.2 million for the years ended December 31, 2018 and 2017, respectively. The increase was primarily due to the costs of providing complimentary food and beverage and entertainment services which were included in food, beverage and other expenses instead of casino expenses upon the Company’s adoption of the New Revenue Standard on January 1, 2018 under the modified retrospective method.
General and administrative.
General and administrative expenses increased by US$38.8 million, or 8.3%, to US$505.9 million for the year ended December 31, 2018 from US$467.1 million for the year ended December 31, 2017, primarily due to a
one-time
special gift granted to
non-management
employees, an increase in aircraft expenses, maintenance costs and other general and administrative expenses to support continuing and expanding operations in 2018.
Payments to the Philippine Parties.
Payments to the Philippine Parties increased to US$60.8 million for the year ended December 31, 2018 from US$51.7 million for the year ended December 31, 2017, due to the improvement in gaming operations and resulting increase in revenues from gaming operations in City of Dreams Manila.
Pre-opening costs.
Pre-opening
costs were US$55.4 million and US$5.3 million for the years ended December 31, 2018 and 2017, respectively. Such costs relate primarily to personnel training, rental, marketing, advertising and administrative costs in connection with new or
start-up
operations. The
pre-opening
costs in the
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year ended December 31, 2018 was mainly related to the marketing and opening event of Morpheus, the marketing of the stunt show Elēkron at Studio City and the opening of the temporary casino in Cyprus.
Development costs.
Development costs were US$23.0 million and US$31.1 million for the years ended December 31, 2018 and 2017, respectively, which predominantly related to marketing and promotion costs as well as professional and consultancy fees for corporate business development.
Amortization of gaming subconcession.
Amortization expenses for our gaming subconcession continued to be recognized on a straight-line basis and were US$56.8 million and US$57.2 million for the years ended December 31, 2018 and 2017, respectively.
Amortization of land use rights.
Amortization expenses for the land use rights continued to be recognized on a straight-line basis and were US$22.6 million and US$22.8 million for the years ended December 31, 2018 and 2017, respectively.
Depreciation and amortization.
Depreciation and amortization expenses increased by US$27.9 million, or 6.1%, to US$488.4 million for the year ended December 31, 2018 from US$460.5 million for the year ended December 31, 2017. The increase was primarily due to the opening of Morpheus in June 2018, partially offset by the decrease due to certain assets becoming fully depreciated during the year ended December 31, 2018.
Property charges and other.
Property charges and other for the year ended December 31, 2018 were US$29.1 million, which primarily included repairs and maintenance costs incurred for our Macau properties as a result Typhoon Hato and Typhoon Mangkhut of US$10.6 million, which is net of the insurance recovery received in 2018, labor remuneration adjustments in City of Dreams Manila resulting from increased business volumes and general wage inflation of US$7.2 million and termination costs for a lease agreement of US$4.2 million. Property charges and other for the year ended December 31, 2017 were US$31.6 million, which primarily included the asset write-offs and impairments of US$30.9 million as a result of the remodel of gaming and
non-gaming
attractions as well as retail and food and beverage outlets at our properties, US$3.8 million Typhoon Hato donation, US$3.7 million license termination fee and consulting fee as a result of the rebranding of our hotel properties at City of Dreams, US$3.1 million termination costs as a result of departmental restructuring, partially offset by the net gain of US$10.3 million from the insurance recovery on property damage and other costs incurred for our Macau properties as a result of Typhoon Hato.
Non-operating
expenses, net
Net
non-operating
expenses consist of interest income, interest expenses, net of capitalized interest, loan commitment and other finance fees, foreign exchange (losses) gains, net, loss on extinguishment of debt and other
non-operating
income, net.
Interest income was US$5.5 million for the year ended December 31, 2018, as compared to US$3.6 million for the year ended December 31, 2017.
Interest expenses were US$264.9 million (net of capitalized interest of US$21.1 million) for the year ended December 31, 2018, compared to US$255.8 million (net of capitalized interest of US$37.5 million) for the year ended December 31, 2017. The increase in interest expenses (net of interest capitalization) of US$9.1 million was primarily due to lower interest capitalization of US$16.4 million associated with the cessation of interest capitalization for Morpheus since its opening in June 2018 and the interest expenses arisen from the drawdown of the revolving credit facility under the 2015 Credit Facilities during the year ended December 31, 2018, partially offset by lower interest expenses on Philippine Notes since it was partially redeemed in October 2017 and fully redeemed during the year ended December 31, 2018, as well as lower amortization of deferred financing costs.
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Loan commitment and other finance fees for the year ended December 31, 2018 amounted to US$4.6 million, compared to US$6.1 million for the year ended December 31, 2017. The decrease was primarily due to the decrease in loan commitment fees as a result of the drawdown of the revolving credit facility under the 2015 Credit Facilities during the year ended December 31, 2018.
Loss on extinguishment of debt for the year ended December 31, 2018 was US$3.5 million, represented the
write-off
of unamortized deferred financing costs as a result of partial redemption of 2012 Studio City Notes and full redemption of the remaining Philippine Notes. Loss on extinguishment of debt for the year ended December 31, 2017 was US$49.3 million, represented a portion of the unamortized deferred financing costs and redemption costs of the 2013 Senior Notes that were not eligible for capitalization as a result of refinancing and the
write-off
of unamortized deferred financing costs as a result of partial redemption of the Philippine Notes.
Costs associated with debt modification for the year ended December 31, 2017 were US$2.8 million, which represented a portion of underwriting fee, legal and professional fees incurred for refinancing of the 2013 Senior Notes that were not eligible for capitalization. We incurred nil costs associated with debt modification for the year ended December 31, 2018.
Income tax (expense) credit
Income tax expense for the year ended December 31, 2018 was primarily attributable to a lump sum tax payable of US$2.3 million in lieu of Macau Complementary Tax otherwise due by Melco Resorts Macau’s shareholders on dividends distributable to them by Melco Resorts Macau, Macau Complimentary Tax of US$0.7 million and income tax on other jurisdictions of US$0.4 million, partially offset by a net deferred tax credit of US$1.8 million and over provision of income tax in prior years of US$1.5 million. The effective tax rate for the year ended December 31, 2018 was 0.07%, as compared to 0% for the year ended December 31, 2017. Such rates differ from the statutory Macau Complementary Tax rate of 12% primarily due to the effect of profits generated by gaming operations being exempted from Macau Complementary Tax and Philippine Corporate Income Tax, the effect of expired tax losses, the effect of changes in valuation allowances, the effect of expenses for which no income tax benefits is receivable, the effect of income for which no income tax expense is payable and the effect of different tax rates of subsidiaries operating in other jurisdictions for the years ended December 31, 2018 and 2017. Our management currently does not expect to realize significant income tax benefits associated with net operating loss carryforwards and other deferred tax assets generated by our Macau and Philippine operations. However, to the extent that the financial results of our Macau and Philippine operations improve and it becomes more likely than not that the deferred tax assets are realizable, we will be able to reduce the valuation allowance related to the net operating losses and other deferred tax assets.
Net loss attributable to noncontrolling interests
Our net loss attributable to noncontrolling interests of US$1.4 million for the year ended December 31, 2018, compared to a net loss attributable to noncontrolling interests of US$32.6 million for the year ended December 31, 2017, represented the share of Studio City’s expenses of US$11.0 million, Cyprus operations’ expenses of US$3.7 million and City of Dreams Manila’s income of US$13.3 million respectively, by the respective minority shareholders for the year ended December 31, 2018. The change was primarily attributable to the share of net revenues generated by City of Dreams Manila and Studio City, partially offset by the respective increase in the share of operating costs during the year ended December 31, 2018.
Net income attributable to Melco Resorts & Entertainment Limited
As a result of the foregoing, we had net income attributable to Melco Resorts & Entertainment Limited of US$340.3 million for the year ended December 31, 2018, compared to US$344.8 million for the year ended December 31, 2017.
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Adjusted Property EBITDA and Adjusted EBITDA
Our earnings before interest, taxes, depreciation, amortization,
 pre-opening
 costs, development costs, property charges and other, share-based compensation, payments to the Philippine Parties, land rent to Belle Corporation, Corporate and Other expenses and other
 non-operating
 income and expenses, or Adjusted Property EBITDA, were US$1,689.5 million, US$1,486.4 million and US$1,422.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. Adjusted Property EBITDA of Altira Macau, City of Dreams, Studio City, Mocha Clubs and City of Dreams Manila were US$51.5 million, US$922.8 million, US$415.1 million, US$23.3 million and US$247.1 million, respectively, for the year ended December 31, 2019, US$55.5 million, US$756.4 million, US$375.3 million, US$21.5 million and US$269.2 million, respectively, for the year ended December 31, 2018, US$20.7 million, US$804.9 million, US$335.6 million, US$26.6 million and US$235.0 million, respectively, for the year ended December 31, 2017. Our operations in Cyprus commenced since June 2018 and recorded Adjusted Property EBITDA of US$29.8 million and US$8.5 million for the years ended December 31, 2019 and 2018, respectively.
Our earnings before interest, taxes, depreciation, amortization,
 pre-opening
 costs, development costs, property charges and other, share-based compensation, payments to the Philippine Parties, land rent to Belle Corporation and other
non-operating
income and expenses, or Adjusted EBITDA, were US$1,574.3 million, US$1,377.8 million and US$1,285.3 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Our management uses Adjusted Property EBITDA to measure the operating performance of our Altira Macau, City of Dreams, Studio City, City of Dreams Manila, Mocha Clubs and Cyprus businesses, and to compare the operating performance of our properties with those of our competitors. Adjusted EBITDA and Adjusted Property EBITDA are also presented as supplemental disclosures because management believes they are widely used to measure performance and as a basis for valuation of gaming companies. Our management also uses Adjusted Property EBITDA and Adjusted EBITDA because they are used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported similar measures as a supplement to financial measures in accordance with generally accepted accounting principles, in particular, U.S. GAAP or International Financial Reporting Standards.
However, Adjusted Property EBITDA or Adjusted EBITDA should not be considered in isolation, construed as an alternative to profit or operating profit, treated as an indicator of our U.S. GAAP operating performance, other operating operations or cash flow data, or interpreted as an alternative to cash flow as a measure of liquidity. Adjusted Property EBITDA and Adjusted EBITDA presented in this annual report may not be comparable to other similarly titled measures of other companies’ operating in the gaming or other business sectors. While our management believes these figures may provide useful additional information to investors when considered in conjunction with our U.S. GAAP financial statements and other information in this annual report, less reliance should be placed on Adjusted Property EBITDA or Adjusted EBITDA as a measure in assessing our overall financial performance.
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Reconciliation of Net Income Attributable to Melco Resorts & Entertainment Limited to Adjusted EBITDA and Adjusted Property EBITDA
                         
 
Year Ended December 31,
 
 
2019
 
  
2018
(As adjusted)
 
  
2017
(As adjusted)
 
 
(in thousands of US$)
 
Net income attributable to Melco Resorts & Entertainment Limited
  $
373,173
    $
340,299
    $
344,828
 
Net income (loss) attributable to noncontrolling interests
   
21,055
     
(1,403
 )    
(32,608
 )
                         
Net income
   
394,228
     
338,896
     
312,220
 
Income tax expense (credit)
   
8,339
     
238
     
(10
 )
Interest and other
 non-operating
 expenses, net
    
345,111
     
274,313
     
292,330
 
Property charges and other
   
20,815
     
29,147
     
31,616
 
Share-based compensation
   
31,797
     
25,143
     
17,305
 
Depreciation and amortization
   
651,205
     
567,901
     
540,575
 
Development costs
   
57,433
     
23,029
     
31,115
 
Pre-opening
 costs
    
4,847
     
55,390
     
5,331
 
Land rent to Belle Corporation
   
3,061
     
3,001
     
3,143
 
Payments to the Philippine Parties
   
57,428
     
60,778
     
51,661
 
                         
Adjusted EBITDA
   
1,574,264
     
1,377,836
     
1,285,286
 
Corporate and Other expenses
   
115,208
     
108,527
     
137,468
 
                         
Adjusted Property EBITDA
  $
1,689,472
    $
1,486,363
    $
1,422,754
 
                         
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements. Our consolidated financial statements were prepared in conformity with U.S. GAAP. Certain of our accounting policies require that management apply significant judgment in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management evaluates those estimates and judgments which are made based on information obtained from our historical experience, terms of existing contracts, industry trends and outside sources that are currently available to us, and on various other assumptions that management believes to be reasonable and appropriate in the circumstances. However, by their nature, judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from our estimates. We believe that the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Property and Equipment and Other Long-lived Assets
During the development and construction stage of our casino gaming and entertainment casino resort facilities, direct and incremental costs related to the design and construction, including costs under the construction contracts, duties and tariffs, equipment installation, shipping costs, payroll and payroll benefit related costs, applicable portions of interest and amortization of deferred financing costs, are capitalized in property and equipment. The capitalization of such costs begins when the construction and development of a project starts and ceases once the construction is substantially completed or development activity is suspended for more than a brief period.
 Pre-opening
 costs, consisting of marketing and other expenses related to our new or
 start-up
 operations are expensed as incurred.
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Depreciation and amortization expense related to capitalized construction costs and other property and equipment is recognized from the time each asset is placed in service. This may occur at different stages as casino gaming and entertainment casino resort facilities are completed and opened.
Property and equipment and other long-lived assets with a finite useful life are depreciated and amortized on a straight-line basis over the asset’s estimated useful life. The estimated useful lives are based on factors including the nature of the assets, its relationship to other assets, our operating plans and anticipated use and other economic and legal factors that impose limits. The remaining estimated useful lives of the property and equipment are periodically reviewed.
Our land use rights in Macau under the land concession contracts for Altira Macau, City of Dreams and Studio City are being amortized over the estimated term of the land use rights on a straight-line basis. The estimated term of the land use rights under the applicable land concession contracts are based on factors including the business and operating environment of the gaming industry in Macau, laws and regulations in Macau, and our development plans. The estimated term of the land use rights are periodically reviewed.
Costs of repairs and maintenance are charged to expense when incurred. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are eliminated from the respective accounts and any resulting gain or loss is included in operating income or loss.
Costs incurred to develop software for internal use are capitalized and amortized on a straight-line basis over the estimated useful life. The capitalization of such costs begins during the application development stage of the software project and ceases once the software project is substantially complete and ready for its intended use. Costs of specified upgrades and enhancements to the
internal-use
software are capitalized, while costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. The remaining estimated useful lives of the
internal-use
software are periodically reviewed.
Our total capital expenditures for the years ended December 31, 2019, 2018 and 2017 were US$471.1 million, US$563.0 million and US$623.3 million, respectively, of which US$80.2 million, US$181.7 million and US$456.7 million, respectively, were attributable to our development and construction projects, with the remainder primarily related to the enhancements to our integrated resort offerings of our properties. The development and construction capital expenditures primarily related to the development and construction of various projects at City of Dreams, including Morpheus, Studio City and City of Dreams Mediterranean during the years ended December 31, 2019, 2018 and 2017. Refer to note 24 to the consolidated financial statements included elsewhere in this annual report for further details of these capital expenditures.
We also review our property and equipment and other long-lived assets with finite lives to be held and used for impairment whenever indicators of impairment exist. If an indicator of impairment exists, we then compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. The undiscounted cash flows of such assets are measured by first grouping our long-lived assets into asset groups and, secondly, estimating the undiscounted future cash flows that are directly associated with and expected to arise from the use of and eventual disposition of such asset group. We define an asset group as the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and estimate the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment charge is recorded based on the fair value of the asset group, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses are recorded as operating expenses.
During the year ended December 31, 2019, impairment loss of US$9.6 million was recognized, of which US$6.3 million and US$3.3 million were provided for a parcel of freehold land due to a significant
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decrease in its market value as of December 31, 2019 and reconfigurations at our operating properties, respectively. During the years ended December 31, 2018 and 2017, impairment losses of nil and US$23.2 million were recognized mainly due to reconfigurations and renovations at our operating properties.
Goodwill and Purchased Intangible Assets
We review the carrying value of goodwill and purchased intangible assets with indefinite useful lives for impairment at least on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill and purchased intangible assets with indefinite useful lives as at December 31, 2019, 2018 and 2017 were primarily associated with Mocha Clubs, a reporting unit, which arose from the acquisition of Mocha Slot Group Limited and its subsidiaries by our Company in 2006.
When performing the impairment analysis for goodwill and intangible assets with indefinite lives, we may first perform a qualitative assessment to determine whether it is more likely than not that the asset is impaired. If we determine a qualitative assessment is to be performed, we assess certain qualitative factors including, but not limited to, the results of the most recent quantitative impairment test, operating results and projected operating results, and macro-economic and industry conditions. If we determined that it is more likely than not that the asset is impaired after assessing the qualitative factors, we then perform a quantitative impairment test.
To perform a quantitative impairment test of goodwill, we perform an assessment that consists of a comparison of the carrying value of our reporting unit with its fair value. If the carrying value of a reporting unit exceeds its fair value, we would perform the second step in our assessment process and record an impairment loss to earnings to the extent the carrying amount of the reporting unit’s goodwill exceeds its implied fair value. We estimate the fair value of our reporting unit through internal analysis and external valuations, which utilize income and market valuation approaches through the application of capitalized earnings and discounted cash flow methods. These valuation techniques are based on a number of estimates and assumptions, including the projected future operating results of the reporting unit, discount rates, long-term growth rates and market comparables.
To perform a quantitative impairment test of the trademarks of Mocha Clubs, we perform an assessment that consists of a comparison of their carrying values with their fair values using the relief-from-royalty method. Under this method, we estimate the fair values of the trademarks through internal and external valuations, mainly based on the incremental
after-tax
cash flow representing the royalties that we are relieved from paying given we are the owner of the trademarks. These valuation techniques are based on a number of estimates and assumptions, including the projected future revenues of the trademarks, calculated using an appropriate royalty rate, discount rate and long-term growth rates.
We have performed annual tests for impairment of goodwill and trademarks in accordance with the accounting standards regarding goodwill and other intangible assets. For the years ended December 31, 2019, 2018 and 2017, we performed qualitative assessments for goodwill and trademarks and determined that it was not more likely than not that goodwill and trademarks were impaired.
As a result of these assessments, we determined that there were no impairment of goodwill and trademarks for the years ended December 31, 2019, 2018 and 2017. Determining the fair value of goodwill and trademarks of Mocha Clubs is judgmental in nature and requires the use of significant estimates and assumptions, including projected future operating results of the reporting unit, discount rates, long-term growth rates and future market conditions. Future changes to our estimates and assumptions based upon changes in operating results, macro-economic factors or management’s intentions may result in future changes to the fair value of the goodwill and trademarks of Mocha Clubs.
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Revenue Recognition
On January 1, 2018, we adopted the New Revenue Standard, using the modified retrospective method applying to those contracts not yet completed as of January 1, 2018. The accounting policies for revenue recognition as a result of the New Revenue Standard are as follows:
Our revenues from contracts with customers consist of casino wagers, sales of rooms, food and beverage, entertainment, retail and other goods and services.
Gross casino revenues are measured by the aggregate net difference between gaming wins and losses. We account for its casino wagering transactions on a portfolio basis versus an individual basis as all wagers have similar characteristics. Commissions rebated to customers either directly or indirectly through gaming promoters and cash discounts and other cash incentives earned by customers are recorded as a reduction of casino revenues. In addition to the wagers, casino transactions typically include performance obligations related to complimentary goods or services provided to incentivize future gaming or in exchange for incentives or points earned under our
non-discretionary
incentives programs (including loyalty programs).
For casino transactions that include complimentary goods or services provided by us to incentivize future gaming, we allocate the standalone selling price of each good or service to the appropriate revenue type based on the good or service provided. Complimentary goods or services that are provided under our control and discretion and supplied by third parties are recorded as operating expenses.
We operate different
non-discretionary
incentives programs in certain of our properties which include our loyalty programs to encourage repeat business mainly from loyal slot machine customers and table games patrons. Customers earn points primarily based gaming activity and such points can be redeemed for free play and other free goods and services. For casino transactions that include points earned under our loyalty programs, we defer a portion of the revenue by recording the estimated standalone selling prices of the earned points that are expected to be redeemed as a liability. Upon redemption of the points for our self-owned goods or services, the standalone selling price of each good or service is allocated to the appropriate revenue type based on the good or service provided. Upon the redemption of the points with third parties, the redemption amount is deducted from the liability and paid directly to the third party.
After allocating amounts to the complimentary goods or services provided and to the points earned under our loyalty programs, the residual amount is recorded as casino revenue when the wagers are settled.
We follow the accounting standards for reporting revenue gross as a principal versus net as an agent, when accounting for operations of certain hotels and Grand Dragon Casino and concluded that we are the controlling entity and are the principal to these arrangements. For the operations of certain hotels, we are the owner of the hotel properties, and the hotel managers operate the hotels under certain management agreements providing management services to us, and we receive all rewards and take substantial risks associated with the hotels’ business; we are the principal and the transactions are, therefore, recognized on a gross basis. For the operations of Grand Dragon Casino, given we operate the casino under a right to use agreement with the owner of the casino premises and have full responsibility for the casino operations in accordance with our gaming subconcession, we are the principal and casino revenue is, therefore, recognized on a gross basis.
The transaction prices for rooms, food and beverage, entertainment, retail and other goods and services are the net amounts collected from the customers for such goods and services that are recorded as revenues when the goods are provided, services are performed or events are held. Service taxes and other applicable taxes collected by us are excluded from revenues. Advance deposits on rooms and advance ticket sales are recorded as customer deposits until services are provided to the customers. Revenues from contracts with multiple goods or services provided by us are allocated to each good or service based on its relative standalone selling price.
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Minimum operating and right to use fees representing lease revenues, adjusted for contractual base fees and operating fees escalations, are included in other revenues and are recognized over the terms of the related agreements on a straight-line basis.
Upon the adoption of the New Revenue Standard, we recognized the cumulative effect of adopting the New Revenue Standard as an adjustment to the opening balance of accumulated losses. Amounts for the periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with the previous basis. The major changes as a result of the adoption of the New Revenue Standard are as follows:
  (1) The New Revenue Standard changed the presentation of, and accounting for, goods and services furnished to guests without charge that were previously included in gross revenues and deducted as promotional allowances in the accompanying consolidated statements of operations. Under the New Revenue Standard, the promotional allowances line item was eliminated with the amounts being netted against casino revenues in primarily all cases and are measured based on standalone selling prices. Additionally, the estimated cost of providing the promotional allowances is no longer included in casino expenses but, instead is included in the respective operating departments expense categories.
  (2) A portion of commissions paid or payable to gaming promoters, representing the estimated incentives that were returned to customers, was previously reported as reductions in casino revenue, with the balance of commissions expense reflected as a casino expense. Under the New Revenue Standard, all commissions paid or payable to gaming promoters are reflected as reductions in casino revenue.
  (3) The estimated liability for unredeemed
non-discretionary
incentives under our loyalty programs were previously accrued based on the estimated costs of providing such benefits and expected redemption rates. Under the New Revenue Standard,
non-discretionary
incentives represent a separate performance obligation and the resulting liability are recorded using the standalone selling prices of such benefits less estimated breakage and are offset against casino revenue. When the benefits are redeemed, revenues are measured on the same basis and recognized in the resulting category of the goods or services provided. At the adoption date January 1, 2018, we recognized an increase to the opening balance of accumulated losses and noncontrolling interests of US$11.3 million and US$1.7 million, respectively, with a corresponding increase in accrued expenses and other current liabilities.
Accounts Receivable and Credit Risk
Financial instruments that potentially subject our Company to concentrations of credit risk consist principally of casino receivables. We issue credit in the form of markers to approved casino customers following investigations of creditworthiness. Credit is also given to our gaming promoters in Macau and the Philippines, which receivables can be offset against commissions payable and any other value items held by us to the respective customers and for which we intend to set off when required. For the years ended December 31, 2019, 2018 and 2017, approximately 22.5%, 27.0% and 31.4% of our casino revenues were derived from customers sourced through our rolling chip gaming promoters, respectively.
As of December 31, 2019 and 2018, a substantial portion of our markers were due from customers and gaming promoters residing in foreign countries. Business or economic conditions, the legal enforceability of gaming debts, or other significant events in foreign countries could affect the collectability of receivables from customers and gaming promoters residing in these countries.
Accounts receivable, including casino, hotel and other receivables, are typically
non-interest
bearing and are initially recorded at cost. Accounts are written off when management deems it is probable the receivables are uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful debts is maintained to reduce our receivables to their carrying amounts, which approximate fair values. The allowance is estimated based on our specific reviews of customer accounts as well
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as management’s experience with collection trends in the casino industry and current economic and business conditions. For balances over a specified dollar amount, our review is based upon the age of the specific account balance, the customer’s financial condition, collection history and any other known information. At December 31, 2019, a 100 basis-point change in the estimated allowance for doubtful debts as a percentage of casino receivables would change the provision for doubtful debts by approximately US$5.1 million.
Income Tax
Deferred income taxes are recognized for all significant temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As of December 31, 2019 and 2018, we recorded valuation allowances of US$258.0 million and US$232.9 million, respectively, as management believes it is more likely than not that these deferred tax assets will not be realized. Our assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, and the duration of statutory carryforward periods. To the extent that the financial results of our operations improve and it becomes more likely than not that the deferred tax assets are realizable, the valuation allowances will be reduced.
Recent Changes in Accounting Standards
See note 2 to the consolidated financial statements included elsewhere in this annual report for discussion of recent changes in accounting standards.
B. LIQUIDITY AND CAPITAL RESOURCES
We have relied and intend to rely on our cash generated from our operations and our debt and equity financings to meet our financing needs and repay our indebtedness, as the case may be.
As of December 31, 2019, we held cash and cash equivalents, investments in mutual funds that mainly invest in bonds and fixed-interest securities and restricted cash of approximately US$1,395.0 million, US$49.4 million and US$37.5 million, respectively, and the HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility under the 2015 Credit Facilities remains available for future drawdown, subject to satisfaction of certain conditions precedent. Further, the 2015 Credit Facilities includes an incremental facility of up to US$1.3 billion to be made available upon further agreement with any of the existing lenders under the 2015 Credit Facilities or with other entities. Major currencies in which our cash and bank balances (including restricted cash) held as of December 31, 2019 were U.S. dollar, H.K. dollar, Euro, the Philippine peso and Pataca.
The HK$233.0 million (equivalent to approximately US$29.9 million) revolving credit facility under the 2021 Studio City Senior Secured Credit Facility is available for future drawdown as of December 31, 2019, subject to satisfaction of certain conditions precedent.
MRP entered into a PHP2.35 billion (equivalent to approximately US$46.3 million) bank credit facility with the availability up to May 31, 2020, which remains available for future drawdown as of December 31, 2019, subject to satisfaction of certain conditions precedent.
As of December 31, 2019, restricted cash primarily represented the unspent cash from the capital injection for the remaining project for Studio City from our Company and the SCI minority shareholder, which was restricted only for the initial development costs and other project costs of the remaining project of Studio City; and certain bank account balances required to be maintained in accordance with the 2016 Studio City Notes to serve the interest repayment obligations.
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We have been able to meet our working capital needs, and we believe that our operating cash flow, existing cash balances, funds available under various credit facilities and any additional equity or debt financings will be adequate to satisfy our current and anticipated operating, debt and capital commitments, including our development project plans, as described in “— Other Financing and Liquidity Matters” below. For any additional financing requirements, we cannot provide assurance that future borrowings will be available. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Financing and Indebtedness” for more information. We have significant indebtedness and will continue to evaluate our capital structure and opportunities to enhance it in the normal course of our activities. We may from time to time seek to retire or purchase our outstanding debt through cash purchases, in open market purchases, privately-negotiated transactions or otherwise. Such purchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Cash Flows
The following table sets forth a summary of our cash flows for the years presented. The consolidated cash flows data for the year ended December 31, 2017 have been adjusted to reflect the retrospective adoption on January 1, 2018 of Accounting Standards Update
 2016-18
 Statement of Cash Flows (Topic 230): Restricted Cash (A Consensus of the FASB Emerging Issues Task Force
). As a result of the adoption, restricted cash is included with cash and cash equivalents in the beginning and ending balances, and the changes in restricted cash that were previously reported within cash flows from investing activities in the consolidated statements of cash flows have been eliminated.
In connection with the Cyprus Acquisition pursuant to which we acquired a 75% equity interest in ICR Cyprus from Melco International on July 31, 2019, the consolidated cash flows data for the years ended 31 December 2018 and 2017 has been adjusted to include ICR Cyprus and its subsidiaries that were acquired by the Company.
                         
 
Year Ended December 31,
 
 
2019
 
  
2018
(As adjusted)
 
  
2017
(As adjusted)
 
 
(in thousands of US$)
 
Net cash provided by operating activities
  $
836,162
    $
1,053,369
    $
1,161,097
 
Net cash used in investing activities
   
(1,031,849
 )    
(662,121
 )    
(404,017
 )
Net cash provided by (used in) financing activities
   
97,114
     
(340,517
 )    
(1,015,909
 )
Effect of foreign exchange on cash, cash equivalents and restricted cash
   
10,486
     
(12,624
 )    
(281
 )
                         
Net (decrease) increase in cash, cash equivalents and restricted cash
   
(88,087
 )    
38,107
     
(259,110
 )
Cash, cash equivalents and restricted cash at beginning of year
   
1,520,589
     
1,482,482
     
1,741,592
 
                         
Cash, cash equivalents and restricted cash at end of year
  $
1,432,502
    $
1,520,589
    $
1,482,482
 
                         
Operating Activities
Operating cash flows are generally affected by changes in operating income and accounts receivable with VIP table games play and hotel operations conducted on a cash and credit basis and the remainder of the business including mass market table games play, gaming machine play, food and beverage, and entertainment are conducted primarily on a cash basis.
Net cash provided by operating activities was US$836.2 million for the year ended December 31, 2019, compared to US$1,053.4 million for the year ended December 31, 2018. The decrease in net cash provided by
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operating activities was primarily due to increased working capital for operations net with higher contribution of cash generated the improving operations as described in the foregoing section.
Net cash provided by operating activities was US$1,053.4 million for the year ended December 31, 2018, compared to US$1,161.1 million for the year ended December 31, 2017. The decrease in net cash provided by operating activities was primarily due to increased working capital for operations.
Investing Activities
Net cash used in investing activities was US$1,031.8 million for the year ended December 31, 2019, compared to net cash used in investing activities of US$662.1 million for the year ended December 31, 2018. The change was primarily due to an increase in payments for investment securities. Net cash used in investing activities for the year ended December 31, 2019 mainly included payments for investment securities of US$617.8 million, capital expenditure payments of US$447.4 million, acquisition of a subsidiary of US$15.0 million, which were offset in part by proceeds from sale of investment securities of US$49.7 million.
Net cash used in investing activities was US$662.1 million for the year ended December 31, 2018, compared to net cash used in investing activities of US$404.0 million for the year ended December 31, 2017. The change was primarily due to a decrease in net withdrawals of bank deposits with original maturities over three months for the year ended December 31, 2018. Net cash used in investing activities for the year ended December 31, 2018 mainly included capital expenditure payments of US$638.1 million, payments for investment securities of US$45.0 million and payment for intangible and other assets of US$29.5 million, which were offset in part by proceeds from sale of investment securities of US$40.0 million and the net withdrawal of bank deposits with original maturities over three months of US$9.9 million.
Our total capital expenditure payments were US$447.4 million and US$638.1 million for the years ended December 31, 2019 and 2018, respectively. Such expenditures were mainly associated with our development projects, including City of Dreams Mediterranean and Morpheus which opened in June 2018, as well as enhancement to our integrated resort offerings.
We expect to incur significant capital expenditures for the development of the remaining land of Studio City and City of Dreams Mediterranean. We intend to finance these projects through our operating cash flow and existing cash balances as well as equity or debt financings. See “— Other Financing and Liquidity Matters” below for more information.
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The following table sets forth our capital expenditures incurred by segment on an accrual basis for the years ended December 31, 2019, 2018 and 2017.
                         
 
Year Ended December 31,
 
 
2019
 
  
2018
(As adjusted)
 
  
2017
(As adjusted)
 
 
(in thousands of US$)
 
Macau:
   
     
     
 
Mocha Clubs
  $
6,620
    $
8,973
    $
4,690
 
Altira Macau
   
17,707
     
24,450
     
5,776
 
City of Dreams
   
134,075
     
311,441
     
467,780
 
Studio City
   
89,846
     
73,189
     
37,174
 
                         
Sub-total
   
248,248
     
418,053
     
515,420
 
The Philippines:
   
     
     
 
City of Dreams Manila
   
58,697
     
22,572
     
13,571
 
Cyprus:
   
     
     
 
Cyprus operations
   
39,911
     
68,238
     
64,283
 
Corporate and Other
   
124,265
     
54,109
     
30,051
 
                         
Total capital expenditures
  $
471,121
    $
562,972
    $
623,325
 
                         
Our capital expenditures for the year ended December 31, 2019 decreased from that for the year ended December 31, 2018 primarily due to the completion of Morpheus which opened in June 2018. Our capital expenditures for the year ended December 31, 2018 decreased from that for the year ended December 31, 2017 primarily due to the completion of Morpheus, net with the increase for the development of various projects at City of Dreams and Studio City, including the remaining land at Studio City.
Financing Activities
Net cash provided by financing activities amounted to US$97.1 million for the year ended December 31, 2019, primarily due to (i) the proceeds from the US$900 million in aggregate principal amount of the 2019 Senior Notes due 2029, (ii) the proceeds from the US$600 million in aggregate principal amount of the 2019 Senior Notes due 2027, (iii) the proceeds from the US$600 million in aggregate principal amount of the 2019 Studio City Notes, (iv) the proceeds from the drawdowns of the revolving credit facility under the 2015 Credit Facilities of US$550.2 million, (v) the proceeds from the US$500 million in aggregate principal amount of the 2019 Senior Notes due 2026 and (vi) net proceeds from issuance of shares of subsidiaries of US$83.2 million, which were offset in part by the (vii) repayment of the revolving credit facility under the 2015 Credit Facilities of US$1,644.0 million, (viii) the scheduled repayment and partial early repayment of the term loan under the 2015 Credit Facilities of US$386.7 million, (ix) the full repayment of the 2016 Studio City Notes due 2019 of US$350.0 million upon its maturity, (x) dividend payments of US$301.0 million, (xi) the payment of the 2012 Studio City Notes Tender Offer of US$216.5 million in aggregate principal amount and the redemption of the remaining 2012 Studio City Notes of US$208.5 million in aggregate principal amount outstanding.
Net cash used in financing activities amounted to US$340.5 million for the year ended December 31, 2018, primarily due to (i) the repurchase of shares of US$655.7 million, (ii) early partial redemption of the 2012 Studio City Notes in the amount of US$400.0 million, (iii) dividend payments of US$271.5 million, (iv) purchase of shares of a subsidiary of US$199.3 million, (v) early redemption of the remaining Philippine Notes in the amount of US$140.9 million, (vi) scheduled repayments of the term loan under the 2015 Credit Facilities and Aircraft Term Loan of US$51.7 million, which were offset in part by (vii) proceeds of US$1,095.7 million from the drawdown of the revolving credit facility under the 2015 Credit Facilities and (viii) net proceeds from issuance of shares of subsidiaries of US$277.9 million, which primarily relate to the initial public offering of a subsidiary.
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Net cash used in financing activities amounted to US$1,015.9 million for the year ended December 31, 2017, primarily due to (i) dividend payments of US$821.3 million, (ii) early partial redemption of the Philippine Notes in the amount of US$144.8 million, (iii) scheduled repayments of the term loan under the 2015 Credit Facilities and Aircraft Term Loan of US$51.5 million, (iv) payments of refinancing costs and debt issuance costs of US$34.6 million primarily associated with the refinancing of the 2013 Senior Notes with the 2017 Senior Notes, which were offset in part by (v) net proceeds from issuance of shares of subsidiaries of US$30.1 million and (vi) net proceeds of US$2.6 million from the refinancing of the 2013 Senior Notes. The US$1.0 billion principal amount outstanding under the 2013 Senior Notes was refinanced by the proceeds from the US$650.0 million principal amount of the 2017 Senior Notes issued on June 6, 2017 and US$350.0 million from the partial drawdown of the revolving credit facility under the 2015 Credit Facilities. The US$350.0 million partial drawdown from the revolving credit facility under the 2015 Credit Facilities was subsequently repaid by the US$352.6 million proceeds from the issuance of the US$350.0 million principal amount of the 2017 Senior Notes issued on July 3, 2017, which priced at 100.75%.
Indebtedness
We enter into loan facilities and issue notes through our subsidiaries. The following table presents a summary of our gross indebtedness as of December 31, 2019:
         
 
As of December 31,
2019
 
 
(in thousands of US$)
 
2017 Senior Notes
  $
1,000,000
 
2019 Senior Notes due 2029
   
900,000
 
2016 Studio City Notes due 2021
   
850,000
 
2019 Studio City Notes
   
600,000
 
2019 Senior Notes due 2027
   
600,000
 
2019 Senior Notes due 2026
   
500,000
 
2015 Credit Facilities
   
1,150
 
2021 Studio City Senior Secured Credit Facility
   
128
 
         
 
$4,451,278
 
         
Major changes in our indebtedness during the year ended and subsequent to December 31, 2019 are summarized below.
During the year ended December 31, 2019, Melco Resorts Macau fully repaid the outstanding revolving credit facility and partially prepaid the outstanding term loan facility under the 2015 Credit Facilities. As of December 31, 2019, the outstanding principal amounts of term loan facility and revolving credit facility under the 2015 Credit Facilities are HK$8.96 million (approximately US$1.15 million) and nil, respectively. HK$9.75 billion (approximately US$1.25 billion) remains available for future drawdown in the revolving credit facility under the 2015 Credit Facilities, subject to satisfaction of certain conditions precedent. In March 2020, Melco Resorts Macau partially drew down HK$1.95 billion (approximately US$250.4 million) from the revolving credit facility under the 2015 Credit Facilities.
On January 22, 2019, Studio City Finance commenced the 2012 Studio City Notes Tender Offer. The 2012 Studio City Notes Tender Offer expired on February 4, 2019. The aggregate principal amount of valid tenders received and not validly withdrawn under the 2012 Studio City Notes Tender Offer amounted to US$216.5 million.
On February 11, 2019, Studio City Finance issued US$600.0 million in aggregate principal amount of 2019 Studio City Notes, the net proceeds of which were used to pay the tendering noteholders from the 2012 Studio City Notes Tender Offer and to redeem all remaining outstanding amounts of the 2012 Studio City Notes, together with accrued interest, on March 13, 2019.
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On April 26, 2019, Melco Resorts Finance issued US$500.0 million in aggregate principal amount of the 2019 Senior Notes due 2026, the net proceeds from which were used to partially repay the principal amount outstanding under the revolving credit facility under the 2015 Credit Facilities.
On July 17, 2019, Melco Resorts Finance issued US$600.0 million in aggregate principal amount of the 2019 Senior Notes due 2027, the net proceeds from which were used to partially repay the principal amount outstanding under the revolving credit facility under the 2015 Credit Facilities.
On November 30, 2019, Studio City Company fully repaid 2016 Studio City Notes due 2019 in aggregate principal amount of US$350.0 million, together with accrued interest, at maturity with cash on hand.
On December 4, 2019, Melco Resorts Finance issued US$900.0 million in aggregate principal amount of the 2019 Senior Notes due 2029, the net proceeds from which were used to fully repay the principal amount outstanding under the revolving credit facility and to partially prepay the principal amount outstanding under the term loan facility under the 2015 Credit Facilities.
For further details of the above indebtedness, see note 12 to the consolidated financial statements included elsewhere in this annual report, which includes information regarding the type of debt facilities used, the extent to which borrowings are at fixed rates, the maturity profile of debt, the currency and interest rate structure, the charge on our assets and the nature and extent of any restrictions on our ability, and the ability of our subsidiaries, to transfer funds as cash dividends, loans or advances. See also “Item 5. Operating and Financial Review and Prospects — F. Tabular Disclosure of Contractual Obligations” for details of the maturity profile of debt and “Item 11. Quantitative and Qualitative Disclosures about Market Risk” for further understanding of our hedging of interest rate risk and foreign exchange risk exposure.
Other Financing and Liquidity Matters
We may obtain financing in the form of, among other things, equity or debt, including additional bank loans or high yield, mezzanine or other debt, or rely on our operating cash flow to fund the development of our projects. We are a growing company with significant financial needs. We expect to have significant capital expenditures in the future as we continue to develop our properties, in particular, the remaining land of Studio City and City of Dreams Mediterranean.
We have relied, and intend in the future to rely, on our operating cash flow and different forms of financing to meet our funding needs and repay our indebtedness, as the case may be.
The timing of any future debt and equity financing activities will be dependent on our funding needs, our development and construction schedule, the availability of funds on terms acceptable to us and prevailing market conditions. We may carry out activities from time to time to strengthen our financial position and ability to better fund our business expansion plans. Such activities may include refinancing existing debt, monetizing assets,
sale-and-leaseback
transactions or other similar activities.
In October 2018, SCI completed its initial public offering of 28,750,000 SC ADSs (equivalent to 115,000,000 Class A ordinary shares of SCI), of which 15,330,000 SC ADSs were purchased by our subsidiary, MCO Cotai Investments Limited. In November 2018, the underwriters exercised their over-allotment option in full to purchase an additional 4,312,500 SC ADSs from SCI. After giving effect to the exercise of the over-allotment option, the total number of SC ADSs sold in the Studio City IPO was 33,062,500 SC ADSs, which raised net proceeds of approximately US$406.7 million from the SC ADSs sold in the Studio City IPO and aggregate gross proceeds of approximately US$2.5 million from the concurrent private placement to Melco International in connection with Melco International’s “assured entitlement” distribution to its shareholders, after deducting underwriting discounts and commissions and a structuring fee, but before deducting offering expenses payable by SCI.
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Any other future developments may be subject to further financing and a number of other factors, many of which are beyond our control.
As of December 31, 2019, we had capital commitments contracted for but not incurred mainly for the construction and acquisition of property and equipment for Studio City, City of Dreams and operations in Cyprus totaling US$818.3 million. In addition, we have contingent liabilities arising in the ordinary course of business. For further details for our commitments and contingencies, see note 22 to the consolidated financial statements included elsewhere in this annual report.
Each of Melco Resorts Macau and Studio City Company has a corporate rating of “BB” and
“BB-”
by Standard & Poor’s, respectively, and each of Melco Resorts Finance and Studio City Finance has a corporate rating of “Ba2” and “B1” by Moody’s Investors Service, respectively. For future borrowings, any decrease in our corporate rating could result in an increase in borrowing costs.
Restrictions on Distributions
For discussion on the ability of our subsidiaries to transfer funds to our Company in the form of cash dividends, loans or advances and the impact such restrictions have on our ability to meet our cash obligations, see “Item 4. Information on the Company — B. Business Overview — Restrictions on Distribution of Profits.” See also “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Dividend Policy” and note 19 to the consolidated financial statements included elsewhere in this annual report.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
We have entered into license or hotel management agreements with the following entities or groups:
  • Crown Melbourne Limited in relation to the use of certain trademarks in Macau and the Philippines;
  • Hyatt group in relation to the use of various trademarks owned by Hyatt group for the branding of the Grand Hyatt hotel at City of Dreams;
  • Nobu Hospitality LLC in relation to the use of certain trademarks and intellectual property rights owned by Nobu in connection with its development, operation and management of the Nobu hotel and restaurant at City of Dreams Manila;
  • Hyatt International Corporation and Melco Resorts Leisure, under which various trademarks owned by Hyatt are licensed to Melco Resorts Leisure for its operation of a hotel at City of Dreams Manila;
  • DreamWorks Animation and Melco Resorts Leisure, under which various trademarks and other intellectual property rights owned by DreamWorks Animation are licensed to Melco Resorts Leisure for its operation of DreamPlay by DreamWorks, a family entertainment center at City of Dreams Manila; and
  • Bandai Namco Amusement Inc. and Melco Resorts Leisure, under which a franchise to operate an entertainment facility in the Philippines, various trademarks owned by Bandai Namco as well as the lease of several virtual reality game machines are granted and licensed to Melco Resorts Leisure for its operation of the VR Zone at The Garage, which is located inside City of Dreams Manila.
In addition, we also purchase gaming tables and gaming machines and enter into licensing agreements for the use of certain trade names and, in the case of the gaming machines, the right to use software in connection therewith. These include a license to use a jackpot system for the gaming machines. For other intellectual property that we owned, see “Item 4. Information on the Company — B. Business Overview — Intellectual Property.”
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D. TREND INFORMATION
The following trends and uncertainties may affect our operations and financial conditions:
  • The impact of the
Covid-19
outbreak, including its severity, magnitude and duration, and any recovery from such impact, which will be significantly affected by the duration of travel and visa restrictions and customer sentiment, including the length of time before customers will resume travelling and participating in entertainment and leisure activities at high-density venues, all of which are highly uncertain. The disruptions to our operations caused by the
Covid-19
outbreak have had a material adverse effect on the Company’s financial condition, operations and prospects during the first quarter of 2020. As such disruptions are ongoing, such material adverse effects will continue, and may worsen, beyond the first quarter of 2020;
  • Policies and campaigns implemented by the Chinese government, including restrictions on travel, anti-corruption campaigns, heightened monitoring of cross-border currency movement and adoption of new measures to eliminate perceived channels of illicit cross-border currency movements, restrictions on currency withdrawal, increased scrutiny of marketing activities in China or new measures taken by the Chinese government to deter marketing of gaming activities to mainland Chinese residents by foreign casinos, as well as any slowdown of economic growth in China, may lead to a decline and limit the recovery and growth in the number of patrons visiting our properties and the spending amount of such patrons;
  • The gaming and leisure market in Macau and the Philippines are developing and the competitive landscapes are expected to evolve as more gaming and
 non-gaming
 facilities are developed in the regions where our properties are located. More supply of integrated resorts in the Cotai region of Macau and in Entertainment City of the Philippines will intensify the competition in the business that we operate. Our business in Cyprus operates in a new gaming market and the market landscape is expected to be more volatile and unpredictable, especially given that our flagship project in Cyprus, City of Dreams Mediterranean, is still being developed;
  • The impact of new policies and legislation implemented by the Macau government, including travel and visa policies, anti-smoking legislation as well as policies relating to gaming table allocations and gaming machine requirements;
  • The impact of new policies and legislation implemented by the Philippine government, including potential additional licensing requirements and potential tax legislation subjecting our Philippine subsidiaries to Philippines corporate income tax, value-added tax and other tax assessments in addition to the license fees paid to PAGCOR pursuant to the Philippine License;
  • Greater regulatory scrutiny, including increased audits and inspections, in relation to movement of capital and anti-money laundering and other financial crime. Anti-money laundering, anti-bribery and corruption and sanctions and counter-terrorism financing laws and regulations have become increasingly complex and subject to greater regulatory scrutiny and supervision by regulators globally and may increase our compliance costs and any potential
non-compliances
of such laws and regulations could have an adverse effect on our reputation, financial condition, results of operations or cash flows;
  • Enactment of new laws, or amendments to existing laws with more stringent requirements, in relation to personal data, including, among others, collection, use and/or transmission of personal data, and as to which there may be limited precedence on their interpretation and application, may increase operating costs and/or adversely impact our ability to market to our customers and guests. In addition, any
non-compliance
with such laws may result in damage of our reputation and/or subject us to lawsuits, fines and other penalties as well as restrictions on our use or transfer of data; and
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  • Gaming promoters in Macau are experiencing increased regulatory scrutiny that has resulted in the cessation of business of certain gaming promoters, a trend which may affect our operations in a number of ways:
  – a concentration of gaming promoters may result in such gaming promoters having significant leverage and bargaining strength in negotiating agreements with gaming operators, which could result in gaming promoters negotiating changes to our agreements with them or the loss of business to a competitor or the loss of certain relationships with gaming promoters, any of which may adversely affect our results of operations;
  – if any of our gaming promoters ceases business or fails to maintain the required standards of regulatory compliance, probity and integrity, their exposure to patron and other litigation and regulatory enforcement actions may increase, which in turn may expose us to an increased risk for litigation, regulatory enforcement actions and damage to our reputations; and
  – since we depend on gaming promoters for our VIP gaming revenue, difficulties in their operations may expose us to higher operational risk.
See also “Item 3. Key Information — D. Risk Factors,” “Item 4. Information on the Company — B. Business Overview — Market and Competition,” and other information elsewhere in this annual report for recent trends affecting our revenues and costs since the previous financial year and a discussion of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause the reported financial information not necessarily to be indicative of future operating results or financial condition.
E.
 OFF-BALANCE
 SHEET ARRANGEMENTS
We have not entered into any material financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
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F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Our total long-term indebtedness and other contractual obligations as of December 31, 2019 are summarized below.
                                         
 
Payments Due by Period
 
 
Less than
1 year
 
  
1-3
 years
 
  
3-5
 years
 
  
More than
5 years
 
  
Total
 
 
(in millions of US$)
 
Long-term debt obligations
(1)
:
  
 
2017 Senior Notes
  $
—
    $
—
     $
—
     $
1,000.0
     $
1,000.0
  
2019 Senior Notes due 2029
   
—
     
—
     
—
     
900.0
      
900.0
  
2016 Studio City Notes due 2021
   
—
     
850.0
      
—
     
—
     
850.0
  
2019 Studio City Notes
   
—
     
—
     
600.0
      
—
     
600.0
  
2019 Senior Notes due 2027
   
—
     
—
     
—
     
600.0
      
600.0
  
2019 Senior Notes due 2026
   
—
     
—
     
—
     
500.0
      
500.0
  
2015 Credit Facilities
   
0.2
      
1.0
      
—
     
—
     
1.2
  
2021 Studio City Senior Secured Credit Facility
   
—
     
0.1
      
—
     
—
     
0.1
  
Fixed interest payments
   
262.3
     
457.8
      
362.6
      
379.6
      
1,462.3
  
Finance leases
(2)
    
42.8
     
95.3
      
100.0
      
434.2
      
672.3
  
Operating leases
(2)
    
33.8
     
38.6
      
15.5
      
99.6
      
187.5
  
Construction costs and property and equipment retention payables
   
11.2
     
0.8
      
—
     
—
     
12.0
  
Other contractual commitments:
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Construction costs and property and equipment acquisition commitments
(3)
    
435.6
     
382.7
      
—
     
—
     
818.3
  
Gaming subconcession premium and gaming license fee
(4)
    
31.3
     
56.1
      
15.7
      
176.4
      
279.5
  
                                         
Total contractual obligations
  $
817.2
     $
1,882.4
     $
1,093.8
     $
4,089.8
     $
7,883.2
  
                                         
(1) See note 12 to the consolidated financial statements included elsewhere in this annual report for further details on these debt facilities.
(2) See note 13 to the consolidated financial statements included elsewhere in this annual report for further details on these lease liabilities.
(3) See note 22(a) to the consolidated financial statements included elsewhere in this annual report for further details on construction costs and property and equipment acquisition commitments.
(4) Represents i) annual premium with a fixed portion and a variable portion based on the number and type of gaming tables and machines in operation as of December 31, 2019 for our gaming subconcession in Macau, which expires in June 2022; and ii) fixed portion of gaming license fee in Cyprus which expires in June 2047. The gaming tax for gaming subconcession in Macau and the license fee for gaming licenses in the Philippines and Cyprus as disclosed in note 22(b) to the consolidated financial statements are not included in this table as the amount is variable in nature.
G. SAFE HARBOR
See “Special Note Regarding Forward-Looking Statements.”
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ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding our directors and executive officers as of the date of this annual report on Form
 20-F.
             
Name
 
Age
 
  
Position/Title
Lawrence Yau Lung Ho
   
43
   
Chairman, chief executive officer and director
Clarence Yuk Man Chung
   
57
   
Director
Evan Andrew Winkler
   
45
   
President and Director
Alec Yiu Wa Tsui
   
70
   
Independent
 non-executive
 director
Thomas Jefferson Wu
   
47
   
Independent
 non-executive
 director
John William Crawford
   
77
   
Independent
 non-executive
 director
Francesca Galante
   
44
   
Independent
non-executive
director
Geoffrey Stuart Davis
   
51
   
Executive vice president and chief financial officer
Stephanie Cheung
   
57
   
Executive vice president and chief legal officer
Akiko Takahashi
   
66
   
Executive vice president and chief of staff to Chairman and chief executive officer
Directors
Mr. Lawrence Yau Lung Ho
 was appointed as our director on December 20, 2004, and served as our
 co-chairman
 and chief executive officer between December 2004 and April 2016 before he was
 re-designated
 as chairman and chief executive officer in May 2016. Since November 2001, Mr. Ho has served as the managing director of Melco International and its chairman and chief executive officer since March 2006. In addition, Mr. Ho has been a director of SCI since July 2011. Mr. Ho has also been appointed as the chairman and director of Maple Peak Investment Inc., a company listed on the TSX Venture Exchange in Canada, since July 2016.
As a member of the National Committee of the Chinese People’s Political Consultative Conference, Mr. Ho serves on the board or participates as a committee member in various organizations in Hong Kong, Macau and mainland China. He is a vice chairman of the
 All-China
Federation of Industry and Commerce; a vice patron of The Community Chest of Hong Kong; a member of the All China Youth Federation; a member of the Macau Basic Law Promotion Association; chairman of the Macau International Volunteers Association; a member of the Board of Governors of The Canadian Chamber of Commerce in Hong Kong; honorary lifetime director of The Chinese General Chamber of Commerce of Hong Kong; honorary patron of The Canadian Chamber of Commerce in Macao; honorary president of the Association of Property Agents and Real Estate Developers of Macau; and director executive of the Macao Chamber of Commerce.
In recognition of Mr. Ho’s excellent directorship and entrepreneurial spirit, Institutional Investor honored him as the “Best CEO” in 2005. He was also granted the “5th China Enterprise Award for Creative Businessmen” by the China Marketing Association and China Enterprise News, “Leader of Tomorrow” by Hong Kong Tatler and the “Directors of the Year Award” by the Hong Kong Institute of Directors in 2005. In 2017, Mr. Ho was awarded the Medal of Merit-Tourism by the Macau SAR government for his significant contributions to tourism in the territory.
As a socially-responsible young entrepreneur in Hong Kong, Mr. Ho was selected as one of the “Ten Outstanding Young Persons Selection 2006”, organized by Junior Chamber International Hong Kong. In 2007,
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he was elected as a finalist in the “Best Chairman” category in the “Stevie International Business Awards” and one of the “100 Most Influential People across Asia Pacific” by Asiamoney magazine. In 2008, he was granted the “China Charity Award” by the Ministry of Civil Affairs of the People’s Republic of China. In 2009, Mr. Ho was selected as one of the “China Top Ten Financial and Intelligent Persons” judged by a panel led by the Beijing Cultural Development Study Institute and Fortune Times and was named “Young Entrepreneur of the Year” at Hong Kong’s first Asia Pacific Entrepreneurship Awards.
Mr. Ho was selected by FinanceAsia magazine as one of the “Best CEOs in Hong Kong” for the fifth time in 2014 and was granted the “Leadership Gold Award” in the Business Awards of Macau in 2015. Mr. Ho has been honored as one of the recipients of the “Asian Corporate Director Recognition Awards” by Corporate Governance Asia magazine for eight consecutive years since 2012, and was awarded “Asia’s Best CEO” at the Asian Excellence Awards for the eighth time in 2019.
Mr. Ho graduated with a Bachelor of Arts degree in commerce from the University of Toronto, Canada, in June 1999 and was awarded the Honorary Doctor of Business Administration degree by Edinburgh Napier University, Scotland, in July 2009 for his contribution to business, education and the community in Hong Kong, Macau and China.
Mr. Clarence Yuk Man Chung
 was appointed as our director on November 21, 2006. Mr. Chung has also been an executive director of Melco International since May 2006, which he joined in December 2003. In addition, Mr. Chung has been the chairman and president of MRP since December 2012, a director of SCI since October 2018 and has also been appointed as a director of certain of our subsidiaries incorporated in various jurisdictions. Before joining Melco International, Mr. Chung had been in the financial industry in various capacities as a chief financial officer, an investment banker and a merger and acquisition specialist. He was named one of the “Asian Gaming 50” for multiple years (including 2018) by Inside Asian Gaming magazine. Mr. Chung is a member of the Hong Kong Institute of Certified Public Accountants and the Institute of Chartered Accountants in England and Wales and obtained a master’s degree in business administration from the Kellogg School of Management at Northwestern University and The Hong Kong University of Science and Technology.
Mr. Evan Andrew Winkler
 was appointed as our director on August 3, 2016 and also our president on September 4, 2019. Mr. Winkler has served as the managing director and the president of Melco International since August 2016 and May 2018, respectively, and also a director of SCI since August 2016. Mr. Winkler has also been appointed as a director of various subsidiaries of Melco International.
Before joining Melco International, Mr. Winkler served as a managing director at Moelis & Company, a global investment bank. Prior to that, he was a managing director and
 co-head
 of technology, media and telecommunications M&A at UBS Investment Bank. Mr. Winkler has extensive experience in providing senior level advisory services on mergers and acquisitions and other corporate finance initiatives, having spent nearly two decades working on Wall Street. He holds a bachelor degree in Economics from the University of Chicago.
Mr. Alec Yiu Wa Tsui
 was appointed as an independent
 non-executive
 director on December 18, 2006. Mr. Tsui is the chairman of our nominating and corporate governance committee and a member of our audit and risk committee and compensation committee. Mr. Tsui has extensive experience in finance and administration, corporate and strategic planning, information technology and human resources management, having served at various international companies. He held key positions at the Securities and Futures Commission of Hong Kong from 1989 to 1993, joined the HKSE in 1994 as an executive director of the finance and operations services division and was its chief executive from February 1997 to July 2000. He was also the chief operating officer of Hong Kong Exchanges and Clearing Limited from March to August 2000. During his tenure at the HKSE, Mr. Tsui was in charge of the finance and accounting functions. Mr. Tsui was the chairman of the Hong Kong Securities Institute from 2001 to 2004 and a consultant of the Shenzhen Stock Exchange from July 2001 to June 2002. Mr. Tsui was an independent
 non-executive
 director of China Blue Chemical Limited from April 2006 to June 2012, China Chengtong Development Group Limited from March 2003 to November 2013, China Power
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International Development Limited from March 2004 to December 2016 and China Oilfield Services Limited from June 2009 to June 2015, all of which are listed on the HKSE. Mr. Tsui has been a director of Industrial and Commercial Bank of China (Asia) Limited since August 2000. Mr. Tsui is also an independent
non-executive
director of MRP since December 2012 and a number of companies listed on the HKSE and Nasdaq, including COSCO Shipping International (Hong Kong) Co., Ltd. since 2004, Pacific Online Limited since 2007, ATA Creativity Global since 2008, Summit Ascent Holdings Limited from March 2011 to September 2018, Kangda International Environmental Company Limited from July 2014 to April 2019, DTXS Silk Road Investment Holdings Company Limited since December 2015 and Hua Medicine since September 2018. In addition, due to his long experience as an executive supervising finance and accounting functions, and extensive knowledge and expertise in internal controls and procedures for financial reporting and other matters performed by audit committees in general, Mr. Tsui also serves as a member of the audit committee on several of the companies on which he serves as a director.
Mr. Tsui graduated from the University of Tennessee with a bachelor’s degree in industrial engineering in 1975 and a master of engineering degree in 1976. He completed a program for senior managers in government at the John F. Kennedy School of Government at Harvard University in 1993.
Mr. Thomas Jefferson Wu
 JP
was appointed as an independent
 non-executive
director on December 18, 2006. Mr. Wu is also the chairman of our compensation committee and a member of our audit and risk committee and nominating and corporate governance committee. Mr. Wu was the deputy chairman and managing director of Hopewell Holdings Limited, a business conglomerate which was
de-listed
from the HKSE from February 2018 to May 2019. Mr. Wu has served in various roles with the Hopewell Holdings group since 1999, including group controller from March 2000 to June 2001, executive director from June 2001 to May 2019, chief operating officer from January 2002 to August 2002, deputy managing director from August 2003 to June 2007,
 co-managing
 director from July 2007 to September 2009, managing director from October 2009 to May 2019 and deputy chairman of Hopewell Holdings Limited from February 2018 to May 2019. Mr. Wu has also been an executive director, managing director and
non-executive
director of Shenzhen Investment Holdings Bay Area Development Company Limited (formerly known as Hopewell Highway Infrastructure Limited), a company listed on the HKSE, from January 2003 to April 2018, from July 2003 to April 2018 and from April 2018 to May 2018, respectively.
Mr. Wu graduated with high honors from Princeton University in 1994 with a Bachelor of Science degree in Mechanical and Aerospace Engineering. Mr. Wu then worked in Japan as an engineer for Mitsubishi Electric Corporation for three years before returning to full-time studies at Stanford University, where he obtained a Master of Business Administration degree in 1999. In 2015, he was conferred an honorary fellowship by Lingnan University.
Mr. Wu is active in public service in both Hong Kong and China. Mr. Wu serves in a number of advisory roles at different levels of government. In China, Mr. Wu is a member of the 13th National Committee of the Chinese People’s Political Consultative Conference and the 11th & 12th Heilongjiang Provincial Committee of the Chinese People’s Political Consultative Conference and was a Standing Committee member and a member of the Guangzhou Municipality Huadu District Committee of the Chinese People’s Political Consultative Conference, among other public service capacities.
In Hong Kong, Mr. Wu’s major public service appointments include being a board member of The Airport Authority Hong Kong of the Hong Kong Special Administrative Region Government (the “HKSARG”), a member of the Hong Kong Tourism Board of the HKSARG, a member of the Energy Advisory Committee of the Environment Bureau of the HKSARG, a member of the Committee on Real Estate Investment Trusts of Securities and Futures Commission, a Vice Patron of the Community Chest of Hong Kong, a deputy director of Economic Affairs Committee and a member of Friends of Hong Kong Association Limited as well as Honorary Advisor of the Hong Kong Army Cadets Association. Mr. Wu is also a member of the Business School Advisory Council of The Hong Kong University of Science and Technology. Previously, Mr. Wu was a council member of
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The Hong Kong Polytechnic University and the Hong Kong Baptist University, a member of the Court of The Hong Kong University of Science and Technology, a board member of the Asian Youth Orchestra and a member of the standing committee on Disciplined Services Salaries and Conditions of Service of the HKSARG.
In addition to his professional and public service engagements, Mr. Wu is mostly known for his passion for ice hockey, as well as the sport’s development in Hong Kong and the region. Mr. Wu is the vice president (Asia/Oceania) of the International Ice Hockey Federation,
 co-founder
 and chairman of the Hong Kong Amateur Club and Hong Kong Academy of Ice Hockey, as well as chairman of the Hong Kong Ice Hockey Officials Association. Mr. Wu is also the honorary president of the Hong Kong Ice Hockey Association (the national sports association of ice hockey in Hong Kong), vice-chairman of Chinese Ice Hockey Association, honorary president of Macau Ice Sports Federation and honorary chairman of Ice Hockey Association of Taipei Municipal Athletics Federation.
In 2006, the World Economic Forum selected Mr. Wu as a “Young Global Leader”. Mr. Wu was also awarded the “Directors of the Year Award” by the Hong Kong Institute of Directors in 2010, the “Asian Corporate Director Recognition Award” by Corporate Governance Asia in 2011, 2012 and 2013, and named the “Asia’s Best CEO (Investor Relations)” in 2012, 2013 and 2014.
Mr. John William Crawford
 JP
 was appointed as an independent
 non-executive
 director on January 12, 2017. Mr. Crawford was a member of our audit and risk committee up until March 21, 2018 when he became its chairman. He is also a member of our compensation committee and nominating and corporate governance committee. Mr. Crawford became an independent
non-executive
director of Melco International, the chairman of its audit committee and nomination committee and a member of its corporate governance committee on September 13, 2019. Mr. Crawford has been the managing director of Crawford Consultants Limited and International Quality Education Limited since 1997 and 2002, respectively. Previously, Mr. Crawford was a founding partner of Ernst & Young, Hong Kong, where he acted as engagement or review partner for many public companies and banks during his 25 years in public accounting and was the chairman of the audit division and the vice chairman of the Hong Kong office of the firm prior to retiring in 1997. Mr. Crawford has extensive knowledge of accounting issues from his experience as a managing audit partner of a major international accounting firm and also has extensive operational knowledge as a result of his consulting experience. Mr. Crawford has served as an independent
 non-executive
 director and chairman of the audit committee of Regal Portfolio Management Limited of Regal REIT since November 2006 and as an independent
non-executive
director of Entertainment Gaming Asia Inc. since November 2007 and up until his resignation on July 3, 2017. In November 2011, Mr. Crawford was appointed as a member of the conflicts committee of our subsidiary SCI and resigned from this position on January 10, 2017. Mr. Crawford previously served as an independent
non-executive
director and chairman of the audit committee of other companies publicly listed in Hong Kong, the most recent of which was
 E-Kong
 Group Limited until June 8, 2015.
Mr. Crawford has been deeply involved in the education sector in Asia, including setting up international schools and providing consulting services. He was a member and a governor for many years of the Canadian International School of Hong Kong and remains active in overseeing and consulting for other similar
pre-university
 schools. Additionally, Mr. Crawford is involved in various charitable and/or community activities and was a founding member of UNICEF Hong Kong Committee and the Hong Kong Institute of Directors. In 1997, Mr. Crawford was appointed a Justice of the Peace in Hong Kong. He is a member of the Hong Kong Institute of Certified Public Accountants, a member and honorary president of the Macau Society of Certified Practising Accountants and a member of the Canadian Institute of Chartered Accountants.
Ms. Francesca Galante
 was appointed as an independent
 non-executive
 director on September 5, 2018. Ms. Galante is a member of each of our compensation committee, audit and risk committee and nominating and corporate governance committee. Ms. Galante has been the
co-founder
and partner of First Growth Real Estate, a specialist advisory firm focused on real estate structured debt arranging, restructuring and special servicing throughout Continental Europe since 2010. Previously, Ms. Galante was an executive director
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in the real estate principal finance division at UBS Investment Bank in London. Prior to that she worked at Soros Real Estate Partners and Merrill Lynch. With 20 years of real estate investment and advisory experience in both Europe and North America, Ms. Galante has extensive experience on real estate transactions in office, hotel, residential and industrial asset classes. Ms. Galante received her Master of Science in Management from the Université Paris-Dauphine and Master of Finance from Ecole Supérieure De Commerce De Paris (now ESCP Europe).
Executive Officers
Mr. Geoffrey Stuart Davis
 is our executive vice president and chief financial officer and he was appointed to his current role in April 2011. Prior to that, he served as our deputy chief financial officer from August 2010 to March 2011 and our senior vice president, corporate finance since 2007, when he joined our Company. In addition, Mr. Davis has been the chief financial officer of Melco International since December 2017, a director of MRP since January 2018 and the chief financial officer and a director of SCI since June 2019 and October 2018, respectively. Prior to joining us, Mr. Davis was a research analyst for Citigroup Investment Research, where he covered the U.S. gaming industry from 2001 to 2007. From 1996 to 2000, he held a number of positions at Hilton Hotels Corporation and Park Place Entertainment. Park Place was spun off from Hilton Hotels Corporation and subsequently renamed Caesars Entertainment. Mr. Davis has been a CFA charter holder since 2000 and obtained a bachelor of arts degree from Brown University.
Ms. Stephanie Cheung
 is our executive vice president and chief legal officer and she was appointed to her current role in December 2008. Prior to that, she held the title of general counsel from November 2006, when she joined our Company. She has acted as the secretary to our board since she joined our Company. In addition, Ms. Cheung has been a director of SCI since October 2018. Prior to joining us, Ms. Cheung practiced law with various international law firms in Hong Kong, Singapore and Toronto. Ms. Cheung graduated with a bachelor of laws degree from Osgoode Hall Law School in 1986 and a master’s degree in business administration from York University in 1994. Ms. Cheung is admitted as a solicitor in Ontario, Canada, England and Wales, and Hong Kong and is a member of the Hong Kong Institute of Directors and a fellow of Salzburg Global.
Ms. Akiko Takahashi
 is our executive vice president and chief of staff to Chairman and chief executive officer and she was appointed to her current role in June 2019. Prior to that, she was our executive vice president and chief officer, human resources/corporate social responsibility, and was appointed to this role in December 2008. In addition, Ms. Takahashi has been a director of SCI since October 2018. Prior to her present role, she held the title group human resources director from December 2006, when she joined our Company. Prior to joining us, Ms. Takahashi worked as a consultant in her own consultancy company from 2003 to 2006 where she conducted
 “C-level”
 executive searches for clients and assisted with brand/service culture alignment for a luxury hotel in New York City and where her last engagement prior to joining our Company was to lead the human resources integration for the largest international hospitality joint venture in Japan between InterContinental Hotels Group and ANA Hotels. She was the global group director of human resources for
 Shangri-la
 Hotels and Resorts, an international luxury hotel group headquartered in Hong Kong, from 1995 to 2003. Between 1993 and 1995, she was the senior vice president of human resources and service quality for Bank of America, Hawaii, FSB. She served as regional human resources manager for Sheraton Hotels Hawaii / Japan from 1985 to 1993. She started her hospitality career as a training manager for Halekulani Hotel. She began her career in the fashion luxury retail industry in merchandising, operations, training and human resources. Ms. Takahashi attended the University of Hawaii.
Management Structure
Mr. Ho, our chairman and chief executive officer, is responsible for the
day-to-day
operational leadership of our Company. Our management structure includes an executive committee which is composed of our executive officers and other senior executives including chief operating officers, property president, executive vice presidents and other business unit leaders and is responsible for formulating business strategies
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and considering
 day-to-day
 operational matters. On September 4, 2019, Mr. Evan Andrew Winkler, a board member of the Company, was appointed as President of the Company. Prior to September 4, 2019, all our executive officers and senior executives reported directly to Mr. Ho. Upon Mr. Winkler’s appointment as President of the Company, he assumed responsibility for the Company’s
day-to-day
operational matters globally and the Company’s operational departments, chief operating officers and property president commenced reporting directly to Mr. Winkler while our executive officers and a few other senior executives, together with Mr. Winkler himself, continued to report directly to Mr. Ho.
B. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers receive compensation in the form of salaries, discretionary bonuses, equity awards, contributions to pension schemes and other benefits. The aggregate amount of compensation paid, and benefits in kind granted, including contingent or deferred compensation accrued for the year, to all the directors and executive officers of our Company as a group, amounted to approximately US$29.9 million for the year ended December 31, 2019.
Bonus Plan
We offer our management employees, including senior executive officers, the ability to participate in our Company’s discretionary annual bonus plan. As part of this plan, employees may receive compensation in addition to their base salary upon satisfactory achievement of certain financial, strategic and individual objectives. Directors, other than Mr. Lawrence Ho, who participates in his capacity as our chief executive officer, are excluded from this plan. The discretionary annual bonus plan is administered at the sole discretion of our Company and our compensation committee.
Equity Awards
On April 1, 2019, we granted share options to acquire 4,320,498 of our ordinary shares pursuant to the 2011 Share Incentive Plan to directors and senior executive officers of our Company with exercise prices of US$8.1433 per share and 3,674,799 restricted shares with grant date fair value (closing price of the grant date) at US$8.1433 per share. The options expire ten years from the date of grant. We will issue ordinary shares to such grantees upon vesting of restricted shares at par value.
In March 2020, our compensation committee approved to grant share options and restricted shares to directors and senior executive officers of our Company with the amount of the share options, and related exercise prices, and the amount of restricted shares to be determined based on the closing price of our ADSs on March 31, 2020. The options will expire ten years from the date of grant. We will issue ordinary shares to such grantees upon vesting of restricted shares at par value.
Pension, Retirement or Similar Benefits
For the year ended December 31, 2019, we set aside or accrued approximately US$0.2 million to provide pension, retirement or similar benefits to our senior executive officers. Our directors, other than Mr. Lawrence Ho who participates in his capacity as our chief executive officer, do not participate in such schemes. For a description of the pension scheme in which our senior executive officers in Hong Kong participate, see “— D. Employees.”
C. BOARD PRACTICES
Composition of Board of Directors
Our board consists of seven directors, including three directors nominated by Melco International and four independent directors. Nasdaq Stock Market Rule 5605(b)(1) generally requires that a majority of an
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issuer’s board of directors must consist of independent directors, but provides for certain
 phase-in
 periods under Nasdaq Stock Market Rule 5615(c)(3). However, Nasdaq Stock Market Rule 5615(a)(3) permits foreign private issuers like us to follow “home country practice” in certain corporate governance matters. Walkers (Hong Kong), our Cayman Islands counsel, has provided a letter to Nasdaq certifying that under the Companies Law (as amended) of the Cayman Islands, we are not required to have a majority of independent directors serving on our board. Since September 5, 2018, we have had a majority of independent directors serving on our board. Prior to that, we relied on this “home country practice” exception.
Duties of Directors
Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time. An individual shareholder or we, as the Company, have (as applicable) the right to seek damages if a duty owed by our directors is breached.
The functions and powers of our board include, among others:
  • convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;
  • declaring dividends and distributions;
  • appointing officers and determining the term of office of officers;
  • exercising the borrowing powers of our Company and mortgaging the property of our Company; and
  • approving the transfer of shares of our Company, including the registering of such shares in our share register.
Terms of Directors and Executive Officers
Our officers are elected by and serve at the discretion of the board. Our directors are not subject to a term of office and hold office until such time as they are removed from office by special resolution or the unanimous written resolution of all shareholders. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; or (ii) dies or is found by our Company to be or becomes of unsound mind. In addition, none of the service agreements between us and our directors provide benefits upon termination of their service.
Committees of the Board of Directors
Our board established an audit committee, a compensation committee and a nominating and corporate governance committee in December 2006. Our audit committee was renamed our audit and risk committee on August 3, 2016. Each committee has its defined scope of duties and terms of reference within its own charter, which empowers the committee members to make decisions on certain matters. The charters of these board committees were adopted by our board on November 28, 2006 and have been amended and restated on several occasions, with the latest version of the compensation committee charter adopted on March 18, 2020 and the latest versions of the audit and risk committee charter and the nominating and corporate governance committee charter each adopted on March 20, 2019. These charters are found on our website. Each of these committees consists entirely of directors whom our board has determined to be independent under the “independence” requirements of the Nasdaq corporate governance rules. The current membership of these three committees and summary of its respective charter are provided below.
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Audit and Risk Committee
Our audit and risk committee consists of Messrs. Thomas Jefferson Wu, Alec Yiu Wa Tsui, John William Crawford and Ms. Francesca Galante, and is chaired by Mr. Crawford. Each of the committee members satisfies the “independence” requirements of Rule
 10A-3
under the Securities Exchange Act of 1934, or the Exchange Act. We believe that Mr. Crawford qualifies as an “audit committee financial expert” as defined in Item 16A of Form
 20-F.
On September 13, 2019, Mr. Crawford was appointed as an independent
non-executive
director of Melco International, our parent company and a related party. Since his appointment to the Melco International board, Mr. Crawford has not participated in, or voted on or consented to, any actions or matters being considered by our audit and risk committee which involved any related party transaction with Melco International. The purpose of the committee is to assist our board in overseeing and monitoring:
  • the audits of the financial statements of our Company;
  • the qualifications and independence of our independent auditors;
  • the performance of our independent auditors;
  • the account and financial reporting processes of our Company and the integrity of our systems of internal accounting and financial controls;
  • legal and regulatory issues relating to the financial statements of our Company, including the oversight of the independent auditor, the review of the financial statements and related material, the internal audit process and the procedure for receiving complaints regarding accounting, internal accounting controls, auditing or other related matters;
  • the disclosure, in accordance with our relevant policies, of any material information regarding the quality or integrity of our financial statements, which is brought to its attention by our disclosure committee;
  • the integrity and effectiveness of our internal audit function; and
  • the risk management policies, procedures and practices.
The duties of the committee include:
  • reviewing and recommending to our board for approval, the appointment,
 re-appointment
 or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor and after considering a tendering process for the appointment of the independent auditor every five years;
  • approving the remuneration and terms of engagement of the independent auditor, and
pre-approving
all auditing and
non-auditing
 services permitted to be performed by our independent auditors;
  • at least annually, obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures;
  • discussing with our independent auditor and our management, among other things, the audits of the financial statements, including whether any material information brought to their attention should be disclosed, issues regarding accounting and auditing principles and practices and the management’s internal control report;
  • reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to our board for inclusion in our annual reports;
  • approving all material related party transactions brought to its attention, without further approval of our board;
  • establishing and overseeing procedures for the handling of complaints and whistleblowing;
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  • approving the internal audit charter and annual audit plans, and undertaking an annual performance evaluation of the internal audit function;
  • assessing Chief Risk Officer and senior management’s policies and procedures to identify, accept, mitigate, allocate or otherwise manage various types of risks presented by management, and making recommendations with respect to our risk management process for the board’s approval;
  • reviewing our financial controls, internal control and risk management systems, and discussing with our management the system of internal control and ensuring that our management has discharged its duty to have an effective internal control system including the adequacy of resources, the qualifications and experience of our accounting and financial staff, and their training programs and budget;
  • together with our board, evaluating the performance of the audit and risk committee on an annual basis;
  • assessing the adequacy of its charter; and
  •
co-operating
 with the other board committees in any areas of overlapping responsibilities.
Compensation Committee
Our compensation committee consists of Messrs. Thomas Jefferson Wu, Alec Yiu Wa Tsui, John William Crawford and Ms. Francesca Galante, and is chaired by Mr. Wu. The purpose of the committee is to discharge the responsibilities of the board relating to compensation of our directors and our executives, including, amongst others, to design (in consultation with management), evaluate and approve the compensation plans, policies and programs for the executives and evaluate and recommend to our board for approval of the directors’ compensation.
Members of this committee are not prohibited from direct involvement in determining their own compensation. Our chief executive officer may not be present at any compensation committee meeting during the time when his compensation is deliberated.
The duties of the committee include:
  • overseeing the development and implementation of executive compensation programs in consultation with our management;
  • at least annually, making recommendations to our board for approval with respect to the compensation arrangements for our directors, and approving compensation arrangements for our chief executive officer and other executives;
  • at least annually, reviewing and approving our incentive compensation plans and equity grant, if any, under our share incentive plans, and overseeing the administration of these plans and discharging any responsibilities imposed on the compensation committee by any of these plans;
  • reviewing and approving the compensation payable to our executive directors and executives in connection with any loss or termination of their office or appointment;
  • reviewing and approving any benefits in kind received by any director or executives where such benefits are not provided for under the relevant employment terms;
  • reviewing executive officer and director indemnification and insurance matters;
  • overseeing our regulatory compliance with respect to compensation matters, including our policies and restrictions on compensation plans and loans to officers;
  • together with the board, evaluating the performance of the compensation committee on an annual basis;
  • at such time as it deems appropriate, reviewing and making recommendations to the Board with respect to the adoption of any share incentive plans and/or modifications to the terms thereof and carrying out of the committee’s duties and responsibilities as set forth in such share incentive plans;
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  • assessing the adequacy of its charter; and
  •
co-operating
 with the other board committees in any areas of overlapping responsibilities.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Messrs. Thomas Jefferson Wu, Alec Yiu Wa Tsui, John William Crawford and Ms. Francesca Galante, and is chaired by Mr. Tsui. The purpose of the committee is to assist our board in discharging its responsibilities regarding:
  • the identification of qualified candidates to become members and chairs of the board and its committees and to fill any such vacancies, and reviewing the appropriateness of the continued service of directors;
  • ensuring that our board meets the criteria for independence under the Nasdaq corporate governance rules and nominating directors who meet such independence criteria;
  • oversight of our compliance with legal and regulatory requirements, in particular the legal and regulatory requirements of Macau (including the relevant laws related to the gaming industry), the Cayman Islands, the SEC and Nasdaq;
  • the development and recommendation to our board of a set of corporate governance principles applicable to our Company;
  • the disclosure, in accordance with our relevant policies, of any material information (other than that regarding the quality or integrity of our financial statements), which is brought to its attention by the disclosure committee; and
  • oversight of our environmental, social and governance-related risks and opportunities.
The duties of the committee include:
  • making recommendations to our board for its approval, the appointment or
 re-appointment
 of any members of our board and the chairs and members of its committees, including evaluating any succession planning;
  • reviewing on an annual basis the appropriate skills, knowledge and characteristics required of board members and of the committees of our board, and making any recommendations to improve the performance of our board and its committees;
  • developing and recommending to our board such policies and procedures with respect to nomination or appointment of members of our board and chairs and members of its committees or other corporate governance matters as may be required pursuant to any SEC or Nasdaq rules, or otherwise considered desirable and appropriate;
  • developing a set of corporate governance principles and reviewing such principles at least annually;
  • deciding whether any material information (other than that regarding the quality or integrity of our financial statements), which is brought to its attention by the disclosure committee, should be disclosed;
  • reviewing and monitoring the training and continuous professional development of our directors and senior management;
  • developing, reviewing and monitoring the code of conduct and compliance manual applicable to employees and directors;
  • together with the board, evaluating the performance of the committee on an annual basis;
  • reviewing the environmental, social and governance-related policies and the related regular public disclosures;
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  • assessing the adequacy of its charter; and
  •
co-operating
with the other board committees in any areas of overlapping responsibilities.
Employment Agreements
We have entered into an employment agreement with each of our executive officers. The terms of the employment agreements are substantially similar for each executive officer, except as noted below. We may terminate an executive officer’s employment for cause, at any time, without advance notice, for certain acts of the officer, including, but not limited to, a serious criminal act, willful misconduct to our detriment or a failure to perform agreed duties. Furthermore, either we or an executive officer may terminate employment at any time without cause upon advance written notice to the other party. Except in the case of Mr. Lawrence Yau Lung Ho, upon notice to terminate employment from either the executive officer or our Company, our Company may limit the executive officer’s services for a period until the termination of employment. Each executive officer (or his estate, as applicable) is entitled to accrued amounts in relation to such executive officer’s employment with us upon termination due to disability or death. We will indemnify an executive officer for his or her losses based on or related to his or her acts and decisions made in the course of his or her performance of duties within the scope of his or her employment.
Each executive officer has agreed to hold, both during and after the termination of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or as compelled by law, any of our or our customers’ confidential information or trade secrets. Each executive officer also agrees to comply with all material applicable laws and regulations related to his or her responsibilities at our Company as well as all material written corporate and business policies and procedures of our Company.
Each executive officer is prohibited from gambling at any of our Company’s facilities during the term of his or her employment and six months following the termination of such employment agreement.
Each executive officer has agreed to be bound by
non-competition
and
non-solicitation
restrictions during the term of his or her employment and for certain periods following the termination of such employment agreement. Specifically, each executive officer has agreed not to (i) assume employment with or provide services as a director for any of our competitors who operate in a restricted area for six months following termination of employment; (ii) solicit or seek any business orders from our customers for one year following termination of employment; or (iii) seek directly or indirectly, to solicit the services of any of our employees for one year following termination of employment. The restricted area is defined as, including but not limited to, Hong Kong, Macau, the Philippines and any other country or region in which our Company operates or intends to operate.
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D. EMPLOYEES
Employees
We had 23,078, 21,413 and 19,609 employees as of December 31, 2019, 2018 and 2017, respectively. The following table sets forth the number of employees categorized by the areas of operations and as a percentage of our workforce as of December 31, 2019, 2018 and 2017. Staff remuneration packages are determined taking into account market conditions and the performance of the individuals concerned, and are subject to review from time to time.
                                                 
 
As of December 31,
 
 
2019
   
2018
   
2017
 
 
Number
of
Employees
 
  
Percentage
of Total
 
  
Number
of
Employees
 
  
Percentage
of Total
 
  
Number
of
Employees
 
  
Percentage
of Total
 
Mocha Clubs
   
693
     
3.1
 %    
745
     
3.5
 %    
747
     
3.8
 %
Altira Macau
   
1,686
     
7.3
 %    
1,668
     
7.8
 %    
1,610
     
8.2
 %
City of Dreams
   
8,706
     
37.7
 %    
8,312
     
38.8
 %    
7,202
     
36.7
 %
Corporate and centralized services
   
675
     
2.9
 %    
676
     
3.1
 %    
636
     
3.2
 %
Studio City
   
4,485
     
19.4
 %    
4,374
     
20.4
 %    
4,520
     
23.1
 %
City of Dreams Manila
   
5,867
      
25.4
 %    
5,638
     
26.3
 %    
4,894
     
25.0
 %
Cyprus Operations
   
965
     
4.2
 %    
—  
      
—  
      
—  
      
—  
  
                                                 
Total
   
23,078
     
100
 %    
21,413
     
100.0
 %    
19,609
     
100.0
 %
                                                 
Other than the
rank-and-file
employees of the Table Games Division of City of Dreams Manila, none of our employees are members of any labor union and we are not party to any collective bargaining or similar agreement with our employees. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Operations — The success of our business depends on our ability to attract and retain an adequate number of qualified personnel. A limited labor supply, increased competition and any increase in demands from our employees could cause labor costs to increase.”
We have implemented a number of employee attraction and retention initiatives over recent years for the benefit of our employees and their families. These initiatives include, among others, a unique
in-house
learning academy (which provides curriculum across multi-functional tracks such as technical training — gaming and
non-gaming,
sales and marketing, legal, finance, human resources, computer application, language, service, leadership and lifestyle), a foundation acceleration program designed to enhance our employees’ understanding of business perspectives beyond their own jobs, an
 on-site
 high school diploma program and Diploma in Casino Management program (a collaboration with The University of Macau), the Diploma in Hospitality Management (a collaboration with the Institute for Tourism Studies), scholarship awards to encourage the concept of life-long learning, as well as ample internal promotion and transfer opportunities. In September 2015, we launched the Melco
 You-niversity
 program with the Edinburgh Napier University, an overseas institution based in the United Kingdom which was rated ‘Excellent’ in Eduniversal 2014 ranking, to bring a bachelor degree program
 in-house.
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E. SHARE OWNERSHIP
Share Ownership of Directors and Members of Senior Management
The following table sets forth the beneficial interest of each director and executive officer in our ordinary shares as of March 27, 2020.
                 
Name
 
Number of
ordinary shares
 
  
Approximate
percentage of
shareholding
(1)
 
Lawrence Yau Lung Ho
   
812,729,781 
(2)
 		    
55.80
 %
   
13,386,171 
(3)
 		    
0.92
 %
Clarence Yuk Man Chung
   
*
     
*
 
Evan Andrew Winkler
   
*
     
*
 
Alec Yiu Wa Tsui
   
*
     
*
 
Thomas Jefferson Wu
   
*
     
*
 
John William Crawford
   
*
     
*
 
Francesca Galante
   
—
     
—
 
Geoffrey Stuart Davis
   
*
     
*
 
Stephanie Cheung
   
*
     
*
 
Akiko Takahashi
   
*
     
*
 
Directors and executive officers as a group
   
831,003,260
     
57.05
 %
* The options, restricted shares and our shares in aggregate held by each of these directors and executive officers represent less than 1% of our total outstanding shares.
(1) Percentage of beneficial ownership of each director and executive officer is based on: (i) 1,456,547,942 ordinary shares of our Company outstanding as of March 27, 2020, (ii) the number of ordinary shares of underlying options that have vested or will vest within 60 days after March 27, 2020 and (iii) the number of restricted shares that will vest within 60 days after March 27, 2020, each as held by such person as of that date.
(2) Represents 812,729,781 ordinary shares beneficially owned by Melco Leisure, a company wholly owned by Melco International, a Hong Kong company listed on the HKSE. Mr. Lawrence Ho is taken to have interest in these shares as a result of his interest in approximately 55.52% of the total issued shares of Melco International by virtue of the Securities and Futures Ordinance (Chapter 571, the Laws of Hong Kong). Please see “Item 7. Major Shareholders and Related Party Transactions” for more details.
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(3) Comprises 5,200,518 restricted shares vested and 3,588,672 shares acquired from exercise of options and 4,596,981 share options granted under the 2006 and 2011 Share Incentive Plans and vested in Mr. Lawrence Ho as of March 27, 2020. The following table summarizes, as of March 27, 2020, the outstanding options and restricted shares (including 4,596,981 vested but unexercised share options and excluding 5,200,518 vested restricted shares) held by Mr. Lawrence Ho:
                                     
Name
 
Type of awards
 
Grant date
 
  
Last exercisable date
and expiration date
of share options
 
  
Exercise price
of share options per
share /Fair value of
restricted shares at
grant date per share
(US$)
 
  
Number of
underlying
shares
outstanding
 
Lawrence Yau Lung Ho
 
Share options
   
March 23, 2011
     
March 22, 2021
     
1.7537
+
 		    
1,446,498
 
 
Share options
   
March 29, 2012
     
March 28, 2022
     
3.9270
+
 		    
474,399
 
 
Share options
   
May 10, 2013
     
May 9, 2023
     
5.3163
+
 		    
362,610
 
 
Share options
   
March 28, 2014
     
March 27, 2024
     
5.3163
+
 		    
320,343
 
 
Share options
   
March 30, 2015
     
March 29, 2025
     
5.3163
+
 		    
690,291
 
 
Share options
   
March 18, 2016
     
March 17, 2026
     
5.3163
+
 		    
1,302,840
 
 
Share options
   
March 31, 2017
     
March 30, 2027
     
6.18
     
1,470,000
 
 
Share options
   
April 2, 2018
     
April 1, 2028
     
9.40
     
1,470,000
 
 
Restricted shares
   
March 31, 2017
     
N/A
     
6.18
     
631,470
 
 
Restricted shares
   
March 29, 2018
     
N/A
     
9.66
     
531,381
 
 
Restricted shares
   
April 1, 2019
     
N/A
     
8.1433
     
1,227,228
 
 
 
 
 
  
 
 
  
 
Total
 
  
 
9,927,060
 
+
 With effect from March 18, 2016, the exercise price of all outstanding share options awarded in 2013, 2014 and 2015 under the 2011 Share Incentive Plan were reduced and the vesting schedule of such outstanding share options was extended. In addition, on February 10, 2017, we reduced the exercise price of all outstanding and unexercised options granted prior to January 19, 2017 by approximately US$0.4404 per share (equivalent to approximately US$1.3212 per ADS) as a result of our declaration of special dividends in January 2017. Further on March 31, 2017, we reduced the exercise price of certain share options outstanding as of such date by approximately US$0.3293 per share (equivalent to approximately US$0.988 per ADS) reflecting prior special dividends. The adjustments to the option exercise prices in 2017 were made as required by our 2006 Share Incentive Plan and 2011 Share Incentive Plan.
None of our directors or executive officers who are shareholders have different voting rights from other shareholders of our Company.
Share Incentive Plans
We adopted the 2006 Share Incentive Plan, 2011 Share Incentive Plan and MRP Share Incentive Plan. The 2006 Share Incentive Plan has been succeeded by our 2011 Share Incentive Plan. No further awards may be granted under the 2006 Share Incentive Plan. All subsequent awards will be issued under the 2011 Share Incentive Plan. Awards previously granted under the 2006 Share Incentive Plan shall remain subject to the terms and conditions of the 2006 Share Incentive Plan. As of December 31, 2019, all share options and restricted shares granted under the 2006 Share Incentive Plan had vested.
2011 Share Incentive Plan
We adopted the 2011 Share Incentive Plan to provide our employees, directors and consultants with incentives to increase shareholder value, and to attract and retain the services of those upon whom we depend for the success of our business. The 2011 Share Incentive Plan was conditionally approved by our shareholders at the
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extraordinary general meeting held on October 6, 2011 and became effective upon commencement of dealings in our shares on the HKSE on December 7, 2011. Amendments to the 2011 Share Incentive Plan were approved by our shareholders on May 20, 2015 and on December 7, 2016. The amendments to our 2011 Share Incentive Plan approved by our shareholders on December 7, 2016 were to, among other things, include provisions relating to share option schemes required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “HKSE”) following the consolidation of the financial results of our Company in the financial statements of Melco International as a result of our repurchase of 155,000,000 ordinary shares of our Company (equivalent to 51,666,666 ADSs) from Crown Asia Investments Pty, Ltd. and the subsequent cancellation of such shares and with certain changes in the composition of our board of directors in May 2016. Such provisions in our 2011 Share Incentive Plan required by the HKSE rules shall automatically lapse to the extent the requirements under the HKSE rules are no longer applicable to us. The maximum aggregate number of shares which may be issued pursuant to all awards is 100,000,000 shares and the plan will expire ten years from December 7, 2011. As of December 31, 2019, we have granted (i) share options to subscribe for a total of 26,691,216 shares and (ii) restricted shares in respect of a total of 15,446,730 shares pursuant to the 2011 Share Incentive Plan. The 2011 Share Incentive Plan succeeds the 2006 Share Incentive Plan.
The following paragraphs describe the principal terms included in the current 2011 Share Incentive Plan.
Types of Awards
. The awards that may be granted under the plan include options, incentive share options, restricted shares, share appreciation rights, dividend equivalents, share payments, deferred shares and restricted share units.
Eligible Participants
. We may grant awards to directors, employees and consultants of our Company, any parent or subsidiary of our Company, or any of our related entities that our board designates as a related entity for the purposes of the 2011 Share Incentive Plan. Our compensation committee may, from time to time, select from among all eligible individuals, those to whom awards shall be granted and shall determine the nature and amount of each award.
Option Periods and Payments
. Our compensation committee may in its discretion determine, subject to the plan expiration period, the period within which shares must be taken up under an option; the minimum period, if any, for which an option must be held before it can be exercised; the amount, if any, payable on application or acceptance of the option.
Plan Administration
. Our compensation committee will administer the 2011 Share Incentive Plan and has the power to, among other actions, designate eligible participants, determine the number and types of awards to be granted, and set the terms and conditions of each award granted. The compensation committee’s decisions are final, binding, and conclusive for all purposes and upon all parties.
Award Agreement
. Awards granted will be evidenced by an award agreement that sets forth the terms, conditions and limitations for each award.
Exercise Price
. Our compensation committee may determine the exercise price or purchase price, if any, of any award.
Term of Awards.
 The term of each award shall be stated in the award agreement. If the participant ceases to be eligible for any reason, the validity of the award shall depend on the terms and conditions of the award agreement. An option will lapse automatically and may not be exercised upon the first to occur of the following events: (a) ten years from the date of the grant, unless an earlier time is set out in the award agreement; (b) three months after termination of service, subject to certain exceptions; (c) one year after the date of termination of service on account of disability or death; (d) the date on which the participant ceases to be eligible by reason of termination of relationship with us and/or any of our subsidiaries on grounds that such participant
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has been guilty of serious misconduct or convicted of any criminal offense involving integrity or honesty; and (e) date on which our compensation committee cancels the option.
Change in Control and Corporate Transactions
. Upon the consummation of a merger or consolidation in which our Company is not the surviving entity, a change of control of our Company, a sale of substantially all of our assets, the complete liquidation or dissolution of our Company or a reverse takeover, each award will terminate, unless the award is assumed by the successor entity. If the successor entity assumes the award or replaces it with a comparable award, or replaces the award with a cash incentive program and provides for subsequent payout, the replacement award or cash incentive program will automatically become fully vested, exercisable and payable, as applicable, upon termination of the participant’s employment without cause within 12 months of such corporate transaction. If the award is neither assumed nor replaced, it shall become fully vested and exercisable and released from any repurchase or forfeiture rights immediately prior to the effective date of such corporate transaction, provided that the participant remains eligible on the effective date of the corporate transaction.
Amendment and Termination.
 With the approval of the Board, our compensation committee may terminate, amend or modify the 2011 Share Incentive Plan, except certain amendments requiring the approval of our shareholders and/or the shareholders of Melco International pursuant to the applicable law. Except amendments made pursuant to the above, no termination, amendment or modification of the plan shall adversely affect in any material way any award previously granted under the plan or any previous plans, without the prior written consent of the participant.
The 2011 Share Incentive Plan will expire ten years after December 7, 2011, the date on which it became effective. No awards may be granted pursuant to the 2011 Share Incentive Plan after that time.
Vesting Schedule
. In general, our compensation committee determined, or the award agreement would specify, the vesting schedule.
MRP Share Incentive Plan
Apart from the 2006 Share Incentive Plan and the 2011 Share Incentive Plan, our subsidiary, MRP adopted the MRP Share Incentive Plan in June 2013.
In December 2018, we completed the tender offer for common shares of MRP at the tender offer price of PHP7.25 per MRP Share to acquire a total of 1,338,477,668 shares from other minority shareholders of MRP and, together with an additional of 107,475,300 shares acquired on or after December 6, 2018, increased our equity interest in MRP from approximately 72.8% immediately prior to the announcement of the tender offer to approximately 97.9%.
As MRP’s public ownership has fallen below the minimum requirement of the Philippine Stock Exchange, trading of its shares on the Philippine Stock Exchange has been suspended since December 10, 2018. In accordance with the rules of the Philippine Stock Exchange, MRP has been involuntarily delisted from the Philippine Stock Exchange due to MRP’s public ownership having fallen below the minimum requirement of the Philippine Stock Exchange for more than six months.
During the year ended December 31, 2019, in view of the then possible and subsequent delisting of MRP, no equity awards were granted under the MRP Share Incentive Plan and MRP has also retired all outstanding awards under the MRP Share Incentive Plan, including the unvested MRP restricted shares and both the unvested and vested but unexercised MRP share options by the payment of cash to the relevant grantees.
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ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
The following table sets forth the beneficial ownership of our ordinary shares as of March 27, 2020 by all persons who are known to us to be the beneficial owners of 5% or more of our issued share capital.
                 
 
Ordinary shares beneficially
owned
 (1)
  
Name
 
Number
 
  
%
 
Melco Leisure
 (2)(3)
    
812,729,781
      
55.80
  
Capital Research Global Investors
(4)
    
112,281,090
      
7.71
  
BlackRock, Inc.
(5)
    
91,447,425
      
6.28
  
EuroPacific Growth Fund
(6)
    
81,804,750
      
5.62
  
(1) Beneficial ownership is determined in accordance with Rule
13d-3
under the Exchange Act, and includes voting or investment power with respect to the securities.
(2) The address of Melco International and Melco Leisure is The Penthouse, 38th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong. Melco International is listed on the Main Board of the HKSE.
(3) 812,729,781 ordinary shares are beneficially owned by Mr. Lawrence Ho through Melco Leisure as of March 27, 2020. As of March 27, 2020, Mr. Lawrence Ho, our chairman, chief executive officer and director as well as the chairman, chief executive officer and executive director of Melco International, personally holds 54,033,132 ordinary shares of Melco International, representing approximately 3.57% of the total issued shares of Melco International. In addition, 120,333,024 ordinary shares of Melco International are held by Lasting Legend Ltd., 297,851,606 ordinary shares of Melco International are held by Better Joy Overseas Ltd., 53,491,345 ordinary shares of Melco International are held by Mighty Dragon Developments Limited and 1,566,000 ordinary shares of Melco International are held by Maple Peak Investments Inc., representing approximately 7.94%, 19.66%, 3.53% and 0.10% of the total issued shares of Melco International, all of which companies are owned by Mr. Ho, and/or persons and/or trusts affiliated with Mr. Ho. Mr. Ho also has interest in Great Respect Limited, a company controlled by a discretionary family trust, the beneficiaries of which include Mr. Ho and his immediate family members and held 309,476,187 ordinary shares of Melco International, representing 20.43% of the total issued shares of Melco International. Moreover, Ms. Lo Sau Yan, Sharen, the spouse of Mr. Ho, personally holds 4,212,102 ordinary shares of Melco International, representing 0.28% of the total issued shares of Melco International. Therefore, we believe that Mr. Ho holds an aggregate of 840,963,396 ordinary shares of Melco International, representing approximately 55.52% of the total issued shares of Melco International, including beneficial interest, interest of his controlled corporations, interest of his spouse and interest of a trust in which he is one of the beneficiaries and taken to have interest by virtue of the Securities and Futures Ordinance (Chapter 571, the Laws of Hong Kong). Melco Leisure is a wholly-owned subsidiary of Melco International.
(4) Reflects 112,281,090 ordinary shares represented by ADSs. Information regarding beneficial ownership is reported as of December 31, 2019 and is based on the information contained in the amended Schedule 13G filed by Capital Research Global Investors with the SEC on February 14, 2020. The address of Capital Research Global Investors is 333 South Hope Street, Los Angeles, CA 90071.
(5) Reflects 91,447,425 ordinary shares represented by ADSs. Information regarding beneficial ownership is reported as of December 31, 2019 and is based on the information contained in the Schedule 13G filed by BlackRock, Inc. with the SEC on February 7, 2020. The address of BlackRock, Inc. is 55 East 52
nd
Street, New York, NY 10055.
(6) Reflects 81,804,750 ordinary shares represented by ADSs. Information regarding beneficial ownership is reported as of December 31, 2018 and is based on the information contained in the Schedule 13G filed by
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  EuroPacific Growth Fund with the SEC on February 14, 2019. According to information reported therein, the 81,804,750 ordinary shares may also be reflected in a filing made by Capital Research Global Investors, Capital International Investors, and/or Capital World Investors. The address of EuroPacific Growth Fund is 333 South Hope Street Los Angeles, California 90071.
In May 2016, we repurchased 155 million ordinary shares (equivalent to 51,666,666 ADSs) from Crown Asia Investments Pty, Ltd. for the aggregate purchase price of US$800.8 million. Following completion of the repurchase and cancellation of such shares, Melco International became our single largest shareholder. In December 2016, Crown Asia Investments Pty, Ltd. sold 40,925,499 ordinary shares of our Company in an underwritten offering and, concurrently, entered into cash-settled swap transactions relating to a fixed number of our ordinary shares. In February 2017, the privately-negotiated sale by Crown Asia Investments Pty, Ltd. to Melco Leisure, through which Melco Leisure purchased 198,000,000 of our ordinary shares from Crown Asia Investments Pty, Ltd., closed and Melco International became our majority shareholder. In connection with a credit facility entered into by, among others, Melco International in relation to such acquisition, Melco Leisure has pledged 452,057,472 ordinary shares of our Company held by it. In May 2017, we issued and sold 27,769,248 ADSs (equivalent to 83,307,744 ordinary shares) and 81,995,799 ordinary shares and also repurchased 165,303,544 ordinary shares from Crown Asia Investments Pty, Ltd. for the aggregate purchase price of US$1.2 billion, and such shares repurchased by us were subsequently cancelled by us.
As of December 31, 2019, a total of 1,456,547,942 ordinary shares were outstanding, of which 643,278,131 ordinary shares were registered in the name of a nominee of Deutsche Bank Trust Company Americas, the depositary under the deposit agreement. Other than as described in this annual report, we have no further information as to shares held, or beneficially owned, by U.S. persons. Since the completion of our initial public offering in December 2006, all ordinary shares underlying the ADSs have been held in Hong Kong by the custodian, Deutsche Bank AG, Hong Kong Branch, on behalf of the depositary.
None of our shareholders will have different voting rights from other shareholders after the filing of this annual report. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company.
See “Item 4. Information on the Company — C. Organizational Structure” for our current corporate structure.
B. RELATED PARTY TRANSACTIONS
For discussion of significant related party transactions we entered into during the years ended December 31, 2019, 2018 and 2017, see note 23 to the consolidated financial statements included elsewhere in this annual report.
Employment Agreements
We have entered into employment agreements with key management and personnel of our Company and our subsidiaries. See “Item 6. Directors, Senior Management and Employees — C. Board Practices — Employment Agreements.”
Equity Incentive Plans
See “Item 6. Directors, Senior Management and Employees — B. Compensation of Directors and Executive Officers.”
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Transactions with Melco International in Relation to Cyprus Prior to the Completion of the Cyprus Acquisition
Prior to our acquisition of ICR Cyprus, we provided certain planning, designing, construction and other services to Melco International and its subsidiaries that, at that time, were not our subsidiaries in connection with the City of Dreams Mediterranean project and the launch and operation of the temporary and satellite casinos. In addition, we also entered into agreements and other arrangements with Melco International, or subsidiaries of Melco International that, at that time, were not our subsidiaries, in relation to the management and operation of the City of Dreams Mediterranean project, including the management and operation of the temporary and satellite casinos.    For the year ended December 31, 2019, we received service fee income of US$1.1 million from Melco International for the provision of certain services for the City of Dreams Mediterranean project from January 1, 2019 to July 31, 2019.
Acquisition of 75% Equity Interest in ICR Cyprus from Melco International
On July 31, 2019, we acquired a 75% equity interest in ICR Cyprus from Melco International and, in consideration, issued 55.5 million ordinary shares to Melco International, or 4.0% of the Company’s outstanding shares as of June 24, 2019. A special committee of the Company’s Board of Directors comprised solely of independent directors considered the acquisition and unanimously approved the transaction. The special committee engaged independent financial and legal advisors to assist in its evaluation process. The acquisition was also approved by the Audit and Risk Committee of the Company.
Transactions with EHY Construction
EHY Construction and Engineering Company Limited, or EHY Construction, is a subsidiary of MECOM Power and Construction Limited, or MECOM. We have had a working relationship with MECOM for over ten years, commencing with the development of City of Dreams. In June 2017, our chairman and chief executive officer, Mr. Ho, acquired a 29.4% equity interest in MECOM. Mr. Ho’s equity interest in MECOM was approximately 20% immediately prior to the disposal of all of his equity interest in MECOM on December 10, 2019 following which he no longer held any equity interest in MECOM. MECOM, through its subsidiary, EHY Construction, continues to provide certain services in relation to our properties in Macau, including but not limited to structural steelwork, construction,
fitting-out
 and renovation work, facility management and repair and maintenance. In July 2018, we entered into a term contract with EHY Construction pursuant to which EHY Construction agreed to provide certain services to us, including but not limited to structural steelworks, civil engineering construction and fitting out and renovation works for certain of our properties in Macau for a term of three years. The performance by EHY Construction of these services under the term contract is subject to (i) individual work orders as may be issued by us to EHY Construction from time to time; and (ii) the maximum aggregate contract amount of HK$600 million (equivalent to approximately US$77.0 million). During the period from January 1, 2019 to December 10, 2019, the amount incurred for the services provided by EHY Construction was US$16.4 million.
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
We have appended consolidated financial statements filed as part of this annual report.
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Legal and Administrative Proceedings
We are currently a party to certain legal and administrative proceedings which relate to matters arising out of the ordinary course of our business. Based on the current status of such proceedings and the information currently available, our management does not believe that the outcome of such proceedings will have a significant adverse effect on our business, financial condition or results of operations.
Dividend Policy
In February 2019, our board amended our quarterly dividend policy to one targeting a quarterly cash dividend of US$0.0517 per ordinary share of the Company (equivalent to US$0.1551 per ADS), subject to our ability to pay dividends from our accumulated and future earnings, cash availability and future commitments. In February 2019 and May 2019, we declared a quarterly dividend of US$0.0517 per ordinary share of the Company (equivalent to US$0.1551 per ADS) to our shareholders whose names appeared on our register of members as of the close of business on March 4, 2019 and May 20, 2019, respectively.
In July 2019, our board amended our quarterly dividend policy to one targeting a quarterly cash dividend of US$0.05504 per ordinary share of the Company (equivalent to US$0.16512 per ADS), subject to our ability to pay dividends from our accumulated and future earnings, cash availability and future commitments. In July 2019 and October 2019, we declared a quarterly dividend of US$0.05504 per ordinary share of the Company (equivalent to US$0.16512 per ADS) to our shareholders whose names appeared on our register of members as of the close of business on August 5, 2019 and November 12, 2019, respectively.
In February 2020, we declared a quarterly dividend of US$0.05504 per ordinary share of the Company (equivalent to US$0.16512 per ADS) to our shareholders whose names appeared on our register of members as of the close of business on March 2, 2020.
Our board will continue to review from time to time our dividend policy as part of our commitment to maximizing shareholder value, taking into consideration our financial performance and market conditions.
Our board retains complete discretion on whether to pay dividends. Even if our board decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our board may deem relevant. Dividends will be declared and paid in Hong Kong dollar for holders of ordinary shares and U.S. dollar for holders of our ADSs.
All subsidiaries incorporated in Macau are required to set aside a minimum of 10% to 25% of the entity’s profit after tax to the legal reserve until the balance of the legal reserve reaches a level equivalent to 25% to 50% of the entity’s share capital in accordance with the provisions of the Macau Commercial Code. The legal reserve sets aside an amount from the subsidiaries’ statements of operations and is not available for distribution to the shareholders of the subsidiaries. The appropriation of legal reserve is recorded in the subsidiaries’ financial statements in the year in which it is approved by the boards of directors or administration of the relevant subsidiaries.
Our 2015 Credit Facilities, Studio City Notes, 2021 Studio City Senior Secured Credit Facility and other indebtedness we may incur contain, or may be expected to contain, restrictions on payment of dividends to us, which is expected to affect our ability to pay dividends in the foreseeable future. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Shares and ADSs — We cannot assure you that we will make dividend payments in the future.”
Under the Cayman Companies Law, subject to the provisions of our amended and restated memorandum and articles of association adopted on March 29, 2017, the share premium account of our
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Company may be applied to pay distributions or dividends to shareholders, provided that immediately following the date the distribution or dividend is proposed to be paid, we are able to pay our debts as they fall due in the ordinary course of business.
B. SIGNIFICANT CHANGES
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
ITEM
9. THE OFFER AND LISTING
A. OFFERING AND LISTING DETAILS
Our ADSs, each representing three ordinary shares, have been listed on Nasdaq under the symbol “MPEL” from December 19, 2006 to April 5, 2017 and under the symbol “MLCO” since April 6, 2017. Our ordinary shares were listed on the HKSE and began trading under the stock code “6883” on December 7, 2011 and were delisted from the HKSE on July 3, 2015.
B. PLAN OF DISTRIBUTION
Not applicable.
C. MARKETS
Our ADSs, each representing three ordinary shares, have been listed on Nasdaq under the symbol “MPEL” from December 19, 2006 to April 5, 2017 and under the symbol “MLCO” since April 6, 2017. Our ordinary shares were listed on the HKSE under the stock code “6883” from December 7, 2011 until July 3, 2015. On January 2, 2015, we applied for a voluntary withdrawal of listing of our ordinary shares on the Main Board of the HKSE, which was approved by our shareholders on March 25, 2015. The voluntary withdrawal of listing of our ordinary shares on HKSE took effect on July 3, 2015, following which our shares are only traded on the Nasdaq Global Select Market in the form of ADSs.
D. SELLING SHAREHOLDERS
Not applicable.
E. DILUTION
Not applicable.
F. EXPENSES OF THE ISSUE
Not applicable.
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ITEM 10.
ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
The following are summaries of material provisions of our memorandum and articles of association and the Companies Law, as amended, of the Cayman Islands, or Companies Law, insofar as they relate to the material terms of our ordinary shares.
General
All of our outstanding ordinary shares are fully paid and
 non-assessable.
 Some of the ordinary shares are issued in registered form only with no share certificates. Our shareholders who are
 non-residents
 of the Cayman Islands may freely hold and vote their ordinary shares. Under article 3 of our memorandum of association, the objects for which we were established are unrestricted and we have full power and authority to carry out any object not prohibited by any law as provided by Section 7(4) of the Companies Law.
Dividends
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law and our articles of association. Our articles of association do not provide a time limit after which a shareholder’s entitlement to an unclaimed dividend lapses.
Directors
Directors of our company may be appointed either by an ordinary resolution of the shareholders or by the affirmative vote of all directors. Each director holds office until the expiry of his or her term and until a successor has been elected or appointed. Our articles of association do not require directors to stand for reelection at staggered intervals.
Voting Rights
Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by our chairman or one or more shareholders present in person or by proxy entitled to vote and who together hold not less than 10 % of the paid up voting share capital of our company.
A quorum required for a meeting of shareholders consists of one or more shareholders who hold at least
 one-third
 of our ordinary shares at the meeting present in person or by proxy or, if a corporation or other
 non-natural
 person, by its duly authorized representative. Shareholders’ meetings are held annually and may be convened by our board on its own initiative or upon a request to the directors by shareholders holding in aggregate at least ten percent of our ordinary shares. Advance notice of at least seven days is required for the convening of our annual general meeting and other shareholders meetings.
An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of not less than
 two-thirds
 of the votes cast attaching to the ordinary shares. A special resolution will be required for important matters such as changing our name or making changes to our memorandum and articles of association.
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Transfer of Ordinary Shares
Subject to the restrictions of our articles of association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.
Our board may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any ordinary share unless:
  • the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates, and such other evidence as our board may reasonably require to show the right of the transferor to make the transfer;
  • the instrument of transfer is in respect of only one class of ordinary shares;
  • the instrument of transfer is properly stamped, if required; or
  • in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four.
If our directors refuse to register a transfer they must, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board may from time to time determine, provided, however, that the registration of transfers may not be suspended nor the register closed for more than 30 days in any year.
Liquidation
On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for distribution among the holders of ordinary shares will be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the
 paid-up
 capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
Our board may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on the specified time are subject to forfeiture. Shareholders are not liable for any capital calls by the company except to the extent there is an amount unpaid on their shares.
Redemption of Ordinary Shares
Subject to the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as the directors may determine.
Prohibitions on the Receipt of Dividends, the Exercise of Voting or Other Rights or the Receipt of Other Remuneration
Our memorandum and articles of association prohibit anyone who is an unsuitable person or an affiliate of an unsuitable person from:
  • receiving dividends or interest with regard to our shares;
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  • exercising voting or other rights conferred by our shares; and
  • receiving any remuneration in any form from us or an affiliated company for services rendered or otherwise.
Such unsuitable person or its affiliate must sell all of the shares, or allow us to redeem or repurchase the shares on such terms and manner as the directors may determine and agree with the shareholders, within such period of time as specified by a gaming authority.
These prohibitions commence on the date that a gaming authority serves notice of a determination of unsuitability or our board determines that a person or its affiliate is unsuitable and continue until the securities are owned or controlled by persons found suitable by a gaming authority or our board, as applicable, to own them. An “unsuitable person” is any person who is determined by a gaming authority to be unsuitable to own or control any of our shares or who causes us or any affiliated company to lose or to be threatened with the loss of any gaming license, or who, in the sole discretion of our board, is deemed likely to jeopardize our or any of our affiliates’ application for, receipt of approval for right to the use of, or entitlement to, any gaming license.
The terms “affiliated companies,” “gaming authority” and “person” have the meanings set forth in our articles of association.
Redemption of Securities Owned or Controlled by an Unsuitable Person or an Affiliate
Our memorandum and articles of association provide that shares owned or controlled by an unsuitable person or an affiliate of an unsuitable person are redeemable by us, out of funds legally available for that redemption, by appropriate action of our board to the extent required by the gaming authorities making the determination of unsuitability or to the extent deemed necessary or advisable by our board having regard to relevant gaming laws. From and after the redemption date, the securities will not be considered outstanding and all rights of the unsuitable person or affiliate will cease, other than the right to receive the redemption price and the right to receive any dividends declared prior to any receipt of any written notice from a gaming authority declaring the suitable person to be an unsuitable person but not yet paid. The redemption price will be the price, if any, required to be paid by the gaming authority making the finding of unsuitability or, if the gaming authority does not require a price to be paid, the sum deemed to be the fair value of the securities by our board. The price for the shares will not exceed the closing price per share of the shares on the principal national securities exchange on which the shares are then listed on the trading date on the day before the redemption notice is given. If the shares are not then listed, the redemption price will not exceed the closing sales price of the shares as quoted on an automated quotation system, or if the closing price is not then reported, the mean between the bid and asked prices, as quoted by any other generally recognized reporting system. Our right of redemption is not exclusive of any other rights that we may have or later acquire under any agreement, its bylaws or otherwise. The redemption price may be paid in cash, by promissory note, or both, as required by the applicable gaming authority and, if not, as we elect.
Our memorandum and articles of association require any unsuitable person and any affiliate of an unsuitable person to indemnify us and our affiliated companies for any and all losses, costs and expenses, including attorneys’ fees, incurred by us and our subsidiaries as a result of the unsuitable person’s or affiliate’s ownership or control of shares, the neglect, refusal or other failure to comply with the provisions of our memorandum and articles of association relating to unsuitable persons, or failure to promptly divest itself of any shares in us.
Variations of Rights of Shares
All or any of the rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied or abrogated either with the unanimous written consent of the holders of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.
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Changes in Capital
We may from time to time by ordinary resolution:
  • increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution may prescribe;
  • consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
  • convert all or any of our
 paid-up
 shares into stock and reconvert that stock into paid up shares of any denomination;
  •
sub-divide
 our existing shares, or any of them, into shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share will be the same as it was in case of the share from which the reduced share is derived; or
  • cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled.
We may by special resolution reduce our share capital and any capital redemption reserve in any manner authorized by law.
Accounts and Audit
No shareholder (other than a director) has any right to inspect any of our accounting record or book or document except as conferred by law or authorized by our board or our company by ordinary resolution of the shareholders.
Subject to compliance with all applicable laws, we may send to every person entitled to receive notices of our general meetings under the provisions of the articles of association a summary financial statement derived from our annual accounts and our board’s report.
Auditors shall be appointed and the terms and tenure of such appointment and their duties at all times regulated in accordance with the provisions of the articles of association. The remuneration of the auditors shall be fixed by our board.
Our financial statements shall be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the shareholders in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the financial statements and the report of the auditor should disclose this fact and name such country or jurisdiction.
Exempted Company
We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:
  • annual reporting requirements are minimal and consist mainly of a statement that the company has conducted its operations mainly outside of the Cayman Islands and has complied with the provisions of the Companies Law;
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  • an exempted company’s register of members is not open to inspection;
  • an exempted company does not have to hold an annual general meeting;
  • an exempted company may issue shares with no par value;
  • an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
  • an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
  • an exempted company may register as a limited duration company; and
  • an exempted company may register as a segregated portfolio company.
Differences in Corporate Law
The Companies Law is modeled after that of England and Wales but does not follow recent statutory enactments in England. In addition, the Companies Law differs from laws applicable to Delaware corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to Delaware corporations and their shareholders.
Mergers and Similar Arrangements
The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and
 non-Cayman
 Islands companies. For these purposes:
  • a “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company; and
  • a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company.
In order to effect a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by:
  • a special resolution of the shareholders of each constituent company; and
  • such other authorization, if any, as may be specified in such constituent company’s articles of association.
A merger between a parent company incorporated in the Cayman Islands and its subsidiary or subsidiaries incorporated in the Cayman Islands does not require authorization by a resolution of shareholders of the constituent companies provided a copy of the plan of merger is given to every shareholder of each subsidiary company to be merged unless that shareholder agrees otherwise. For this purpose, a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.
The plan of merger or consolidation must be filed with the Registrar of Companies in the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a declaration as to the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger and consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares if they follow the required procedures, subject to certain exceptions. The fair value of the shares will be determined by the Cayman Islands court if it cannot be agreed among the parties. Court approval is not required for a merger or consolidation effected in compliance with these statutory procedures.
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In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands.
While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
  • the statutory provisions as to the required majority vote have been met;
  • the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;
  • the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
  • the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
When a take-over offer is made and accepted by holders of not less than 90% of the shares within four months, the offeror may, within a
 two-month
 period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.
If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits
Derivative actions have been brought in the Cayman Islands courts. In most cases, the company will be the proper plaintiff in any claim based on a breach of duty owed to it, and a claim against (for example) the company’s officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:
  • a company is acting, or proposing to act, illegally or beyond the scope of its authority;
  • the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or
  • those who control the company are perpetrating a “fraud on the minority.”
A shareholder may have a direct right of action against the company where the individual rights of that shareholder have been infringed or are about to be infringed.
Directors’ Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components, the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would
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exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director must act in a manner he or she reasonably believes to be in the best interests of the corporation. A director must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interests of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company, and therefore it is considered that he or she owes the following duties to the company: a duty to act bona fide in the best interests of the company, a duty not to make a profit out of his or her position as director (unless the company permits him or her to do so), a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interests or his or her duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, there are indications that the courts are moving towards an objective standard with regard to the required skill and care.
Under our memorandum and articles of association, directors who are in any way, whether directly or indirectly, interested in a contract or proposed contract with our company must declare the nature of their interest at a meeting of the board of directors. Following such declaration, a director may vote in respect of any contract or proposed contract notwithstanding his or her interest.
Shareholder Action by Written Resolution
Under the Delaware General Corporation Law, a corporation’s certificate of incorporation may eliminate the right of stockholders to act by written consent. Our memorandum and articles of association allow shareholders to act by written resolutions.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled for a single director, which increases the shareholder’s voting interest with respect to electing such director.
As permitted under Cayman Islands law, our memorandum and articles of association do not provide for cumulative voting.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation may be removed with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
Under our memorandum and articles of association, directors can be removed by special resolution of the shareholders.
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Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date on which such person becomes an interested shareholder. An interested shareholder generally is one which owns or owned 15% or more of the target’s outstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a
 two-tiered
 bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction that resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions entered into must be bona fide in the best interests of the company, for a proper corporate purpose and not with the effect of perpetrating a fraud on the minority shareholders.
Dissolution and Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting interest of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. The Delaware General Corporation Law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board of directors.
Under our memorandum and articles of association, a resolution that our company be wound up by the court or be wound up voluntarily shall be a special resolution, except where the company is to be wound up voluntarily because it is unable to pay its debts as they may fall due in which event the resolution shall be an ordinary resolution.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise.
Under Cayman Islands law and our memorandum and articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the unanimous consent in writing of the holders of the issued shares of the relevant class or with the sanction of a resolution passed at a separate meeting of the holders of the shares of such class by a majority of
 two-thirds
 of the votes cast at such a meeting.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
Our memorandum and articles of association may be amended by a special resolution of shareholders.
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Inspection of Books and Records
Under the Delaware General Corporation Law, any shareholder of a corporation may for any proper purpose inspect or make copies of the corporation’s stock ledger, list of shareholders and other books and records.
Holders of our shares have no general right under Cayman Islands law, nor any right under our memorandum and articles of association, to inspect or obtain copies of our register of members or our corporate records. However, we intend to provide our shareholders with annual reports containing audited financial statements.
Anti-takeover Provisions in our Memorandum and Articles of Association
Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including a provision that authorizes our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders.
Such shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue these preference shares, the price of our ordinary shares may fall and the voting and other rights of the holders of our ordinary shares may be materially and adversely affected.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Rights of
 Non-resident
 or Foreign Shareholders
There are no limitations imposed by our memorandum and articles of association on the rights of
non-resident
or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
C. MATERIAL CONTRACTS
We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” and “Item 7. Major Shareholders and Related Party Transactions” or elsewhere in this annual report on Form
 20-F.
D. EXCHANGE CONTROLS
With regard to our operations in Macau, no foreign exchange controls exist in Macau and Hong Kong and there is a free flow of capital into and out of Macau and Hong Kong. There are no restrictions on remittances of H.K. dollar or any other currency from Macau and Hong Kong to persons not resident in Macau and Hong Kong for the purpose of paying dividends or otherwise. No foreign exchange controls exist in the Cayman Islands.
With regard to our operations in the Philippines, the Philippines has been liberalizing foreign exchange controls in the country, and has adopted a floating exchange rate regime. In any event, the Philippine peso still
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fluctuates against the H.K. dollar and the U.S. dollar from time to time. Although there are no restrictions or limits on the amounts of the Philippine peso or foreign currency that may be taken in or out of the country, the Bangko Sentral ng Pilipinas (BSP), the Central Bank of the Philippines, imposed a requirement that inward and outward transfers of the Philippine peso in excess of PHP10,000 must be with prior authorization of BSP, while foreign currency in excess of US$10,000 or its equivalent must be declared to the Bureau of Customs Desk at the airport upon arrival or before departure, as the case may be.
With regard to our operations in Cyprus, no foreign exchange controls exist and there is a free flow of capital into and out of Cyprus. There are no restrictions on remittances of Euros or any other currency from Cyprus to persons not resident in Cyprus for the purpose of paying dividends or otherwise. There are no restrictions on the import or export of local or foreign currency. However, amounts exceeding EUR10,000 in cash (or its equivalent) or in gold must be declared at the Customs and Excise department desk at the airport upon departure, regardless of whether traveling to or from a country inside or outside the European Union.
E. TAXATION
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our ordinary shares will not be subject to taxation in the
Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our
ordinary shares, nor will gains derived from the disposal of our ordinary shares be subject to Cayman Islands income or corporation tax.
No stamp duty is payable in respect of the issue of our ordinary shares or on an instrument of transfer in respect of our ordinary shares.
United States Federal Income Taxation
The following discussion describes certain material U.S. federal income tax consequences to U.S. Holders (as defined below) under present law of an investment in the ADSs or ordinary shares. The effects of any applicable state or local laws and other U.S. federal tax laws such as estate and gift tax laws, and the impact of the alternative minimum tax and the Medicare contribution tax on net investment income, are not discussed. This discussion applies only to U.S. Holders that hold the ADSs or ordinary shares as capital assets within the meaning of Section 1221 of the United States Internal Revenue Code of 1986, as amended, or the Code (generally, property held for investment), and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as of the date of this annual report and U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.
The following discussion does not address all U.S. federal income tax consequences relevant to a holder’s particular circumstances or to holders subject to particular rules, including:
  • banks;
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  • certain financial institutions;
  • insurance companies;
  • regulated investment companies;
  • real estate investment trusts;
  • broker-dealers;
  • traders that elect to mark to market;
  • U.S. expatriates and certain former citizens or long-term residents of the United States;
  •
tax-exempt
 entities;
  • persons holding ADSs or ordinary shares as part of a straddle, hedging, conversion or integrated transaction;
  • persons that actually or constructively own 10% or more of our stock by vote or value;
  • persons subject to special tax accounting rules as a result of any item of gross income with respect to ADSs or ordinary shares being taken into account in an “applicable financial statement” (as defined in the Code);
  • persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation;
  • persons that hold ADSs or ordinary shares through a permanent establishment or fixed base outside the United States; or
  • partnerships or pass-through entities, or persons holding ADSs or ordinary shares through such entities.
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL,
 NON-U.S.
 AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR ORDINARY SHARES.
The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are the beneficial owner of ADSs or ordinary shares and you are, for U.S. federal income tax purposes,
  • an individual who is a citizen or resident of the United States;
  • a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;
  • an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
  • a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person for U.S. federal income tax purposes.
If you are a partner in a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) that holds ADSs or ordinary shares, your tax treatment will generally depend on your status and the activities of the partnership. If you are a partner in such partnership, you should consult your tax advisor.
The discussion below assumes the representations contained in the deposit agreement are true and the obligations in the deposit agreement and any related agreement will be complied with in accordance with their
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terms. If you own ADSs, you should be treated as the owner of the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to U.S. federal income tax.
The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying security (for example,
 pre-releasing
 ADSs to persons that do not have the beneficial ownership of the securities underlying the ADSs). Accordingly, the availability of a reduced tax rate for any dividends received by certain
 non-corporate
 U.S. Holders, including individual U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between the holders of ADSs and our Company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners of underlying ordinary shares.
Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares
Subject to the PFIC rules discussed below, the gross amount of any distributions we make to you with respect to the ADSs or ordinary shares (including the amount of any taxes withheld therefrom) generally will be includible in your gross income as dividend income on the date of receipt by the depositary, in the case of ADSs, or on the date of receipt by you, in the case of ordinary shares, but only to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any such dividends will not be eligible for the dividends received deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a
 tax-free
 return of your tax basis in your ADSs or ordinary shares, and then, to the extent such excess amount exceeds your tax basis in your ADSs or ordinary shares, as capital gain. We currently do not, and we do not intend to, calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that any distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a
 non-taxable
 return of capital or as capital gain under the rules described above.
With respect to certain
 non-corporate
 U.S. Holders, including individual U.S. Holders, any dividends may be taxed at the lower capital gains rate applicable to “qualified dividend income,” provided (1) the ADSs or ordinary shares, as applicable, are readily tradable on an established securities market in the United States, (2) we are neither a PFIC nor treated as such with respect to you (as discussed below) for the taxable year in which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, ADSs will be considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq, as are our ADSs. There can be no assurance that our ADSs will continue to be readily tradable on an established securities market in later years. Consequently, there can be no assurance that dividends paid on our ADSs will continue to qualify for the reduced tax rates. You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends paid with respect to our ADSs or ordinary shares.
Any dividends we pay with respect to our ADSs or ordinary shares will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation generally will be limited to the gross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, any dividends we pay with respect to the ADSs or ordinary shares will generally constitute “passive category income.”
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Taxation of Disposition of ADSs or Ordinary Shares
Subject to the PFIC rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of ADSs or ordinary shares equal to the difference between the amount realized for the ADSs or ordinary shares and your tax basis in the ADSs or ordinary shares. The gain or loss generally will be capital gain or loss. If you are a
 non-corporate
 U.S. Holder, including an individual U.S. Holder, that has held the ADSs or ordinary shares for more than one year, you may be eligible for reduced U.S. federal income tax rates. The deductibility of capital losses is subject to limitations. Any gain or loss you recognize on a disposition of ADSs or ordinary shares will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes. You should consult your tax advisors regarding the proper treatment of gain or loss in your particular circumstances.
Passive Foreign Investment Company
Based on the market price of our ADSs and ordinary shares, and the composition of our income and assets, we do not believe we were a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2019. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you we will not be a PFIC for any taxable year. Furthermore, because PFIC status is a factual determination based on actual results for the entire taxable year, our U.S. counsel expresses no opinion with respect to our PFIC status and expresses no opinion with respect to this paragraph. A
 non-U.S.
 corporation will be a PFIC for U.S. federal income tax purposes for any taxable year if either:
  • at least 75% of its gross income for such year is passive income; or
  • at least 50% of the value of its assets (generally based on a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passive income.
For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person), as well as gains from the sale of assets (such as stock) that produce passive income, foreign currency gains, and certain other categories of income. For purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.
A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs and ordinary shares, fluctuations in the market price of the ADSs and ordinary shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC.
If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, we generally will continue to be treated as a PFIC with respect to you for that year and for all succeeding years during which you hold ADSs or ordinary shares (regardless of whether we continue to meet the tests described above), unless we cease to be a PFIC and you make a “deemed sale” election with respect to the ADSs or ordinary shares. If such election is made, you will be deemed to have sold ADSs or ordinary shares you hold at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain from such deemed sale would be subject to the consequences described in the following two paragraphs. After the deemed sale election, your ADSs or ordinary shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC. You are urged to consult your tax advisor about this election.
For each taxable year we are treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” you receive and any gain you recognize from a sale or other
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disposition (including a pledge) of the ADSs or ordinary shares, unless you make a
 “mark-to-market”
 election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules:
  • the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or ordinary shares;
  • the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and
  • the amount allocated to each other taxable year will be subject to tax at the highest income tax rate in effect for individuals or corporations, as applicable, for each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
The tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale or other disposition of the ADSs or ordinary shares cannot be treated as capital, even if you hold the ADSs or ordinary shares as capital assets.
If we are a PFIC with respect to you for any taxable year, to the extent any of our subsidiaries are also PFICs or we make direct or indirect equity investments in other entities that are PFICs, you will be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in that proportion which the value of the ADSs or ordinary shares you own bears to the value of all of our ADSs or ordinary shares, as applicable, and you may be subject to the adverse tax consequences described in the preceding two paragraphs with respect to the shares of such lower-tier PFICs that you would be deemed to own. You should consult your tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a
mark-to-market
election for such stock to elect out of the PFIC rules described above regarding excess distributions and recognized gains. If you make an effective
 mark-to-market
 election for the ADSs or ordinary shares, you will include in income for each year we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs or ordinary shares as of the close of your taxable year over your adjusted basis in such ADSs or ordinary shares. You will be allowed a deduction for the excess, if any, of the adjusted basis of the ADSs or ordinary shares over their fair market value as of the close of the taxable year. However, deductions will be allowable only to the extent of any net
 mark-to-market
 gains on the ADSs or ordinary shares included in your income for prior taxable years. Amounts included in your income under a
 mark-to-market
 election, as well as gain on the actual sale or other disposition of the ADSs or ordinary shares, will be treated as ordinary income. Ordinary loss treatment will also apply to the deductible portion of any
 mark-to-market
 loss on the ADSs or ordinary shares, as well as to any loss realized on the actual sale or other disposition of the ADSs or ordinary shares, to the extent the amount of such loss does not exceed the net
 mark-to-market
 gains previously included for such ADSs or ordinary shares. Your basis in the ADSs or ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a
 mark-to-market
 election, any distributions we make would generally be subject to the rules discussed above under “— Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares,” except the lower rate applicable to qualified dividend income would not apply.
The
 mark-to-market
 election is available only for “marketable stock,” which generally is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. Our ADSs are listed on the Nasdaq, which is a qualified exchange or other market for these purposes. Consequently, if the ADSs continue to be listed on Nasdaq and are regularly traded, and you are a holder of ADSs, we expect the
 mark-to-market
 election would be available to you if we were to become a PFIC. There can be no assurance that the ADSs will be “regularly traded” for purposes of the
 mark-to-market
 election. Because a
 mark-to-market
 election cannot be made for equity interests in any lower-tier PFICs that we own, a U.S. Holder
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may continue to be subject to the PFIC rules with respect to its indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. You should consult your tax advisors as to the availability and desirability of a
 mark-to-market
 election, as well as the impact of such election on interests in any lower-tier PFICs.
Alternatively, if a
 non-U.S.
 corporation is a PFIC, a holder of shares in that corporation may elect out of the PFIC rules described above regarding excess distributions and recognized gains by making a “qualified electing fund” election to include in income its
 pro rata
 share of the corporation’s income on a current basis. However, you may make a qualified electing fund election with respect to your ADSs or ordinary shares only if we agree to furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information.
Unless otherwise provided by the U.S. Treasury, each U.S. Holder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. If we are or become a PFIC, you should consult your tax advisors regarding any reporting requirements that may apply to you.
You are strongly urged to consult your tax advisors regarding the application of the PFIC rules to your investment in ADSs or ordinary shares.
Information Reporting and Backup Withholding
Any dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange or other taxable disposition of ADSs or ordinary shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form
 W-9.
 The Company does not assume responsibility for backup withholding. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information in a timely manner.
Additional Reporting Requirements
Certain U.S. Holders who are individuals are required to report information relating to an interest in our common shares, subject to certain exceptions (including an exception for ADSs or ordinary shares held in accounts maintained by certain financial institutions). You should consult your tax advisors regarding the effect, if any, of these rules on your ownership and disposition of ADSs or ordinary shares.
THE DISCUSSION ABOVE IS A GENERAL DISCUSSION. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE IMPORTANT TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN THE ADSs OR ORDINARY SHARES UNDER THE INVESTOR’S OWN CIRCUMSTANCES.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
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G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file an annual report on Form
 20-F
 no later than four months after the close of each fiscal year, which is December 31. As permitted by the SEC, in Item 19 of this annual report, we incorporate by reference certain information we have filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report.
Copies of reports and other information, when so filed, may be inspected without charge at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC- 0330. The SEC also maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
Our financial statements have been prepared in accordance with U.S. GAAP. Our annual reports will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP.
Nasdaq Stock Market Rule 5250(d)(1) requires each issuer to distribute to shareholders copies of an annual report containing audited financial statements of our Company and its subsidiaries a reasonable period of time prior to our Company’s annual meeting of shareholders. We do not intend to provide copies. However, shareholders can request a copy, in physical or electronic form, from us or our ADR depositary bank, Deutsche Bank. In addition, we intend to post our annual report on our website www.melco-resorts.com. Nasdaq Stock Market Rule 5615(a)(3) permits foreign private issuers like us to follow “home country practice” in certain corporate governance matters. Walkers (Hong Kong), our Cayman Islands counsel, has provided a letter to the Nasdaq certifying that under the Companies Law (as amended) of the Cayman Islands, we are not required to deliver annual reports to our shareholders prior to an annual general meeting.
I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and equity prices.
Foreign Exchange Risk
Our exposure to foreign exchange rate risk is associated with the currency of our operations and our indebtedness and as a result of the presentation of our financial statements in U.S. dollar. The majority of our
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revenues are denominated in H.K. dollar, given the H.K. dollar is the predominant currency used in Macau and is often used interchangeably with the Pataca in Macau, while our expenses are denominated predominantly in Pataca, H.K. dollar and the Philippine peso. In addition, a significant portion of our indebtedness, including the Melco Resorts Finance Notes and the Studio City Notes, and certain expenses, have been and are denominated in U.S. dollar, and the costs associated with servicing and repaying such debt will be denominated in U.S. dollar. We also have a certain portion of our assets and liabilities denominated in the Philippine peso and the Euro.
The value of the H.K. dollar, Pataca, the Philippine peso and the Euro against the U.S. dollar may fluctuate and may be affected by, among other things, changes in political and economic conditions. While the H.K. dollar is pegged to the U.S. dollar within a narrow range and the Pataca is in turn pegged to the H.K. dollar, and the exchange rates between these currencies has remained relatively stable over the past several years, we cannot assure you that the current peg or linkages between the U.S. dollar, H.K. dollar and Pataca will not be
de-pegged,
de-linked
or otherwise modified and subject to fluctuations. Any significant fluctuations in exchange rates between the H.K. dollar, Pataca, the Philippine peso or the Euro to U.S. dollar may have a material adverse effect on our revenues and financial condition.
We accept foreign currencies from our customers and as of December 31, 2019, in addition to H.K. dollar, Pataca and the Philippine peso and the Euro, we also hold other foreign currencies. However, any foreign exchange risk exposure associated with those currencies is minimal.
We have not engaged in hedging transactions with respect to foreign exchange exposure of our revenues and expenses in our
day-to-day
operations during the year ended December 31, 2019. Instead, we maintain a certain amount of our operating funds in the same currencies in which we have obligations, thereby reducing our exposure to currency fluctuations. However, we occasionally enter into foreign exchange transactions as part of financing transactions and capital expenditure programs.
See note 12 to the consolidated financial statements included elsewhere in this annual report for further details related to our indebtedness as of December 31, 2019.
Major currencies in which our cash and bank balances (including restricted cash) held as of December 31, 2019 were U.S. dollar, H.K. dollar, the Philippine peso, the Euro and Pataca. Based on the cash and bank balances as of December 31, 2019, an assumed 1% change in the exchange rates between currencies other than U.S. dollar against the U.S. dollar would cause a maximum foreign transaction gain or loss of approximately US$13.7 million for the year ended December 31, 2019.
Interest Rate Risk
Our exposure to interest rate risk is associated with our indebtedness bearing interest based on floating rates. We attempt to manage interest rate risk by managing the mix of long-term fixed rate borrowings and variable rate borrowings and we may supplement by hedging activities in a manner we deem prudent. We cannot be sure that these risk management strategies have had the desired effect, and interest rate fluctuations could have a negative impact on our results of operations.
As of December 31, 2019, we are subject to fluctuations in HIBOR and LIBOR as a result of our 2015 Credit Facilities and 2021 Studio City Senior Secured Credit Facility. As of December 31, 2019, almost all of our total indebtedness was based on fixed rates. Based on our December 31, 2019 indebtedness level, an assumed 100 basis point change in HIBOR and LIBOR would be immaterial.
To the extent that we effect hedging in respect of our credit facilities, the counterparties to such hedging will also benefit from the security and guarantees we provide to the lenders under such credit facilities, which could increase our aggregate secured indebtedness. We do not intend to engage in transactions in derivatives or other financial instruments for trading or speculative purposes and we expect the provisions of our existing and any future credit facilities to restrict or prohibit the use of derivatives and financial instruments for purposes other than hedging.
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Equity Price Risk
Our exposure to equity price risk is associated with our investments in marketable equity securities which is primarily our investment in a 9.99% ownership interest in Crown Resorts. We have not engaged in hedging transactions with respect to equity price exposure. As of December 31, 2019, the balance of our investment in the 9.99% ownership interest in Crown Resorts which carried at fair value was US$568.9 million. An assumed 20% change in the share price of Crown Resorts would cause a gain or loss of marketable equity securities of approximately US$113.8 million for the year ended December 31, 2019.
ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. DEBT SECURITIES
Not applicable.
B. WARRANTS AND RIGHTS
Not applicable.
C. OTHER SECURITIES
Not applicable.
D. AMERICAN DEPOSITARY SHARES
Persons depositing shares are charged a fee for each issuance of ADSs, including issuances resulting from distributions of shares, share dividends, share splits, bonus and rights distributions and other property, and for each surrender of ADSs in exchange for deposited securities. The fee in each case is not in excess of US$5.00 for each 100 ADSs (or fraction thereof) issued or surrendered. Any holder of ADSs is charged a fee not in excess of US$5.00 per 100 ADSs (or portion thereof) issued upon the exercise of rights. The depositary also charges a fee not in excess of US$5.00 per 100 ADSs held for the distribution of cash proceeds pursuant to cash dividends, sale of rights and other entitlements or otherwise. The depositary may also charge an annual fee not in excess of US$5.00 per 100 ADSs for the operation and maintenance costs in administering the ADSs. Persons depositing shares may also be required to pay the following charges:
  • Taxes (including any applicable interest and penalties thereon) and other governmental charges;
  • Cable, telex, facsimile and electronic transmission and delivery expenses;
  • Registration fees as may from time to time be in effect for the registration of shares or other deposited securities with the foreign registrar and applicable to transfers of shares or other deposited securities to or from the name of the custodian, the depositary or any nominees upon the making of deposits and withdrawals, respectively;
  • Expenses and charges incurred by the depositary in connection with the conversion of foreign currency;
  • Fees and expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to the shares, deposited securities and ADSs; and
  • Any additional fees, charges, costs or expenses that may be incurred by the depositary from time to time.
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We will pay all other charges and expenses of the depositary and any agent of the depositary, except the custodian, pursuant to agreements from time to time between us and the depositary. We and the depositary may amend the fees described above from time to time.
Depositary fees payable upon the issuance and cancelation of ADSs are generally paid to the depositary by the brokers receiving the newly issued ADSs from the depositary and by the brokers delivering the ADSs to the depositary for cancelation. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary service fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date.
In the case of cash distributions, service fees are generally deducted from the cash being distributed. In the case of distributions other than cash, such as stock dividends or certain rights, the depositary charges the applicable ADS record date holder concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or in The Depository Trust Company (“DTC”)), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary generally collects the fees through the settlement systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the service fees paid to the depositary.
Fees and Other Payments Made by the Depositary to Us
In 2019, we received approximately US$10.0 million (after tax) reimbursement from the depositary in connection with our ADS facility, which included US$7.0 million (after tax)
up-front
payment in relation to such ADS facility.
PART II
ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM
15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this annual report, our management, with the participation of our chief executive officer and our chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures within the meaning of Rules
 13a-15(e)
 and
 15d-15(e)
 of the Exchange Act. In designing and evaluating the disclosure controls and procedures, it should be noted that any controls and procedures, no matter how well designed and operated, can only provide reasonable, but not absolute, assurance of achieving the desired control objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,
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summarized and reported, within the time period specified in the SEC’s rules and forms, and accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules
 13a-15(f)
 and
 15d-15(f)
of the Exchange Act.
Our Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our Company’s internal control over financial reporting includes those policies and procedures that:
  (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our Company’s assets;
  (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our Company’s receipts and expenditures are being made only in accordance with authorizations of its management and directors; and
  (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our Company’s management assessed the effectiveness of our Company’s internal control over financial reporting as of December 31, 2019. In making this assessment, our Company’s management used the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
 Internal Control — Integrated Framework (2013)
.
Based on this assessment, management concluded that, as of December 31, 2019, our Company’s internal control over financial reporting is effective based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
 Internal Control — Integrated Framework (2013)
.
Attestation Report of the Registered Public Accounting Firm
The effectiveness of our Company’s internal control over financial reporting as of December 31, 2019, has been audited by Ernst & Young, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Controls Over Financial Reporting
There were no changes in our Company’s internal control over financial reporting (as such term is defined in Rules
 13a-15(f)
 and
 15d-15(f)
 under the Exchange Act) during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our Company’s internal control over financial reporting.
ITEM
16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board has determined that Mr. John William Crawford qualifies as “audit committee financial expert” as defined in Item 16A of Form
 20-F.
 Each of the members of our audit and risk committee satisfies the
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“independence” requirements of the Nasdaq corporate governance rules and Rule
 10A-3
 under the Exchange Act. See “Item 6. Directors, Senior Management and Employees.”
ITEM
16B. CODE OF ETHICS
Our board has adopted a code of business conduct and ethics that applies to our directors, officers, employees and agents, including certain provisions that specifically apply to our chief executive officer, chief financial officer and any other persons who perform similar functions for us. The code of business conduct and ethics was last amended on December 4, 2019 to reflect that our Chief Risk Officer is also our Ethical Business Adviser. We have posted our current code of business conduct and ethics on our website at www.melco-resorts.com. We hereby undertake to provide to any person without charge, a copy of our code of business conduct and ethics within ten working days after we receive such person’s written request.
ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by our principal external auditors, for the years indicated. We did not pay any other fees to our auditor during the years indicated below.
                 
 
Year Ended December 31,
 
 
    2019    
 
  
    2018    
 
 
(In thousands of US$)
 
Audit fees
 (1)
   $
2,133
    $
1,609
 
Audit-related fees
(2)
    
393
     
311
 
Tax fees
 (3)
    
298
      
282
 
All other fees
 (4)
    
183
     
240
 
(1) “Audit fees” means the aggregate fees in each of the fiscal years indicated for our calendar year audits.
(2) “Audit-related fees” primarily include the aggregate fees for professional services provided in connection with (i) the issuance of the 2019 Senior Notes due 2026, 2019 Senior Notes due 2027, and 2019 Senior Notes due 2029 in 2019; (ii) the issuance of the 2019 Studio City Notes in 2018; and (iii) the registration statement on Form
F-1
for an initial public offering of SCI in 2018.
(3) “Tax fees” include the aggregate fees for tax consultations.
(4) “All other fees” include the aggregate fees for advisory services and an annual charge for an online technical accounting research tool.
The policy of our audit and risk committee is to
 pre-approve
 all audit and
 non-audit
 services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services, other than those for
 de minimis
 services which are approved by our audit and risk committee prior to the completion of the audit.
For the years ended December 31, 2019 and 2018, none of the total audit-related, tax and all other fees as described above were approved by our audit and risk committee pursuant to paragraph (c)(7)(i)(C) of Rule
 2-01
 of Regulation
S-X,
respectively.
ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
No purchase of equity security in the Company was made by or on behalf of the Company or any affiliated purchaser in the fiscal year ended December 31, 2019.
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In March 2020, we repurchased 9,446,472 ordinary shares at an average price of approximately US$4.75 per ordinary share under the share repurchase program we announced in November 2018. The maximum dollar value of ordinary shares that may yet be purchased under the share repurchase program announced in November 2018 is approximately US$298.8 million.
ITEM
16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM
16G. CORPORATE GOVERNANCE
Nasdaq Stock Market Rule 5615(a)(3) permits foreign private issuers like us to follow “home country practice” in certain corporate governance matters. For example, Nasdaq Stock Market Rule 5605(b)(1) generally requires that a majority of an issuer’s board of directors must consist of independent directors. Since September 5, 2018, we have had a majority of independent directors serving on our board. Prior to that, we relied on this “home country practice” exception when we did not have a majority of independent directors serving on our board.
In addition, Nasdaq Stock Market Rule 5250(d)(1) requires each issuer to distribute to shareholders copies of an annual report containing audited financial statements of our Company and its subsidiaries a reasonable period of time prior to our Company’s annual meeting of shareholders. We do not intend to provide copies. However, shareholders can request a copy, in physical or electronic form, from us or our ADR depositary bank, Deutsche Bank. We intend to post our annual report on our website www.melco-resorts.com. Lastly, Nasdaq Stock Market Rule 5635 requires each issuer to obtain shareholder approval prior to the issuance of securities in certain circumstances in connection with the acquisition of the stock or assets of another company, equity based compensation of officers, directors, employees or consultants, change of control and certain transactions other than a public offering. Walkers (Hong Kong), our Cayman Islands counsel, has provided letters to Nasdaq certifying that under the Companies Law (as amended) of the Cayman Islands, we are not required to: (i) have a majority of independent directors serving on our board; (ii) deliver annual reports to our shareholders prior to an annual general meeting; or (iii) obtain shareholders’ approval prior to any issuance of our ordinary shares. The foregoing is subject to our memorandum and articles of association, as amended and restated from time to time.
ITEM
16H. MINE SAFETY DISCLOSURE
Not applicable.
PART III
ITEM
17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM
18. FINANCIAL STATEMENTS
The consolidated financial statements of Melco Resorts & Entertainment Limited and its subsidiaries are included at the end of this annual report.
181
Table of Contents
ITEM 19.
EXHIBITS
         
Exhibit
Number
 
  
Description of Document
         
 
      1.1
   
         
 
      2.1
   
         
 
      2.2
   
         
 
      2.3
   
         
 
      2.4
   
         
 
      2.5
   
         
 
      2.6
   
         
 
      2.7
   
         
 
      2.8
   
         
 
      2.9
   
         
 
      2.10
   
182
Table of Contents
         
Exhibit
Number
 
  
Description of Document
         
 
      2.11
   
         
 
      2.12
   
Senior Term Loan and Revolving Facilities Agreement, dated January 28, 2013, among Studio City Investments Limited, Studio City Company Limited, certain guarantors as specified therein, Australia and New Zealand Banking Group Limited, Bank of America, N.A., Bank of China Limited, Macau Branch, Citigroup Global Markets Asia Limited, Credit Agricole Corporate and Investment Bank, Deutsche Bank AG, Hong Kong Branch, Industrial and Commercial Bank of China (Macau) Limited and UBS AG Hong Kong Branch as bookrunner mandated lead arrangers, certain other entities as specified therein as mandated lead arranger, lead arrangers, arranger, senior managers and managers, certain financial institutions as lenders, Deutsche Bank AG, Hong Kong Branch as facility agent, Industrial and Commercial Bank of China (Macau) Limited as agent and security trustee, disbursement agent and agent for the agent and security trustee and Bank of China Limited, Macau Branch as issuing bank (incorporated by reference to Exhibit 2.16 from our annual report on Form 20-F for the fiscal year ended December 31, 2012 (File No. 001-33178), filed with the SEC on April 18, 2013)
         
 
      2.13
   
         
 
      2.14
   
         
 
      2.15
   
         
 
      2.16
   
         
 
      2.17
   
183
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Exhibit
Number
 
  
Description of Document
         
 
      2.18
   
         
 
      2.19
   
         
 
      2.20
   
         
 
      2.21
   
         
 
      2.22
   
         
 
      2.23
   
         
 
      2.24
   
         
 
      2.25
   
184
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Exhibit
Number
 
  
Description of Document
         
 
      2.26
   
         
 
      2.27
   
         
 
      2.28*
   
         
 
      2.29*
   
         
 
      2.30*
   
         
 
      2.31*
    
         
 
      4.1
   
         
 
      4.2
   
         
 
      4.3
   
         
 
      4.4
   
         
 
      4.5
   
         
 
      4.6
   
         
 
      4.7
   
185
Table of Contents
Exhibit
Number
 
  
Description of Document
         
 
      4.8
   
         
 
      4.9
   
         
 
      4.10
   
         
 
      4.11
   
         
 
      4.12
   
         
 
      4.13
   
         
 
      4.14
   
         
 
      4.15
   
         
 
      4.16
   
186
Table of Contents
         
Exhibit
Number
 
  
Description of Document
         
 
      4.17
   
         
 
      4.18
   
         
 
      4.19
   
         
 
      4.20
   
         
 
      4.21
   
         
 
      4.22
   
         
 
      4.23
   
         
 
      4.24
   
         
 
      4.25
   
         
 
      4.26
   
187
Table of Contents
         
Exhibit
Number
 
  
Description of Document
         
 
      4.27*
   
         
 
      4.28*
   
         
 
      4.29*
   
         
 
      4.30*
   
         
 
      4.31**
   
         
 
      4.32*
   
         
 
      4.33*
   
         
 
      4.34*
   
         
 
      8.1*
   
         
 
    12.1*
   
         
 
    12.2*
   
         
 
    13.1*
   
         
 
    13.2*
   
         
 
    15.1*
   
         
 
    15.2*
   
         
 
101.INS*
   
Inline XBRL Instance Document
         
 
101.SCH*
   
Inline XBRL Taxonomy Extension Schema Document
188
Table of Contents
         
Exhibit
Number
 
  
Description of Document
         
 
101.CAL*
   
Inline XBRL Taxonomy Extension Calculation Linkbase Document
         
 
101.DEF*
   
Inline XBRL Taxonomy Extension Definition Linkbase Document
         
 
101.LAB*
   
Inline XBRL Taxonomy Extension Label Linkbase Document
         
 
101.PRE*
   
Inline XBRL Taxonomy Extension Presentation Linkbase Document
         
 
104
    
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed with this annual report on Form
20-F
** Certain confidential information contained in this exhibit has been omitted because it is both (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form
 20-F
 and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
             
 
 
MELCO RESORTS & ENTERTAINMENT LIMITED
             
Date: March 31, 2020
 
 
By:
 
/s/ Lawrence Yau Lung Ho
 
 
 
Name: Lawrence Yau Lung Ho
 
 
 
Title: Chairman and Chief Executive Officer
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MELCO RESORTS & ENTERTAINMENT LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
         
 
Page
 
   
F-
2
  
         
   
F-
4
  
         
   
F-
6
  
         
   
F-
8
  
         
   
F-
10
  
         
   
F-
11
  
         
   
F-
12
  
         
   
F-
14
  
 
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Melco Resorts & Entertainment Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Melco Resorts & Entertainment Limited (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 31, 2020 expressed an unqualified opinion thereon.
Adoption of New Accounting Standards
As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for leases using the modified retrospective approach in the year ended December 31, 2019 and its method for accounting for revenue from contracts with customers using the modified retrospective approach in the year ended December 31, 2018.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
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Recoverability of casino accounts receivable
 
Description of the
Matter
  
At December 31, 2019, the Company’s allowance for doubtful debts with respect to accounts receivable was US$233 million, primarily related to casino accounts receivable. As discussed in the Company’s accounting policy in note 2 to the consolidated financial statements, the allowance for casino doubtful debts is estimated based on specific reviews of customer accounts, management’s experience with collection trends in the casino industry and current economic and business conditions. The Company evaluates the allowance for casino doubtful debts on a regular basis and adjusts the allowance based on changes in the customers’ circumstances and other available information.
 
Auditing management’s allowance for casino doubtful debts was highly judgmental due to the significant estimation in evaluating the customers’ ability to repay amounts owed. The Company considers the age of the debts, collection history and customers’ financial condition to quantify the probability and magnitude of losses. This in turn led to significant auditor judgment, subjectivity and effort in evaluating management’s estimates.
 
How We Addressed the
Matter in Our Audit
  
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s allowance for casino doubtful debts estimation process. For example, we tested the controls over the granting of credits and the collection process. We also tested management’s review controls over the assessment of the collectability and the allowance for casino doubtful debts.
 
To test the allowance for casino doubtful debts, we performed the following audit procedures, among others, on a sample of casino accounts receivable. We obtained evidence related to collection history and correspondence with the customers. We examined publicly available information on the customers’ financial condition and performed confirmation procedures with the customers. We evaluated the Company’s use of this information in establishing the allowance for casino doubtful debts, and examined subsequent settlements, if any.
 
In addition, we evaluated the overall allowance for casino doubtful debts by performing a retrospective analysis of the Company’s historical estimates, which consisted of comparing the Company’s estimates to subsequent settlements and write-offs.
/s/ Ernst & Young
We have served as the Company’s auditor since 2017.
Hong Kong
March 31, 2020
F-3
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Melco Resorts & Entertainment Limited
Opinion on Internal Control over Financial Reporting
We have audited Melco Resorts & Entertainment Limited’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Melco Resorts & Entertainment Limited (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and our report dated March 31, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
F-4
Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young
Hong Kong
March 31, 2020
F-5
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share and per share data)
               
 
December 31,
 
 
2019
   
2018
 
 
 
 
 
 
(As adjusted)
 
ASSETS
 
 
 
  
 
 
                 
CURRENT ASSETS
   
                  
      
 
Cash and cash equivalents
  $
 1,394,982
     $
   1,472,423
 
Investment securities
   
49,369
      
91,598
 
Restricted cash
   
37,390
      
48,037
 
Accounts receivable, net
   
284,333
      
242,089
 
Amounts due from affiliated companies
   
442
      
87,394
 
Inventories
   
43,959
      
41,093
 
Prepaid expenses and other current assets
   
84,197
      
95,176
 
                 
Total current assets
   
1,894,672
      
2,077,810
 
                 
                 
PROPERTY AND EQUIPMENT, NET
   
5,723,909
      
5,784,343
 
                 
GAMING SUBCONCESSION, NET
   
141,440
      
197,533
 
                 
INTANGIBLE ASSETS, NET
   
31,628
      
31,454
 
                 
GOODWILL
   
95,620
      
81,376
 
                 
LONG-TERM PREPAYMENTS, DEPOSITS AND OTHER ASSETS
   
176,478
      
186,708
 
                 
INVESTMENT SECURITIES
    
568,936
      
—  
  
                 
RESTRICTED CASH
   
130
      
129
 
                 
DEFERRED TAX ASSETS
   
3,558
      
2,992
 
                 
OPERATING LEASE
RIGHT-OF-USE
ASSETS
    
111,043
      
—  
  
                 
LAND USE RIGHTS, NET
   
741,008
      
759,651
 
                 
TOTAL ASSETS
  $
 9,488,422
     $
9,121,996
 
                 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
  
 
 
                 
CURRENT LIABILITIES
   
     
 
Accounts payable
  $
 21,882
     $
25,003
 
Accrued expenses and other current liabilities
   
1,420,516
      
1,671,630
 
Income tax payable
   
8,516
      
4,903
 
Operating lease liabilities, current
   
33,152
      
—  
  
Finance lease liabilities, current
   
39,725
      
34,659
 
Current portion of long-term debt, net
   
146
      
395,547
 
Amounts due to affiliated companies
   
1,523
      
15,186
 
                 
Total current liabilities
   
1,525,460
      
2,146,928
 
                 
                 
LONG-TERM DEBT, NET
   
4,393,985
      
3,665,370
 
                 
OTHER LONG-TERM LIABILITIES
   
18,773
      
29,286
 
                 
DEFERRED TAX LIABILITIES
   
56,677
      
54,746
 
                 
OPERATING LEASE LIABILITIES,
NON-CURRENT
   
88,259
      
—  
  
                 
FINANCE LEASE LIABILITIES,
NON-CURRENT
   
262,040
      
253,374
 
                 
                 
                 
TOTAL LIABILITIES
  $
 6,345,194
     $
6,149,704
 
                 
                 
COMMITMENTS AND CONTINGENCIES (Note 2
2
)
   
 
 
    
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-6
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED BALANCE SHEETS - continued
(In thousands of U.S. dollars, except share and per share data)
                 
 
December 31,
 
 
2019
   
2018
 
 
 
 
 
 
 
 (As adjusted)
 
SHAREHOLDERS’ EQUITY
 
 
                  
 
  
 
 
Ordinary shares, par value $
0.01
;
7,300,000,000
shares authorized;
1,456,547,942
 a
nd
1,538,500,172
shares issued;
1,437,328,096
and
1,435,263,001
shares outstanding, respectively
  $
 14,565
     $
15,385
 
Treasury shares, at cost;
19,219,846
and
103,237,171
shares, respectively
   
(90,585
 )     
(657,389
 )
Additional
paid-in
capital
    
3,178,579
      
3,715,579
 
Accumulated other comprehensive losses
   
(18,803
 )     
(59,332
 )
Accumulated losses
   
(644,788
 )     
(716,966
 )
                 
Total Melco Resorts & Entertainment Limited shareholders’ equity
   
2,438,968
      
2,297,277
 
Noncontrolling interests
   
704,260
      
675,015
 
                 
Total equity
   
3,143,228
      
2,972,292
 
                 
TOTAL LIABILITIES AND EQUITY
  $
 9,488,422
     $
   9,121,996
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-7
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except share and per share data)
                         
 
  
Year Ended December 31,
  
 
  
2019
    
2018
    
2017
  
 
  
 
 
  
(As
adjusted)
    
(As
adjusted)
  
OPERATING REVENUES
   
            
      
     
 
Casino
  $
 4,976,686
     $
4,496,625
    $
4,937,597
 
Rooms
   
349,908
      
311,028
     
271,500
 
Food and beverage
   
235,120
      
204,171
     
184,979
 
Entertainment, retail and other
   
175,087
      
177,118
     
203,763
 
                         
Gross revenues
   
5,736,801
      
5,188,942
     
5,597,839
 
Less: promotional allowances
   
—
      
—
      
(313,016
 )
                         
Net revenues
   
5,736,801
      
5,188,942
     
5,284,823
 
                         
OPERATING COSTS AND EXPENSES
   
     
     
 
Casino
   
(3,266,736
 )    
(3,001,310
 )    
(3,374,013
 )
Rooms
   
(89,778
 )    
(78,377
 )    
(32,641
 )
Food and beverage
   
(181,456
 )    
(161,184
 )    
(57,927
 )
Entertainment, retail and other
   
(99,945
 )    
(92,449
 )    
(88,268
 )
General and administrative
   
(559,480
 )    
(505,930
 )    
(467,136
 )
Payments to the Philippine Parties
   
(57,428
 )    
(60,778
 )    
(51,661
 )
Pre-opening
costs
    
(4,847
 )    
(55,390
 )    
(5,331
 )
Development costs
   
(57,433
 )    
(23,029
 )    
(31,115
 )
Amortization of gaming subconcession
   
(56,841
 )    
(56,809
 )    
(57,237
 )
Amortization of land use rights
   
(22,659
 )    
(22,646
 )    
(22,817
 )
Depreciation and amortization
   
(571,705
 )    
(488,446
 )    
(460,521
 )
Property charges and other
   
(20,815
 )    
(29,147
 )    
(31,616
 )
                         
Total operating costs and expenses
   
(4,989,123
 )    
(4,575,495
 )    
(4,680,283
 )
                         
OPERATING INCOME
   
747,678
      
613,447
     
604,540
 
                         
NON-OPERATING
INCOME (EXPENSES)
    
     
     
 
Interest income
   
9,311
      
5,471
     
3,580
 
Interest expenses, net of capitalized interest
   
(310,102
 )    
(264,880
 )    
(255,764
 )
Loan commitment and other finance fees
   
(2,738
 )    
(4,630
 )    
(6,079
 )
Foreign exchange (losses) gains, net
   
(10,756
 )    
(10,497
 )    
12,781
 
Other (expenses) income, net
   
(23,914
 )    
3,684
     
5,282
 
Loss on extinguishment of debt
   
(6,333
 )    
(3,461
 )    
(49,337
 )
Costs associated with debt modification
   
(579
 )    
—
      
(2,793
 )
                         
Total
non-operating
expenses, net
    
(345,111
 )    
(274,313
 )    
(292,330
 )
                         
INCOME BEFORE INCOME TAX
   
402,567
      
339,134
     
312,210
 
INCOME TAX (EXPENSE) CREDIT
   
(8,339
 )    
(238
 )    
10
 
                         
NET INCOME
   
394,228
      
338,896
     
312,220
 
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
   
(21,055
 )    
1,403
     
32,608
 
                         
NET INCOME ATTRIBUTABLE TO MELCO RESORTS & ENTERTAINMENT LIMITED
  $
 373,173
     $
340,299
    $
344,828
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
F-8
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS - continued
(In thousands of U.S. dollars, except share and per share data)
                         
 
Year Ended December 31,
  
 
2019
    
2018
    
2017
  
 
 
 
 
 
 (As adjusted)
 
 
 (As adjusted)
 
NET INCOME ATTRIBUTABLE TO MELCO RESORTS & ENTERTAINMENT LIMITED PER SHARE:
   
     
     
 
Basic
  $
 0.260
     $
0.226
    $
 0.232
  
                         
Diluted
  $
 0.258
     $
0.224
    $
 0.230
  
                         
WEIGHTED AVERAGE SHARES OUTSTANDING USED IN NET INCOME ATTRIBUTABLE TO MELCO RESORTS & ENTERTAINMENT LIMITED PER SHARE CALCULATION:
   
     
     
 
Basic
   
1,436,569,083
      
1,506,551,789
     
1,484,379,459
  
                         
Diluted
   
1,443,447,422
      
1,516,410,062
     
1,496,068,459
  
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-9
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
 
 
 
 
 
 
 (As adjusted)
 
 
 (As adjusted)
 
Net income
   $
394,228
     $
338,896
    $
312,220
 
Other comprehensive income (loss):
    
                  
      
                  
      
                  
  
Foreign currency translation adjustments, before and after tax
    
48,734
      
(48,900
 )    
(746
 )
Unrealized losses on investment securities, before and after tax
    
—
      
—  
      
(1,150
 )
                         
Other comprehensive income (loss)
    
48,734
      
(48,900
 )    
(1,896
 )
                         
Total comprehensive income
    
442,962
      
289,996
     
310,324
 
Comprehensive (income) loss attributable to noncontrolling interests
    
(29,260
 )     
16,431
      
32,662
 
                         
Comprehensive income attributable to Melco Resorts & Entertainment Limited
   $
 413,702
     $
306,427
    $
342,986
 
                         
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-10
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands of U.S. dollars, except share and per share data)
                                                                         
 
  
Melco Resorts & Entertainment Limited Shareholders’ Equity
    
 
    
 
  
 
 
Ordinary Shares
 
 
Treasury Shares
 
 
Additional
Paid-in

Capital
 
 
Accumulated
Other
Comprehensive
Losses
 
 
Retained
Earnings
(Accumulated
losses)
 
 
Noncontrolling
Interests
 
 
Total
Equity
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
BALANCE AT JANUARY 1, 2017
    
1,475,924,523
    $
14,759
     
(10,823,770
 )   $
(108
 )   $
2,783,062
    $
(24,768
 )   $
570,925
    $
479,544
    $
3,823,414
 
Net income for the year (As adjusted)
    
—  
      
—  
      
—  
      
—  
      
—  
      
—  
      
344,828
     
(32,608
 )    
312,220
 
Foreign currency translation adjustments
    
—  
      
—  
      
—  
      
—  
      
—  
      
(692
 )    
—  
      
(54
 )    
(746
 )
Unrealized losses on investment securities
    
—  
      
—  
      
—  
      
—  
      
—  
      
(1,150
 )    
—  
      
—  
      
(1,150
 )
Share-based compensation
    
—  
      
—  
      
—  
      
—  
      
17,164
     
—  
      
—  
      
141
     
17,305
 
Shares issued
    
165,303,543
     
1,653
     
—  
      
—  
      
1,161,533
     
—  
      
—  
      
—  
      
1,163,186
 
Retirement of repurchased shares
    
(165,303,544
 )    
(1,653
 )    
—  
      
—  
      
(204,533
 )    
—  
      
(957,000
 )    
—  
      
(1,163,186
 )
Shares issued for future vesting of restricted shares and exercise of share
options
    
2,504,721
     
25
     
(2,504,721
 )    
(25
 )    
—  
      
—  
      
—  
      
—  
      
—  
  
Issuance of shares for restricted shares vested
    
—  
      
—  
      
950,320
     
9
     
(9
 )    
—  
      
—  
      
—  
      
—  
  
Exercise of share options
    
—  
      
—  
      
3,363,159
     
34
     
2,622
     
—  
      
—  
      
—  
      
2,656
 
Changes in shareholdings of the Philippine subsidiaries
    
—  
      
—  
      
—  
      
—  
      
29
     
—  
      
—  
      
143
     
172
 
Acquisition of ICR Cyprus (as disclosed in Note 25)
    
55,500,738
     
555
     
—  
      
—  
      
192,304
     
—  
      
—  
      
64,285
     
257,144
 
Dividends declared ($
0.5604
per share)
   
—  
      
—  
      
—  
      
—  
      
(88,063
 )    
—  
      
(733,265
 )    
—  
      
(821,328
 )
                                           
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE AT DECEMBER 31, 2017 (As adjusted)
    
1,533,929,981
     
15,339
     
(9,015,012
 )    
(90
 )    
3,864,109
     
(26,610
 )    
(774,512
 )    
511,451
     
3,589,687
 
Cumulative-effect adjustment upon adoption of new standard on equity investments
    
—  
      
—  
      
—  
      
—  
      
—  
      
1,150
     
(1,150
 )    
—  
      
—  
  
Cumulative-effect adjustment upon adoption of New Revenue Standard
    
—  
      
—  
      
—  
      
—  
      
—  
      
—  
      
(11,286
 )    
(1,684
 )    
(12,970
 )
Net income for the year (As adjusted)
    
—  
      
—  
      
—  
      
—  
      
—  
      
—  
      
340,299
     
(1,403
 )     
338,896
 
Foreign currency translation adjustments (As adjusted)
    
—  
      
—  
      
—  
      
—  
      
—  
      
(33,872
 )    
—  
      
(15,028
 )    
(48,900
 )
Share-based compensation
    
—  
      
—  
      
—  
      
—  
      
24,830
     
—  
      
—  
      
(55
 )    
24,775
 
Reclassification of share-based compensation plan from equity-settled to
cash-settled
    
—  
      
—  
      
—  
      
—  
      
(505
 )    
—  
      
—  
      
—  
      
(505
 )
Shares repurchased by the Company
    
—  
      
—  
      
(96,571,065
 )    
(657,322
 )    
—  
      
—  
      
—  
      
—  
      
(657,322
 )
Shares issued for future vesting of restricted shares and exercise of share options
    
4,570,191
     
46
     
(4,570,191
 )    
(46
 )    
—  
      
—  
      
—  
      
—  
      
—  
  
Issuance of shares for restricted shares vested
    
—  
      
—  
      
2,115,809
     
21
     
(58
 )    
—  
      
—  
      
—  
      
(37
 )
Exercise of share options
    
—  
      
—  
      
4,803,288
     
48
     
1,834
     
—  
      
—  
      
—  
      
1,882
 
Changes in shareholdings of the Philippine subsidiaries
    
—  
      
—  
      
—  
      
—  
      
(141,572
 )    
—  
      
—  
      
(57,695
 )    
(199,267
 )
Changes in shareholdings of Studio City International
    
—  
      
—  
      
—  
      
—  
      
(31,845
 )    
—  
      
—  
      
239,429
     
207,584
 
Dividends declared ($
0.1867
per share)
   
—  
      
—  
      
—  
      
—  
      
(1,214
 )    
—  
      
(270,317
 )    
—  
      
(271,531
 )
                                           
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE AT DECEMBER 31, 2018 (As adjusted)
    
1,538,500,172
     
15,385
     
(103,237,171
 )    
(657,389
 )    
3,715,579
     
(59,332
 )    
(716,966
 )    
675,015
     
2,972,292
 
Net income for the year
    
—
      
—
      
—
      
—
      
—
      
—
      
373,173
      
21,055
      
394,228
  
Foreign currency translation adjustments
    
—
      
—
      
—
      
—
      
—
      
40,529
      
—
      
8,205
      
48,734
  
Share-based compensation
    
—
      
—
      
—
      
—
      
30,815
      
—
      
—
      
10
      
30,825
  
Reclassification of share-based compensation plan from equity-settled to
cash-settled
    
— 
      
—  
      
—
      
—
      
(4,619
)
    
—
      
—  
      
(84
)
    
(4,703
)
Retirement of repurchased shares
    
(81,952,230
 )     
(820
 )     
81,952,230
      
557,818
      
(556,998
 )     
—
      
—
      
—
      
—
  
Issuance of shares for restricted shares vested
    
—
      
—
      
1,398,840
      
6,593
      
(6,616
 )     
—
      
—
      
—
      
(23
 )
Exercise of share options
    
—
      
—
      
666,255
      
2,393
      
448
      
—
      
—
      
—
      
2,841
  
Changes in shareholdings of the Philippine subsidiaries
    
—
      
—
      
—
      
—
      
(30
 )     
—
      
—
      
59
      
29
  
Dividends declared ($
0.21348
 
per share)
   
—
      
—
      
—
      
—
      
—
      
—
      
(300,995
 )     
—
      
(300,995
 )
                                           
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE AT DECEMBER 31, 2019
   
1,456,547,942
     $
 14,565
      
(19,219,846
 )    $
 (90,585
 )    $
 3,178,579
     $
 (18,803
 )    $
 (644,788
 )    $
 704,260
     $
 3,143,228
  
                                                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-11
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
 
 
 
 
 
 
(As adjusted)
 
 
(As adjusted)
 
CASH FLOWS FROM OPERATING ACTIVITIES
   
                
      
     
 
Net income
  $
 394,228
     $
338,896
    $
312,220
 
Adjustments to reconcile net income to net cash provided by operating activities:
   
     
     
 
Depreciation and amortization
   
651,205
      
567,901
     
540,575
 
Amortization of deferred financing costs and original issue premiums
   
20,324
      
22,311
     
26,022
 
Interest accretion on finance lease liabilities
   
1,942
      
5,161
     
6,878
 
Net (gain) loss on disposal of property and equipment
   
(169
 )     
1,518
     
5,409
 
Impairment loss recognized on property and equipment
   
9,590
      
—
      
23,197
 
Written-off of other assets
 
 
7,556
 
 
 
—
 
 
 
—
 
Addition (credit) for doubtful debts provision
   
33,176
      
(2,637
 )    
(2,028
 )
Provision for input value-added tax
   
3,733
      
4,095
     
2,813
 
Loss on extinguishment of debt
   
6,333
      
3,461
     
49,337
 
Costs associated with debt modification
   
579
      
—
      
2,793
 
Share-based compensation
   
31,797
      
25,143
     
17,305
 
Net losses recognized on investment securities
   
41,737
      
111
     
—
  
Changes in operating assets and liabilities:
   
     
     
 
Accounts receivable
   
(77,627
 )     
(60,475
 )    
54,903
 
Inventories and prepaid expenses and other
   
(593
 )     
(26,154
 )    
(2,101
 )
Long-term prepayments, deposits and other
   
49,726
      
14,673
     
(49,370
 )
Accounts payable and accrued expenses and other
   
(341,756
 )     
167,443
     
183,336
 
Other long-term liabilities
   
4,381
      
(8,078
 )    
(10,192
 )
 
                        
Net cash provided by operating activities
   
836,162
      
1,053,369
     
1,161,097
 
 
                        
CASH FLOWS FROM INVESTING ACTIVITIES
   
     
     
 
Payments for investment securities
    
(617,848
 )     
(45,048
 )    
(91,024
 )
Acquisition of property and equipment
   
(337,560
 )     
(386,824
 )    
(173,480
 )
Payments for capitalized construction costs
    
(109,851
 )     
(251,233
 )    
(341,509
 )
Placement of bank deposits with original maturities over three months
   
(60,152
 )     
(24,823
 )    
(62,591
 )
Acquisition of a subsidiary
    
(15,037
 )     
—
     
—
  
Payments for intangible and other assets
    
(2,505
 )     
(29,476
 )    
—
  
Proceeds from sale of property and equipment
   
1,283
      
595
     
932
  
Proceeds from sale of investment securities
    
49,669
      
40,013
      
—
  
Withdrawals of bank deposits with original maturities over three months
   
60,152
      
34,675
     
263,547
  
Insurance proceeds received for damaged property and equipment
   
—
      
—
     
108
  
 
                        
Net cash used in investing activities
   
(1,031,849
 )     
(662,121
 )    
(404,017
 )
 
                        
CASH FLOWS FROM FINANCING ACTIVITIES
   
     
     
 
Principal payments on long-term debt
    
 (2,592,631
 )     
(592,573
 )    
(896,276
 ) 
Dividends paid
   
(300,995
 )     
(271,531
 )    
(821,328
 )
Payments of deferred financing costs
    
(28,825
 )     
—
     
(34,552
 )
Net proceeds from issuance of shares of subsidiaries
    
83,233
      
277,881
      
30,132  
  
Proceeds from exercise of share options
   
2,700
      
5,018
     
3,610
  
Proceeds from long-term debt
   
2,933,632
      
1,095,714
     
702,625
 
Repurchase of shares
    
—
      
(655,652
)     
—  
  
Purchase of shares of a subsidiary
    
—
      
(199,267
)     
—
 
Principal payments on finance lease liabilities
    
—
      
(107
 )     
(120
 )
 
                        
Net cash provided by (used in) financing activities
 
$
97,114
    
$
(340,517
 )  
$
(1,015,909
 )
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
F-12
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(In thousands of U.S. dollars)
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
 
 
 
 
 
 
 (As adjusted)
 
 
 (As adjusted)
 
EFFECT OF FOREIGN EXCHANGE ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
$
10,486
    
$
(12,624
 )  
$
(281
 )
 
                        
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
   
(88,087
 )     
38,107
     
(259,110
 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR
   
1,520,589
      
1,482,482
     
1,741,592
 
 
                        
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR
  $
 
1,432,502
     $
1,520,589
    $
 
1,482,482
 
 
                        
SUPPLEMENTAL CASH FLOW DISCLOSURES
   
     
     
 
Cash paid for interest, net of amounts capitalized
  $
 (253,312
 )    $
(239,338
 )   $
(239,780
 )
Cash paid for income taxes, net of refunds
   
(3,889
 )     
(275
 )    
(6,537
 )
Cash paid for amounts included in the measurement of lease liabilities—operating cash flows from operating leases
   
(40,542
 )     
—
      
—
  
Change in accrued expenses and other current liabilities and other long-term liabilities related to acquisition of property and equipment
   
56,623
      
54,226
     
34,147
 
Change in input value-added tax related to acquisition of property and equipment
    
8,648
      
—
      
—
  
Property and equipment contributed by noncontrolling interests
 
 
—
 
 
 
—
 
 
 
64,283
 
Change in accrued expenses and other current liabilities and other long-term liabilities related to construction costs
   
43,236
      
13,355
     
62,714
 
Change in amounts due from/to affiliated companies related to construction costs
   
—
      
7,759
     
10,847
  
Operating lease liabilities arising from obtaining operating lease right-of-use assets
 
 
27,693
 
 
 
—
 
 
 
—
 
Deferred financing costs included in accrued expenses and other current liabilities
 
 
4,204
 
 
 
—
 
 
 
26
 
Change in amounts due from affiliated companies related to issuance of shares of a subsidiary
    
—
      
—
      
162,729
  
Offering expenses capitalized for the issuance of shares of a subsidiary included in accrued expenses and other current liabilities
   
—
      
5,943   
      
—
 
Repurchase of shares included in accrued expenses and other current liabilities
 
 
—
 
 
 
1,670
 
 
 
—
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-13
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)
1.
COMPANY INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Melco Resorts & Entertainment Limited (“Melco”) was incorporated in the Cayman Islands, with its American depositary shares (“ADSs”) listed on the NASDAQ Global Select Market under the symbol “MLCO” in the United States of America.
Melco together with its subsidiaries (collectively referred to as the “Company”) is a developer, owner and operator of casino gaming and entertainment casino resort facilities in Asia and Europe. The Company currently operates Altira Macau, a casino hotel located at Taipa, the Macau Special Administrative Region of the People’s Republic of China (“Macau”), City of Dreams, an integrated urban casino resort located at Cotai, Macau and Grand Dragon Casino, a casino located at Taipa, Macau. The Company’s business also includes the Mocha Clubs, which comprise the
non-casino
based operations of electronic gaming machines in Macau. Melco, through its subsidiaries, including Studio City International Holdings Limited (“Studio City International”), which completed its initial public offering with its ADSs listed on the New York Stock Exchange in October 2018, also majority owns and operates Studio City, a cinematically-themed integrated entertainment, retail and gaming resort in Cotai, Macau. In the Philippines, a majority-owned subsidiary of Melco operates and manages City of Dreams Manila, a casino, hotel, retail and entertainment integrated resort in the Entertainment City complex in Manila. In Europe, Melco, through its majority-owned subsidiaries, ICR Cyprus Holdings Limited (“ICR Cyprus”) and its subsidiaries (collectively referred to as “ICR Cyprus Group”), is currently developing City of Dreams
Mediterranean, the integrated casino resort in Limassol, the Republic of Cyprus (“Cyprus”),
and is currently operating a temporary casino in Limassol, and three satellite casinos in Nicosia, Larnaca, Ayia Napa with a fourth satellite casino in Paphos opened in February 2020 (“Cyprus Operations”). Upon the opening of City of Dreams Mediterranean, the Company will continue to operate the four satellite casinos while operations of the temporary casino will cease.
As of December 31, 2019 and 2018, Melco International Development Limited (“Melco International”), a company listed in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), is the single largest shareholder of Melco.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (a)
Basis of Presentation and
Principles of Consolidation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”).
The accompanying consolidated financial statements include the accounts of Melco and its subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation.
In connection to the Acquisition of ICR Cyprus as described in Note 25, the Company and ICR Cyprus are under the common control of Melco International. In accordance with the applicable accounting standards, the Acquisition of ICR Cyprus is accounted for as a transaction involving a transfer of business between entities under common control that resulted in a change in reporting entity requiring retrospective adjustment to the consolidated financial statements of the Company. Accordingly, all periods presented in these consolidated financial statements have been
adjusted to include the assets and liabilities of ICR Cyprus Group that were acquired by the Company at historical carrying amounts, and the financial results of ICR Cyprus Group, as if the Acquisition of ICR Cyprus had been in effect since the inception of common control
resulting from the acquisition of ICR Cyprus and its subsidiaries by Melco International in September 2017.
 
F-14
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (a)
Basis of Presentation and Principles of Consolidation - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Acquisition of ICR Cyprus had an effect to increase (decrease) the Company’s net income of $14,180, $(14,955) and $(3,073); decrease other comprehensive income of $4,617 and increase other comprehensive loss of $12,527 and nil; decrease basic earnings per share of $0.003, $0.016 and $0.004; and decrease diluted earnings per share of $0.003, $0.016 and $0.005 for the years ended December 31, 2019 and 2018 and for the period since the inception of common control in September 2017 to the end of December 31, 2017, respectively.
  (b)
Use of Estimates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The preparation of accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Accordingly, actual results could differ from those estimates.
  (c)
Fair Value of Financial Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date. The Company estimated the fair values using appropriate valuation methodologies and market information available as of the balance sheet date.
  (d)
Cash and Cash Equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less.
Cash equivalents are placed with financial institutions with high-credit ratings and quality.
  (e)
Investment Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities consist of investments in mutual funds that mainly invest in bonds and fixed interest securities and investments in equity interests in a public
company on which the Company has no significant influence. The investment securities are considered as marketable equity securities. Management determines the appropriate classification of its investment securities at the time of purchase and re-evaluates the classifications at each balance sheet date. Investment securities are classified as either current and non-current based on the nature of each security and its availability for use in current operations. Investment securities are measured at fair value with changes in fair values recognized through net income in the accompanying consolidated statements of operations starting from January 1, 2018.
  (f)
Restricted Cash
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The current portion of restricted cash represents cash deposited into bank accounts which are restricted as to withdrawal and use and the Company expects these funds will be released or utilized in accordance with the terms of the respective agreements within the next twelve months, while the
non-current
portion of restricted cash represents funds that will not be released or utilized within the next twelve months. Restricted cash mainly consists of i) bank accounts that are restricted for
 
withdrawals and for payment of project costs or debt servicing associated with borrowings under the respective senior notes and credit facilities; and ii) collateral bank accounts associated with borrowings under the credit facilities.
 
F-15
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
  (g)
Accounts Receivable and Credit Risk
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino receivables. The Company issues credit in the form of markers to approved casino customers following investigations of creditworthiness. Credit is also given to its gaming promoters in Macau and the Philippines, which receivables can be offset against commissions payable and any other value items held by the Company to the respective customers and for which the Company intends to set off when required. As of December 31, 2019 and 2018, a substantial portion of the Company’s markers were due from customers and gaming promoters residing in foreign countries. Business or economic conditions, the legal enforceability of gaming debts, or other significant events in foreign countries could affect the collectability of receivables from customers and gaming promoters residing in these countries.
Accounts receivable, including casino, hotel and other receivables, are typically
non-interest
bearing and are initially recorded at cost. Accounts are written off when management deems it is probable the receivables are uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful debts is maintained to reduce the Company’s receivables to their carrying amounts, which approximate fair values. The allowance is estimated based on specific reviews of customer accounts as well as management’s experience with collection trends in the casino industry and current economic and business conditions. Management believes that as of December 31, 2019 and 2018, no significant concentrations of credit risk existed for which an allowance had not already been recorded.
  (h)
Inventories
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inventories consist of retail merchandise, food and beverage items and certain operating supplies, which are stated at the lower of cost or net realizable value. Cost is calculated using the
first-in,
first-out,
weighted average and specific identification methods.
  (i)
Property and Equipment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment are stated at cost, net of accumulated depreciation and amortization, and impairment losses, if any. Gains or losses on dispositions of property and equipment are included in the accompanying consolidated statements of operations. Major additions, renewals and betterments are capitalized, while maintenance and repairs are expensed as incurred.
During the construction and development stage of the Company’s casino gaming and entertainment casino resort facilities, direct and incremental costs related to the design and construction, including costs under the construction contracts, duties and tariffs, equipment installation, shipping costs, payroll and payroll-benefit related costs, applicable portions of interest and amortization of deferred financing costs, are capitalized in property and equipment. The capitalization of such costs begins when the construction and development of a project starts and ceases once the construction is substantially completed or development activity is suspended
for more than a brief period.
Depreciation and amortization expense related to capitalized construction costs and other property and equipment is recognized from the time each asset is placed in service. This may occur at different stages as casino gaming and entertainment casino resort facilities are completed and opened.
 
F-16
 
Table of Contents
MELCO RESORTS &
ENTERTAINMENT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (i)
Property and Equipment - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment are depreciated and amortized over the following estimated useful lives on a straight-line basis:
     
Freehold land
 
Not depreciated
Buildings
 
4 to 40 years
Transportation
 
5 to 10 years
Leasehold improvements
 
3 to 10 years or over the lease term, whichever is shorter
Furniture, fixtures and equipment
 
2 to 15 years
Plant and gaming machinery
 
3 to 5 years
 
 
 
 
 
 
  (j)
Capitalized Interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest, including amortization of
d
eferred financing costs, associated with major development and construction projects is capitalized and included in the cost of the projects. The capitalization of interest ceases when the project is substantially completed or the development activity is suspended for more than a brief period. The amount to be capitalized is determined by applying the weighted average interest rate of the Company’s outstanding borrowings to the average amount of accumulated qualifying capital expenditures for assets under construction during the year. Total interest expenses incurred amounted to $310,102, $285,947 and $293,247, of which
 nil
,
$21,067 and $37,483 were capitalized during the years ended December 31, 2019, 2018 and 2017, respectively.
  (k)
Gaming Subconcession
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The deemed cost of the gaming subconcession in Macau is capitalized based on the fair value of the gaming subconcession agreement as of the date of acquisition of Melco Resorts (Macau) Limited (“Melco Resorts Macau”), a subsidiary of Melco and the holder of the gaming subconcession in Macau, in 2006, and amortized over the term of agreement which is due to expire in June 2022 on a straight-line basis.
  (l)
Internal-Use Software
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs incurred to develop software for internal use are capitalized and amortized over the estimated useful lives of the software of
 3
to
 
15 years on a straight-line basis. The capitalization of such costs begins during the application development stage of the software project and ceases once the software project is substantially complete and ready for its intended use. Costs of specified upgrades and enhancements to the
internal-use
software are capitalized, while costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.
  (m)
Goodwill and Intangible Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill represents the excess of the acquisition cost over the fair value of tangible and identifiable intangible net assets of any business acquired. Goodwill is not amortized, but is tested for impairment at the reporting unit level on an annual basis, and between annual tests when circumstances indicate that the carrying value of goodwill may not be recoverable.
Intangible assets other than goodwill are amortized over their useful lives unless their lives are determined to be indefinite in which case they are not amortized. Intangible assets are carried at cost, less accumulated amortization. The Company’s finite-lived intangible assets consist of the gaming
 
F-17
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (m)
Goodwill and Intangible Assets - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
subconcession and
internal-use
software. Finite-lived intangible assets are amortized over the shorter of their contractual terms or estimated useful lives. The Company’s intangible assets with indefinite lives represent Mocha Clubs trademarks, which are tested for impairment on an annual basis or when circumstances indicate the carrying value of the intangible assets may not be recoverable.
When performing the impairment analysis for goodwill and intangible assets with indefinite lives, the Company may first perform a qualitative assessment to determine whether it is more likely than not that the asset is impaired. If it is determined that it is more likely than not that the asset is impaired after assessing the qualitative factors, the Company then performs a quantitative impairment test that consists of a comparison of the implied fair value of goodwill and the fair values of the intangible assets with indefinite lives with their carrying amounts. An impairment loss is recognized in an amount equal to the excess of the carrying amount over the implied fair value for goodwill or the excess of the carrying amounts over the fair values of the intangible assets with indefinite lives.
No impairment losses have been recognized during the years ended December 31, 2019, 2018 and 2017.
  (n)
Impairment of Long-lived Assets (Other Than
Goodwill
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company evaluates the long-lived assets with finite lives to be held and used for impairment whenever indicators of impairment exist. The Company then compares the estimated future cash flows of the assets, on an undiscounted basis, to the carrying values of the assets. If the undiscounted cash flows exceed the carrying values,
no
impairments are indicated. If the undiscounted cash flows do not exceed the carrying values, then an impairment charge is recorded based on the fair values of the assets, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. 
During the year ended December 31, 2019, impairment
loss of $
9,590
 
was recognized, of which $6,293 and $3,297 were provided for
a parcel of freehold land due to a significant decrease in its market value as of December 31, 2019 and reconfigurations at the Company’s operating properties, respectively. The fair value of the freehold land was calculated by using level 3 inputs based on direct comparison method. During the years ended December 31, 2018 and 2017, impairment losses of
nil
and $
23,197
were recognized, mainly due to reconfigurations and renovations at the Company’s operating properties. The impairment losses are included in the
accompanying consolidated statements of operations.
  (o)
Deferred Financing Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct and incremental costs incurred in obtaining loans or in connection with the issuance of long-term debt are capitalized and amortized to interest expenses over the terms of the related debt agreements using the effective interest method. Deferred financing costs incurred in connection with the issuance of revolving credit facilities are included in
other assets either current or non-current in the accompanying consolidated balance sheets, based on the maturity of each revolving credit facility. All other deferred financing costs are presented as a reduction of long-term debt in the accompanying consolidated balance sheets.
 
(p)
Land Use Rights
 
 
 
 
Land use rights represent the upfront land premium paid for the use of land held under operating leases, which
are recorded at cost less accumulated amortization. Amortization is provided over the estimated term of the land use rights of 40 years on a straight-line basis.
 
F-18
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
  (q)
Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On January 1, 2019, the Company adopted the Accounting Standard
s
Codification 842,
Leases,
using the modified retrospective method. At the inception of the contract or upon modification, the Company will perform an assessment as to whether the contract is a lease or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. A lessee has control of an identified asset if it has both the right to direct the use of the asset and the right to receive substantially all of the economic benefits from the use of the asset. 
Finance and operating lease
right-of-use
assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The initial measurement of the
right-of-use
assets also includes any prepaid lease payments and any initial direct costs incurred, and is reduced by any lease incentive received. For leases where the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The expected lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. Leases with an expected term of 12 months or less are not accounted for on the balance sheet and the related lease expense is recognized on a straight-line basis over the expected lease term.
The Company’s lease contracts have lease and
non-lease
components. For contracts in which the Company is a lessee, the Company accounts for the lease components and
non-lease
components as a single lease component for all classes of underlying assets, except for real estate. For contracts in which the Company is a lessor,
all
are accounted for as operating leases, and the lease components and
non-lease
components are accounted for separately.
The major changes from the previous basis, as a result of the adoption of the new leases standard are summarized in Note 2(ab).
  (r)
Revenue Recognition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On January 1, 2018, the Company adopted the Accounting Standards Codification 606,
Revenue from Contracts with Customers
(“New Revenue Standard”), using the modified retrospective method.
The cumulative effect of the adoption of this guidance did not have a material impact on the accumulated losses as of January 1, 2018. In addition, the adoption of this guidance did not have a material impact on net income, comprehensive income, basic and diluted net income attributable to Melco Resorts & Entertainment Limited per share amounts for the year ended December 31, 2018 and net assets as of December 31, 2018.
The Company’s revenues from contracts with customers consist of casino wagers, sales of rooms, food and beverage, entertainment, retail and other goods and services.
Gross casino revenues are measured by the aggregate net difference between gaming wins and losses. The Company accounts for its casino wagering transactions on a portfolio basis versus an individual basis as all wagers have similar characteristics. Commissions rebated to customers either directly or indirectly through gaming promoters and cash discounts and other cash incentives earned by customers are recorded as a reduction of casino revenues. In addition to the wagers, casino transactions typically include performance obligations related to complimentary goods or services provided to incentivize
 
F-19
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
  (r)
Revenue Recognition - continued
future gaming or in exchange for incentives or points earned under the Company’s
 
non-discretionary
 
incentives programs (including loyalty programs).
For casino transactions that include complimentary goods or services provided by the Company to incentivize future gaming, the Company allocates the standalone selling price of each good or service to the appropriate revenue type based on the good or service provided. Complimentary goods or services that are provided under the Company’s control and discretion and supplied by third parties are recorded as operating expenses.
The Company operates different
non-discretionary
incentives programs in certain of its properties which include loyalty programs (the “Loyalty Programs”) to encourage repeat business mainly from loyal slot machine customers and table games patrons. Customers earn points primarily based on gaming activity and such points can be redeemed for free play and other free goods and services. For casino transactions that include points earned under the Loyalty Programs, the Company defers a portion of the revenue by recording the estimated standalone selling prices of the earned points that are expected to be redeemed as a liability. Upon redemption of the points for Company-owned goods or services, the standalone selling price of each good or service is allocated to the appropriate revenue type based on the good or service provided. Upon the redemption of the points with third parties, the redemption amount is deducted from the liability and paid directly to the third party.
After allocating amounts to the complimentary goods or services provided and to the points earned under the Loyalty Programs, the residual amount is recorded as casino revenue when the wagers are settled.
The Company follows the accounting standards for reporting revenue gross as a principal versus net as an agent, when accounting for operations of certain hotels and Grand Dragon Casino and concluded that it is the controlling entity and is the principal to these arrangements. For the operations of certain hotels, the Company is the owner of the hotel properties, and the hotel managers operate the hotels under certain management agreements providing management services to the Company, and the Company receives all rewards and takes substantial risks associated with the hotels’ business; it is the principal and the transactions are, therefore, recognized on a gross basis. For the operations of Grand Dragon Casino, given the Company operates the casino under a right to use agreement with the owner of the casino premises and has full responsibility for the casino operations in accordance with its gaming subconcession, it is the principal and casino revenue is, therefore, recognized on a gross basis.
The transaction prices for rooms, food and beverage, entertainment, retail and other goods and services are the net amounts collected from customers for such goods and services that are recorded as revenues when the goods are provided, services are performed or events are held. Service taxes and other applicable taxes collected by the Company are excluded from revenues. Advance deposits on rooms and advance ticket sales are recorded as customer deposits until services are provided to the customers. Revenues from contracts with multiple goods or services provided by the Company are allocated to each good or service based on its relative standalone selling price.
Minimum operating and right to use fees representing lease revenues, adjusted for contractual base fees and operating fee escalations, are included in other revenues and are recognized over the terms of the related agreements on a straight-line basis.
 
F-20
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
  (r)
Revenue Recognition - continued
Contract and Contract-Related Liabilities
In providing goods and services to its customers, there may be a timing difference between cash receipts from customers and recognition of revenues, resulting in a contract or contract-related liability.
The Company primarily has three types of liabilities related to contracts with customers: (1) outstanding gaming chips and tokens, which represent the amounts owed in exchange for gaming chips held by a customer, (2) loyalty program liabilities, which represent the deferred allocation of revenues relating to incentive earned from the Loyalty Programs, and (3) advance customer deposits and ticket sales, which represent casino front money deposits that are funds deposited by customers before gaming play occurs and advance payments on goods and services yet to be provided such as advance ticket sales and deposits on rooms and convention space. These liabilities are generally expected to be recognized as revenues within one year of being purchased, earned, or deposited and are recorded as accrued expenses and other current liabilities on the accompanying consolidated balance sheets. Decreases in these balances generally represent the recognition of revenues and increases in the balances represent additional chips and tokens held by customers, increases in unredeemed incentives relating to the Loyalty Programs and additional deposits made by customers.
The following table summarizes the activities related to contract and contract-related liabilities:
 
December 31,
2019
 
 
December 31,
2018
 
 
Increase/
(Decrease)
 
 
December 31,
2018
 
 
January 1,
2018
 
 
Increase/
(Decrease)
 
Outstanding gaming chips and tokens
 
$
473,330
 
 
$
638,702
 
 
$
(165,372
)
 
$
638,702
 
 
$
464,613
 
 
$
174,089
 
Loyalty program liabilities
 
 
39,591
 
 
 
46,729
 
 
 
(7,138
)
 
 
46,729
 
 
 
42,929
 
 
 
3,800
 
Advanced customer deposits and ticket sales
 
 
255,884
 
 
 
386,869
 
 
 
(130,985
)
 
 
386,869
 
 
 
423,603
 
 
 
(36,734
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
768,805
 
 
$
1,072,300
 
 
$
(303,495
)
 
$
1,072,300
 
 
$
931,145
 
 
$
141,155
 
 
  (s)
Gaming Taxes and License Fees
The Company is subject to taxes and license fees based on gross
gaming
revenue and other metrics in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes and license fees are mainly recognized as casino expense in the accompanying consolidated statements of operations. These taxes and license fees totaled
 
$
2,550,755
, $
2,372,144
and $
2,224,058
for the years ended December 31, 2019, 2018 and 2017, respectively.
 
 
(t)
Pre-opening Costs
Pre-opening
costs represent personnel, marketing and other costs incurred prior to the opening of new or
start-up
operations and are expensed as incurred. During the years ended December 31, 2019, 2018 and 2017, the Company incurred
pre-opening
costs primarily in connection with the development of further expansions to City of Dreams, Studio City and Cyprus Operations. The Company also incurs
pre-opening
costs on other
one-off
activities related to the marketing of new facilities and operations.
F-21
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
(u)
Development Costs
Development costs include the costs associated with the Company’s evaluation and pursuit of new business opportunities, which are expensed as incurred.
 
 
(v)
Advertising and Promotional Costs
The Company expenses advertising and promotional costs the first time the advertising takes place or as incurred. Advertising and promotional costs included in the accompanying consolidated statements of operations were $89,376, $111,633 and $87,778 for the years ended December 31, 2019, 2018 and 2017, respectively.
 
(w)
Foreign Currency Transactions and Translations
All transactions in currencies other than functional currencies of Melco and its subsidiaries during the year are remeasured at the exchange rates prevailing on the respective transaction dates. Monetary assets and liabilities existing at the balance sheet date denominated in currencies other than functional currencies are remeasured at the exchange rates existing on that date. Exchange differences are recorded in the accompanying consolidated statements of operations.
The functional currency of Melco is the United States dollar (“$” or “US$”) and the functional currency of most of Melco’s foreign subsidiaries is the local currency in which the subsidiary operates. All assets and liabilities are translated at the rates of exchange prevailing at the balance sheet date and all income and expense items are translated at the average rates of exchange over the year. All exchange differences arising from the translation of foreign subsidiaries’ financial statements are recorded as a component of other comprehensive income (loss).
 
(x)
Comprehensive Income and Accumulated Other Comprehensive Losses
Comprehensive income includes net income and all other non-shareholder changes in equity, or other comprehensive income (loss) and is reported in the accompanying consolidated statements of comprehensive income.
As of December 31, 2019 and 2018, the Company’s accumulated other comprehensive losses consisted solely of foreign currency translation adjustments, net of tax and noncontrolling interests.
 
 
(y)
Share-based Compensation Expenses
The Company measures the cost of employee services received in
exchange
for an award of equity instruments based on the grant date fair value of the award and recognizes that cost over the service period. Compensation is attributed to the periods of associated service and such expense is recognized over the vesting period of the awards on a straight-line basis. Forfeitures are recognized when they occur.
Further information on the Company’s share-based compensation arrangements is included in Note 17.
 
(
z
)
Income Tax
The Company is subject to income taxes in Macau, Hong Kong, the Philippines, Cyprus and other jurisdictions where it operates.
Deferred income taxes are recognized for all significant temporary differences between the tax basis of assets and liabilities and their reported amounts in the accompanying consolidated financial statements.
 
F-22
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (
z
)
Income Tax - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
The Company’s income tax returns are subject to examination by tax authorities in the jurisdictions where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes. These accounting standards utilize a
two-step
approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position, based on the technical merits of position, will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based on cumulative probability.
  (
aa
)
Net Income Attributable to Melco Resorts & Entertainment Limited Per Share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic net income attributable to Melco Resorts & Entertainment Limited per share is calculated by dividing the net income attributable to Melco Resorts & Entertainment Limited by the weighted average number of ordinary shares outstanding during the year.
Diluted net income attributable to Melco Resorts & Entertainment Limited per share is calculated by dividing the net income attributable to Melco Resorts & Entertainment Limited by the weighted average number of ordinary shares outstanding during the year adjusted to include the potentially dilutive effect of outstanding share-based awards.
The weighted average number of ordinary shares outstanding used in the calculation of basic net income attributable to Melco Resorts & Entertainment Limited per share for all periods presented have been
adjust
ed
 to include the effect of the issuance of
 
55,500,738
 
ordinary shares of Melco as the consideration for the Acquisition of ICR Cyprus as described in Note 25, as if the Acquisition of ICR Cyprus had been in effect since the inception of common control
resulting from the acquisition of ICR Cyprus and its subsidiaries by Melco International in September 2017.
 
F-23
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (
aa
)
Net Income Attributable to Melco Resorts & Entertainment Limited Per Share - continued
 
 
 
The weighted average number of ordinary and ordinary equivalent shares used in the calculation of basic and diluted net income attributable to Melco Resorts & Entertainment Limited per share consisted of the following:
                         
 
Year Ended December 31,
 
 
        2019        
    
2018
   
2017
 
Weighted average number of ordinary shares outstanding used in the calculation of basic net income attributable to Melco Resorts & Entertainment Limited per share
   
1,436,569,083
      
1,506,551,789
     
1,484,379,459
  
                         
Incremental weighted average number of ordinary shares from assumed vesting of restricted shares and exercise of share options using the treasury stock method
   
6,878,339
      
9,858,273
     
11,689,000
 
                         
Weighted average number of ordinary shares outstanding used in the calculation of diluted net income attributable to Melco Resorts & Entertainment Limited per share
   
1,443,447,422
      
1,516,410,062
     
1,496,068,459
  
                         
Anti-dilutive share options and restricted shares excluded from the calculation of diluted net income attributable to Melco Resorts & Entertainment Limited per share
   
8,053,109
      
7,200,837
     
6,624,345
 
                         
 
 
 
 
(ab)
Recent Changes in Accounting Standards
 
 
 
 
 
 
 
 
 
 
 
 
 
Newly Adopted Accounting Pronouncement:
In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (as subsequently amended) on leases, which amends various aspects of existing accounting guidance for leases (“New Leases Standard”). The guidance requires all lessees to recognize a lease liability and a
right-of-use
asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The standard also requires more detailed disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases.
On January 1, 2019, the Company adopted the New Leases Standard using the modified retrospective method without restating comparative information. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date; and (3) initial direct costs for any existing leases as of the adoption date. As a result of adoption, the Company recognized $154,459
of operating lease
 
right-of-use
 
assets (including the reclassification of deferred rent assets, prepaid rent, deferred rent liabilities and accrued rent to operating lease right-of-use assets) and
$170,833 of operating lease liabilities as of January 1, 2019. The adoption of this guidance did not have a material impact on net income or cash flows.
 
F-24
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (ab)
Recent Changes in Accounting
Standards - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recent Accounting Pronouncements Not Yet Adopted:
In June 2016, the FASB issued an accounting standard
s
update which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for interim and fiscal years beginning after December 15, 2019, with early adoption permitted. The guidance is applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date. The Company adopted this new guidance on January 1, 2020 and this adoption did not have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued an accounting standards update which eliminates step two from the goodwill impairment test and instead requires an entity to recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, limited to the total amount of goodwill allocated to that reporting unit. This guidance is effective for interim and fiscal years beginning after December 15, 2019, with early adoption permitted. The guidance
is applied prospectively. The Company adopted this new guidance on January 1, 2020. The adoption of this guidance would only impact the Company’s consolidated financial statements in situations where an impairment of a reporting unit’s assets is determined and the measurement of the impairment charge.
In August 2018, the FASB issued an accounting standards update which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain
internal-use
software (and hosting arrangements that include an
internal-use
software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by this new guidance. This guidance is effective for interim and fiscal years beginning after December 15, 2019, with early
 
adoption permitted. The
Company adopted this new guidance on January 1, 2020 and this adoption did not have a material impact on the Company’s consolidated financial statements.
 
3.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
 
 
 
Cash, cash equivalents and restricted cash reported within the accompanying consolidated statements of cash flows consisted of the following:
                 
 
December 31,
 
 
2019
 
 
2018
 
Cash and cash equivalents
 
$
1,394,982
 
 
$
1,472,423
 
Current portion of restricted cash
 
 
37,390
 
 
 
48,037
 
Non-current portion of restricted cash
 
 
130
 
 
 
129
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents and restricted cash
 
$
1,432,502
 
 
$
1,520,589
 
 
 
 
 
 
 
 
 
 
 
 
 
F-25
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
4.
I
NVESTMENT SECURITIES
On May 30, 2019, Melco executed a definitive purchase agreement as amended on August 28, 2019 (collectively, the “Share Sale Agreement”) pursuant to which Melco agreed to, through its subsidiary, acquire and an independent third party, CPH Crown Holdings Pty Limited (“CPH”),
 
agreed to sell, an aggregate of
 
135,350,000
 
shares of Crown Resorts Limited (“Crown”), an Australian-listed corporation, representing approximately
 
19.99%
 
of the issued shares of Crown, in two equal tranches (the “Transaction”) at Australian dollar
s
(“AUD”) 13.00 per share
.
On June 6, 2019, the Company completed the acquisition of the first tranche of approximately
9.99%
issued shares of Crown and recognized non-current investment securities of
 
$
618,455
(including transaction costs).
On February 6, 2020, the Company agreed with CPH to terminate the obligation to purchase the second tranche of approximately
9.99%
issued shares of Crown as contemplated under the Share Sale Agreement at no consideration.
As of December 31, 2019, the investment securities represented investments in marketable equity securities, which comprised investments in mutual funds that mainly invest in bonds and fixed interest securities of $49,369 and investments in 9.99% issued shares of Crown of $568,936. As of December 31, 2018, the investment securities solely represented investments in marketable equity securities, which comprised investments in mutual funds that mainly invest in bonds and fixed interest securities of $ 91,598.
The components of (losses) gains on marketable equity securities were as follows:
 
  
Year Ended
December 31,
 
  
2019
   
2018
 
Net losses recognized on marketable equity securities
  $
(41,737
 )   $
(111
)
Less: Net (gains) losses recognized on marketable equity securities sold during the year
    
(3,085
 )     
1,345
  
                 
Unrealized (losses) gains recognized on marketable equity securities still held at the reporting date
 
   $
(44,822
 )   $
1,234
 
                 
 
5.
ACCOUNTS RECEIVABLE, NET
Components of accounts receivable, net are as follows:
 
December 31,
 
 
2019
 
 
2018
 
Casino
 
$
510,008
 
 
$
433,565
 
Hotel
 
 
4,369
 
 
 
5,714
 
Other
 
 
2,949
 
 
 
5,847
 
 
 
 
 
 
 
 
 
 
Sub-total
 
 
517,326
 
 
 
445,126
 
Less: allowances for doubtful debts
 
 
(232,993
)
 
 
(203,037
)
 
 
 
 
 
 
 
 
 
 
$
284,333
 
 
$
242,089
 
 
 
 
 
 
 
 
 
 
F-2
6
 
Table of Contents 
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
5.
ACCOUNTS RECEIVABLE, NET - continued
Movement
in
the allowances for doubtful debts were as follows:
 
Year Ended
December 31,
 
  
2019
   
2018
   
2017
 
At beginning of year
  $
203,037
     $
210,997
    $
265,931
 
Additional (credit) provision
   
32,888
      
(2,479
 )    
(4,178
 )
Write-offs, net of recoveries
   
(4,460
 )     
(2,115
 )    
(57,696
 )
Reclassified
from
(to) long-term receivables, net
   
662
      
(2,062
 )    
6,940
 
Exchange adjustments
   
866
      
(1,304
 )    
—  
  
   
 
 
    
 
 
    
 
 
  
At end of year
  $
 232,993
     $
203,037
    $
210,997
 
                         
6.
PROPERTY AND EQUIPMENT, NET
 
  
December 31,
 
  
2019
   
2018
 
Cost
   
     
 
Buildings
  $
6,288,083
     $
6,244,348
 
Furniture, fixtures and equipment
   
1,071,341
      
1,007,626
 
Leasehold improvements
   
1,049,332
      
953,535
 
Plant and gaming machinery
   
265,856
      
227,263
 
Transportation
   
218,952
      
101,915
 
Construction in progress
   
143,330
      
69,186
 
Freehold land
   
77,876
      
85,068
 
   
 
 
    
 
 
  
Sub-total
   
9,114,770
      
8,688,941
 
Less: accumulated depreciation and amortization
   
(3,390,861
 )     
(2,904,598
 )
   
 
 
    
 
 
  
Property and equipment, net
  $
  5,723,909
     $
5,784,343
 
                 
 
As of December 31, 2019 and 2018, construction in progress mainly in relation to Studio City and Cyprus Operations included interest capitalized in accordance with applicable accounting standards and other direct incidental costs capitalized which, in the aggregate, amounted to
$21,774
 
and $8,542, respectively.
The cost and accumulated depreciation and amortization of right-of-use assets
held under
finance
lease arrangements were $233,503 and $
63,758
as of December 31, 2019 and $224,752 and $49,288 as of December 31, 2018, respectively. Further information of the lease arrangements is included in Note 13.
7.
GAMING SUBCONCESSION, NET
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                 
 
December 31,
 
 
2019
   
2018
 
Deemed cost
  $
898,959
     $
894,079
 
Less: accumulated amortization
   
(757,519
 )     
(696,546
 )
   
 
 
    
 
 
  
Gaming subconcession, net
  $
141,440
     $
197,533
 
                 
 
 
 
 
 
 
 
 
 
F-27
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
7.
GAMING SUBCONCESSION, NET - continued
 
 
 
 
 
 
 
 
The Company expects that amortization of the gaming subconcession will be approximately $57,171 each year from 2020 through 2021, and approximately $27,098 in 2022.
8
.
GOODWILL AND INTANGIBLE ASSETS, NET
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Goodwill
Goodwill by segment is as follows:
                 
 
December 31,
 
 
2019
 
 
2018
 
Mocha Clubs
(1)
 
$
81,820
 
 
$
81,376
 
Corporate and Other
(2)
 
 
13,800
 
 
 
—
 
 
 
 
 
 
 
 
 
 
Goodwill
 
$
95,620
 
 
$
81,376
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
(1)
The amount represents goodwill arose from the acquisition of Mocha Slot Group Limited and its subsidiaries by the Company in 2006. The changes in carrying amounts represented the exchange differences arising from foreign currency translation at the balance sheet date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2)
The amount represents goodwill arose from the acquisition of Japan Ski Resort on November 28, 2019 amounted to $13,731 as described in Note 25 and the exchange differences arising from foreign currency translation at the balance sheet date.
 
 
 
 
 
 
 
 
 
 
 
 
 
(b) Intangible Assets, Net
As of December 31
, 2019
and 2018
, intangible assets comprised the carrying amounts of trademarks of Mocha Clubs of $4,215 and $4,193 and
internal-use
software, a finite-lived intangible asset, of $27,413 and $27,261
, respectively. Trademarks arose from the acquisition of Mocha Slot Group Limited and its subsidiaries by the Company in 2006
. The changes in carrying amounts of trademarks represented the exchange differences arising from foreign currency translation at the balance sheet date.
The cost and the accumulated amortization of
internal-use
software amounted to $30,353 and $2,940 as of December 31, 2019 and $27,958 and $697 as of December 31, 2018, respectively. The amortization expense of
internal-use
software recognized for the year
s
ended December 31, 2019 and 2018 w
ere
$2,232 and $697, respectively. The Company expects the amortization of the
internal-use
software will be approximately $2,512
, $
2,512, $1,990, $1,943, $1,943 and $16,513 in 2020, 2021, 2022, 2023, 2024 and thereafter, respectively
.
 
F-28
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
9.
LONG-TERM PREPAYMENTS, DEPOSITS AND OTHER ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term prepayments, deposits and other assets consisted of the following:
                 
 
December 31,
 
 
2019
   
2018
 
Entertainment production costs
  $
76,795
    $
76,379
 
Less: accumulated amortization
   
(72,230
)     
(65,027
 )
 
                
Entertainment production costs, net
   
4,565
      
11,352
 
Other long-term prepayments and other assets
 
 
53,585
 
 
 
30,504
 
Deferred rent assets
    
37,835
      
46,864
 
Advance payments for construction costs
    
32,911
      
—
  
Other deposits
    
16,709
      
14,976
 
Deposits for acquisition of property and equipment
   
13,642
      
51,580
 
Input value-added tax, net
   
12,469
      
20,097
 
Deferred financing costs, net
   
885
      
11,330
 
Long-term receivables, net
   
3,877
      
5
 
 
                
Long-term prepayments, deposits and other assets
  $
 176,478
     $
186,708
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Entertainment production costs represent amounts incurred and capitalized for entertainment shows in City of Dreams. The Company amortized the entertainment production costs
over 10 years or the respective estimated useful live of the entertainment show, whichever is shorter.
Input value-added tax, net represents the value-added tax expected to be recoverable from the tax authority in the Philippines mainly connected with the purchase of assets or services for City of Dreams Manila. Certain input value-added tax incurred on purchase of assets of $8,648 was considered non-refundable which was recognized as property and equipment for the year ended December 31, 2019. During the years ended December 31, 2019, 2018 and 2017, provisions for input value-added tax expected to be
 
non-recoverable
 
amounting to
$3,733, $4,095 and $2,813, respectively,
were recognized in the accompanying consolidated statements of operations.
Long-term receivables, net represent casino receivables from casino customers where settlements are not expected within the next year. During the year ended December 31, 2019, net amount of long-term receivables of $3,215 was reclassified
from current accounts receivable to non-current accounts receivable; and net amount of allowances for doubtful debts of
$662
was reclassified from non-current allowances for doubtful debts to current allowances for doubtful debts. During the year ended December 31, 2018, net amount of long-term receivables of
$1,633
was reclassified to current accounts receivable; and net amount of allowances for doubtful debts of
$2,062
was reclassified from current allowances for doubtful debts to
 
non-current
 
allowances for doubtful debts. During the year ended December 31, 2017, net amount of long-term receivables of
$8,771
and net amount of allowances for doubtful debts of
$6,940,
was reclassified to current accounts receivable and allowances for doubtful debts. Reclassifications to current accounts receivable, net, are made when settlement of such balances are expected to occur within one year.
F-29
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
 
10
.
LAND USE RIGHTS, NET
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                 
 
December 31,
 
 
2019
   
2018
 
Altira Macau (“Taipa Land”)
  $
146,306
     $
145,511
 
City of Dreams (“Cotai Land”)
   
399,115
      
396,949
 
Studio City (“Studio City Land”)
   
652,807
      
649,263
 
                 
   
 1,198,228
      
 1,191,723
  
Less: accumulated amortization
   
(457,220
)    
(432,072
 )
                 
Land use rights, net
  $
  741,008
     $
759,651
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
11.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  
December 31,
 
  
2019
   
2018
 
Outstanding gaming chips and tokens
  
$
  473,330
 
 
$
638,702
 
Advance customer deposits and ticket sales
    
255,884
      
386,869
 
Gaming tax and license fee accruals
    
217,773
      
223,681
 
Staff cost accruals
    
169,622
      
147,049
 
Operating expense and other accruals and liabilities
    
117,338
      
123,223
 
Property and equipment payables
    
69,097
      
63,178
 
Interest expenses payable
    
49,298
      
14,754
 
Loyalty program liabilities
    
39,591
      
46,729
 
Construction costs payables
    
28,583
      
27,445
 
                 
   $
1,420,516
     $
1,671,630
 
                 
 
F-30
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET
Long-term debt, net consisted of the following:
 
December 31,
 
  
2019
   
2018
 
Credit Facilities
   
     
 
2015 Credit Facilities (net of unamortized deferred financing costs of $42 and $4,428, respectively)
(1)
   $
    1,108
     $
1,471,466
 
2016 Studio City Credit Facilities
(2)
    
128
      
128
 
Aircraft Term Loan
   
—  
      
3,503
 
                 
Senior Notes
   
     
 
2017
 4.875%
Senior Notes, due 2025 (net of
unamortized
deferred financing costs and original issue premiums of $
19,827
and $
22,904
, respectively)
    
980,173
      
977,096
 
2019 5.250% Senior Notes, due 2026 (net of unamortized deferred financing costs of $
5,948
)
   
494,052
      
—  
  
2019 5.625% Senior Notes, due 2027 (net of unamortized deferred financing costs of $
7,298
)
   
592,702
      
—  
  
2019 5.375% Senior Notes, due 2029 (net of unamortized deferred financing costs of $
8,992
)
   
891,008
      
—  
  
2016 7.250% SC Secured Notes, due 2021 (net of unamortized deferred financing costs of $7,211 and $10,580, respectively)
 
 
842,789
 
 
 
839,420
 
2019 7.250% Studio City Notes, due 2024 (net of unamortized deferred
 
financing costs of $7,829)
 
 
592,171
 
 
 
—
 
2012 8.500% Studio City Notes, due 2020 (net of unamortized deferred
 
financing costs of $3,436)
 
 
—
 
 
 
421,564
 
2016 5.875% SC Secured Notes, due 2019 (net of unamortized deferred
 
financing costs of $2,260)
 
 
—
 
 
 
347,740
 
 
 
4,394,131
 
 
 
4,060,917
 
Current portion of long-term debt (net of unamortized deferred financing costs of $
5
and $
2,775
, respectively)
   
(146
 )     
(395,547
 )
                 
 
$
  4,393,985
 
 
$
3,665,370
 
                 
 
Notes
 
1.
As of December 31, 2019 and 2018, the unamortized deferred financing costs related to the 2015 Revolving Credit Facility of the 2015 Credit Facilities of $3,097 and nil are included in prepaid expenses and other current assets, and nil and $10,031 are included in long-term prepayments, deposits and other assets, in the accompanying consolidated balance sheets, respectively.
 
2.
As of December 31, 2019 and 2018, the unamortized deferred financing costs related to the 2016 SC Revolving Credit Facility of the 2016 Studio City Credit Facilities of $885 and $1,299 are included in long-term prepayments, deposits and other assets in the accompanying consolidated balance sheets, respectively.
(a) Credit Facilities
2015 Credit Facilities
On June 29, 2015, Melco Resorts Macau (the “Borrower”) amended and restated the Borrower’s prior senior secured credit facilities agreement from 9,362,160,000
Hong Kong dollars (“HK$”)
(equivalent to $
1,203,362
) to
a
HK$13,650,000,000 (equivalent to $1,750,000
)
 
senior secured credit facilities agreement
 
F-31
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
(a) Credit Facilities - continued
2015 Credit Facilities - continued
(the “2015 Credit Facilities
”), comprising
a HK$3,900,000,000 (equivalent to $500,000
)
 term loan facility (the “2015 Term Loan Facility”) and a HK$9,750,000,000 (equivalent to $1,250,000
)
 multicurrency revolving credit facility (the “2015 Revolving Credit Facility”). The 2015 Credit Facilities provide for additional incremental facilities to be made available, upon further agreement with any of the existing lenders under the 2015 Credit Facilities or other entities, of up to $1,300,000
(the “2015 Incremental Facility”). As of December 31, 2019, the outstanding principal amount of the 2015 Term Loan Facility and the 2015 Revolving Credit Facility were HK$8,955,830 (equivalent to $1,150) and nil, respectively, and the available borrowing capacity under the 2015 Revolving Credit Facility was HK$9,750,000,000 (equivalent to $1,251,764).
In December 2019, the Company partially prepaid an outstanding principal amount of HK$2,750,000,000 (equivalent to $353,062) of the 2015 Term Loan Facility, together with accrued interest and associated costs, with a portion of the net proceeds from the 2019 5.375% Senior Notes (as
 
described below). In connection with this prepayment, the Company recorded a loss on extinguishment of debt of $2,612 during the
year
ended December 31, 2019.
The maturity date of the 2015 Credit Facilities is: (i) June 29, 2021 in respect of the 2015 Term Loan Facility; and (ii) June 29, 2020 in respect of the 2015 Revolving Credit Facility. The maturity date, amount, margin, currency, form and other terms of the 2015 Incremental Facility will be further specified and agreed by the Borrower and the lenders under the 2015 Credit Facilities and additional lenders, if any, upon drawdown on the 2015 Incremental Facility. The 2015 Term Loan Facility is repayable in quarterly installments according to an amortization schedule. Each loan made under the 2015 Revolving Credit Facility is repayable in full on the last day of an agreed upon interest period in respect of the loan, generally ranging from one to six months, or rolling over subject to compliance with certain covenants and satisfaction of conditions precedent. The Borrower is also subject to mandatory prepayment requirements in respect of various amounts as specified in the 2015 Credit Facilities; in the event of the disposal of all or substantially all of the business and assets of the borrowing group which includes the Borrower and certain of its subsidiaries as defined under the 2015 Credit Facilities (the “2015 Borrowing Group”), the 2015 Credit Facilities are required to be repaid in full. In the event of a change of control, the Borrower may be required, at the election of any lender under the 2015 Credit Facilities, to repay such lender in full.
The indebtedness under the 2015 Credit Facilities is guaranteed by the 2015 Borrowing Group. Security for the 2015 Credit Facilities includes: a first-priority interest in substantially all assets of the 2015 Borrowing Group, the issued share capital and equity interests and certain buildings, fixtures and equipment of the 2015 Borrowing Group and certain other excluded assets and customary security.
The 2015 Credit Facilities contain certain covenants customary for such financings including, but not limited to: the 2015 Borrowing Group’s limitations on, except as permitted (i) incurring additional liens; (ii) incurring additional indebtedness (including guarantees); (iii) making certain investments; (iv) paying dividends and other restricted payments; (v) creating any subsidiaries; and (vi) selling assets. The 2015 Credit Facilities also contains conditions and events of default customary for such financings and the financial covenants including a leverage ratio, total leverage ratio and interest cover ratio.
There are provisions that limit certain payments of dividends and other distributions by the 2015 Borrowing Group to companies or persons who are not members of the 2015 Borrowing Group. As of December 31,
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
(a) Credit Facilities - continued
2015 Credit Facilities - continued
2019, there were no material net assets of the 2015 Borrowing Group restricted from being distributed under the terms of the 2015 Credit Facilities as certain financial tests and conditions are satisfied.
Borrowings under the 2015 Credit Facilities bear interest at Hong Kong Interbank Offered Rate (“HIBOR”) plus a margin ranging from 1.25% to 2.50% per annum as adjusted in accordance with the leverage ratio in respect of the 2015 Borrowing Group. The Borrower may select an interest period for borrowings under the 2015 Credit Facilities ranging from one to six months or any other agreed period. The Borrower is obligated to pay a commitment fee on the undrawn amount of the 2015 Revolving Credit Facility and recognized loan commitment fees of $2,322, $3,870 and $4,819 during the years ended December 31, 2019, 2018 and 2017, respectively.
2016 Studio City Credit Facilities
On November 30, 2016, Studio City Company Limited (“Studio City Company” or the “Studio City Borrower”), a majority-owned subsidiary of Melco, amended and restated the Studio City Borrower’s prior senior secured credit facilities agreement from HK$10,855,880,000 (equivalent to $1,395,357) to
a
HK$234,000,000 (equivalent to $30,077) senior secured credit facilities agreement (the “2016 Studio City Credit Facilities”), comprising a HK$1,000,000 (equivalent to $129) term loan facility (the “2016 SC Term Loan Facility”) and a HK$233,000,000 (equivalent to $29,948) revolving credit facility (the “2016 SC Revolving Credit Facility”). As of December 31, 2019, the outstanding principal amount of
the 2016 SC Term Loan Facility
and the 2016 SC Revolving Credit Facility
were HK$1,000,000 (equivalent to $128) and nil, respectively, and the available borrowing capacity under the 2016 SC Revolving Credit Facility was
HK$233,000,000 (equivalent to $29,914)
.
The 2016 SC Term Loan Facility and the 2016 SC Revolving Credit Facility mature on November 30, 2021. The 2016 SC Term Loan Facility has to be repaid at maturity with no interim amortization payments. The 2016 SC Revolving Credit Facility is available up to the date that is one month prior to the 2016 SC Revolving Credit Facility’s maturity date. The 2016 SC Term Loan Facility is collateralized by cash
of
HK$1,012,500 (equivalent to $130). The Studio City Borrower is subject to mandatory prepayment requirements in respect of various amounts of the 2016 SC Revolving Credit Facility as specified in the 2016 Studio City Credit Facilities; in the event of the disposal of all or substantially all of the business and assets of the Studio City borrowing group which includes the Studio City Borrower and certain of its subsidiaries as defined under the 2016 Studio City Credit Facilities (the “2016 Studio City Borrowing Group”), the 2016 Studio City Credit Facilities are required to be repaid in full. In the event of a change of control, the Studio City Borrower may be required, at the election of any lender under the 2016 Studio City Credit Facilities, to repay such lender in full (other than the principal amount of the 2016 SC Term Loan Facility).
The indebtedness under the 2016 Studio City Credit Facilities is guaranteed by Studio City Investments Limited (“Studio City Investments”), a majority-owned subsidiary of Melco, and its subsidiaries (other than the Studio City Borrower). Security for the 2016 Studio City Credit Facilities includes a first-priority mortgage over any rights under the land concession contract of Studio City and an assignment of certain leases or rights to use agreements; as well as other customary security. The 2016 Studio City Credit Facilities contain certain affirmative and negative covenants customary for such financings, as well as affirmative, negative and financial covenants equivalent to those contained in the 2016 7.250% SC Secured Notes (as described below).
Certain specified
bank accounts of Melco Resorts Macau are pledged under
 
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
(a) Credit Facilities - continued
2016 Studio City Credit Facilities - continued
2016 Studio City Credit Facilities and related finance documents. The 2016 Studio City Credit Facilities are secured, on an equal basis with the 2016 7.250% SC Secured Notes, by substantially all of the material assets of Studio City Investments and its subsidiaries (although obligations under the 2016 Studio City Credit Facilities that are secured by common collateral securing the 2016 7.250% SC Secured Notes will have priority over the 2016 7.250% SC Secured Notes with respect to any proceeds received upon any enforcement action of such common collateral).
The 2016 Studio City Credit Facilities contain certain covenants that, subject to certain exceptions and conditions, limit the ability of Studio City Company, Studio City Investments and their respective restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness and issue certain preferred stock; (ii) make specified restricted payments and investments; (iii) prepay or redeem subordinated debt or equity; (iv) issue or sell capital stock; (v) transfer, lease or sell assets; (vi) create or incur certain liens; (vii) impair the security interests in the Collateral as defined below; (viii) enter into agreements that restrict the restricted subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans; (ix) change the nature of the business of the relevant group; (x) enter into transactions with shareholders or affiliates; and (xi) effect a consolidation or merger. The 2016 Studio City Credit Facilities also contains conditions and events of default customary for such financings.
There are provisions that limit certain payments of dividends and other distributions by the 2016 Studio City Borrowing Group to companies or persons who are not members of the 2016 Studio City Borrowing Group. As of December 31, 2019, the net assets of Studio City Investments and its restricted subsidiaries of approximately $1,082,000 were restricted from being distributed under the terms of the 2016 Studio City Credit Facilities.
Borrowings under the 2016 Studio City Credit Facilities bear interest at HIBOR plus a margin of 4% per annum. The Studio City Borrower may select an interest period for borrowings under the 2016 Studio City
 
Credit Facilities ranging from one to six months or any other agreed period. The Studio City Borrower is obligated to pay a commitment fee on the undrawn amount of the 2016 SC Revolving Credit Facility and recognized loan commitment fees of $416, $419 and $419 during the years ended December 31, 2019, 2018 and 2017, respectively.
Philippine Credit Facility
On October 14, 2015, Melco Resorts and Entertainment (Philippines) Corporation (“MRP”), a majority-owned subsidiary of Melco, entered into an
on-demand,
unsecured credit facility agreement of 2,350,000,000
Philippine Pesos (“PHP”)
 
(equivalent to $49,824), as amended from time to time (the “Philippine Credit Facility”) with a lender to finance advances to Melco Resorts Leisure (PHP) Corporation (“Melco Resorts Leisure”), a majority-owned subsidiary of Melco. As of December 31, 2019, the Philippine Credit Facility availability period, as amended from time to time, is up to May 31, 2020, and the maturity date of each individual drawdown, as amended from time to time, to be the earlier of: (i) the date which is one year from the date of drawdown, and (ii) the date which is 360 days after the end of the availability period. The individual drawdowns under the Philippine Credit Facility are subject to certain conditions precedents, including issuance of a promissory note in favor of the lender evidencing such drawdown. As of December 31, 2019, borrowings under the Philippine Credit Facility bear interest, as amended
 from time to time
, at the higher of: (i) the PHP BVAL Reference Rate of the selected interest period plus the applicable margin to be mutually agreed by the bank and the borrower at the time of drawdown, and (ii) Philippines
 
 
 
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
(a) Credit Facilities - continued
Philippine Credit Facility - continued
Term Deposit Facility Rate of the selected interest period plus the applicable margin to be mutually agreed by the bank and the borrower at the time of drawdown
, such rate to be set one business day prior to the relevant interest period
.
 
The Philippine Credit Facility includes a tax
gross-up
provision requiring MRP to pay without any deduction or withholding for or on account of tax.
 
As of December 31, 2019, the Philippine Credit Facility had not yet been drawn and the available borrowing capacity under the Philippine Credit Facility was PHP2,350,000,000 (equivalent to $46,311).
Aircraft Term Loan
On June 25, 2012, MCE Transportation Limited, a subsidiary of Melco, entered into a $43,000 term loan facility agreement
, matured
 on
June 27, 2019
 and bore
interest
at
London Interbank Offered Rate plus a margin of 2.80% per annum
, to partly finance the acquisition of an aircraft (the “Aircraft Term Loan”). On June 27
, 2019, the Aircraft Term Loan
was
repaid
 in full and terminated
.
(b) Senior Notes
2017
Senior Notes
On June 6, 2017, Melco Resorts Finance
Limited (“Melco Resorts Finance”), a subsidiary of Melco,
issued $650,000 in aggregate principal amount of 4.875% senior notes due
June 6, 2025
 
and priced at 100% (the “First 2017 Senior Notes”); and on July 3, 2017, Melco Resorts Finance further issued $350,000 in aggregate principal amount of 4.875% senior notes due
June 6,
2025 and priced at 100.75% (the “Second 2017 Senior Notes” and together with the First 2017 Senior Notes, collectively referred to as the “2017 Senior Notes”).
The
interest on the 2017 Senior Notes is accrued at a rate of 4.875% per annum, payable semi-annually in arrears on June 6 and December 6 of each year. The 2017 Senior Notes are general obligations of Melco Resorts Finance, rank equally in right of payment to all existing and future senior indebtedness of Melco Resorts Finance
,
rank senior in right of payment to any existing and future subordinated indebtedness of Melco Resorts Finance and effectively subordinated to all of Melco Resorts Finance’s existing and future secured indebtedness to the extent of the value of the assets securing such debt and all of the indebtedness of Melco Resorts Finance’s subsidiaries.
 
The net proceeds from the offering of the First 2017 Senior Notes were used to partly fund the redemption of the previous senior notes of Melco Resorts Finance and the net proceeds from the offering of the Second 2017 Senior Notes were used to repay the 2015 Revolving Credit Facility.
Melco Resorts Finance has the option to redeem all or a portion of the 2017 Senior Notes at any time prior to June 6, 2020, at a “make-whole” redemption price. On or after June 6, 2020, Melco Resorts Finance has the option to redeem all or a portion of the 2017 Senior Notes at any time at fixed redemption prices that decline ratably over time. In addition, Melco Resorts Finance has the option to redeem up to 35% of the 2017 Senior Notes with the net cash proceeds from one or more equity offerings at a fixed redemption price at any time prior to June 6, 2020. Further, under certain circumstances and subject to certain exceptions as more fully described in the indenture, Melco Resorts Finance also has the option to redeem in whole, but not in part the 2017 Senior Notes at fixed redemption prices. In certain events that relate to the gaming subconcession of Melco Resorts Macau and subject to certain exceptions as more fully described in the indenture, each holder of the 2017 Senior Notes will have the right to require Melco Resorts Finance to repurchase all or any part of such holder’s 2017 Senior Notes at a fixed redemption price.
 
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
(b) Senior Notes - continued
2017 Senior Notes - continued
The indenture governing the 2017 Senior Notes contains certain covenants that, subject to certain exceptions and conditions, limit the ability of Melco Resorts Finance to, among other things, effect a consolidation or merger or sell assets. The indenture governing the 2017 Senior Notes also contains conditions and events of default customary for such financings
.
2019 5.250%
Senior Notes
On
April
 26,
2019, Melco Resorts
Finance issued $500,000 in aggregate principal amount of 5.250% senior notes due
April 26, 2026
and priced at 100% (the “
2019 5.250% Senior
Notes”). The interest on the
2019 5.250% Senior
Notes
is
accrued at a rate of 5.250%
 
per annum, payable semi-annually in arrears 
on
April 26 and October 26 of each
 year, commenced on October 26, 2019. The 2019 5.250% Senior Notes are general obligations of Melco Resorts Finance, rank equally in right of payment to all existing and future senior indebtedness of Melco Resorts Finance, rank senior in right of payment to any existing and future subordinated indebtedness of Melco Resorts Finance and effectively subordinated to all of Melco Resorts Finance’s existing and future secured indebtedness to the extent of the value of the assets securing such debt and to the indebtedness of Melco Resorts Finance’s subsidiaries.
 
The net proceeds from the offering of the 2019 5.250% Senior Notes were used to partially repay the 2015 Revolving Credit Facility in May 2019. 
Melco Resorts Finance has the option to redeem all or a portion of the 2019 5.250% Senior Notes at any time prior to April 26, 2022, at a “make-whole” redemption price. On or after April 26, 2022, Melco Resorts Finance has the option to redeem all or a portion of the 2019 5.250% Senior Notes at any time at fixed redemption prices that decline ratably over time. In addition, Melco Resorts Finance has the option to redeem up to 35% of the 2019 5.250% Senior Notes with the net cash proceeds from one or more equity offerings at a fixed redemption price at any time prior to April 26, 2022. Further, under certain circumstances and subject to certain exceptions as more fully described in the indenture, Melco Resorts Finance also has the option to redeem in whole, but not in part the 2019 5.250% Senior Notes at fixed redemption prices. In certain events that relate to the gaming subconcession of Melco Resorts Macau and subject to certain exceptions as more fully described in the indenture, each holder of the 2019 5.250% Senior Notes will have the right to require Melco Resorts Finance to repurchase all or any part of such holder’s 2019 5.250% Senior Notes at a fixed redemption price.
The indenture governing the 2019 5.250% Senior Notes contains certain covenants that, subject to certain exceptions and conditions, limit the ability of Melco Resorts Finance to, among other things, effect a consolidation or merger or sell assets. The indenture governing the 2019 5.250% Senior Notes also contains conditions and events of default customary for such financings.
2019 5.625% Senior Notes
On July 17, 2019, Melco Resorts Finance issued $600,000 in aggregate principal amount of 5.625% senior notes due July 17, 2027 and priced at 100% (the “2019 5.625% Senior Notes”). The interest on the 2019 5.625% Senior Notes is accrued at a rate of 5.625% per annum, payable semi-annually in arrears on January 17 and July 17 of each year, commenced on January 17, 2020. The 2019 5.625% Senior Notes are general obligations of Melco Resorts Finance, rank equally in right of payment to all existing and future senior indebtedness of Melco Resorts Finance, rank senior in right of payment to any existing and future subordinated indebtedness of Melco Resorts Finance and effectively subordinated to all of Melco Resorts
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
 
 
 
 
 
(b) Senior Notes - continued
2019 5.625% Senior Notes - continued
Finance’s existing and future secured indebtedness to the extent of the value of the assets securing such debt and to the indebtedness of Melco Resorts Finance’s subsidiaries.
 
The net proceeds from the offering of the
2019
5.625
% Senior Notes were used to partially repay the
2015
Revolving Credit Facility in July 
2019
.
Melco Resorts Finance has the option to redeem all or a portion of the 2019 5.625% Senior Notes at any time prior to July 17, 2022, at a “make-whole” redemption price. On or after July 17, 2022, Melco Resorts Finance has the option to redeem all or a portion of the 2019 5.625% Senior Notes at any time at fixed redemption prices that decline ratably over time. In addition, Melco Resorts Finance has the option to redeem up to
35%
of the 2019 5.625% Senior Notes with the net cash proceeds from one or more equity offerings at a fixed redemption price at any time prior to July 17, 2022. Further, under certain circumstances and subject to certain exceptions as more fully described in the indenture, Melco Resorts Finance also has the option to redeem in whole, but not in part the 2019 5.625% Senior Notes at fixed redemption prices. In certain events that relate to the gaming subconcession of Melco Resorts Macau and subject to certain exceptions as more fully described in the indenture, each holder of the 2019 5.625% Senior Notes will have the right to require Melco Resorts Finance to repurchase all or any part of such holder’s 2019 5.625% Senior Notes at a fixed redemption price.
The indenture governing the 2019 5.625% Senior Notes contains certain covenants that, subject to certain exceptions and conditions, limit the ability of Melco Resorts Finance to, among other things, effect a consolidation or merger or sell assets. The indenture governing the 2019 5.625% Senior Notes also contains conditions and events of default customary for such financings.
2019 5.375% Senior Notes
On December 4, 2019, Melco Resorts Finance issued $900,000 in aggregate principal amount of 5.375% senior notes due December 4, 2029 and priced at 100% (the “2019 5.375% Senior Notes”). The interest on the 2019 5.375% Senior Notes is accrued at a rate of 5.375% per annum, payable semi-annually in arrears on June 4 and December 4 of each year, commencing on June 4, 2020. The 2019 5.375% Senior Notes are general obligations of Melco Resorts Finance, rank equally in right of payment to all existing and future senior indebtedness of Melco Resorts Finance, rank senior in right of payment to any existing and future subordinated indebtedness of Melco Resorts Finance and effectively subordinated to all of Melco Resorts Finance’s existing and future secured indebtedness to the extent of the value of the assets securing such debt and to the indebtedness of Melco Resorts Finance’s subsidiaries. The net proceeds from the offering of the 2019 5.375% Senior Notes were used to repay the outstanding borrowing of the 2015 Revolving Credit Facility in full and to partially prepay the 2015 Term Loan Facility in December 2019.
Melco Resorts Finance has the option to redeem all or a portion of the 2019 5.375% Senior Notes at any time prior to December 4, 2024 at a “make-whole” redemption price. On or after December 4, 2024, Melco Resorts Finance has the option to redeem all or a portion of the 2019 5.375% Senior Notes at any time at fixed redemption prices that decline ratably over time. In addition, Melco Resorts Finance has the option to redeem up to 35% of the 2019 5.375% Senior Notes with the net cash proceeds from one or more equity offerings at a fixed redemption price at any time prior to December 4, 2024. Further, under certain circumstances and subject to certain exceptions as more fully described in the indenture, Melco Resorts
 
Finance also has the option to redeem in whole, but not in part the 2019 5.375% Senior Notes at fixed
 
F-37
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
 
 
 
 
(b) Senior Notes - continued
2019 5.375% Senior Notes - continued
redemption prices. In certain events that relate to the gaming subconcession of Melco Resorts Macau and subject to certain exceptions as more fully described in the indenture, each holder of the 2019 5.375% Senior Notes will have the right to require Melco Resorts Finance to repurchase all or any part of such holder’s 2019 5.375% Senior Notes at a fixed redemption price.
The indenture governing the 2019 5.375% Senior Notes contains certain covenants that, subject to certain exceptions and conditions, limit the ability of Melco Resorts Finance to, among other things, effect a consolidation or merger or sell assets. The indenture governing the 2019 5.375% Senior Notes also contains conditions and events of default customary for such financings.
2016 Studio City Secured Notes
On November 30, 2016, Studio City Company issued $350,000 in aggregate principal amount of 5.875% senior secured notes due November 30, 2019 and priced at 100% (the “2016 5.875% SC Secured Notes”) and $850,000 in aggregate principal amount of 7.250% senior secured notes due November 30, 2021 and priced at 100% (the “2016 7.250% SC Secured Notes” and together with the 2016 5.875% SC Secured Notes, the “2016 Studio City Secured Notes”). The net proceeds from the offering of the 2016 Studio City Secured Notes were used to partially repay the Studio City Borrower’s prior senior secured credit facilities.
The interest on the 2016 5.875% SC Secured Notes was accrued at a rate of 5.875% per annum, payable semi-annually in arrears. On November 30, 2019, Studio City Company repaid the 2016 5.875% SC Secured Notes in full at maturity with cash on hand.
The interest on the 2016 7.250% SC Secured Notes is accrued at a rate of 7.250% per annum, payable semi-annually in arrears on May 30 and November 30 of each year.
The 2016 7.250% SC Secured Notes are senior secured obligations of Studio City Company, rank equally in right of payment to all existing and future senior indebtedness of Studio City Company (although any liabilities in respect of obligations under the 2016 Studio City Credit Facilities that are secured by common collateral securing the 2016 7.250% SC Secured Notes will have priority over the 2016 7.250% SC Secured Notes with respect to any proceeds received upon any enforcement action of such common collateral) and rank senior in right of payment to any existing and future subordinated indebtedness of Studio City Company and effectively subordinated to Studio City Company’s existing and future secured indebtedness that is secured by assets that do not secure the 2016 7.250% SC Secured Notes, to the extent of the assets securing such indebtedness.
All of the existing subsidiaries of Studio City Investments (other than Studio City Company) and any other future restricted subsidiaries that provide guarantees of certain specified indebtedness (including the 2016 Studio City Credit Facilities) (the “2016 7.250% SC Secured Notes Guarantors”) jointly, severally and unconditionally guarantee the 2016 7.250% SC Secured Notes on a senior basis (the “2016 7.250% SC Secured Notes Guarantees”). The 2016 7.250% SC Secured Notes Guarantees are senior obligations of the 2016 7.250% SC Secured Notes Guarantors, rank equally in right of payment to all existing and future senior indebtedness of the 2016 7.250% SC Secured Notes Guarantors and rank senior in right of payment to any existing and future subordinated indebtedness of the 2016 7.250% SC Secured Notes Guarantors. The 2016 7.250% SC Secured Notes Guarantees are pari passu to the 2016 7.250% SC Secured Notes
F-38
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
 
 
 
 
(b) Senior Notes - continued
2016 Studio City Secured Notes - continued
Guarantors’ obligations under the 2016 Studio City Credit Facilities,
and effectively subordinated to any future secured indebtedness that is secured by assets that do not secure the 2016 7.250% SC Secured Notes and the 2016 7.250% SC Secured Notes Guarantees, to the extent of the value of the assets.
The 2016 7.250% SC Secured Notes are secured, on an equal basis with the 2016 Studio City Credit Facilities, by substantially all of the material assets of Studio City Investments and its subsidiaries (although obligations under the 2016 Studio City Credit Facilities that are secured by common collateral securing the 2016 7.250% SC Secured Notes will have priority over the 2016 7.250% SC Secured Notes with respect to any proceeds received upon any enforcement action of such common collateral). The common collateral (shared with the 2016 Studio City Credit Facilities) includes a first-priority mortgage over any rights under the land concession contract of Studio City and an assignment of certain leases or rights to use agreements; as well as other customary security. The 2016 7.250% SC Secured Notes are secured by the common collateral and, in addition, certain bank accounts (together with the common collateral, the “Collateral”). Certain specified bank accounts of Melco Resorts Macau are pledged under 2016 Studio City Credit Facilities and related finance documents. In addition, the 2016 7.250% SC Secured Notes are also separately secured by certain specified bank accounts.
At any time prior to November 30, 2018, Studio City Company had the options i) to redeem all or a portion of the 2016 7.250% SC Secured Notes at a “make-whole” redemption price; and ii) to redeem up to 35% of the 2016 7.250% SC Secured Notes with the net cash proceeds of certain equity offerings at a fixed redemption price. Thereafter, Studio City Company has the option to redeem all or a portion of the 2016 7.250% SC Secured Notes at any time at fixed redemption prices that decline ratably over time. Further, under certain circumstances and subject to certain exceptions as more fully described in the indenture governing the 2016 7.250% SC Secured Notes, Studio City Company also has the option to redeem in whole, but not in part the 2016 7.250% SC Secured Notes at fixed redemption prices.
The indenture governing the 2016 7.250% SC Secured Notes contains certain covenants that, subject to certain exceptions and conditions, limit the ability of Studio City Company, Studio City Investments and their respective restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness and issue certain preferred stock; (ii) make specified restricted payments and investments; (iii) prepay or redeem subordinated debt or equity; (iv) issue or sell capital stock; (v) transfer, lease or sell assets; (vi) create or incur certain liens; (vii) impair the security interests in the Collateral; (viii) enter into agreements that restrict the restricted subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans; (ix) change the nature of the business of the relevant group; (x) enter into transactions with shareholders or affiliates; and (xi) effect a consolidation or merger. The indenture governing the 2016 7.250% SC Secured Notes also contains conditions and events of default customary for such financings.
There are provisions under the indenture governing the 2016 7.250% SC Secured Notes that limit or prohibit certain payments of dividends and other distributions by Studio City Company, Studio City Investments and their respective restricted subsidiaries to companies or persons who are not Studio City Company, Studio City Investments and their respective restricted subsidiaries, subject to certain exceptions and conditions. As of December 31, 2019, the net assets of Studio City Investments and its restricted subsidiaries of approximately $1,082,000 were restricted from being distributed under the terms of the 2016 7.250% SC Secured Notes.
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Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
 
 
 
 
(b) Senior Notes - continued
2019 Studio City Notes
On February 11, 2019, Studio City Finance Limited (“Studio City Finance”), a majority-owned subsidiary of Melco, issued $600,000 in aggregate principal amount of 7.250% senior notes due February 11, 2024 and priced at 100% (the “2019 Studio City Notes”). The interest on the 2019 Studio City Notes is accrued at a rate of 7.250% per annum, payable semi-annually in arrears on February 11 and August 11 of each year, commenced on August 11, 2019. The 2019 Studio City Notes are general obligations of Studio City Finance, rank equally in right of payment to all existing and future senior indebtedness of Studio City Finance, rank senior in right of payment to any existing and future subordinated indebtedness of Studio City Finance and effectively subordinated to all of Studio City Finance’s existing and future secured indebtedness to the extent of the value of the property and assets securing such indebtedness.
The net proceeds from the offering of the 2019 Studio City Notes were used to partially fund the Conditional Tender Offer, redeem in full the remaining outstanding balance of 2012 Studio City Notes with accrued interest (as described below) in March 2019 and with the remaining amount used for general corporate purposes.
All of the existing subsidiaries of Studio City Finance and any other future restricted subsidiaries that provide guarantees of certain specified indebtedness (including the 2016 Studio City Credit Facilities) (the “2019 Studio City Notes Guarantors”) jointly, severally and unconditionally guarantee the 2019 Studio City Notes on a senior basis (the “2019 Studio City Notes Guarantees”). The 2019 Studio City Notes Guarantees are general obligations of the 2019 Studio City Notes Guarantors, rank equally in right of payment to all existing and future senior indebtedness of the 2019 Studio City Notes Guarantors and rank senior in right of payment to any existing and future subordinated indebtedness of the 2019 Studio City Notes Guarantors. The 2019 Studio City Notes Guarantees are effectively subordinated to the 2019 Studio City Notes Guarantors’ obligations under all existing and any future secured indebtedness to the extent of the value of such property and assets securing such indebtedness.
At any time prior to February 11, 2021, Studio City Finance has the options i) to redeem all or a portion of the 2019 Studio City Notes at a “make-whole” redemption price; and ii) to redeem up to 35% of the 2019 Studio City Notes with the net cash proceeds of certain equity offerings at a fixed redemption price. Thereafter, Studio City Finance has the option to redeem all or a portion of the 2019 Studio City Notes at any time at fixed redemption prices that decline ratably over time. Further, under certain circumstances and subject to certain exceptions as more fully described in the indenture governing the 2019 Studio City Notes, Studio City Finance also has the option to redeem in whole, but not in part the 2019 Studio City Notes at fixed redemption prices. In certain events that relate to the gaming subconcession of Melco Resorts Macau and subject to certain exceptions as more fully described in the indenture governing the 2019 Studio City Notes, each holder of the 2019 Studio City Notes will have the right to require Studio City Finance to repurchase all or any part of such holder’s 2019 Studio City Notes at a fixed redemption price.
The indenture governing the 2019 Studio City Notes contains certain covenants that, subject to certain exceptions and conditions, limit the ability of Studio City Finance and its restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness; (ii) make specified restricted payments; (iii) issue or sell capital stock; (iv) sell assets; (v) create liens; (vi) enter into agreements that restrict the restricted subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans; (vii) enter into transactions with shareholders or affiliates; and (viii) effect a consolidation or merger. The indenture
F-40
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
(b) Senior Notes - continued
2019 Studio City Notes - continued
governing the 2019 Studio City Notes also contains conditions and events of default customary for such financings.
There are provisions under the indenture governing the 2019 Studio City Notes that limit or prohibit certain payments of dividends and other distributions by Studio City Finance and its restricted subsidiaries to companies or persons who are not Studio City Finance or restricted subsidiaries of Studio City Finance, subject to certain exceptions and conditions. As of December 31, 2019, the net assets of Studio City Finance and its restricted subsidiaries of approximately $1,180,000 were restricted from being distributed under the terms of the 2019 Studio City Notes.
2012 Studio City Notes
On November 26, 2012, Studio City Finance Limited issued $825,000 in aggregate principal amount of 8.5% senior notes due December 1, 2020 and priced at 100% (the “2012 Studio City Notes”). The interest on the 2012 Studio City Notes was accrued at a rate of 8.5% per annum, payable semi-annually in arrears. The net proceeds from the offering of the 2012 Studio City Notes were used to fund the Studio City project with conditions and sequence for disbursements in accordance with an agreement.
On December 31, 2018, Studio City Finance partially redeemed the 2012 Studio City Notes in aggregate principal amount of $400,000 at a price of 100%, together with accrued interest. The Company recorded a loss on extinguishment of debt of $3,233 during the year ended December 31, 2018 in connection with this redemption.
On January 22, 2019, Studio City Finance initiated a conditional tender offer (the “Conditional Tender Offer”), subject to sufficient funding, to purchase the outstanding balance of 2012 Studio City Notes in aggregate principal amount of $425,000, with accrued interest. The Conditional Tender Offer expired on February 4, 2019 with $216,534 aggregate principal amount of the 2012 Studio City Notes tendered. Studio City Finance used a portion of the net proceeds from the offering of the 2019 Studio City Notes (as described above) to fund the Conditional Tender Offer, and to redeem in full the remaining outstanding balance of 2012 Studio City Notes in aggregate principal amount of $208,466, with accrued interest on March 13, 2019. In connection with the redemption of the 2012 Studio City Notes, the Company recorded a loss on extinguishment of debt of $3,721 and a cost associated with debt modification of $579, during the year ended December 31, 2019.
(c) Borrowing Rates and Scheduled Maturities of Long-term Debt
During the years ended December 31, 2019, 2018 and 2017, the Company’s average borrowing rates were approximately 5.45%, 5.97% and 6.01% per annum, respectively.
F-41
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
12.
LONG-TERM DEBT, NET - continued
(c) Borrowing Rates and Scheduled Maturities of Long-term Debt - continued
Scheduled maturities of the long-term debt (excluding unamortized deferred financing costs and original issue premiums) as of December 31, 2019 are as follows:
Year ending December 31,
   
 
2020
  $
          151
  
2021
   
851,127
  
2022
   
—
 
2023
   
—
 
2024
   
600,000
  
Over 2024
   
3,000,000
  
         
   $
  4,451,278
  
         
13.
LEASES
Lessee Arrangements
The Company is the lessee under operating and finance leases for equipment and real estate, including the land and certain of the building structure for City of Dreams Manila under the MRP Lease Agreement as described in Note 21, Cyprus casino sites, Mocha Clubs sites, office space, warehouses, staff quarters, and certain parcels of land in Macau on which Altira Macau, City of Dreams and Studio City are located. Certain lease agreements provide for periodic rental increases based on both contractual agreed incremental rates and on the general inflation rate once agreed by the Company and its lessor and in some cases contingent rental expenses stated as a percentage of turnover. Certain leases include options to extend the
lease term and options to terminate the lease term. The land concession contracts in Macau have a term of 25 years, which is renewable for further consecutive periods of 10 years, subject to applicable legislation in Macau. The estimated term related to the land concession contracts in Macau is 40 years.
 
The components of lease cost are as follows:
 
Year Ended
December 31,
2
019
 
Operating lease cost:
   
 
Amortization of land use rights
  $
 22,659
  
Operating lease cost
   
39,681
  
Short-term lease cost
   
1,569
  
Variable lease cost
   
9,595
  
Finance lease cost:
   
 
Amortization of right-of-use assets
    
12,326
  
Interest cost
   
39,696
  
   
 
 
  
Total lease cost
  $
 125,526
  
         
 
During the years ended December 31, 2018 and 2017, the Company incurred rental and right to use expenses amounting to $45,816 and $45,807, respectively, which consisted of minimum rental and right to
 
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
13.
LEASES - continued
Lessee Arrangements - continued
use expenses of $29,896 and $30,556 and contingent rental and right to use expenses of $15,920 and $15,251, respectively.
Other information related to lease term and discount rate is as follows: 
  
December 31,
2019
 
Weighted average remaining lease term
   
 
Operating leases
   
18.3
 years
 
Finance leases
   
13.5
years
 
         
Weighted average discount rate
   
 
Operating leases
   
5.82
 %
Finance leases
   
13.49
 %
Maturities of lease liabilities as of December 31, 2019 are as follows:
                 
 
Operating leases
   
Finance leases
 
Year ending December 31,
   
     
 
2020
  $
 33,846
     $
  42,681
  
2021
   
24,178
      
47,115
  
2022
   
14,447
      
48,214
  
2023
   
8,591
      
49,337
  
2024
   
6,862
      
50,666
  
Over 2024
   
99,625
      
434,247
  
   
 
 
    
 
 
  
Total future minimum lease payments
   
187,549
      
672,260
  
Less: amount representing interest
   
(66,138
 )     
(370,495
 )
   
 
 
    
 
 
  
Present value of future minimum lease payments
    
121,411
      
301,765
  
Current portion
 
 
(33,152
)
 
 
(39,725
)
   
 
 
    
 
 
  
Non-current
portion
   $
  88,259
     $
 262,040
  
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lessor Arrangements
The Company is the lessor under
non-cancellable
operating
leases
mainly for mall spaces in the site of City of Dreams, City of Dreams Manila and Studio City with various retailers that expire at various dates through August 2028. Certain of the operating leases include minimum base fees with contingent fee clauses based on a percentage of turnover.
During the years ended December 31, 2019, 2018 and 2017, the Company earned minimum operating lease income of $36,938, $43,270 and $51,023, respectively, and contingent operating lease income of $14,295, $12,654 and $27,457, respectively.
F-43
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
13.
LEASES - continued
 
 
 
 
Lessor Arrangements - continued
Future minimum fees, excluding the contingent fees to be received under
non-cancellable
operating leases
as of December 31, 2019 were as follows:
         
Year ending December 31,
   
 
2020
  $
54,544
  
2021
   
43,994
  
2022
   
39,973
  
2023
   
40,387
  
2024
   
41,650
  
Over 2024
   
65,274
  
         
  $
 285,822
  
         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14.
FAIR VALUE MEASUREMENTS
 
 
 
 
 
 
 
 
 
 
Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value
 
measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
  • Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The carrying values of cash and cash equivalents and restricted cash approximated fair value and were classified as level 1 in the fair value hierarchy. The carrying values of long-term deposits, long-term receivables and other long-term liabilities approximated fair value and were classified as level 2 in the fair value hierarchy. The estimated fair value of long-term debt as of December 31, 2019 and 2018, which included the 2015 Credit Facilities, the 2016 Studio City Credit Facilities, the Aircraft Term Loan, the 2017 Senior Notes, the 2019 5.250% Senior Notes, the 2019 5.625% Senior Notes
,
the 2019 5.375% Senior
Notes, the 2016 Studio City Secured Notes, the 2019 Studio City Notes and the 2012 Studio City
Notes were approximately $4,607,202 and $4,043,427, respectively, as compared to its carrying value, excluding unamortized deferred financing costs and original issue premiums, of $4,451,278 and $4,104,525, respectively. Fair values were estimated using quoted market prices and were classified as level 1 in the fair value hierarchy for the 2017 Senior Notes, the 2019 5.250% Senior Notes, the 2019 5.625% Senior Notes
,
the 2019 5.375% Senior Notes
, 2016 Studio City Secured Notes, the 2019 Studio
City Notes and the 2012 Studio City Notes.
 Fair values for the 2015 Credit Facilities, the 2016 Studio City Credit Facilities and the
 
F-
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4
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
14.
FAIR VALUE MEASUREMENTS - continued
 
 
 
 
 
Aircraft Term Loan approximated the carrying values as the instruments carried either variable interest rates or the fixed interest rates approximated the market rates and were classified as level 2 in the fair value hierarchy.
As of December 31, 2019 and 2018, the Company did not have any
non-financial
assets or liabilities that were recognized or disclosed at fair value in the accompanying consolidated financial statements.
The Company’s financial assets and liabilities recorded at fair value have been categorized based upon fair values in accordance with the applicable accounting standards. As of December 31, 2019 and 2018, investment securities were carried at fair value. Fair values of investment securities were estimated using quoted market prices and were classified as level 1 in the fair value hierarchy.
15.
CAPITAL STRUCTURE
 
 
 
 
 
Offering and Share Repurchase Transactions
On May 15, 2017, Melco completed the offer and sale of 27,769,248 ADSs (equivalent to 83,307,744 ordinary shares) and 81,995,799 ordinary shares, representing a total of 165,303,543 ordinary shares in aggregate with gross proceeds amounting to $1,163,186, with offering expenses of $3,686 for the offering being reimbursed by a subsidiary of Crown 
(the “Offering”).
The Offering was made as follow
s: i)
15,769,248
ADSs (equivalent to
47,307,744
ordinary shares) to the underwriters for resale in an underwritten public offering; ii)
81,995,799
ordinary shares to the underwriters which they used to satisfy the return obligations of their respective affiliates for ADSs borrowed by such affiliates representing
81,995,799
ordinary shares from
Melco
Leisure and Entertainment Group Limited, the single largest shareholder of
Melco
which is wholly owned by
Melco
International, in conjunction with the termination and hedge unwind of certain cash-settled swap transactions entered into in
December 2016
; and iii) 
12,000,000
additional ADSs purchased by one of the underwriters. 
Melco
repurchased
165,303,544
ordinary shares from a subsidiary of Crown concurrently with the Offering at an aggregate price of $
1,163,186
which was partially settled by the net proceeds of $
1,159,500
from the Offering and the remaining amount of $
3,686
being reimbursed by a subsidiary of Crown and not reflected in the transaction costs as described above. Following the completion of this share repurchase, the
165,303,544
repurchased shares were
cancelled
.
On July 31, 2019, Melco completed the Acquisition of ICR Cyprus as described in Note
25
for a consideration
with the issuance
of 55,500,738 ordinary shares of
Melco
. For the preparation of the accompanying consolidated financial statements, Melco has retrospectively presented the ordinary shares as if the Acquisition of ICR Cyprus had been in effect since the inception of common control
resulting from the acquisition of ICR Cyprus and its subsidiaries by Melco International in September 2017. Further details are disclosed in Note 2(a).
Treasury Shares
Melco’s treasury shares represent new shares issued by Melco and the shares repurchased by Melco under the respective share repurchase programs. The treasury shares are mainly held by the depositary bank to facilitate the administration and operations of Melco’s share incentive plans, and are to be delivered to the directors, eligible employees and consultants on the vesting of restricted shares and upon the exercise of share options.
During the years ended December 31, 2019, 2018 and 2017, Melco issued nil, 4,570,191 and 2,504,721 ordinary shares to its depositary bank for future vesting of restricted shares and exercise of share options,
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
15.
CAPITAL STRUCTURE - continued
 
 
 
 
 
 
 
 
Treasury Shares - continued
respectively. Melco issued 1,398,840, 2,115,809 and 950,320 of these ordinary shares upon vesting of restricted shares; and 666,255, 4,803,288 and 3,363,159 of these ordinary shares upon exercise of share options during the years ended December 31, 2019, 2018 and 2017, respectively.
On March 21, 2018, the Board of Directors of Melco authorized the repurchase of Melco’s ordinary shares and/or ADSs of up to an aggregate of $500,000 over a three-year period which commenced on March 21, 2018 under a share repurchase program. On November 8, 2018, the Board of Directors of Melco further authorized the repurchase of Melco’s ordinary shares and/or ADSs of up to an aggregate of $500,000 over a three-year period commenced on November 8, 2018 under an additional share repurchase program (this share repurchase program together with the share repurchase program authorized on March 21, 2018, the “2018 Share Repurchase Programs”). Purchases under the 2018 Share Repurchase Programs may be made from time to time on the open market at prevailing market prices, including pursuant to a trading plan in accordance with Rule
10b-18
of the U.S. Securities Exchange Act, and/or in privately-negotiated transactions. The timing and the amount of ordinary shares and/or ADSs purchased were determined by Melco’s management based on its evaluation of market conditions, trading prices, applicable securities laws
 
and other factors. The
2018
Share Repurchase Programs may be suspended, modified or terminated by
Melco
at any time prior to its expiration.
During the year ended December 31, 2019, no ordinary share was repurchased under the 2018 Share Repurchase Programs, while 81,952,230 ordinary shares repurchased under the 2018 Share Repurchase Programs were retired. During the year ended December 31, 2018, 32,190,355 ADSs, equivalent to 96,571,065 ordinary shares were repurchased under the 2018 Share Repurchase Programs, of which nil ordinary shares repurchased were
retired. In March 2020, 3,148,824 ADSs, equivalent to 9,446,472 ordinary shares were repurchased under the 2018 Share Repurchase Programs.
As of December 31, 2019 and 2018, Melco had 1,456,547,942 and 1,538,500,172 issued ordinary shares, and 19,219,846 and 103,237,171 treasury shares, with 1,437,328,096 and 1,435,263,001 ordinary shares outstanding, respectively.
16.
INCOME TAXES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income tax consisted of:
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
Macau operations
  $
              665,591
     $
              522,390
    $
             562,140
 
Hong Kong operations
   
(72,676
 )     
(48,385
 )    
(26,111
 )
Philippine operations
   
61,768
      
83,758
     
36,035
 
Cyprus operations
   
16,432
      
(14,268
 )    
(3,073
 )
Other jurisdictions operations
   
(268,548
 )     
(204,361
 )    
(256,781
 )
                         
Income before income tax
  $
  402,567
     $
339,134
    $
312,210
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-
4
6
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
16.
INCOME TAXES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The income tax expense (credit)
consisted
of:
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
Income tax expense - current
   
     
     
 
Macau Complementary Tax
  $
 1,130
     $
676
    $
13
 
Lump sum in lieu of Macau Complementary Tax on dividends
   
2,345
      
     2,341
        
     2,359
    
Hong Kong Profits Tax
   
64
      
46
     
2,516
 
Income tax in other jurisdictions
   
3,571
      
408
     
54
 
   
 
 
    
 
 
    
 
 
  
Sub-total
   
7,110
      
3,471
     
4,942
 
   
 
 
    
 
 
    
 
 
  
Under (over) provision of income taxes in prior years:
   
     
     
 
Macau Complementary Tax
   
38
      
793
     
(2,575
 )
Hong Kong Profits Tax
   
(3
 )     
(2,303
 )    
30
 
Income tax in other jurisdictions
   
325
      
39
     
(77
 )
   
 
 
    
 
 
    
 
 
  
Sub-total
   
360
      
(1,471
 )    
(2,622
 )
   
 
 
    
 
 
    
 
 
  
Income tax expense (credit) - deferred:
    
     
     
 
Macau Complementary Tax
   
(900
 )     
(629
 )    
(3,020
 )
Hong Kong Profits Tax
   
(341
 )     
(2,554
 )    
245
 
Income tax in other jurisdictions
   
2,110
      
1,421
     
445
 
   
 
 
    
 
 
    
 
 
  
Sub-total
   
869
      
(1,762
 )    
(2,330
 )
   
 
 
    
 
 
    
 
 
  
Total income tax expense (credit)
  $
  8,339
     $
238
    $
(10
 )
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A reconciliation of the income tax expense (credit) from income before income tax per the accompanying consolidated statements of
operations
is as follows:
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
Income before income tax
  $
 402,567
     $
339,134
    $
312,210
 
Macau Complementary Tax rate
   
        12
 %    
12
 %    
12
 %
Income tax expense at Macau Complementary Tax rate
   
48,308
      
40,696
     
37,465
 
Lump sum in lieu of Macau Complementary Tax on dividends
   
2,345
      
2,341
     
2,359
 
Effect of different tax rates of subsidiaries operating in other jurisdictions
   
2,178
      
7,067
     
181
 
Under (over) provision in prior years
   
360
      
(1,471
 )    
(2,622
 )
Effect of income for which no income tax expense is payable
   
(9,763
 )     
(3,035
 )    
(12,526
 )
Effect of expenses for which no income tax benefit is receivable
   
54,856
      
38,468
     
44,149
 
Effect of profits generated by gaming operations exempted
   
(165,947
 )     
(157,367
 )    
(128,145
 )
Changes in valuation allowances
   
30,473
      
12,838
     
27,259
 
Expired tax losses
 
 
45,529
 
 
 
60,701
 
 
 
31,870
 
   
 
 
    
 
 
    
 
 
  
Income tax expense (credit)
  $
8,339
     $
238
     $
(10
 )
                         
 
 
 
 
 
 
 
 
 
 
F-
4
7
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
16.
INCOME TAXES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Melco and certain of its subsidiaries are exempt from tax in the Cayman Islands or British Virgin Islands, where they are incorporated, however, Melco is subject to Hong Kong Profits Tax on profits from its activities conducted in Hong Kong. Certain subsidiaries incorporated or conducting businesses in Macau, Hong Kong, the Philippines, Cyprus and other jurisdictions are subject to Macau Complementary Tax, Hong Kong Profits Tax, Philippine Corporate Income Tax, Cyprus Corporate Income Tax and income tax in other jurisdictions, respectively, during the years ended December 31, 2019, 2018 and 2017.
Macau Complementary Tax, Hong Kong Profits Tax, Philippine Corporate Income Tax, Cyprus Corporate Income Tax and income tax in other jurisdictions have been provided at 12%, 16.5%, 30%, 12.5% and the respective tax rate
s
in other jurisdictions, on the estimated taxable income earned in or derived from
the respective
jurisdictions, respectively, during the years ended December 31, 2019, 2018 and 2017, if applicable. 
Pursuant to the approval notice issued by the Macau government in September 2016, Melco Resorts Macau was granted an extension of the Macau Complementary Tax exemption on profits generated from gaming operations for an additional five years from 2017 to 2021. One of Melco’s subsidiaries in Macau has also been exempted from Macau Complementary Tax on profits generated from income received from Melco Resorts Macau for an additional five years from 2017 to 2021, to the extent that such income is derived from Studio City gaming operations and has been subject to gaming tax pursuant to a notice issued by the Macau government in January 2017. The exemption coincides with Melco Resorts Macau’s exemption from Macau Complementary Tax. The
non-gaming
profits and dividend distributions of such subsidiary to its shareholders continue to be subject to Macau Complementary Tax. Melco Resorts Macau’s
non-gaming
profits also remain subject to Macau Complementary Tax and Melco Resorts Macau casino revenues remain subject to the Macau special gaming tax and other levies in accordance with its gaming subconcession agreement.
Based on the Supreme Court of the Philippines decision in the case of Bloomberry Resorts and Hotels, Inc. vs. the Bureau of Internal Revenue, G. R. No. 212530 dated November 28, 2016, management believes that the gaming operations of Melco Resorts Leisure, the operator of City of Dreams Manila, are exempt from Philippine Corporate Income Tax, among other taxes, provided the license fees which are inclusive of the
5
% franchise tax under the Philippine Amusement and Gaming
Corporation
(“PAGCOR”) Charter, are paid.
During the years ended December 31, 2019, 2018 and 2017, had the Company not received the income tax exemption on profits generated by gaming operations in Macau and the Philippines, the Company’s consolidated net income attributable to Melco Resorts & Entertainment Limited for the years ended December 31, 2019, 2018 and 2017 would have been reduced by $145,617, $129,241 and $105,364, and diluted earnings per share would have been reduced by $0.101, $0.085 and $0.070 per share, respectively.
In August 2017,
Melco
Resorts Macau received an extension of the agreement with the Macau government for an additional five years applicable to tax years 2017 through
 
2021, in which the extension agreement provides for an annual payment of 18,900,000 Macau Patacas (“MOP”) (equivalent to $2,345) as payments in lieu of Macau Complementary Tax otherwise due by the shareholders of
Melco
Resorts Macau on dividend distributions from gaming profits. Such annual payment is required regardless of whether dividends are actually distributed or whether
Melco
Resorts Macau has distributable profits in the relevant year.
The effective tax rates for the years ended December 31, 2019, 2018 and 2017 were 2.07%, 0.07% and 0%, respectively. Such rates differ
from
the statutory Macau Complementary Tax rate of 12%
primarily
due to
 
F-
48
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
16.
INCOME TAXES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
the effect of profits generated by gaming operations being exempted from Macau Complementary Tax and Philippine Corporate Income Tax, the effect of expired
tax losses, the effect of changes in valuation allowances, the effect of expenses for which no income tax benefit is receivable, the effect of income for which no income tax expense is payable and the effect of different tax rates of subsidiaries operating in other jurisdictions for the years ended December 31, 2019, 2018 and 2017.
The net deferred tax liabilities as of December 31, 2019 and 2018 consisted of the following:
                 
 
December 31,
  
 
2019
    
2018
  
Deferred tax assets
   
     
 
Net operating losses carried forward
  $
 167,293
     $
155,175
 
Depreciation and amortization
   
49,985
     
39,802
 
L
ease liabilities
 
 
104,404
 
 
 
—
 
Deferred rents
   
—
     
36,567
 
Others
   
9,373
      
7,801
 
Sub-total
   
331,055
      
239,345
 
Valuation allowances
   
(257,965
 )     
(232,907
 )
Total deferred tax assets
   
73,090
      
6,438
 
Deferred tax liabilities
   
     
 
Right-of-use assets
 
 
(63,011
)
 
 
—
 
Land use rights
   
(46,430
 )     
(47,554
 )
Intangible assets
   
(506
 )     
(503
 )
Unrealized capital allowances
   
(7,242
 )     
(3,255
 )
Others
   
(9,020
 )     
(6,880
 )
Total deferred tax liabilities
   
(126,209
 )     
(58,192
 )
Deferred tax liabilities, net
  $
 (53,119
 )    $
(51,754
 )
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2019 and 2018, valuation allowances of $257,965 and $232,907 were provided, respectively, as management believes it is more likely than not that these deferred tax assets will not be realized.
As of
 
December 
31
,
2019
, adjusted operating tax losses carried forward of $
55,446
have no expiry date and the remaining tax losses amounting to $
921,436
will expire by
2020
through
2029
. Adjusted operating tax losses carried forward of $
245,539
expired during the year ended December 
31
,
2019
.
Deferred tax, where applicable, is provided under the asset and liability method at the enacted statutory income tax rate of the respective tax jurisdictions, applicable to the respective financial years, on the difference between the consolidated financial statements carrying amounts and income tax base of assets and liabilities.
Aggregate undistributed earnings of Melco’s foreign subsidiaries available for distribution to Melco of approximately $1,024,419 and $655,735 as at December 31, 2019 and 2018, respectively, are considered to be indefinitely reinvested and the amounts exclude the undistributed earnings of Melco Resorts Macau. Accordingly, no provision has been made for the dividend withholding taxes that would be payable upon the distribution of those amounts to Melco. If those earnings were to be distributed or they were determined to be no longer permanently reinvested, Melco would have to record a deferred income tax 
F-49
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
16.
INCOME TAXES - continued
 
 
 
 
 
 
 
 
liability in respect of those undistributed earnings of approximately $124,169 and $79,417 as at December 31, 2019 and 2018, respectively.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is presented as follows:
 
Year Ended December 31,
  
 
2019
    
2018
    
2017
  
At beginning of year
  $
4,929
     $
2,582
     $
1,836
  
Additions based on tax positions related to current year
   
2,575
      
2,347
      
943
  
Re
ductions
 due to expiry of the statute of limitations
   
—
      
—
      
(197
 ) 
                         
At end of year
  $
 7,504
     $
 4,929
     $
 2,582
  
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $7,504 and $4,929 as of December 31, 2019 and 2018, respectively.
As of December 31, 2019 and 2018, there were no interest and penalties related to uncertain tax positions recognized in the
accompanying
consolidated financial statements. The Company does not anticipate any significant increases or decreases in unrecognized tax benefits within the next twelve months.
Melco and its subsidiaries’ major tax jurisdictions are Macau, Hong Kong, the Philippines and Cyprus. Income tax returns of Melco and its subsidiaries remain open and subject to examination by the local tax authorities of Macau, Hong Kong, the Philippines and Cyprus until the statute of limitations expire in each corresponding jurisdiction. The statute of limitations in Macau, Hong Kong, the Philippines and Cyprus are five years, six years
, three years and six years
,
 respectively.
 
17.
SHARE-BASED COMPENSATION
 
 
 
 
 
 
 
 
 
 
 
2006 Share Incentive Plan
Melco adopted a share incentive plan in 2006 (“2006 Share Incentive Plan”), as amended, for grants of share options and nonvested shares of Melco’s ordinary shares to eligible directors, employees and consultants of the Company and its affiliates. The maximum term of an award was 10 years from the date of the grant. The maximum aggregate number of ordinary shares to be available for all awards under the 2006 Share Incentive Plan was 100,000,000 over 10 years. On December 7, 2011, the Company adopted a new share incentive plan (“2011 Share Incentive Plan”) as described below and no further awards may be granted under the 2006 Share Incentive Plan on or after such date as all subsequent awards will be issued under the 2011 Share Incentive Plan.
 
 
 
 
 
 
F-5
0
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17.
SHARE-BASED COMPENSATION - continued
2006 Share Incentive Plan - continued
Share Options
A summary of the share options activity under the 2006 Share Incentive Plan for the year ended December 31, 2019, is presented as follows:
  
Number
 
of
Share
Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
Outstanding as of January 1, 2019
   
2,289,468
    $
            
1.64
     
     
 
Exercised
   
(138,036
 )     
0.32
     
     
 
                                 
Outstanding as of December 31, 2019
   
2,151,432
    $
 1.72
     
            
1.21
    $
        13,631
 
                                 
Fully vested and exercisable as of December 31, 2019
   
2,151,432
    $
  1.72
      
1.21
    $
 13,631
 
                                 
The following information is provided for share options under the 2006 Share Incentive Plan:
 
Year Ended December 31,
  
  
2019
 
  
2018
 
  
2017
 
Proceeds from the exercise of share options
  $
         44
     $
1,195
    $
2,192
 
                         
Intrinsic value of share options exercised
  $
 920
     $
37,239
    $
18,004
 
                         
 
As of December 31, 2019, there were no unrecognized compensation costs related to share options under the 2006 Share Incentive Plan.
2011 Share Incentive Plan
Melco adopted the 2011 Share Incentive Plan, effective on December 7, 2011, which has
 
b
een subsequently amended and restated, for grants of various share-based awards, including but not limited to, options to purchase Melco’s ordinary shares, restricted shares, share appreciation rights and other types of awards to eligible directors, employees and consultants of the Company and its affiliates. The maximum term of an award is 10 years from the date of the grant. The maximum aggregate number of ordinary shares to be available for all awards under the 2011 Share Incentive Plan is 100,000,000 over 10 years, which could be raised up to 10% of the issued share capital upon shareholders’ approval. As of December 31, 2019, there were 59,055,920 ordinary shares available for grants of various share-based awards under the 2011 Share Incentive Plan.
Share Options
During the years ended December 31, 2019, 2018 and 2017, the exercise prices for share options granted under the 2011 Share Incentive Plan were determined at the market closing prices of Melco’s ADS trading on the NASDAQ Global Select Market on the dates of grant. These share options became exercisable over vesting periods of two to three years. The share options granted expire 10 years from the date of grant.
The Company uses the Black-Scholes valuation model to determine the estimated fair value for each share option granted, with highly subjective assumptions, changes in which could materially affect the estimated
 
F-
5
1
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17.
SHARE-BASED COMPENSATION - continued
2011 Share Incentive Plan - continued
Share Options - continued
fair value. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of grant. Expected volatility is based on the historical volatility of Melco’s ADS trading on the NASDAQ Global Select Market. Expected term is based upon the vesting term or the historical expected term of publicly traded companies. The risk-free interest rate used for each period presented is based on the United States of America Treasury yield curve at the time of grant for the period equal to the expected term.
The fair values of share options granted under the 2011 Share Incentive Plan were estimated on the dates of grant using the following weighted average assumptions as follows:
 
Year Ended December 31,
 
  
2019
   
2018
   
2017
 
Expected dividend yield
   
2.75
 %    
2.04
 %    
2.00
 %
Expected stock price volatility
   
        41.81
 %    
        40.17
 %    
        47.94
 %
Risk-free interest rate
   
2.34
 %    
2.62
 %    
2.09
 %
Expected term (years)
   
5.6
      
5.56
     
6.1
 
 
A summary of the share options activity under the 2011 Share Incentive Plan for the year ended December 31, 2019, is presented as follows:
 
Number of
Share
Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
Outstanding as of January 1, 2019
   
17,034,960
    $
             
6.72
     
     
 
Granted
   
4,320,498
      
8.14
      
     
 
Exercised
   
(528,219
 )     
5.30
      
     
 
Forfeited or expired
 
 
 
(1,050,261
 )     
7.70
      
                
      
 
                                 
Outstanding as of December 31, 2019
   
19,776,978
    $
  7.01
      
7.20
     $
         
27,896
  
                                 
Fully vested and expected to vest as of December 31, 2019
   
19,776,978
     $
  7.01
      
7.20
     $
  27,896
  
                                 
Exercisable as of December 31, 2019
   
6,577,455
     $
  5.15
      
5.07
     $
  19,127
  
                                 
The following information is provided for share options under the 2011 Share Incentive Plan:
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
Weighted average grant date fair value
  $
 2.59
     $
3.09
    $
2.45
 
                         
Proceeds from the exercise of share options
  $
         
2,798
     $
         
3,823
    $
         
2,195
 
                         
Intrinsic value of share options exercised
  $
 1,201
     $
3,744
    $
1,246
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
F-52
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17.
SHARE-BASED COMPENSATION - continued
 
 
 
 
 
 
 
2011 Share Incentive Plan - continued
Share Options - continued
As of December 31, 2019, there were $14,792 unrecognized compensation costs related to share options under the 2011 Share Incentive Plan and the costs are expected to be recognized over a weighted average period of 1.7 years.
Restricted Shares
During the years ended December 31, 2019, 2018 and 2017, the grant date fair values for restricted shares granted under the 2011 Share Incentive Plan, with vesting periods of
 generally
two to three years, were determined with reference to the market closing prices of Melco’s ADS trading on the NASDAQ Global Select Market on the dates of grant.
A summary of the restricted shares activity under the 2011 Share Incentive Plan for the year ended December 31, 2019, is presented as follows:
                 
 
Number of
Restricted
Shares
   
Weighted
Average
Grant Date
Fair Value
 
Unvested as of January 1, 2019
   
5,239,074
    $
          7.30
 
Granted
   
3,681,477
      
8.14
  
Vested
   
(1,438,533
 )     
6.13
  
Forfeited
   
(376,842
 )     
7.82
  
                 
Unvested as of December 31, 2019
   
7,105,176
     $
  7.94
  
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following information is provided for restricted shares under the 2011 Share Incentive Plan:
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
Weighted average grant date fair value
  $
 8.14
     $
9.50
    $
6.30
 
                         
Grant date fair value of restricted shares vested
  $
 
 
 
 
 
 
 
 
 
 
 8,825
     $
         13,952
    $
         9,236
 
                         
 
 
 
As of December 31, 2019, there were $28,851 unrecognized compensation costs related to restricted shares under the 2011 Share Incentive Plan and the costs are expected to be recognized over a weighted average period of 1.94 years.
MRP Share Incentive Plan
MRP adopted a share incentive plan (the “MRP Share Incentive Plan”), effective on June 24, 2013, which has been subsequently amended and restated, for grants of various share-based awards, including but not limited to, options to purchase MRP common shares, restricted shares, share appreciation rights and other types of awards to eligible directors, employees and consultants of MRP and its subsidiaries, and the Company and its affiliates. The maximum term of an award is 10 years from the date of grant. The maximum aggregate number of common shares to be available for all awards under the MRP Share Incentive Plan is 442,630,330 shares and with up to 5% of the issued capital stock of MRP from time to
 
F-53
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17.
SHARE-BASED COMPENSATION - continued
 
 
 
 
 
 
 
MRP Share Incentive Plan - continued
time over 10 years. As of December 31, 2019, there were 152,459,026 MRP common shares available for grants of various share-based awards under the MRP Share Incentive Plan.
On May 22, 2019, MRP offered to all eligible participants of the MRP Share Incentive Plan the option to retire all outstanding equity awards, including the unvested share options, vested but unexercised share options and unvested restricted shares (collectively, the “MRP Outstanding Awards”) by the payment of cash to the eligible participants (the “MRP SIP Retirement Arrangements”) in light of the delisting of the MRP as disclosed in Note 26
.
 
T
he
 acquiescence of such MRP SIP Retirement Arrangements was obtained from the Philippine S
ecurities and
 Exchange Commission
 on May 17, 2019. As a result of all eligible participants elect
ing
to participate in the MRP SIP Retirement Arrangements, all the MRP Outstanding Awards, including a total of 15,971,173 outstanding share options (including both unvested and vested but unexercised share options) and 29,068,424 outstanding restricted shares under the MRP Share Incentive Plan, were irrevocably cancelled and extinguished pursuant to the MRP SIP Retirement Arrangements on May 31, 2019 (the “MRP SIP Modification”).
Under the MRP SIP Retirement Arrangements, MRP will pay the eligible participants a fixed amount in cash (“MRP Settlement Amount”) according to the original vesting schedules of the outstanding share options and restricted shares, subject to other terms and conditions. The MRP Settlement Amount of the outstanding restricted shares is PHP7.25
(equivalent to $0.14)
per share, based on the offer price of the Tender Offer (as described in Note 26) in 2018 and the MRP Settlement Amount of the
outstanding
share options
which was
determined using the Black-Scholes valuation model
. The
weighted average fair value of the share options at the modification date
was
PHP4.23
(
e
quivalent to $0.08
)
per option.
MRP uses the Black-Scholes valuation model to determine the estimated fair value for each outstanding share option under the MRP SIP Retirement Arrangements at the modification date, with highly subjective assumptions, changes in which could materially affect the estimated fair value. Dividend yield is based on the estimate of annual dividends expected to be paid. Expected volatility is based on the historical volatility of MRP’s common shares trading on the Philippine Stock Exchange, Inc. (“PSE”) and the historical volatility of a peer group of publicly traded companies. Expected terms are based upon the expected exercise behavior of the outstanding options. The risk-free interest rate used for each period presented is based on the Philippine government bond yield for the period equal to the expected term.
The fair values of the outstanding share options under the MRP SIP Retirement Arrangements at modification date were estimated using the following weighted average assumptions as follows:
         
Expected dividend yield
   
—  
  
Expected stock price volatility
   
45.00
 %
Risk-free interest rate
   
5.81
 %
Expected term (years)
   
5.7
 
 
 
 
 
 
 
 
 
 
 
 
As a result of the MRP SIP Modification, on May 31, 2019, the Company recognized a liability of $4,064 with a corresponding reduction in additional
paid-in
capital of $4,619 and non-controlling interests of $84. All the MRP Outstanding Awards were modified from equity-settled to cash-settled, with other terms unchanged. Since the fair values of the modified awards and the original awards were the same on the modification date, no incremental share-based compensation expenses resulted. At each balance sheet date until the liability is settled, the liability is accrued for the MRP Outstanding Awards as
they
become
 
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Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17.
SHARE-BASED COMPENSATION - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MRP Share Incentive Plan - continued
vested at the MRP Settlement Amount, with a corresponding share-based com
pensa
tion expense recognized in the accompanying consolidated statements of operations.
As at December 31, 2019, the accrued liability associated with the cash-settled share options and restricted shares was $1,217. No fair value gain or loss on remeasurement of the liability associated with the cash-settled share options and restricted shares was recognized for the year ended December 31, 2019.
Share Options
There were no share options granted under the MRP Share Incentive Plan during the year ended December 31, 2019. During the years ended December 31, 2018 and 2017, the exercise prices for share options granted under the MRP Share Incentive Plan were determined with reference to the market closing prices of MRP common shares on the dates of grant as defined in the MRP Share Incentive Plan. These share options generally became exercisable over vesting periods of two to three years. The share options granted expire 10 years from the date of grant.
MRP uses the Black-Scholes valuation model to determine the estimated fair value for each share option granted, with highly subjective assumptions, changes in which could materially affect the estimated fair value. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of grant. Expected volatility is based on the historical volatility of MRP common shares trading on the PSE and a peer group of publicly traded companies. Expected term is based upon the vesting term or the historical expected term of Melco. The risk-free interest rate used for each period presented is based on the Philippine
government
bond yield at the time of grant for the period equal to the expected term.
The fair values of share options granted under the MRP Share Incentive Plan were estimated on the dates of grant using the following weighted average assumptions as follows:
                 
 
Year Ended December 31,
 
 
2018
    
2017
  
Expected dividend yield
   
—  
      
—  
  
Expected stock price volatility
   
45.00
 %    
45.00
 %
Risk-free interest rate
   
5.69
 %    
4.47
 %
Expected term (years)
   
5.6
      
5.9
  
 
 
 
 
 
 
 
 
 
 
 
F-
55
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
1
7
.
SHARE-BASED COMPENSATION - continued
MRP Share Incentive Plan - continued
Share Options - continued
A summary of the share options activity under the MRP Share Incentive Plan for the year ended December 31, 2019, is presented as follows:
 
Number
 
of
Share
Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
Equity-settled
 
 
 
  
 
 
  
 
 
  
 
 
Outstanding as of January 1, 2019
   
17,035,505
    $
     0.12
     
     
 
Forfeited or expired
   
(1,064,332
 )    
0.16
      
     
 
Modified to cash-settled
   
(15,971,173
 )    
0.12
      
     
 
                                 
Outstanding as of December 31, 2019
   
—  
     $
—  
      
        —  
     $
         —  
  
                                 
Fully vested and expected to vest as of December 31, 2019
   
—  
     $
—  
      
—  
     $
 —  
  
                                 
Exercisable as of December 31, 2019
   
—  
     $
—  
      
—  
     $
 —  
  
                                 
  
 
  
 
  
Number
 
of
share
Options
   
Weighted
Average
Remaining
Contractual
Term
 
Cash-settled
 
 
                
 
  
 
                
 
  
 
 
  
 
 
Outstanding as of January 1, 2019
   
     
     
—  
      
 
Modified from
equity
-settled
   
     
     
15,971,173
     
 
Vested
   
     
     
(8,587,765
)     
 
Outstanding as of December 31, 2019
   
     
     
7,383,408
     
            7.77
  
                                 
The following information is provided for share options under the MRP Share Incentive Plan:
 
Year Ended December 31,
 
  
2019
   
2018
   
2017
 
Weighted average grant date fair value
  $
     —  
     $
     0.07
    $
     0.08
 
                         
Proceeds from the exercise of share options
  $
 —  
     $
—  
     $
173
 
                         
Intrinsic value of share options exercised
  $
 —  
     $
—  
     $
6
 
                         
 
During the year ended December 31, 2019, MRP paid $760 to settle the vested share options that are classified as cash-settled awards under the MRP Share Inventive Plan.
 
F-
5
6
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
1
7
.
SHARE-BASED COMPENSATION - continued
MRP Share Incentive Plan - continued
Share Options - continued
As of December 31, 2019, there were $160 unrecognized compensation costs related to share options under the MRP Share Incentive Plan and the costs are expected to be recognized over a weighted average period of 0.86 years.
Restricted Shares
There were no restricted shares granted under the MRP Share Incentive Plan during the year ended December 31, 2019. During the years ended December 31, 2018 and 2017, the grant date fair values for restricted shares granted under the MRP Share Incentive Plan, with vesting periods of
 
generally
two to three years, were determined with reference to the market closing prices of MRP common shares on the dates of grant as defined in the MRP Share Incentive Plan.
A summary of the restricted shares activity under the MRP Share Incentive Plan for the year ended December 31, 2019, is presented as follows:
 
Number of
Restricted
Shares
   
Weighted
Average
Grant Date
Fair Value
 
Equity-settled
 
 
 
  
 
 
Unvested as of January 1, 2019
   
29,444,660
    $
         0.11
 
Forfeited
   
(376,236
 )    
0.11
  
Modified to cash-settled
   
(29,068,424
 )    
0.11
  
                 
Unvested as of December 31, 2019
   
—  
     $
—  
  
                 
Cash-settled
 
 
 
  
 
 
Unvested as of January 1, 2019
   
—  
     $
—  
  
Modified from
equity
-settled
   
29,068,424
     
0.11
  
Vested
   
(20,816,777
 )    
0.10
  
Forfeited
 
 
(15,961
)
 
 
0.09
 
                 
Unvested as of December 31, 2019
   
8,235,686
    $
0.16
  
                 
 
The following information is provided for restricted shares under the MRP Share Incentive Plan:
 
Year Ended December 31,
 
  
2019
   
2018
   
2017
 
Weighted average grant date fair value
  $
     —
     $
     0.14
    $
     0.16
 
                         
Grant date fair value of restricted shares vested
  $
 2,026
     $
1,747
    $
454
 
                         
 
During the year ended December 31, 2019, MRP paid $2,948
to settle the vested restricted shares that are classified as cash-settled awards under the MRP Share Incentive Plan.
As of December 31, 2019, there were $603 unrecognized compensation costs related to restricted shares under the MRP Share Incentive Plan and the costs are expected to be recognized over a weighted average period of 1.07 years.
 
F-
5
7
 
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17
.
SHARE-BASED COMPENSATION - continued
Melco International Share Incentive Plan
On September 6, 2019, certain share-based awards under Melco International’s share option scheme adopted on May 30, 2012 and share purchase scheme adopted on October 18, 2007 (the “Melco International Share Incentive Plan”) were granted by Melco International to an employee of the Company.
In accordance with the applicable accounting standards, the share-based compensation expenses related to the grant of share-based awards under Melco International Share Incentive Plan to an employee of the Company, to the extent of services received by the Company, are recognized in the accompanying consolidated statements of operations with a corresponding increase in
additional
paid-in capital, representing capital contribution from Melco International.
Share Options
During the year ended December 31, 2019, the exercise price for share options granted under the Melco International Share Incentive Plan was determined at the higher of the closing price of Melco International’s ordinary shares trading on the
m
ain
b
oard of The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) on the date of grant and the average closing prices of Melco International’s ordinary shares trading on the Hong Kong Stock Exchange for the five business days immediately preceding the date of grant. These share options became exercisable over
a
vesting period of 2.8 years. The share options granted expire
 
10 years from the date of grant.
Melco International uses the Black-Scholes valuation model to determine the estimated fair value for each share option granted, with highly subjective assumptions, changes in which could materially affect the estimated fair value. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of grant. Expected volatility is based on the historical volatility of Melco International’s ordinary shares trading on the Hong Kong Stock Exchange. Expected term is based upon the vesting term and the expected term adopted by other publicly traded companies. The risk-free interest rate used for each period
presented
is based on the Hong Kong Government Bond rate at the time of grant for the period equal to the expected term.
The fair value of share options granted under the Melco International Share Incentive Plan was estimated on the date of grant using the following weighted average assumptions as follows:
 
Year Ended
December 31,
 
2019
 
Expected dividend yield
   
0.40
 %
Expected stock price volatility
   
43.33
 %
Risk-free interest rate
   
1.17
 %
Expected term (years)
   
4.9
  
F-58
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17.
SHARE-BASED COMPENSATION - continued
Melco International Share Incentive Plan - continued
Share Options - continued
A summary of the share options activity under the Melco International Share Incentive Plan for the year ended December 31, 2019, is presented as follows:
  
Number of
Share
Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
Outstanding as of January 1, 2019
   
—
     $
             
—  
      
     
 
Granted
   
14,200,000
      
2.43
      
     
 
                                 
Outstanding as of December 31, 2019
   
14,200,000
     $
2.43
      
            
9.69
     $
     
5,360
  
                                 
Fully vested and expected to vest as of December 31, 2019
   
14,200,000
     $
2.43
      
9.69
     $
5,360
  
                                 
Exercisable as of December 31, 2019
   
—
     $
—
      
—
     $
—
  
                                 
During the year ended December 31, 2019, the weighted average grant date fair value under the Melco International Share Incentive Plan
wa
s $0.90. There were no share options exercised under the Melco International Share Incentive Plan during the year ended December 31, 2019.
As of December 31, 2019, there were $9,113 unrecognized compensation costs related to share options under the Melco International Share Incentive Plan and the costs are expected to be recognized over a weighted average period of 2.50 years.
Restricted Shares
During the year ended December 31, 2019, the grant date fair value for restricted shares granted under the Melco International Share Incentive Plan, with
a
vesting period of 2.8 years,
was
determined with reference to the closing price of Melco International’s ordinary shares trading on the Hong Kong Stock Exchange on the date of grant.
A summary of the restricted shares activity under the Melco International Share Incentive Plan for the year ended December 31, 2019, is presented as follows:
 
Number of
Restricted
Shares
   
Weighted
Average
Grant Date
Fair Value
 
Unvested as of January 1, 2019
   
—  
     $
 —  
  
Granted
   
4,879,000
      
2.43
  
   
 
 
    
 
 
  
Unvested as of December 31, 2019
   
4,879,000
     $
 2.43
  
                 
 
There were no restricted share
s
vested under the Melco International Share Incentive Plan during the year ended December 31, 2019.
F-59
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
17.
SHARE-BASED COMPENSATION - continued
Melco International Share Incentive Plan - continued
Restricted Shares - continued
As of December 31, 2019, there were $8,429 unrecognized
compensation
costs related to restricted shares under the Melco International Share Incentive Plan and the costs are expected to be recognized over a weighted average period of 2.50 years.
The share-based compensation cost for the Company was recognized as follows:
 
Year Ended December 31,
 
  
2019
   
2018
   
2017
 
Share-based compensation cost:
   
     
     
 
2011 Share Incentive Plan
  $
 28,466
     $
     25,284
    $
     16,789
 
MRP Share Incentive Plan
   
1,113
      
(141
 )    
516
 
Melco International Share Incentive Plan
   
2,218
      
—  
      
—  
  
                         
Total share-based compensation expenses recognized in general and administrative expenses
  $
  31,797
     $
25,143
    $
17,305
 
                         
18.
EMPLOYEE BENEFIT PLANS
The Company has obligations to make the required contributions with respect to the below defined contribution retirement benefits schemes.
The Company operates defined contribution fund schemes
 in different jurisdictions
, which allow eligible employees to participate in defined contribution plans (the “Defined Contribution Fund Schemes”). The Company either contributes a fixed percentage of the eligible employees’ relevant income, a fixed amount or an amount which matches the contributions of the employees up to a certain percentage of relevant income to the Defined Contribution Fund Schemes. The Company’s contributions to the Defined Contribution Fund Schemes are vested with employees in accordance to a vesting schedule, achieving full
vesting
 
from
4 to
10 years from the date of employment. The Defined Contribution Fund Schemes were established under trusts with the fund assets being held separately from those of the Company by independent trustees.
Employees employed by the Company in different jurisdictions are members of government-managed social security fund schemes (the “Social Security Fund Schemes”), which are operated by the respective governments, if applicable. The Company is required to pay a monthly fixed contribution or certain percentage of the employees’ relevant income and meet the minimum mandatory requirements of the respective Social Security Fund Schemes to fund the benefits.
During the years ended December 31, 2019, 2018 and 2017, the Company’s
contributions
into the defined contribution retirement benefits schemes were $33,391, $23,409 and $21,864, respectively.
19.
DISTRIBUTION OF PROFITS
All subsidiaries of Melco incorporated in Macau are required to set aside a minimum of 10% to 25% of the entity’s profit after tax to the legal reserve until the balance of the legal reserve reaches a level equivalent to 25% to 50% of the entity’s share capital in accordance with the provisions of the Macau Commercial Code.
 
F-60
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
19.
DISTRIBUTION OF PROFITS - continued
The legal reserve sets aside an amount from the subsidiaries’ statements of operations and is not available for distribution to the shareholders of the subsidiaries. The appropriation of the legal reserve is recorded in the subsidiaries’ financial statements in the year in which it is approved by the board of directors of the relevant subsidiaries. As of December 31, 2019 and 2018, the aggregate balance of the reserves amounted to $
31,524
and $
31,522
, respectively.
The Company’s borrowings, subject to certain exceptions and conditions, contain certain restrictions on paying dividends and other distributions, as defined in the respective indentures governing the relevant senior notes and credit facility agreements, details of which are disclosed in Note
12
under each of the respective borrowings.
20.
DIVIDENDS
On March 14, 2019, May 30, 2019, August 15, 2019 and November 22, 2019, Melco paid the quarterly dividends
 
of $
0.0517
, $
0.0517
, $
0.05504
and $
0.05504
per share, respectively, and during the year ended December 31, 2019,
Melco
recorded total amount of quarterly dividends of $
300,995
as distributions against retained
earnings
.
 
On March 7, 2018, May 23, 2018, August 15, 2018 and November 29, 2018, Melco paid the quarterly dividends of $0.045, $0.045, $0.04835 and $0.04835 per share, respectively, and during the year ended December 31, 2018, Melco recorded total amount of quarterly dividends of $271,531, with $1,214 and $270,317 as distributions against additional
paid-in
capital and retained earnings, respectively.
On February 10, 2017,
Melco
paid a special dividend of $
0.4404
per share and on March 15, 2017, May 31, 2017, August 23, 2017 and November 30, 2017,
Melco
paid quarterly dividends of $
0.03
, $
0.03
, $
0.03
and $
0.03
per share, respectively. During the year ended December 31, 2017,
Melco
recorded total amount of special and quarterly dividends of $
821,328
, with $
733,265
and $
88,063
as distributions against retained earnings and additional
paid-in
capital, respectively.
On February
20
, 2020, a quarterly dividend of $0.05504 per share has been declared by the Board of Directors of Melco and was paid to the shareholders of record as of March 2, 2020.
21.
REGULAR LICENSE, COOPERATION AGREEMENT, OPERATING AGREEMENT AND MRP LEASE AGREEMENT FOR CITY OF DREAMS MANILA
Pursuant to a memorandum of agreement entered into by a subsidiary of Melco with the Philippine Parties as
described
below and certain of its subsidiaries in 2012 for the development of City of Dreams Manila, the relevant parties of the Licensees as described below and certain of its subsidiaries entered into the following agreements which became effective on
March 13, 2013
 and end on the date of expiry of the Regular License as described below, currently expected to be on
July 11, 2033
 
unless terminated earlier in accordance with the respective terms of the individual agreements.
  (a)
Regular License
On
April 29, 2015
, PAGCOR issued a regular casino gaming license, as amended (the “Regular License”) in replacement of a provisional license granted as of March 13, 2013, to the
co-licensees
(the “Licensees”) namely, MPHIL Holdings No.1 Corporation, a subsidiary of MRP, and its subsidiaries including Melco Resorts Leisure (collectively the “MPHIL Holdings Group”), SM Investments
 
F-61
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
21.
REGULAR LICENSE, COOPERATION AGREEMENT, OPERATING AGREEMENT AND MRP LEASE AGREEMENT FOR CITY OF DREAMS MANILA - continued
 
(a)
Regular License - continued
Corporation (“SMIC”), Belle Corporation (“Belle”) and PremiumLeisure and Amusement, Inc. (“PLAI”) (SMIC, Belle and PLAI are collectively referred to as the “Philippine Parties”) for the establishment and operation of City of Dreams Manila, with Melco Resorts Leisure, a
co-licensee,
as the “special purpose entity” to operate the casino business and as representative for itself and on behalf of the other
co-licensees
in dealings with PAGCOR. The Regular License has the same terms and conditions as the provisional license, and is valid until July 11, 2033. Further details of the terms and commitments under the Regular License are included in Note 22(b).
 
  (b)
Cooperation Agreement
The Licensees and certain of its subsidiaries entered into a cooperation agreement (the “Cooperation Agreement”) and other related arrangements which govern the rights and obligations of the Licensees. Under the Cooperation Agreement, Melco Resorts Leisure is appointed as the sole and exclusive representative of the Licensees in connection with the Regular License and is designated as the
operator
to operate and manage City of Dreams Manila. Further details of the commitments under the Cooperation Agreement are included in Note
22
(b).
  (c)
Operating Agreement
The Licensees entered into an operating agreement (the “Operating Agreement”) which governs the operation and management of City of Dreams Manila by Melco Resorts Leisure. Under the Operating Agreement, Melco Resorts Leisure is appointed as the sole and exclusive operator and manager of City of Dreams Manila, and is responsible for, and has sole discretion (subject to certain exceptions) and control over, all matters relating to the operation and management of City of Dreams Manila (including
 
the gaming and
non-gaming
operations). The Operating Agreement also includes terms of
certain
monthly payments to PLAI from
Melco
Resorts Leisure, based on the performance of gaming operations of City of Dreams Manila and is included in “Payments to the Philippine Parties” in the
accompanying
consolidated statements of operations, and further provides that
Melco
Resorts Leisure has the right to retain all revenues from
non-gaming
operations of City of Dreams Manila.
  (d)
MRP Lease Agreement
Melco Resorts Leisure and Belle entered into a lease agreement, as amended from time to time (the “MRP Lease Agreement”) under
which
Belle agreed to lease to Melco Resorts Leisure the land and certain of the building structures for City of Dreams Manila. The leased property is used by Melco Resorts Leisure and any of its affiliates exclusively as a hotel, casino and resort complex.
22.
COMMITMENTS AND CONTINGENCIES
  (a)
Capital Commitments
As of December 31, 2019, the Company had capital commitments contracted for but not incurred mainly for the
construction
and acquisition of property and equipment for Studio City, City of Dreams
 
and Cyprus Operations totaling $818,281.
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MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
22.
COMMITMENTS AND CONTINGENCIES - continued
  (b)
Other Commitments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gaming Subconcession
On September 8, 2006, the Macau government granted a gaming subconcession to Melco Resorts Macau to operate its gaming business in Macau. Pursuant to the gaming subconcession agreement, Melco Resorts Macau committed to pay the Macau government the following:
  i) A fixed annual premium of MOP30,000,000 (equivalent to $3,739).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  ii) A variable premium depending on the number and type of gaming tables and gaming machines that Melco Resorts Macau operates. The variable premium is calculated as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • MOP300,000 (equivalent to $37) per year for each gaming table (subject to a minimum of 100 tables) reserved exclusively for certain kinds of games or to certain players;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • MOP150,000 (equivalent to $19) per year for each gaming table (subject to a minimum of 100 tables) not reserved exclusively for certain kinds of games or to certain players; and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • MOP1,000 (equivalent to $0.1) per year for each electrical or mechanical gaming machine, including the slot machine.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  iii) A special gaming tax of an amount equal to 35% of the gross revenues of the gaming business operations on a monthly basis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  iv) A sum of 4% of the gross revenues of the gaming business operations to utilities designated by the Macau government (a portion of which must be used for promotion of tourism in Macau) on a monthly basis.
 
 
 
 
 
 
 
 
 
  v) Melco Resorts Macau must maintain a guarantee issued by a Macau bank in favor of the Macau government in a maximum amount of MOP300,000,000 (equivalent to $37,394) until the 180
th
 day after the
termination
date of the gaming subconcession.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As a result of the bank guarantee issued by the bank to the Macau government as disclosed in Note 
22
(b)(v) above, a sum of 1.75% of the guarantee amount will be payable by Melco Resorts Macau quarterly to the bank.
Regular License
Other commitments required by PAGCOR under the Regular License include as follows:
  • To secure a surety bond in favor of PAGCOR in the amount of PHP100,000,000 (equivalent to $1,971) to ensure prompt and punctual remittances/payments of all license fees.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • License fees must be remitted on a monthly basis, in lieu of all taxes with reference to the income component of the gross gaming revenues: (a) 15% high roller tables; (b) 25%
non-high
roller tables; (c) 25% slot machines and electronic gaming machines; and (d) 15% junket operations. The license fees are inclusive of the 5% franchise tax under the terms of the PAGCOR charter.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • The Licensees are required to remit 2% of casino revenues generated from
non-junket
operation tables to a foundation devoted to the restoration of Philippine cultural heritage, as selected by the Licensees and approved by PAGCOR.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-6
3
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
22.
COMMITMENTS AND CONTINGENCIES - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b)
Other Commitments - continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regular License - continued
 
•
PAGCOR may collect a 5% fee on
non-gaming
revenue received from food and beverage, retail and entertainment outlets. All revenues from hotel operations should not be subject to the 5% fee except for rental income received from retail concessionaires.
 
 
 
 
 
 
 
 
•
Grounds for revocation of the Regular License, among others, are as follows: (a) failure to comply with material provisions of this license; (b) failure to remit license fees within 30 days from receipt of notice of default; (c) has become bankrupt or insolvent; and (d) if the
debt-to-equity
ratio is more than 70:30. As of December 31, 2019 and 2018, MPHIL Holdings Group, as one of the Licensee parties, has complied with the required
debt-to-equity
ratio under the definition as agreed with PAGCOR.
 
 
 
 
 
Cooperation Agreement
Under the terms of the Cooperation Agreement, the Licensees are jointly and severally liable to PAGCOR under the Regular License and each Licensee (indemnifying Licensee) must indemnify the other Licensees for any losses suffered or incurred by that Licensees arising out of, or in connection with, any breach by the indemnifying Licensee of the Regular License. Also, each of the Philippine Parties and MPHIL Holdings Group agree to indemnify the
non-breaching
party for any losses suffered or incurred as a result of a
breach
of any warranties.
Gaming License in Cyprus
On June 26, 2017, the Cyprus government granted a gaming license
(the “Cyprus License”)
to a subsidiary of ICR Cyprus (the “Cyprus Subsidiary”
)
to develop, operate and maintain an integrated casino resort in Limassol, Cyprus and up to
four
satellite casino premises in Cyprus for a term of 30 years, the first 15 years of which are exclusive. Pursuant to the Cyprus License agreement, the Cyprus
Subsidiary
has committed to pay the Cyprus government the following:
  i) Annual license fee for the temporary casino and integrated casino resort of 2,500,000
Euros
(“EUR”)
 
(equivalent to $2,802) per year for the first four years, and EUR5,000,000 (equivalent to $5,604) per year for the next four years. Upon the completion of the eight years and thereafter every four years during the term of the Cyprus License, the Cyprus government may review the annual license fee, with minimum of EUR5,000,000 (equivalent to $5,604) per year and any increase in the annual license fee may not exceed 20% of the annual license fee paid annually during the previous four-year period.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  ii)
Aggregate a
nnual license fee for three operating satellite casinos in Nicosia, Larnaca and Ayia Napa of
EUR
2,000,000 (equivalent to $2,242)
, with annual license fee for the fourth satellite casino in Paphos opened in February 2020 of EU
R500,000 (
equivalent to $561
)
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  iii) A casino tax of an amount equal to 15% of the gross gaming revenue on a monthly basis and shall not be increased during the period of exclusivity for the Cyprus License.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  i
v
)		 If the Cyprus Subsidiary fails to open the integrated casino resort by the opening date, as defined in the Cyprus License as April 30, 2021
which was further extended to December 31, 2021
(the “Opening Date”)
 
based on the
decision of the council of Ministers in Cyprus made on July 25, 2019, the Cyprus Subsidiary shall pay to the Cyprus government the amount of
EUR10,000
 
 
 
 
 
 
 
 
 
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Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
22.
COMMITMENTS AND CONTINGENCIES - continued
 
 
(b)
Other Commitments - continued
 
Gaming License in Cyprus - continued
(equivalent to $11) for each day the integrated casino resort remains unopened past the Opening Date, up to a maximum of EUR1,000,000 (equivalent to $1,121). If the integrated casino resort does not open for 100 business days past the Opening Date, the Cyprus government may terminate the Cyprus License.
  (c)
Guarantees
 
 
 
 
 
 
 
 
Except as disclosed in Notes
12
and
22
(b), the Company has made the following significant guarantees as of December 31, 2019:
  • Melco Resorts Macau has issued a promissory note (“Livrança”) of MOP550,000,000 (equivalent to $68,556) to a bank in respect of the bank guarantee issued to the Macau government under its gaming subconcession.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • Melco has entered into
two
deeds of guarantee with third parties amounting to $35,000 to guarantee certain payment obligations of the City of Dreams’ operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • In October 2013, one of the Melco’s subsidiaries entered into a trade credit facility agreement for HK$200,000,000 (equivalent to $25,677) (“Trade Credit Facility”) with a bank to meet certain payment obligations of the Studio City project. The Trade Credit Facility which matured on
August 31, 2019
was further extended to
August 31, 2021
, and is guaranteed by Studio City Company. As of December 31, 2019, approximately $642 of the Trade Credit Facility had been utilized.
 
 
 
 
 
 
 
 
•
Melco Resorts Leisure has issued a corporate guarantee of PHP100,000,000 (equivalent to $1,971) to a bank in respect of a surety bond issued to PAGCOR as disclosed in Note 22(b) under Regular License.
 
 
 
 
(d)
Litigation
 
 
 
 
 
 
 
As of December 31, 2019, the Company was a party to certain legal proceedings which relate to matters arising out of the ordinary course of its business. Management believes that the outcome of such proceedings have no material impacts on the Company’s consolidated financial statements as a whole.
 
 
F-6
5
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
23.
RELATED PARTY TRANSACTIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
During the years ended December 31, 2019, 2018 and 2017, the Company entered into the following significant related party transactions:
                                 
 
   
Year Ended December 31,
 
Related companies
 
Nature of transactions
   
    2019    
    
2018
   
2017
 
                                 
Transactions with affiliated companies
 
 
 
 
 
 
 
 
 
 
 
 		        
     
     
 
                               
Melco International and its Subsidiaries
  
Revenues (
services provided by the
Company
)
:
      
 
      
 
      
 
  
 
Shared service fee income for corporate office
   
$
1,366
    
$
3,044
    
$
951
  
 
Management fee income for Cyprus
Project
(1)
      
1,056
      
1,903
      
1,487
  
 
Costs and expenses (services provided
to the Company):

Management fee expenses
     
2,798
(
2
)
 
 
 
 
    
4,339
(
2
)
 
 
    
1,787
(
3
)
 
Management fee expenses for Cyprus
Project
(1)
 
 
 
1,316
 
 
 
3,790
 
 
 
—
 
 
Share-based compensation
expenses
(4)
      
2,218
      
—
      
—
  
A joint venture and a subsidiary of MECOM Power and Construction Limited (“MECOM”)
(5)(6)
 
Costs and expenses (services provided
to the Company):

Consultancy fee expense
      
10,031
      
11,723
      
2,228
  
 
Purchase of assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction and renovation work

performed and recognized as property and equipment
      
10,174
      
13,481
      
35,510
  
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
(1)
The amount
mainly
represents management fee income for services provided by the Company to Melco International for management and operation for the project in Cyprus, and such amount was further recharged with mark-up by a subsidiary of Melco International to ICR Cyprus Group. The amount represents the transactions for the period up to the completion of the Acquisition of ICR Cyprus as described in Note 25. 
 
 
 
 
 
 
 
 
 
 
(2)
The amount mainly represents management fee expenses for the services provided by the senior management of Melco International and for the operation of the office of Melco’s Chief Executive Officer.
 
 
 
 
 
 
 
 
 
 
(3)
The amount mainly included Melco’s reimbursement to Melco International’s subsidiary for service fees incurred on its behalf for the operation of the office of Melco’s Chief Executive Officer.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-6
6
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
23.
RELATED PARTY TRANSACTIONS - continued
 
(4)
The amount represents the share-based compensation expenses related to the grant of certain share-
based
awards
under
Melco International
Share Incentive
Plan
 
to
an employee of the Company. Further information on the share-based compensation arrangements is included in Note 17.
 
 
 
 
 
 
 
 
 
 
(5)
A company in which Mr. Lawrence Yau Lung Ho, Melco’s
Chief
Executive Officer, had beneficial interest of approximately 20% until December 10, 2019, the date on which Mr. Lawrence Yau Lung Ho disposed his entire beneficial interest in MECOM. The amount in 2019 represents the transaction
s
with a
joint
venture and a subsidiary of MECOM during the period from January 1, 2019 to December 10, 2019.
 
 
 
 
 
 
  (6) In July 2018, the Company entered into a term contract with EHY Construction and Engineering Company Limited (“EHY Construction”), a subsidiary of MECOM, pursuant to which EHY Construction agreed to provide certain services to the Company, including but not limited to structural steelworks, civil engineering construction and fitting out and renovation work for a term of three years. The performance by EHY Construction of these services under the term contract is subject to (i) individual work orders as may be issued to EHY Construction from time to time; and (ii) the maximum aggregate contract amount of HK$600,000,000 (equivalent to $77,032). The amounts included the services provided by EHY Construction of $
16,362
and $
23,042
during the period from January 1, 2019 to December 10, 2019 and
the
year ended December 31, 2018, respectively.
 
 
 
 
 
 
On July 31, 2019, the Company acquired from Melco International of all of Melco International’s holding of ordinary
shares
of ICR Cyprus. Further details of the transaction are included in Note 25.
  (a)
Amounts Due from Affiliated Companies
 
 
 
 
 
 
 
 
 
 
 
 
 
The outstanding balances mainly arising from operating income or prepayment of
operating
expenses as of
December
31, 2019 and 2018 are unsecured,
non-interest
bearing and repayable on demand with details as follows:
                 
 
December 31,
 
 
2019
   
2018
 
Melco International and its subsidiaries
  $
         
442
     $
87,394
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (b)
Amounts Due to Affiliated Companies
 
 
 
 
 
 
The outstanding balances mainly arising from construction and renovation work performed, operating expenses and expenses paid by affiliated companies on behalf of the Company as of December 31, 2019 and 2018, are unsecured,
non-interest
bearing and repayable on demand with details as follows:
                 
 
December 31,
 
 
2019
   
2018
 
A joint venture and subsidiaries of MECOM
  $
         —  
     $
8,118
 
Subsidiaries of Melco International
   
1,088
      
7,057
 
Others
   
435
      
11
 
                 
  $
 1,523
     $
15,186
 
                 
 
 
 
 
 
 
 
F-6
7
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
24.
SEGMENT INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company is principally engaged in the gaming and hospitality business in Asia and Europe and its principal operating and
developmental
activities occur in three geographic areas: Macau, the Philippines and Cyprus. The Company monitors its operations and evaluates earnings by reviewing the assets and operations of Mocha Clubs, Altira Macau, City of Dreams, Studio City, City of Dreams Manila and Cyprus Operations. Japan development projects, including Japan Ski Resort
,
and Grand Dragon Casino are included in the Corporate and Other category.
The Company’s segment information for total assets and capital expenditures is as follows:
Total Assets
 
December 31,
 
  
2019
   
2018
   
2017
 
Macau:
   
     
     
 
Mocha Clubs
  $
145,919
     $
120,789
    $
121,980
 
Altira Macau
   
429,980
      
376,655
     
427,668
 
City of Dreams
   
3,461,487
      
3,636,732
     
3,453,135
 
Studio City
   
3,153,721
      
3,378,646
     
3,475,321
 
                         
Sub-total
   
7,191,107
      
7,512,822
     
7,478,104
 
                         
The Philippines:
   
     
     
 
City of Dreams Manila
   
721,205
      
644,481
     
682,204
 
Cyprus:
   
     
     
 
Cyprus Operations
   
261,106
      
247,729
     
255,766
 
                         
Corporate and Other
   
1,315,004
      
716,964
     
734,748
 
                         
Total consolidated assets
  $
 
  9,488,422
     $
   9,121,996
    $
   9,150,822
 
                         
 
Capital Expenditures
 
Year Ended December 31,
 
  
2019
   
2018
   
2017
 
Macau:
   
     
     
 
Mocha Clubs
  $
     6,620
     $
8,973
    $
4,690
 
Altira Macau
   
17,707
      
24,450
     
5,776
 
City of Dreams
   
134,075
      
311,441
     
467,780
 
Studio City
   
89,846
      
73,189
     
37,174
 
                         
Sub-total
   
248,248
      
418,053
     
515,420
 
                         
The Philippines:
   
     
     
 
City of Dreams Manila
   
58,697
      
22,572
     
13,571
 
Cyprus:
   
     
     
 
Cyprus Operations
   
39,911
      
68,238
     
64,283
 
                         
Corporate and Other
   
124,265
      
54,109
     
30,051
 
                         
Total capital expenditures
  $
  471,121
     $
   562,972
    $
   623,325
 
                         
 
F-6
8
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
2
4
.
SEGMENT INFORMATION - continued
The Company’s segment information and reconciliation to net income attributable to Melco Resorts & Entertainment Limited is as follows:
 
Year Ended December 31,
 
  
2019
   
2018
   
2017
 
NET REVENUES
   
     
     
 
Macau:
   
     
     
 
Mocha Clubs
  $
   117,473
     $
  113,432
    $
  121,250
 
Altira Macau
   
465,056
      
471,292
     
446,132
 
City of Dreams
   
3,050,491
      
2,543,649
     
2,666,309
 
Studio City
   
1,355,321
      
1,368,400
     
1,363,405
 
   
 
 
    
 
 
    
 
 
  
Sub-total
   
4,988,341
      
4,496,773
     
4,597,096
 
                         
The Philippines:
   
     
     
 
City of Dreams Manila
   
602,479
      
612,947
     
649,276
 
Cyprus:
   
     
     
 
Cyprus Operations
   
94,731
      
32,951
     
—  
  
                         
Corporate and Other
   
51,250
      
46,271
     
38,451
 
                         
Total net revenues
  $
 5,736,801
     $
   5,188,942
    $
   5,284,823
 
                         
                         
ADJUSTED PROPERTY EBITDA
(1)
   
     
     
 
Macau:
   
     
     
 
Mocha Clubs
  $
  23,280
     $
  21,490
    $
  26,639
 
Altira Macau
   
51,470
      
55,547
     
20,671
 
City of Dreams
   
922,776
      
756,378
     
804,872
 
Studio City
   
415,098
      
375,288
     
335,568
 
                         
Sub-total
   
1,412,624
      
1,208,703
     
1,187,750
 
                         
The Philippines:
   
     
     
 
City of Dreams Manila
   
247,091
      
269,199
     
235,019
 
Cyprus:
   
     
     
 
Cyprus Operations
   
29,757
      
8,461
     
(15
 )
                         
Total adjusted property EBITDA
   
1,689,472
      
1,486,363
     
1,422,754
 
                         
OPERATING COSTS AND EXPENSES
   
     
     
 
Payments to the Philippine Parties
   
(57,428
 )     
(60,778
 )    
(51,661
 )
Pre-opening
costs
    
(4,847
 )     
(55,390
 )    
(5,331
 )
Development costs
   
(57,433
 )     
(23,029
 )    
(31,115
 )
Amortization of gaming subconcession
   
(56,841
 )     
(56,809
 )    
(57,237
 )
Amortization of land use rights
   
(22,659
 )     
(22,646
 )    
(22,817
 )
Depreciation and amortization
 
 
(571,705
)
 
 
(488,446
)
 
 
(460,521
)
Land rent to Belle
 
 
(3,061
)
 
 
(3,001
)
 
 
(3,143
)
Share-based compensation
 
 
(31,797
)
 
 
(25,143
)
 
 
(17,305
)
Property charges and other
 
 
(20,815
)
 
 
(29,147
)
 
 
(31,616
)
Corporate and Other expenses
 
 
(115,208
)
 
 
(108,527
)
 
 
(137,468
)
Total operating costs and expenses
 
 
(941,794
)
 
 
(872,916
)
 
 
(818,214
)
OPERATING INCOME
  
$
 747,678    
$
 613,447    
$
 604,540  
 
F-
69
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
24.
SEGMENT INFORMATION - continued
 
 
 
                         
 
Year Ended December 31,
 
 
2019
   
2018
   
2017
 
NON-OPERATING
INCOME (EXPENSES)
    
     
     
 
Interest income
  $
  9,311
     $
5,471
    $
3,580
 
Interest expenses, net of capitalized interest
   
(310,102
 )     
(264,880
 )    
(255,764
 )
Loan commitment and other finance fees
   
(2,738
 )     
(4,630
 )    
(6,079
 )
Foreign exchange (losses) gains, net
   
(10,756
 )     
(10,497
 )    
12,781
 
Other (expenses) income, net
   
(23,914
 )     
3,684
     
5,282
 
Loss on extinguishment of debt
   
(6,333
 )     
(3,461
 )    
(49,337
 )
Costs associated with debt modification
   
(579
 )     
—
      
(2,793
 )
Total
non-operating
expenses, net
    
(345,111
 )     
(274,313
 )    
(292,330
 )
INCOME BEFORE INCOME TAX
   
402,567
      
339,134
     
312,210
 
INCOME TAX (EXPENSE) CREDIT
    
(8,339
 )     
(238
 )    
10
 
NET INCOME
   
394,228
      
338,896
     
312,220
 
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
   
(21,055
 )     
1,403
     
32,608
 
NET INCOME ATTRIBUTABLE TO MELCO RESORTS & ENTERTAINMENT LIMITED
  $
  373,173
     $
340,299
    $
344,828
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note
  (1)
“Adjusted property EBITDA” is earnings before interest, taxes, depreciation, amortization, pre-opening costs, development costs, property charges and other, share-based compensation, payments to the Philippine Parties, land rent to Belle, Corporate and Other expenses, and other non-operating income and expenses. The Company uses Adjusted property EBITDA to measure the operating performance of Mocha Clubs, Altira Macau, City of Dreams, Studio City, City of Dreams Manila and Cyprus Operations and to compare the operating performance of its properties with those of its competitors.
 
 
 
 
 
 
 
 
 
 
The Company’s geographic information for long-lived assets is as follows:
Long-lived Assets
                         
 
December 31,
 
 
2019
   
2018
   
2017
 
Macau
  $
6,207,746
     $
6,287,324
    $
6,389,846
 
The Philippines
   
398,110
      
381,866
     
458,242
 
Cyprus
   
152,066
      
124,072
     
64,283
 
Hong Kong and other foreign countries
   
86,726
      
61,095
     
12,389
 
                         
Total long-lived assets
  $
  6,844,648
     $
6,854,357
    $
6,924,760
 
                         
 
 
 
 
 
 
 
 
 
 
 
F-7
0
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
25.
ACQUISITION OF SUBSIDIARIES
 
 
 
 
 
 
Acquisition of ICR Cyprus
On July 31, 2019, the Company completed its acquisition from Melco International of all of Melco International’s holding of ordinary shares of ICR Cyprus, which represents
a 75%
equity interest in ICR Cyprus (the “Acquisition of ICR Cyprus”) for a consideration
with the issuance
of 55,500,738
ordinary shares of Melco, which were equivalent
to 18,500,246
ADSs. The Acquisition of ICR Cyprus is accounted for as a transaction involving a transfer of business between entities under common control in accordance with the applicable accounting standards as disclosed in Note 2(a). Accordingly, the transfer of Melco International’s equity interest in ICR Cyprus to Melco is accounted for at carrying values of net assets transferred and the consideration in excess of the net assets of ICR Cyprus Group
of
 $192,304
was recognized as an
increase
 
in the Company’s additional
 
p
aid-in
capital.
Acquisition of Japan Ski Resort
On November
28
, 2019, the Company completed its acquisition of 100%
equity interest in Kabushiki Kaisha Okushiga Kogen Resort (the “Japan Ski Resort”), a company currently operates a ski resort in Nagano, Japan, for a cash consideration of
 
1,685,000,000
Japanese Yen
(equivalent to $15,394
),
 
for its business development in Japan. The acquisition was
not m
ate
ri
al
to the Company’s consolidated financial statements. In connection with this acquisition, the Company recorded a goodwill
of $13,731
which is primarily attributable to the benefit of future market development of the Company and is not deductible for tax purposes. Acquisition-related costs were expensed as incurred and were not significant.
The Company accounted for the acquisition as business combinations in accordance with the applicable accounting standards and recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date.
 
The Company estimated fair value using level 2 inputs, which are observable
inputs
for similar assets, and level 3 inputs, which are unobservable inputs, for other acquired assets and assumed liabilities. Given how recently the acquisition was completed, the allocation of fair value for assets acquired and liabilities assumed is preliminary and may be adjusted up to
one
year after the acquisition.
For the period from November 28, 2019 through December 31, 2019, Japan Ski Resort’s net revenue, operating income and net income were not material. Pro forma results of operations for the acquisition have not been presented because it is not material to the consolidated results of operations.
 
26.
CHANGE IN SHAREHOLDING OF THE SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
The Philippine subsidiaries
During the year ended December 31, 2017, 1,040,485 share options under the MRP Share Incentive Plan were exercised, which decreased Melco’s shareholding in MRP and the Company recognized an increase of $96 in Melco’s additional
paid-in
capital which reflected the adjustment to the carrying amount of the noncontrolling interest in MRP.
During the years ended December 31, 2018 and 2017, 20,506,393 and 2,826,644 restricted shares under the MRP Share Incentive Plan were vested, which decreased Melco’s shareholding in MRP and the Company recognized a decrease of $573 and $67, respectively, in Melco’s additional
paid-in
capital which reflected the adjustment to the carrying amount of the noncontrolling interest in MRP.
On October 31, 2018, MCO (Philippines) Investments Limited (“MCO Investments”), a subsidiary of Melco, conducted a voluntary tender offer (the “Tender Offer”) for up to 1,569,786,768 outstanding
F-71
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
26.
CHANGE IN SHAREHOLDING OF THE SUBSIDIARIES - continued
 
 
 
 
 
 
 
 
 
 
 
The Philippine subsidiaries - continued
common shares of MRP held by the public, at a price of PHP7.25 (equivalent to $0.14) per share, for the purpose of increasing and consolidating its shareholding interest in MRP. The Tender Offer expired on November 29, 2018 and 1,338,477,668 outstanding common shares of MRP were tendered and acquired by MCO Investments at the offer price of PHP7.25 (equivalent to $0.14) per MRP share for a total amount of PHP9,703,963,000 (equivalent to $184,055) and were crossed (the “Cross Transaction”) over the facilities of the PSE on December 10, 2018. An additional 107,475,300 common shares of MRP were acquired by MCO Investments from December 6, 2018 until December 10, 2018 
at a total consideration of PHP
779,196,000
(equivalent to $
14,779
). After the Cross Transaction, MRP’s public ownership level fell below the
10
% required threshold over the Minimum Public Ownership Rules of the PSE. As a result, the shares of MRP were automatically suspended for trading by the PSE on
December 10, 2018
. MRP was automatically
delisted
from the PSE on June 
11
,
2019
, by reason of its public ownership remaining below the
10
% minimum threshold prescribed under the PSE’s Rule on Minimum Public Ownership for a period of more than six months. The above transactions increased
Melco
’s shareholding in MRP and the Company recognized a decrease of $
140,999
in
Melco
’s additional
paid-in
capital which
reflected
the adjustment to the carrying amount of the
noncontrolling
interest in MRP. 
During the year ended December 31, 2019, MRP issued and the independent directors subscribed for 1,493,900 common shares of MRP with a par value of PHP1 per share, for a total consideration of PHP1,494,000 (equivalent to $30), which decreased Melco’s shareholding in MRP and the Company recognized a decrease of $30 in Melco’s additional
paid-in
capital which reflected the adjustment to the carrying amount of noncontrolling interest in MRP.
During the years ended December 31, 2019 and 2018, the total transfers to noncontrolling interests amounted to $30 and $141,572, respectively, and during the year ended December 31, 2017, the total transfers from noncontrolling interests amounted to $29, in relation to transactions as described above. The Com
pany retain
s its controlling financial interests in MRP before and after the above transactions.
Studio City International
During the year ended December 31, 2018, Studio City International completed its initial public offering. In connection with its offering, Studio City International issued (i) 28,750,000 ADSs, representing 115,000,000 Class A ordinary shares, (ii) 800,376 Class A ordinary shares to Melco International to effect an assured entitlement distribution, pursuant to a concurrent private placement, and (iii) additional 4,312,500 ADSs, representing 17,250,000 Class A ordinary shares, pursuant to the full exercise by the underwriters of the over-allotment option. The offering decreased Melco’s shareholding in Studio City International and the Company recognized a decrease of $31,845 in Melco’s additional
paid-in
capital which reflected the adjustment to the carrying amount of the noncontrolling interest in Studio City International. The Company retains its controlling financial interests in Studio City International before and after the above
transactions
.
F-72
Table of Contents
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
26.
CHANGE IN SHAREHOLDING OF THE SUBSIDIARIES - continued
The schedule below discloses the effects of changes in Melco’s
ownership
interest in MRP and Studio City International on Melco’s equity:
                         
 
Year Ended December 31,
  
 
2019
   
2018
   
2017
 
Net income attributable to Melco Resorts & Entertainment Limited
  $
 
373,173
     $
340,299
    $
344,828
 
t
ransfers (to) from noncontrolling interests:
   
     
     
 
                         
The Philippine subsidiaries
 
 
 
  
 
 
  
 
 
Decrease in additional
paid-in
capital resulting from the issuance of common shares of MRP to independent directors
    
(30
 )     
—  
      
—  
  
Decrease in additional
paid-in
capital resulting from purchases of common shares of MRP from the open market and the Tender Offer
    
—  
      
(140,999
 )    
—  
  
Decrease in additional
paid-in
capital resulting from the vesting of restricted shares under the MRP Share Incentive Plan
    
—  
      
(573
 )    
(67
 )
Increase in additional
paid-in
capital resulting from the exercise of share options under the MRP Share Incentive Plan
    
—  
      
—  
      
96
 
                         
Sub-total
   
(30
 )     
(141,572
 )    
29
 
                         
                         
Studio City International
 
 
 
  
 
 
  
 
 
Decrease in additional
paid-in
capital resulting from an initial public offering of Studio City International
    
—  
      
(31,845
 )    
—  
  
                         
Sub-total
   
—  
      
(31,845
 )    
—  
  
                         
Changes from net income attributable to Melco Resorts & Entertainment Limited’s shareholders and transfers from noncontrolling interests
  $
 373,143
     $
166,882
    $
   344,857
 
                         
 
 
 
 
 
 
 
 
 
 
27.
SUBSEQUENT EVENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In connection with the outbreak of the coronavirus (Covid-19) in the first quarter of 2020, severe travel restrictions, temporary business closures and other prohibitions have been imposed by the People’s Republic of China (“PRC”), Macau, the Philippines, Cyprus and other countries throughout the world, which has significantly disrupted the Company’s operations. On February 5, 2020, the Company’s Macau casino operations were suspended for a 15-day period. On February 20, 2020, casino operations resumed in Macau with limited visitation from Hong Kong, Taiwan and certain regions of the PRC among other countries. In March 2020, the Macau government, the Hong Kong government and several provinces in the PRC, including Guangdong, imposed further entry bans, restrictions and quarantine requirements on nearly all visitors traveling to and from Macau, which is expected to significantly impact the Company’s casino and resort operations.
On March 15, 2020, PAGCOR ordered the suspension of all casino operations in Metro Manila, which includes the City of Dreams Manila, from March 16, 2020 until April 14, 2020, subject to further review and change.
 
F-73
MELCO RESORTS & ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(In thousands of U.S. dollars, except share and per share data)
27.
SUBSEQUENT EVENT - continued
 
 
 
Also on March 15, 2020 and thereafter, the Cyprus government suspended the Company’s casino operations in Cyprus for four weeks from March 16, 2020 and placed restrictions on non-essential social and business activities from March 24, 2020 to April 13, 2020 such as suspension of most construction work within the country, including construction work at City of Dreams Mediterranean development. The restriction dates are subject to further review and change by the Cyprus government.
The Covid-19 outbreak and the related events have also caused severe disruptions to the Company’s resort tenants and other business partners, which may increase the risk of these entities defaulting on their contractual obligations with the Company.
The disruptions to the Company’s business had material adverse effects on its financial condition and operations during the first quarter of 2020. As the disruptions are ongoing, the Company expects such adverse effects will continue, and may worsen beyond the first quarter of 2020. The Company is unable to reasonably estimate the financial impact to the Company’s future results of operations, cash flows and financial condition due to uncertainties surrounding the business closures, travel restrictions and other events related to the Covid-19 outbreak.
F-74
EX-2.28

Exhibit 2.28

Execution Version

MELCO RESORTS FINANCE LIMITED

as Company

5.250% SENIOR NOTES DUE 2026

 

 

INDENTURE

April 26, 2019

 

 

and

DEUTSCHE BANK TRUST COMPANY AMERICAS

as Trustee, Paying Agent, Registrar and Transfer Agent

TABLE OF CONTENTS

 

          Page
ARTICLE 1
DEFINITIONS

Section 1.01

    Definitions    4

Section 1.02

    Other Definitions    16

Section 1.03

    Rules of Construction    16
     
ARTICLE 2
THE NOTES

Section 2.01

    Form and Dating    17

Section 2.02

    Execution and Authentication    17

Section 2.03

    Registrar and Paying Agent    18

Section 2.04

    Paying Agent to Hold Money in Trust    18

Section 2.05

    Holder Lists    19

Section 2.06

    Transfer and Exchange    19

Section 2.07

    Replacement Notes    28

Section 2.08

    Outstanding Notes    29

Section 2.09

    Treasury Notes    29

Section 2.10

    Temporary Notes    29

Section 2.11

    Cancellation    29

Section 2.12

    Defaulted Interest    30

Section 2.13

    Additional Amounts    30

Section 2.14

    Agents    32
     
ARTICLE 3
REDEMPTION AND PREPAYMENT

Section 3.01

    Notices to Trustee    33

Section 3.02

    Selection of Notes to Be Redeemed or Purchased    33

Section 3.03

    Notice of Redemption    33

Section 3.04

    Effect of Notice of Redemption    34

Section 3.05

    Deposit of Redemption or Purchase Price    35

Section 3.06

    Notes Redeemed or Purchased in Part    35

Section 3.07

    Optional Redemption    35

Section 3.08

    Mandatory Redemption    36

Section 3.09

    Redemption for Taxation Reasons    36

Section 3.10

    Gaming Redemption    37
     
ARTICLE 4
COVENANTS

Section 4.01

    Payment of Notes    38

Section 4.02

    Maintenance of Office or Agency    38

Section 4.03

    Reports    39

Section 4.04

    Compliance Certificate    40

Section 4.05

    Taxes    41

Section 4.06

    Stay, Extension and Usury Laws    41

Section 4.07

    Corporate Existence    41

Section 4.08

    Offer to Repurchase upon Change of Control    41

Section 4.09

    Listing    43

Section 4.10

    Special Put Option      43  
     
ARTICLE 5

 

SUCCESSORS

 

Section 5.01

    Merger, Consolidation, or Sale of Assets      45  

Section 5.02

    Successor Corporation Substituted      45  
     
ARTICLE 6

 

DEFAULTS AND REMEDIES

 

Section 6.01

    Events of Default      45  

Section 6.02

    Acceleration      47  

Section 6.03

    Other Remedies      47  

Section 6.04

    Waiver of Past Defaults      47  

Section 6.05

    Control by Majority      48  

Section 6.06

    Limitation on Suits      48  

Section 6.07

    Rights of Holders to Receive Payment      48  

Section 6.08

    Collection Suit by Trustee      49  

Section 6.09

    Trustee May File Proofs of Claim      49  

Section 6.10

    Priorities      49  

Section 6.11

    Undertaking for Costs      50  
     
ARTICLE 7

 

TRUSTEE

 

Section 7.01

    Duties of Trustee      50  

Section 7.02

    Rights of Trustee      51  

Section 7.03

    [Intentionally Omitted.]      53  

Section 7.04

    Individual Rights of Trustee      53  

Section 7.05

    Trustee’s Disclaimer      53  

Section 7.06

    Notice of Defaults      54  

Section 7.07

    [Intentionally Omitted.]      54  

Section 7.08

    Compensation and Indemnity      54  

Section 7.09

    Replacement of Trustee      55  

Section 7.10

    Successor Trustee by Merger, etc      56  

Section 7.11

    Eligibility; Disqualification      56  

Section 7.12

    Appointment of Co-Trustee      56  

Section 7.13

    [Intentionally Omitted]      57  

Section 7.14

    Resignation of Agents      57  

Section 7.15

    Rights of Trustee in Other Roles      57  
     
ARTICLE 8

 

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

Section 8.01

    Option to Effect Legal Defeasance or Covenant Defeasance      57  

Section 8.02

    Legal Defeasance and Discharge      58  

Section 8.03

    Covenant Defeasance      58  

Section 8.04

    Conditions to Legal or Covenant Defeasance      59  

Section 8.05

    Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions      60  

Section 8.06

    Repayment to Company      60  

Section 8.07

    Reinstatement      61  

 

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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01

    Without Consent of Holders of Notes    61

Section 9.02

    With Consent of Holders of Notes    62

Section 9.03

    Supplemental Indenture    63

Section 9.04

    Revocation and Effect of Consents    63

Section 9.05

    Notation on or Exchange of Notes    63

Section 9.06

    Trustee to Sign Amendments, etc.    63
     
ARTICLE 10
[INTENTIONALLY OMITTED]
     
ARTICLE 11
     
ARTICLE 12
SATISFACTION AND DISCHARGE

Section 12.01

    Satisfaction and Discharge    64

Section 12.02

    Application of Trust Money    65
     
ARTICLE 13
MISCELLANEOUS

Section 13.01

    [Intentionally Omitted]    65

Section 13.02

    Notices    65

Section 13.03

    Communication by Holders of Notes with Other Holders of Notes    66

Section 13.04

    Certificate and Opinion as to Conditions Precedent    66

Section 13.05

    Statements Required in Certificate or Opinion    67

Section 13.06

    Rules by Trustee and Agents    67

Section 13.07

    No Personal Liability of Directors, Officers, Employees and Stockholders    67

Section 13.08

    Governing Law    67

Section 13.09

    No Adverse Interpretation of Other Agreements    67

Section 13.10

    Successors    68

Section 13.11

    Severability    68

Section 13.12

    Counterpart Originals    68

Section 13.13

    Table of Contents, Headings, etc.    68

Section 13.14

    Patriot Act    68

Section 13.15

    Submission to Jurisdiction; Waiver of Jury Trial    68
     
EXHIBITS

Exhibit A

    FORM OF NOTE    A-1

Exhibit B

    FORM OF CERTIFICATE OF TRANSFER    B-1

Exhibit C

    FORM OF CERTIFICATE OF EXCHANGE    C-1

 

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INDENTURE dated as of April 26, 2019, between Melco Resorts Finance Limited, an exempted company incorporated with limited liability in the Cayman Islands (the “Company”) and Deutsche Bank Trust Company Americas, a New York banking corporation, as Trustee, Paying Agent, Registrar and Transfer Agent.

Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined herein) of the 5.250% Senior Notes due 2026 (the “Notes”):

ARTICLE 1

DEFINITIONS

 

  Section

1.01     Definitions.

“144A Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“Additional Notes” means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.02 hereof, as part of the same series as the Initial Notes; provided that any Additional Notes that are not fungible with the Notes for U.S. federal income tax purposes shall have a separate CUSIP number than any previously issued Notes, unless the Notes and the Additional Notes are issued with no more than a de minimis amount of original issue discount for U.S. federal income tax purposes, but shall otherwise be treated as a single class with all other Notes issued under this Indenture.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Agent” means any Registrar, co-registrar, Paying Agent, Transfer Agent or additional paying agents or transfer agents.

“Applicable Premium” means, with respect to any Note on any redemption date, the greater of:

(1)        1.0% of the principal amount of the Note; or

(2)        the excess of: (a) the present value at such redemption date of (i) the redemption price of the Note at April 26, 2022 (such redemption price being set forth in the table appearing in Section 3.07 hereof) plus (ii) all required interest payments due on the Note through April 26, 2022 (excluding accrued but unpaid interest to but excluding the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the principal amount of the Note. For the avoidance of doubt, the calculation of the Applicable Premium shall not be a duty or obligation of the Trustee, the Paying Agent, the Registrar or the Transfer Agent.

 

4

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

“Bankruptcy Law” means (i) the United States Bankruptcy Code of 1978 or any similar U.S. federal or state law for the relief of debtors, (ii) the provisions of the Code of Civil Procedure of Macau that deal with the placement of a debtor into liquidation, the administration and disposal of its assets, the distribution of the proceeds thereof and the alternatives to such liquidation, or any laws of similar effect, and (iii) the provisions of Part V of the Companies Law (Revised) of the Cayman Islands that deal with the winding up or liquidation of a company or any other Cayman Islands law of similar effect.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

“Board of Directors” means:

(1)        with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

(2)        with respect to a partnership, the board of directors of the general partner of the partnership;

(3)        with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

(4)        with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means any day other than a Legal Holiday.

“Capital Stock” means:

(1)        in the case of a corporation, corporate stock;

(2)        in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3)        in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

(4)        any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

 

5

“Change of Control” means the occurrence of any of the following:

(1)        the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d) of the Exchange Act) (other than a Sponsor or a Related Party of a Sponsor);

(2)        the adoption of a plan relating to the liquidation or dissolution of the Company;

(3)        either (i) the Sponsor ceases collectively to beneficially own, directly or indirectly, at least 30% of the outstanding Capital Stock of the Parent (including any and all agreements, warrants, rights or options to acquire any Capital Stock) (measured in each case, by both voting power and size of equity interests), or (ii) the Parent ceases to beneficially own, directly or indirectly, at least 51% of the outstanding Capital Stock of Melco Resorts Macau (including any and all agreements, warrants, rights or options to acquire any Capital Stock) (measured in each case, by both voting power and size of equity interests); or

(4)        the first day on which Parent ceases to own, directly or indirectly, 100% of the outstanding Equity Interests of the Company.

“Change of Control Triggering Event” means the occurrence of a Change of Control and a Ratings Decline.

“Clearstream” means Clearstream Banking, société anonyme.

“Company” means Melco Resorts Finance Limited, and any and all successors thereto.

“Corporate Trust Office of the Trustee” will be the designated corporate trust office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of original execution of this Indenture is located at (i) for purposes of surrender, transfer or exchange of any Notes, Deutsche Bank Trust Company Americas, c/o DB Services Americas, Inc., 5022 Gate Parkway, Suite 200, Jacksonville, FL 32256, Attn: Transfer Department and (ii) for all other purposes, Deutsche Bank Trust Company Americas, Trust and Agency Services, 60 Wall Street, 16th Floor, MS NYC 60-1630, New York, New York 10005, USA, Attention: Corporate Team/Melco Resorts Finance Limited or at any other time at such other address as the Trustee may designate from time to time by notice to the parties hereto or at the designated corporate trust office of any successor trustee as to which such successor trustee may notify the parties hereto in writing.

“Custodian” means Deutsche Bank Trust Company Americas, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

 

6

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Equity Offering” means any public sale or private issuance of Capital Stock (other than Disqualified Stock) of (1) the Company or (2) a direct or indirect parent of the Company to the extent the net proceeds from such issuance are contributed in cash to the common equity capital of the Company (in each case other than pursuant to a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).

“Euroclear” means Euroclear Bank SA/NV.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“GAAP” means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

“Gaming Authorities” means, in any jurisdiction in which the Company or any of its Subsidiaries or the Sponsor manages or conducts any casino, gaming business or activities, the applicable gaming board, commission, or other governmental gaming regulatory body or agency which (a) has, or may at any time after issuance of the Notes have, jurisdiction over the gaming activities of the Company or any of its Subsidiaries, or any successor to such authority or (b) is, or may at any time after the issuance of the Notes be, responsible for interpreting, administering and enforcing the Gaming Laws.

“Gaming Laws” means all applicable constitutions, treatises, resolutions, laws, regulations, instructions and statutes pursuant to which any Gaming Authority possesses regulatory, licensing or permit authority over gaming, gambling or casino activities, and all rules, rulings, orders, ordinances, regulations of any Gaming Authority applicable to the gambling, casino, gaming businesses or activities of Melco Resorts Macau (or any other operator of the casino including the Sponsor or any of its Affiliates) or the Company or any of its Subsidiaries or the Sponsor in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities.

“Gaming License” means the license, concession, subconcession or other authorization from any Government Authority which authorizes, permits, concedes or allows the Company or any of its Subsidiaries, at the relevant time, to own or manage casino or gaming areas or operate casino games of fortune and chance.

 

7

“Global Note Legend” means the legend set forth in Section 2.06(f)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the Depositary or its nominee, substantially in the form of Exhibit A hereto and that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, issued in accordance with Sections 2.01, 2.06(b)(3), 2.06(b)(4), and with Section 2.06(d)(2) or 2.06(f) hereof.

“Governmental Authority” means the government of the Macau SAR or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1)        interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

(2)        other agreements or arrangements designed to manage interest rates or interest rate risk; and

(3)        other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“Holder” means a Person in whose name a Note is registered.

“Incur” means, with respect to any Indebtedness, Capital Stock or other Obligation of any Person, to create, issue, assume, guarantee, incur (by conversion, exchange, or otherwise) or otherwise become liable in respect of such Indebtedness, Capital Stock or other Obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other Obligation on the balance sheet of such Person. Indebtedness or Capital Stock otherwise Incurred by a Person before it becomes a Subsidiary of the Company shall be deemed to be Incurred at the time at which such Person becomes a Subsidiary of the Company. The accretion of original issue discount, the accrual of interest, the accrual of dividends, the payment of interest in the form of additional Indebtedness and the payment of dividends on preferred stock in the form of additional shares of preferred stock shall not be considered an Incurrence of Indebtedness.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:

(1)        in respect of borrowed money;

 

8

(2)        evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3)        in respect of banker’s acceptances;

(4)        representing capital lease obligations;

(5)        representing the balance deferred and unpaid of the purchase price of any property or services due more than one year after such property is acquired or such services are completed; or

(6)        representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

Notwithstanding the foregoing, “Indebtedness” will not include Shareholder Subordinated Debt (other than for purposes of the definition of “Shareholder Subordinated Debt”). In addition “Indebtedness” will not include (i) any capital commitments, deposits or advances from customers or any contingent obligations to refund payments (including deposits) to customers (or any guarantee thereof), or (ii) obligations of the Company or any of its Subsidiaries to pay the deferred and unpaid purchase price of property or services due to suppliers of equipment or other assets (including parts thereof) not more than one year after such property is acquired or such services are completed and the amount of unpaid purchase price retained by the Company or any of its Subsidiaries in the ordinary course of business in connection with an acquisition of equipment or other assets (including parts thereof) pending full operation or contingent on certain conditions during a warranty period of such equipment or assets in accordance with the terms of the acquisition; provided that, in each case, such Indebtedness is not reflected as borrowings on the consolidated balance sheet of the Company (contingent obligations and commitments referred to in a footnote to financial statements and not otherwise reflected as borrowings on the balance sheet will not be deemed to be reflected on such balance sheet); or (iii) any lease of property which would be considered an operating lease under GAAP and any guarantee given by the Company or any of its Subsidiaries in the ordinary course of business solely in connection with, or in respect of, the obligations of the Company and its Subsidiaries under any operating lease.

The amount of Indebtedness of any Person at any time shall be the outstanding balance at such time of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that:

(A)        the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP;

(B)        money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest; and

 

9

(C)        the amount of or the principal amount of Indebtedness with respect to any Hedging Obligation shall be equal to the net amount payable if such Hedging Obligation terminated at or prior to that time due to a default by such Person.

“Indenture” means this Indenture, as amended or supplemented from time to time.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

“Initial Notes” means the first US$500,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof.

“Initial Purchasers” means Deutsche Bank AG, Singapore Branch, Australia and New Zealand Banking Group Limited, Bank of Communications Co., Ltd. Macau Branch, BOCI Asia Limited, Industrial and Commercial Bank of China (Macau) Limited, Mizuho Securities Asia Limited and any of their respective subsidiaries or Affiliates.

“Investment Grade” means a rating of BBB- or better by S&P (or its equivalent under any successor rating category of S&P), a rating of BBB- or better by Fitch (or its equivalent under any successor rating category of Fitch), a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating category of Moody’s), and the equivalent ratings of any other “nationally recognized statistical rating organization” that is registered as such pursuant to Section 15E of the Exchange Act and Rule 17g thereunder selected by the Company as having been substituted as a Rating Agency for S&P, Fitch or Moody’s, as the case may be.

“Issue Date” means the date on which the Notes (other than any Additional Notes) are originally issued.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the Cayman Islands, the City of New York, Hong Kong, Macau or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Melco Resorts Macau” means Melco Resorts (Macau) Limited, formerly known as Melco Crown (Macau) Limited.

“Moody’s” means Moody’s Investors Service, Inc. and any of its successors.

“Non-U.S. Person” means a Person who is not a U.S. Person.

“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes.

 

10

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Memorandum” means the offering memorandum dated April 17, 2019 in respect of the Notes.

“Officer” means the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, any Executive Vice President, Senior Vice President or Vice President, Treasurer or Secretary of the Company, or any Director of the Board of the Company or any Person acting in that capacity.

“Officer’s Certificate” means a certificate signed on behalf of the Company by an Officer of the Company which meets the requirements of Section 13.05 hereof.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee, or the Registrar (as applicable), that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company.

“Parent” means Melco Resorts & Entertainment Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands.

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Private Placement Legend” means the legend set forth in Section 2.06(f)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Rating Agencies” means any of (i) S&P, (ii) Moody’s, (iii) Fitch or (iv) if any or all of them shall not make a rating of the Notes publicly available, any other “nationally recognized statistical rating organization” that is registered as such pursuant to Section 15E of the Exchange Act and Rule 17g thereunder selected by the Company as a replacement agency.

“Rating Category” means (1) with respect to S&P, any of the following categories: “AAA,” “AA,” “A,” “BBB,” “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories); (2) with respect to Moody’s, any of the following categories: “Aaa,” “Aa,” “A,” “Baa,” “Ba,” “B,” “Caa,” “Ca,” “C” and “D” (or equivalent successor categories); (3) with respect to Fitch, any of the following categories “AAA,” “AA,” “A,” “BBB,” “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories) and (4) the equivalent of any such category of S&P, Moody’s or Fitch used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (“+” and “-” for S&P and Fitch; “1,” “2” and “3” for Moody’s; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from “BB+” to “BB,” as well as from “B+” to “B-,” will constitute a decrease of one gradation).

 

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“Rating Date” means that date which is 90 days prior to the earlier of (x) a Change of Control and (y) a public notice of the occurrence of a Change of Control or of the intention by the Company or any other Person or Persons to effect a Change of Control.

“Ratings Decline” means the occurrence on, or within six months after, the date, or public notice of the occurrence of any of the events set forth in clauses (1) to (4) of the definition of Change of Control or the announcement by the Company or any other Person or Persons of the intention by the Company or such other Person or Persons to effect a Change of Control (which period will be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the events listed below:

(1)        in the event either the Notes or the Company is rated by two Rating Agencies on the Rating Date as Investment Grade, such rating of the Notes or the Company by either such Rating Agency shall be below Investment Grade;

(2)        in the event either the Notes or the Company is rated by one, and only one, of the Rating Agencies on the Rating Date as Investment Grade, such rating of the Notes or the Company by such Rating Agency shall be below Investment Grade; or

(3)        in the event either the Notes or the Company is rated below Investment Grade by any two Rating Agencies on the Rating Date, such rating of the Notes or the Company by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories); provided that, for a decline that occurs during the review period subsequent to the initial occurrence, public notice or notice of intention, such decline will only qualify as a Ratings Decline if (i) such Rating Agencies’ published report refers to the Change of Control as a factor, or one of the factors in the downgrade, and (ii) such Rating Agencies have not previously affirmed their ratings following the initial occurrence, public notice or notice of intention.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of Regulation S.

“Related Party” means:

(1)        any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of the Sponsor; or

(2)        any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of the Sponsor and/or such other Persons referred to in the immediately preceding clause (1).

“Responsible Officer” when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee (or any successor of the Trustee) who shall have direct responsibility for the administration of the Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

 

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“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“Restricted Period” means the 40-day distribution compliance period as defined in Regulation S.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“S&P” means Standard & Poor’s Ratings Group and any of its successors.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Senior Credit Agreement” means the credit facilities entered into pursuant to an amendment and restatement agreement dated June 19, 2015, as amended from time to time, between, among others, Melco Resorts Macau, Deutsche Bank AG, Hong Kong Branch as agent and DB Trustees (Hong Kong) Limited as security agent, in a total amount of HK$13.65 billion (equivalent to approximately US$1.75 billion), comprising a HK$3.90 billion (equivalent to approximately US$500 million) term loan facility and a HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility and any incremental facilities thereunder, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such agreement may be further amended, modified or extended from time to time in compliance with the terms of the Indenture, and any refinancing thereof.

“SGX-ST” means the Singapore Exchange Securities Trading Limited or its successor.

“Shareholder Subordinated Debt” means, collectively, any debt provided to the Company by any direct or indirect parent holding company of the Company (or the Sponsor), in exchange for or pursuant to any security, instrument or agreement other than Capital Stock, together with any such security, instrument or agreement and any other security or instrument other than Capital Stock issued in payment of any obligation under any Shareholder Subordinated Debt; provided that such Shareholder Subordinated Debt:

(1)        does not (including upon the happening of any event) mature or require any amortization or other payment of principal prior to the first anniversary of the maturity of the Notes (other than through conversion or exchange of any such security or instrument for Equity Interests of the Company (other than Disqualified Stock) or for any other security or instrument meeting the requirements of the definition);

 

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(2)        does not (including upon the happening of any event) require the payment of cash interest prior to the first anniversary of the maturity of the Notes;

(3)        does not (including upon the happening of any event) provide for the acceleration of its maturity nor confer on its shareholders any right (including upon the happening of any event) to declare a default or event of default or take any enforcement action, in each case, prior to the first anniversary of the maturity of the Notes;

(4)        is not secured by a Lien on any assets of the Company or any of its Subsidiaries and is not guaranteed by any Subsidiary of the Company;

(5)        is subordinated in right of payment to the prior payment in full in cash of the Notes in the event of any default, bankruptcy, reorganization, liquidation, winding up or other disposition of assets of the Company;

(6)        does not (including upon the happening of any event) restrict the payment of amounts due in respect of the Notes or compliance by the Company with its Obligations under the Notes and this Indenture; and

(7)        is not (including upon the happening of any event) mandatorily convertible or exchangeable, or convertible or exchangeable at the option of the holder, in whole or in part, prior to the date on which the Notes mature other than into or for Capital Stock (other than Disqualified Stock) of the Company.

“Significant Subsidiary” means any Subsidiary that contributed at least (i) 10% of the total consolidated net income of the Company and its Subsidiaries for the most recently completed fiscal year, or (ii) 10% of the total consolidated assets of the Company and its Subsidiaries as of the end of the most recently completed fiscal year.

“Special Put Option Triggering Event” means:

(1)        any event after which none of the Company or any Subsidiary of the Company has such licenses, concessions, subconcessions or other permits or authorizations as are necessary for the Company and its Subsidiaries to own or manage casino or gaming areas or operate casino games of fortune and chance in Macau in substantially the same manner and scope as the Company and its Subsidiaries are entitled to at the Issue Date, for a period of ten consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole; or

(2)        the termination, rescission, revocation or modification of any Gaming License which has had a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole.

“Sponsor” means Melco International Development Limited.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the Issue Date, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

 

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“Subsidiary” means, with respect to any specified Person:

(1)        any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholder’s agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2)        any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to April 26, 2022; provided, however, that if the period from the redemption date to April 26, 2022 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

“Trustee” means Deutsche Bank Trust Company Americas until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“Unrestricted Definitive Note” means a Definitive Note that does not bear and is not required to bear the Private Placement Legend.

“Unrestricted Global Note” means a Global Note that does not bear and is not required to bear the Private Placement Legend.

“U.S. Government Obligations” means securities that are:

 

  (1)

direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

 

  (2)

obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in each case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt.

 

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“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

Section 1.02     Other Definitions.

 

Term

    Defined in
Section		  

“Additional Amounts”

      2.13  

“Applicable Law”

      13.14  

“Authentication Order”

      2.02  

“Change of Control Offer”

      4.08  

“Change of Control Payment”

      4.08  

“Change of Control Payment Date”

      4.08  

“Covenant Defeasance”

      8.03  

“DTC”

      2.03  

“Event of Default”

      6.01  

“Legal Defeasance”

      8.02  

“Paying Agent”

      2.03  

“Registrar”

      2.03  

“Relevant Jurisdiction”

      2.13  

“Special Put Option Offer”

      4.10  

“Special Put Option Payment”

      4.10  

“Taxes”

      2.13  

“Transfer Agent”

      2.03  

Section 1.03    Rules of Construction.

Unless the context otherwise requires:

(1)        a term has the meaning assigned to it;

(2)        an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3)        “or” is not exclusive;

(4)        words in the singular include the plural, and in the plural include the singular;

(5)        “will” shall be interpreted to express a command;

(6)        provisions apply to successive events and transactions; and

(7)        references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.

 

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ARTICLE 2

THE NOTES

Section 2.01     Form and Dating.

(a)        General. The Notes and the Trustee’s certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof.

The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b)        Global Notes. Notes issued in global form will be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Registrar, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

(c)        Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions—Clearstream Banking, Luxembourg” and “Customer Handbook” of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Global Note that are held by Participants through Euroclear or Clearstream.

Section 2.02     Execution and Authentication.

At least one Officer must sign the Notes for the Company by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.

A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee will, upon receipt of a written order of the Company signed by an Officer (an “Authentication Order”), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Company pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof.

 

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The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03     Registrar and Paying Agent.

The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”). The Company will also maintain a transfer agent (the “Transfer Agent”). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Company may change any Paying Agent, Transfer Agent or Registrar without notice to any Holder and shall so notify the Trustee and each Paying Agent thereof in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar, Transfer Agent or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent, Transfer Agent or Registrar.

The Company initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Company initially appoints Deutsche Bank Trust Company Americas to act as the Registrar, Transfer Agent and Paying Agent and to act as Custodian, with respect to the Global Notes.

If and for so long as the Notes are listed on the SGX-ST, and the rules of the SGX-ST so require, in the event that the Global Notes are exchanged for certificated Notes, the Company will appoint and maintain a paying agent in Singapore where the certificated Notes may be presented or surrendered for payment or redemption. In the event that the Global Notes are exchanged for certificated Notes, an announcement of such exchange shall be made by or on behalf of the Company through the SGX-ST and such announcement will include all material information with respect to the delivery of the certificated Notes, including details of the Singapore paying agent by way of an announcement to the SGX-ST, for so long as the Notes are listed on the SGX-ST.

Section 2.04     Paying Agent to Hold Money in Trust.

The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Amounts, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes.

 

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Section 2.05     Holder Lists.

The Registrar will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders. If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes.

Section 2.06     Transfer and Exchange.

(a)        Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if:

(1)        the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary;

(2)        the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or

(3)        there has occurred and is continuing a Default or Event of Default with respect to the Notes.

Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

(b)        Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(1)        Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).

 

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(2)         All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either:

(A)     both:

(i)         a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii)         instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or

(B)     both:

(i)         a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii)         instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above.

Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(g) hereof.

(3)         Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(A)         if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and

(B)         if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.

 

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(4)        Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(i)        if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(ii)        if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to the paragraph above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to the paragraph above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

(c)        Transfer or Exchange of Beneficial Interests for Definitive Notes.

(1)        Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A)        if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

(B)        if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

 

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(C)        if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D)        if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E)        if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F)        if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(2)        Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if the Registrar receives the following:

(i)        if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(ii)        if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

 

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(3)        Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will not bear the Private Placement Legend.

(d)        Transfer and Exchange of Definitive Notes for Beneficial Interests.

(1)        Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A)        if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B)        if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C)        if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D)        if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E)        if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F)        if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

 

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the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Note.

(2)        Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following:

(i)        if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(ii)        if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(3)        Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (1)(B), (1)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e)        Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

 

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(1)        Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(A)        if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B)        if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C)        if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates required by item (3) thereof, if applicable.

(2)        Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:

(i)        if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(ii)        if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(3)        Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f)        Legends.     The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

 

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(1)        Private Placement Legend.

(A)        Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER FOR THE BENEFIT OF THE COMPANY AND ANY OF ITS SUCCESSORS IN INTEREST (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS [IN THE CASE OF RULE 144A NOTES: ONE YEAR] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY [RULE 144A] [REGULATION S] UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE DATE OF ORIGINAL ISSUE AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THE NOTES (OR ANY PREDECESSOR THERETO) (THE “RESALE RESTRICTION TERMINATION DATE”) RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE OR A BENEFICIAL INTEREST IN THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON THAT THE SELLER, AND ANY PERSON ACTING ON ITS BEHALF, REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF SUCH CASES IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (D) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THAT AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, THE TRUSTEE AND THE REGISTRAR IS COMPLETED AND DELIVERED BY THE TRANSFEROR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES,” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.”

(B)        Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2), (d)(2), (d)(3), (e)(2) or (e)(3) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend.

 

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(2)        Global Note Legend. Each Global Note will bear a legend in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

(g)        Cancellation and/or Adjustment of Global Notes.     At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Registrar at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Registrar at the direction of the Trustee to reflect such increase.

(h)        General Provisions Relating to Transfers and Exchanges.

(1)        To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.

 

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(2)        No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.06, 3.06, 4.08, 4.10 and 9.05 hereof).

(3)        The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(4)        All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(5)        Neither the Registrar nor the Company will be required:

(A)        to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;

(B)        to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or

(C)        to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(6)        Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

(7)        The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(8)        All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

Section 2.07     Replacement Notes.

If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee’s requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge the Holder for its expenses in replacing a Note, including, but not limited to the reasonable expenses of counsel and any tax that may be imposed with respect to replacement of such Note.

 

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Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

Section 2.08     Outstanding Notes.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.

Section 2.09     Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or any of its Subsidiaries, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any of its Subsidiaries, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.

Section 2.10     Temporary Notes.

Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes.

Holders of temporary Notes will be entitled to all of the benefits of this Indenture.

Section 2.11     Cancellation.

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the Trustee’s record retention requirements). Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

 

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Section 2.12     Defaulted Interest.

If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than ten (10) days prior to the related payment date for such defaulted interest. At least fifteen (15) days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

Section 2.13     Additional Amounts.

(a)        All payments by or on behalf of the Company of principal of, and premium, if any, and interest on the Notes will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by the Cayman Islands, Macau, any jurisdiction in which the Company is resident for tax purposes or any jurisdiction from or through which payments are made by or on behalf of the Company (or any political subdivision or taxing authority thereof or therein) (each, as applicable, a “Relevant Jurisdiction”), unless such withholding or deduction is required by law. In such event, the Company will make such withholding or deduction, make payment of the amount so withheld or deducted to the appropriate Governmental Authority as required by applicable law and will pay such additional amounts (“Additional Amounts”) as will result in receipt by the Holder of such amounts as would have been received by such holder had no such withholding or deduction been required, provided that no Additional Amounts will be payable with respect to any Note for or on account of:

(1)         any Taxes that would not have been imposed but for:

(A)        the existence of any present or former connection between the Holder or beneficial owner of such Note, as the case may be, and the Relevant Jurisdiction including, without limitation, such holder or beneficial owner being or having been a citizen or resident of such Relevant Jurisdiction, being or having been treated as a resident of such Relevant Jurisdiction or being or having been present or engaged in a trade or business in such Relevant Jurisdiction or having or having had a permanent establishment in such Relevant Jurisdiction, other than merely holding such Note or the receipt of payments thereunder;

(B)        the presentation of such Note (where presentation is required) more than thirty (30) days after the later of the date on which the payment of the principal of, premium, if any, or interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30-day period;

 

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(C)        the failure of the Holder or beneficial owner of such Note to comply with a timely request of the Company addressed to such Holder or beneficial owner to provide information concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Jurisdiction; or

(D)        the presentation of such Note (where presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;

(2)        any estate, inheritance, gift, sale, transfer, excise, personal property, net income or similar Tax;

(3)        any Tax arising pursuant to Sections 1471 – 1474 of the U.S. Internal Revenue Code of 1986, as amended, and any successor or amended version that is substantively comparable and not materially more onerous to comply with, any official interpretations thereof, current or future regulations or agreements entered pursuant thereto, any U.S. or non-U.S. law enacted in connection with an intergovernmental agreement related thereto, or any rules, regulations, or administrative guidance of any kind relating to any of the foregoing;

(4)        any Taxes that are payable other than (i) by withholding or deduction from payments of principal of, or premium (if any) or interest on the Note, or (ii) by direct payment by the Company in respect of claims made against the Company; or

(5)        any combination of Taxes referred to in the preceding clauses (1), (2), (3) and (4); or

(b)        with respect to any payment of the principal of, or premium, if any, or interest on, such Note to or for the account of a fiduciary, partnership or other fiscally transparent entity or any other person (other than the sole beneficial owner of such payment) to the extent that a beneficiary or settlor with respect to that fiduciary, or a partner or member of that partnership or fiscally transparent entity or a beneficial owner with respect to such other person, as the case may be, who would not have been entitled to such Additional Amounts had such beneficiary, settlor, partner, member or beneficial owner held directly the Note with respect to which such payment was made.

(c)        In addition to the foregoing, the Company will also pay and indemnify the Holder for any present or future stamp, issue, registration, court or documentary taxes, or any other excise or property taxes, charges or similar levies (including penalties, interest and other reasonable expenses related thereto) which are levied by any Relevant Jurisdiction on the execution, delivery, issuance, or registration of any of the Notes, this Indenture or any other document or instrument referred to herein, or the receipt of any payments with respect thereto, or enforcement of, any of the Notes. The Company will use all reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any taxes so deducted or withheld from each Relevant Jurisdiction imposing such taxes, in such form as provided in the ordinary course by the Relevant Jurisdiction and as is reasonably available to the Company, and will provide such certified copies to the Trustee and the Paying Agent. Such copies shall be made available to the Holders upon request and will be made available at the offices of the Paying Agent. The Company will attach to each certified copy a certificate stating (x) that the amount of withholding taxes evidenced by the certified copy was paid in connection with payments in respect of the principal amount of Notes then outstanding and (y) the amount of such withholding taxes paid per $1,000 principal amount of the Notes.

 

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(d)        Whenever there is mentioned in any context the payment of principal of, and any premium or interest, on any Note, such mention will be deemed to include payment of Additional Amounts provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

Section 2.14     Agents.

 

  (a)

Actions of Agents. The rights, powers, duties and obligations and actions of each Agent under this Indenture are several and not joint or joint and several.

 

  (b)

Agents of Trustee. The Company and the Agents acknowledge and agree that in the event of a Default or Event of Default, the Trustee may, by notice in writing to the Company and the Agents, require that the Agents act as agents of, and take instructions exclusively from, the Trustee. Prior to receiving such written notice from the Trustee, the Agents shall be the agents of the Company and need have no concern for the interests of the Holders.

 

  (c)

Funds held by Agents. The Agents will hold all funds as banker subject to the terms of this Indenture and as a result such money need not be segregated from other funds except to the extent required by law.

 

  (d)

Publication of Notices. For so long as the Notes are held as Book-Entry Interests in Global Notes, any obligation the Agents may have to publish a notice to Holders on behalf of the Company will be satisfied upon delivery of the notice to DTC.

 

  (e)

In the event that instructions given to any Agent are not reasonably clear, then such Agent shall be entitled to seek clarification from the Company or other party entitled to give the Agents instructions under this Indenture. If an Agent has sought clarification in accordance with this Section 2.14, then such Agent shall be entitled to take no action until such clarification is provided, and shall not incur any liability for not taking any action pending receipt of such clarification.

 

  (f)

Save as provided in this Section 2.14, no Agent shall be under any duty or other obligation towards, or have any relationship of agency or trust for or with, any person other than the Company.

 

  (g)

No Agent shall be required to make any payment under this Indenture unless and until it has received the full amount to be paid in accordance with the terms of this Indenture. To the extent that an Agent has made a payment for which it did not receive the full amount, the Company will reimburse the Agent the full amount of any shortfall.

 

  (h)

The roles, duties and functions of the Agents are of an administrative nature and each Agent shall only perform those acts and duties as specifically set out in this Indenture and no other acts, covenants, obligations or duties shall be implied or read into this Indenture against any of the Agents.

 

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ARTICLE 3

REDEMPTION AND PREPAYMENT

Section 3.01     Notices to Trustee.

If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, the Registrar and the Paying Agent, at least 30 days but not more than 60 days before a redemption date, an Officer’s Certificate setting forth:

(1)        the clause of this Indenture pursuant to which the redemption shall occur;

(2)        the redemption date;

(3)        the principal amount of Notes to be redeemed; and

(4)        the redemption price.

Section 3.02     Selection of Notes to Be Redeemed or Purchased.

If fewer than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee, the Paying Agent or the Registrar (as applicable) will select Notes for redemption or purchase (i) in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed and any applicable depositary procedures, (ii) by lot or such other similar method in accordance with the applicable procedures of the Depositary or any other applicable clearing system (if the Notes are Global Notes), or (iii) if there are no such requirements of such exchange or the Notes are not then listed on a national securities exchange or cleared through the Depositary or any other applicable clearing system, on a pro rata basis. No Notes of a principal amount of US$200,000 or less may be redeemed or purchased in part, and if Notes are redeemed or purchased in part, the remaining outstanding amount must be at least equal to US$200,000 and integral multiples of US$1,000 in excess thereof. None of the Trustee, the Paying Agent or the Registrar will be liable for any selections made by it under this paragraph.

In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Registrar from the outstanding Notes not previously called for redemption or purchase.

The Registrar will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of US$200,000 or integral multiples of US$1,000 in excess thereof; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03     Notice of Redemption.

Subject to the provisions set forth in the second paragraph of Section 3.07(d), at least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date (with prior notice to the Trustee) if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 hereof or less than 30 days prior to a redemption date as provided under Section 3.10 hereof.

 

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The notice will identify the Notes to be redeemed and will state:

(1)        the redemption date;

(2)        the redemption price;

(3)        if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note, provided that the unredeemed portion has a minimum denomination of US$200,000;

(4)        the name and address of the Paying Agent;

(5)        that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(6)        that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

(7)        the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;

(8)        that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes; and

(9)        whether the redemption is conditioned on any events and, if so, a reasonably detailed explanation of such conditions.

At the Company’s written request, the Paying Agent will give the notice of redemption in the Company’s name and at its expense; provided, however, that the Company has delivered to the Paying Agent, at least three Business Days prior to the date that the notice of redemption is to be delivered to Holders, an Officer’s Certificate requesting that the Paying Agent give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.04     Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the redemption price stated in the notice, provided, that any notice of redemption given in respect of the redemption referred to in Section 5 of the Notes may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, to the extent permitted by Section 3.07 of the Indenture and Section 5 of the Notes.

 

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Section 3.05     Deposit of Redemption or Purchase Price.

No later than 10 a.m. New York time one Business Days prior to the redemption or purchase date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest and Additional Amounts, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Additional Amounts, if any, on all Notes to be redeemed or purchased.

If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06     Notes Redeemed or Purchased in Part.

Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.

Section 3.07     Optional Redemption.

(a)        At any time prior to April 26, 2022, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 105.250% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that:

(1)        at least 65% of the aggregate principal amount of Notes originally issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and

(2)        the redemption occurs within 45 days of the date of the closing of such Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Equity Offering, and any such redemption or notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Equity Offering.

(b)        At any time prior to April 26, 2022, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the discretion of the Company, be subject to satisfaction of one or more conditions precedent.

 

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(c)        Except pursuant to the two preceding paragraphs and Sections 3.09 and 3.10, the Notes will not be redeemable at the Company’s option prior to April 26, 2022.

(d)        On or after April 26, 2022, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, and Additional Amounts, if any, on the Notes redeemed, to but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on April 26 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

 

Year

    Percentage  

2022

      102.625%  

2023

      101.313%  

2024 and thereafter

      100.000%  

Any such redemption may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent. If such redemption is so subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Company’s discretion, the redemption date may be delayed until such time (provided, however, that any delayed redemption date shall not be more than 60 days after the date the relevant notice of redemption was sent) as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date or by the redemption date as so delayed. In addition, the Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person.

Unless the Company defaults in the payment of the redemption price or fails to satisfy the conditions precedent to the redemption and thereby terminates the redemption, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(e)        Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08     Mandatory Redemption.

The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Company may be required to offer to purchase Notes as described in Sections 4.08 and 4.10 hereof. The Company may at any time and from time to time purchase Notes in the open market or otherwise.

Section 3.09     Redemption for Taxation Reasons.

The Notes may be redeemed, at the option of the Company, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to Holders (which notice will be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to but excluding the date fixed by the Company for redemption (the “Tax Redemption Date”) if, as a result of:

 

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(1)        any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Jurisdiction affecting taxation; or

(2)        any change in, or amendment to, an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment or order by a court of competent jurisdiction),

which change or amendment becomes effective on or after the date of this Indenture with respect to any payment due or to become due under the Notes or this Indenture, the Company is, or on the next interest payment date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the Company, taking reasonable measures available to it; provided that for the avoidance of doubt, changing the jurisdiction of the Company is not a reasonable measure for the purposes of this Section 3.09; provided, further, that no such notice of redemption will be given earlier than 90 days prior to the earliest date on which the Company would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

Prior to the mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company will deliver to the Trustee:

(1)        an Officer’s Certificate stating that such change or amendment referred to in the prior paragraph has occurred, and describing the facts related thereto and stating that such requirement cannot be avoided by the Company, taking reasonable measures available to it; and

(2)        an Opinion of Counsel or an opinion of a tax consultant of recognized international standing stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in the prior paragraph.

The Trustee will accept and shall be entitled to rely on such Officer’s Certificate and Opinion of Counsel or opinion of tax consultant as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it will be conclusive and binding on the Holders.

Any Notes that are redeemed pursuant to this Section 3.09 will be cancelled.

Section 3.10     Gaming Redemption.

Each Holder, by accepting a Note, shall be deemed to have agreed that if the Gaming Authority of any jurisdiction in which the Company, any of its Subsidiaries or the Sponsor conducts or proposes to conduct gaming requires that a person who is a holder or the beneficial owner of Notes be licensed, qualified or found suitable under applicable Gaming Laws, such holder or beneficial owner, as the case may be, shall apply for a license, qualification or a finding of suitability within the required time period. If such Person fails to apply or become licensed or qualified or is found unsuitable, the Company shall have the right, at its option:

(1)        to require such Person to dispose of its Notes or beneficial interest therein within 30 days of receipt of notice of the Company’s election or such earlier date as may be requested or prescribed by such Gaming Authority; or

 

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(2)        to redeem such Notes, which redemption may be less than 30 days following the notice of redemption if so requested or prescribed by the applicable gaming authority, at a redemption price equal to:

(A)        the lesser of:

 

  (1)

the person’s cost, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; and

 

  (2)

100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; or

(B)        such other amount as may be required by applicable law or order of the applicable Gaming Authority.

The Company shall notify the Trustee in writing of any such redemption as soon as practicable. Neither the Company nor the Trustee shall be responsible for any costs or expenses any Holder may incur in connection with such Holder’s application for a license, qualification or a finding of suitability.

ARTICLE 4

COVENANTS

Section 4.01     Payment of Notes.

The Company will pay or cause to be paid the principal of, premium, if any, and interest and Additional Amounts, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Additional Amounts, if any, will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. New York Time one Business Day prior to the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due.

The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Amounts (without regard to any applicable grace period) at the same rate to the extent lawful.

Subject to actual receipt of funds as provided in this Section 4.01 by the Paying Agent, such Paying Agent shall make payments on the Notes in accordance with the provisions of this Indenture

Section 4.02     Maintenance of Office or Agency.

The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

 

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The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Company hereby designates Deutsche Bank Trust Company Americas as one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03     Reports.

(a)        The Company will furnish to the Trustee and the Holders or, at the written request and expense of the Company, cause the Trustee to furnish to the Holders, and make available to potential investors:

(1)        within 120 days after the end of the Company’s fiscal year, annual reports of the Company containing: (a) information with a level of detail that is substantially comparable to the sections in the Offering Memorandum entitled “Selected Consolidated Financial Information”, “Business”, “Management”, “Related Party Transactions” and “Description of Other Material Indebtedness”; (b) the Company’s audited consolidated (i) balance sheet as of the end of the two most recent fiscal years and (ii) statement of operations and statement of cash flow for the two most recent fiscal years, in each case prepared in accordance with GAAP and including complete footnotes to such financial statements and the report of the independent auditors on the financial statements; (c) an operating and financial review of the two most recent fiscal years for the Company and its Subsidiaries, including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and any material changes between such two fiscal years and (ii) any material developments in the business of the Company and its Subsidiaries; and (d) pro forma statement of operations and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal year, unless pro forma information has been provided in a previous report pursuant to paragraph (2)(c) below;

(2)        within 60 days after the end of each day of the first three fiscal quarters in each fiscal year of the Company, quarterly reports containing: (a) the Company’s unaudited condensed consolidated (i) balance sheet as of the end of such quarter and (ii) statement of operations and cash flow for the quarterly and year to date periods ending on the most recent balance sheet date, and the comparable prior year periods, in each case prepared in accordance with GAAP; (b) an operating and financial review of such periods for the Company and its Subsidiaries including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and material changes between the current period and the period of the prior year and (ii) any material developments in the business of the Company and its Subsidiaries; (c) pro forma statement of operations and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal quarter, provided that the Company may provide any such pro forma information relating to a material acquisition within 75 days following such quarterly report in the form of a report provided pursuant to clause (3) below; and

 

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(3)        promptly from time to time after the occurrence of any of the events listed in (a) to (d) of this clause (3) information with respect to (a) any change in the independent accountants of the Company or any of its Significant Subsidiaries, (b) any material acquisition or disposition, (c) any material event that the Company or any of its Subsidiaries announces publicly and (d) any information that the Company is required to make publicly available under the requirements of the Singapore Exchange Securities Trading Limited or such other exchanges on which the securities of the Company or its Subsidiaries are then listed.

The Company may satisfy the requirement to furnish reports or information as described in (1), (2) and (3) above by furnishing, or making available, such required report or information on the website of the SEC or SGX-ST; provided that the Trustee shall have no responsibility whatsoever to determine whether such report or information has been furnished or made available on such website.

(b)        In addition, so long as any Notes remain outstanding, the Company shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(c)        Delivery of such reports, information and documents to the Trustee shall be for informational purposes only and the Trustee’s receipt of such reports, information and documents shall not constitute notice of any information contained therein, including the Company’s compliance with any of the covenants hereunder (as to which the Trustee is entitled to rely exclusively on the Officer’s Certificate).

Section 4.04     Compliance Certificate.

(a)        The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year or at any other times upon the written request of the Trustee, an Officer’s Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b)        So long as any of the Notes are outstanding, the Company will deliver to the Trustee, as soon as possible and in any event within five (5) Business Days after the Company becomes aware of any Default or Event of Default, an Officer’s Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. The Trustee shall not be deemed to have a duty to monitor compliance by the Company, nor to have knowledge of a Default or an Event of Default unless a Responsible Officer of the Trustee receives written notice thereof, stating that it is a notice of default and referencing the applicable section of this Indenture.

 

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Section 4.05     Taxes.

The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies required to be paid by the Company or such Subsidiaries except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders.

Section 4.06     Stay, Extension and Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07     Corporate Existence.

Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:

(1)        its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and

(2)        the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders.

Section 4.08     Offer to Repurchase upon Change of Control.

(a)        Upon the occurrence of a Change of Control Triggering Event, each Holder will have the right to require the Company to repurchase all or any part of such Holder’s Notes pursuant to a Change of Control Offer (as defined below) on the terms set forth below. In the Change of Control Offer, the Company will offer to purchase the Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), except to the extent the Company has previously or concurrently elected to redeem the Notes in full pursuant to Section 3.07 hereof or Section 3.09 hereof. Within twenty (20) days following any Change of Control Triggering Event, except to the extent that the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof, the Company shall mail a notice (a “Change of Control Offer”) to each Holder with a copy to the Trustee stating:

(1)        that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Company to repurchase such Holder’s Notes at a repurchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of holders of record on a record date to receive interest on the relevant interest payment date) (the “Change of Control Payment”);

 

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(2)        the circumstances and relevant facts and financial information regarding such Change of Control;

(3)        the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”);

(4)        that any Note not tendered will continue to accrue interest;

(5)        that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;

(6)        the Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(7)        the Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased, and

(8)        that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, provided that the unpurchased portion has a minimum denomination of US$200,000.

(b)        On the Change of Control Payment Date, the Company will, to the extent lawful:

(1)        accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

(2)        deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

(3)        deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that the unpurchased portion has a minimum denomination of US$200,000. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

 

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(c)        Notwithstanding anything to the contrary in this Section 4.08, the Company will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.08 and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given in accordance with the terms of Section 3.03 hereof or Section 3.09 hereof, pursuant to which the Company exercised its right to redeem the Notes in full, unless and until there is a default in payment of the applicable redemption price.

(d)        A Change of Control Offer may be made in advance of a Change of Control Triggering Event, and conditioned upon such Change of Control Triggering Event, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

(e)        Notes repurchased by the Company pursuant to a Change of Control Offer will have the status of Notes issued but not outstanding or will be retired and cancelled at the option of the Company. Subject to Section 2.09 hereof, Notes purchased by a third party pursuant to the preceding paragraph will have the status of Notes issued and outstanding.

(f)        The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of the Notes pursuant to this Section 4.08. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.08, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.08 by virtue of such compliance.

Section 4.09     Listing.

The Company will use its commercially reasonable efforts to list and maintain the listing and quotation of the Notes on the Official List of the Singapore Exchange Securities Trading Limited or another comparable exchange.

Section 4.10     Special Put Option.

(a)        Upon a Special Put Option Triggering Event, each Holder will have the right to require the Company to repurchase all or any part of such Holder’s Notes pursuant to a Special Put Option Offer (as defined below) as set forth below. In the Special Put Option Offer, the Company will offer to purchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date), except to the extent the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof. Within ten (10) days following the occurrence of a Special Put Option Triggering Event, except to the extent that the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof or Section 3.09 hereof, the Company shall mail a notice (a “Special Put Option Offer”) to each Holder with a copy to the Trustee and the Paying Agent stating:

 

  (1)

that a Special Put Option Triggering Event has occurred and that such Holder has the right to require the Company to repurchase such Holder’s Notes at a repurchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date);

 

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  (2)

the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and

 

  (3)

the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes repurchased.

(b)        On the date of repurchase pursuant to a Special Put Option Offer, the Company will, to the extent lawful:

 

  (1)

accept for payment all Notes or portions of Notes properly tendered pursuant to the Special Put Option Offer;

 

  (2)

deposit with the Paying Agent an amount equal to the repurchase price, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (the “Special Put Option Payment”), in respect of all Notes or portions of Notes properly tendered; and

 

  (3)

deliver or cause to be delivered to the Trustee, the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes properly tendered the Special Put Option Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any.

(c)        Notwithstanding anything to the contrary in this Section 4.10, the Company will not be required to make a Special Put Option Offer upon a Special Put Option Triggering Event if (1) a third party makes the Special Put Option Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Special Put Option Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Special Put Option Offer, or (2) notice of redemption has been given in accordance with the terms of the Indenture, as described above under Section 3.07 hereof or Section 3.09 hereof pursuant to which the Company has exercised its right to redeem the Notes in full, unless and until there is a default in payment of the applicable redemption price.

(d)        Notes repurchased by the Company pursuant to a Special Put Option Offer will have the status of Notes issued but not outstanding or will be retired and cancelled at the option of the Company. Subject to Section 2.09 hereof, Notes purchased by a third party pursuant to the preceding paragraph will have the status of Notes issued and outstanding.

(e)        The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this provision. To the extent that the provisions of any securities laws or regulations conflict with provisions of this provision, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof.

(f)        The provisions described above that require the Company to make a Special Put Option Offer following a Special Put Option Triggering Event will be applicable whether or not any other provisions of this Indenture are applicable.

 

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ARTICLE 5

SUCCESSORS

Section 5.01     Merger, Consolidation, or Sale of Assets.

(a)        The Company will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company survives); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person unless:

(1)        either:

(A)        if the transaction or series of transactions is a consolidation of the Company with or a merger of the Company with or into any other Person, the Company shall be the surviving corporation of such merger or consolidation; or

(B)        the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made shall be a corporation organized and existing under the laws of the British Virgin Islands, Cayman Islands, Hong Kong, Macau, Singapore, United States, any state of the United States or the District of Columbia, and such Person shall expressly assume all the Obligations of the Company under the Notes and this Indenture pursuant to supplemental indentures or other documents or agreements reasonably satisfactory to the Trustee; and

(2)        immediately after such transaction, no Default or Event of Default exists.

Section 5.02     Successor Corporation Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the “Company” shall refer instead to the successor Person and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company’s assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01     Events of Default.

(a)        Each of the following is an “Event of Default”:

(1)        default for 30 days in the payment when due of interest on the Notes;

 

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(2)        default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes;

(3)        failure by the Company to comply with its obligations under the provisions of Sections 4.08, 4.10 or 5.01 hereof;

(4)        failure by the Company for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in this Indenture;

(5)        default under any mortgage, indenture or instrument (other than the Senior Credit Agreement) under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness (or guarantee) now exists, or is created after the date of this Indenture, if such default results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates US$50.0 million or more, if such acceleration is not annulled within 30 days after written notice as provided in this Indenture;

(6)        default under the Senior Credit Agreement that results in the acceleration thereof prior to the final maturity thereof;

(7)        failure by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary to pay final judgments entered by a court or courts of competent jurisdiction (other than any judgment as to which a reputable third party insurer has accepted full responsibility and coverage) aggregating in excess of US$50.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(8)        the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:

(A)        commences a voluntary case,

(B)        consents to the entry of an order for relief against it in an involuntary case,

(C)        consents to the appointment of a custodian of it or for all or substantially all of its property,

(D)        makes a general assignment for the benefit of its creditors, or

(E)        generally is not paying its debts as they become due;

(9)        a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

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(A)        is for relief against the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary in an involuntary case;

(B)        appoints a custodian of the Company or of any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary; or

(C)        orders the liquidation of the Company or of any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary.

Section 6.02     Acceleration.

In the case of an Event of Default specified in Section 6.01(a)(8) or 6.01(a)(9) hereof, with respect to the Company, any Subsidiary of the Company that is a Significant Subsidiary or any group of Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately.

The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration of the Notes or waive any existing Default or Event of Default and its consequences under this Indenture except with respect to a continuing Default or Event of Default in the payment of principal, interest, premium or Additional Amounts, if any, on the Notes; provided, however, that Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration.

Section 6.03     Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Additional Amounts, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04     Waiver of Past Defaults.

Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder; provided that Holders of not less than 90% of the aggregate principal amount of the then outstanding Notes shall be required to waive a continuing Default or Event of Default in the payment of the principal of, premium, Additional Amounts, if any, or interest on, the Notes; provided further, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

 

47

Section 6.05     Control by Majority.

Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability.

Section 6.06     Limitation on Suits.

(a)        Subject to the provisions of this Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any Holders unless such Holders have offered to the Trustee indemnity and/or security to its satisfaction against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest or Additional Amounts, if any, when due, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:

(1)        such Holder has previously given the Trustee written notice that an Event of Default is continuing;

(2)        Holders of at least 25% in aggregate principal amount of the then outstanding Notes have made a written request to the Trustee to pursue the remedy;

(3)        such Holders have offered the Trustee security and/or indemnity satisfactory to the Trustee against any loss, liability or expense;

(4)        the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security and/or indemnity to its satisfaction; and

(5)        during such 60-day period, Holders of a majority in aggregate principal amount of the then outstanding Notes have not given the Trustee a direction inconsistent with such request.

(b)        A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

Section 6.07     Rights of Holders to Receive Payment.

Subject to Section 9.02 hereof, the right of any Holder to receive payment of principal, premium, Additional Amounts, if any, and interest on the Notes, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of Holders of not less than 90% of the aggregate principal of the then outstanding Notes; provided that a Holder shall not have the right to institute any such suit for the enforcement of payment if and to the extent that the institution or prosecution thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture upon any property subject to such Lien.

 

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Section 6.08     Collection Suit by Trustee.

If an Event of Default specified in Section 6.01(a)(1) or (a)(2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, Additional Amounts, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and premium, if any and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09     Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.08 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.08 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10     Priorities.

If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

First:        to the Trustee, the Agents, and their respective agents and attorneys for amounts due under Section 7.08 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee or any Agent, and the costs and expenses of collection;

Second:        to Holders for amounts due and unpaid on the Notes for principal, premium, Additional Amounts, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, Additional Amounts, if any, and interest, respectively; and

 

49

Third:        to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

Section 6.11     Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes.

ARTICLE 7

TRUSTEE

Section 7.01     Duties of Trustee.

(a)        If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)        Except during the continuance of an Event of Default:

(1)        the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)        in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(3)        the Trustee shall not be charged with knowledge of any Default or Event of Default unless the Company has delivered written notice of such default or Event of Default to a Responsible Officer at the Corporate Trust Office of the Trustee referencing the applicable provision of this Indenture.

(c)        The Trustee may not be relieved from liabilities for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct, except that:

(1)        this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

 

50

(2)        the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer; and

(3)        the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d)        Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01.

(e)        No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability.

(f)        The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02     Rights of Trustee.

(a)        The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b)        Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel. The Trustee may engage and consult with professional advisors and counsel selected by it and the Trustee may rely conclusively upon advice of such professional advisors and counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon by the Trustee and any of its directors, officers, employees or agents duly appointed.

(c)        The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. The Trustee shall have no duty to monitor the performance of such agents.

(d)        The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. The Trustee shall not be required to take action at the direction of the Company or Holders which conflicts with the requirements of this Indenture, or for which it is not indemnified and/or secured to its satisfaction, or which involves undue risk or would be contrary to applicable law or regulation.

(e)        Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company.

(f)        The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security satisfactory to the Trustee in its sole discretion against the losses, liabilities and expenses that might be incurred by it in compliance with such request or direction.

(g)        In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

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(h)        The recitals contained herein and in the Notes are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Indenture or the Notes.

(i)        The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(j)        In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(k)        The rights, privileges, indemnity, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified and/or secured, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder, provided, however any such agent or custodian shall not be deemed to be a fiduciary;

(l)        The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture;

(m)        So long as any of the Notes remains outstanding, the Company shall provide the Agents with a sufficient number of copies of this Indenture and each of the documents sent to the Trustee or which are required to be made available by stock exchange regulations or stated in the Offering Memorandum relating to the Notes, to be available and, subject to being provided with such copies, each of the Agents will procure that such copies shall be available at its specified office during normal office hours for examination by the Holders and that copies thereof will be furnished to the Holders upon written request at their own expense;

(n)        If the Trustee shall be uncertain as to its duties or rights hereunder, it shall be entitled to refrain from taking action until directed in writing by a final order or judgment of a court of competent jurisdiction.

(o)        If the Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of Holders, each representing less than a majority in aggregate principal amount of the Notes then outstanding, pursuant to the provisions of this Indenture, the Trustee, in its sole discretion, may determine what action, if any, to take and shall not incur any liability for its failure to act until such inconsistency or conflict is, in its sole opinion, resolved.

 

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(p)        Notwithstanding any other provision of this Indenture, the Trustee and the Paying Agent shall be entitled to make a deduction or withholding from any payment which they make under this Indenture for or on account of any present or future taxes, duties or charges if and to the extent so required by applicable law, in which event the Trustee or the Paying Agent, as applicable, shall make such payment after such withholding or deduction has been made and shall account to the relevant authorities for the amount so withheld or deducted.

(q)        The Trustee shall (except as expressly otherwise provided herein) as regards all the trusts, powers, authorities and discretions vested in it by this Indenture or by applicable law, have absolute and uncontrolled discretion as to the exercise or non-exercise thereof and, absent any wilful misconduct, gross negligence or fraud on the part of the Trustee, the Trustee shall not be responsible for any loss, damage, cost, claim or any other liability or inconvenience that may result from the exercise or non-exercise thereof.

(r)        Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice of the Company mentioned herein shall be sufficiently evidenced if in writing and signed by an Officer of the Company and any resolution of the Board of Directors shall be sufficiently evidenced by a board resolution.

(s)        The Trustee shall have no duty to inquire as to the performance of the covenants of the Company. Delivery of reports, information and documents to the Trustee under Section 4.03 hereof shall be for informational purposes only as regards the Trustee and the Trustee’s receipt of such reports, information and documents shall not constitute constructive notice of any information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).

(t)        The Trustee shall not have any obligation or duty to monitor, determine or inquire as to compliance, and shall not be responsible or liable for compliance with restrictions on transfer, exchange, redemption, purchase or repurchase, as applicable, of minimum denominations imposed under this Indenture or under applicable law or regulation with respect to any transfer, exchange, redemption, purchase or repurchase, as applicable, of any interest in any Global Notes.

(u)        The Trustee may assume without inquiry in the absence of actual knowledge that the Company is duly complying with its obligations contained in this Indenture required to be performed and observed by it, and that no Default or Event of Default or other event which would require repayment of the Notes has occurred.

Section 7.03     [Intentionally Omitted.]

Section 7.04     Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. The Trustee is also subject to Section 7.11 hereof.

Section 7.05     Trustee’s Disclaimer.

The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the proceeds from the Notes or any money paid to the Company or upon the Company’s direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. The Trustee shall not be deemed to be required to calculate any Fixed Charges, Treasury Rates, Additional Amounts, any make-whole amount, any Fixed Charge Coverage Ratio or other coverage ratio, or otherwise.

 

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Section 7.06     Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders a notice of the Default or Event of Default within ninety (90) days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, Additional Amounts, if any, or interest on, any Note, the Trustee shall not be deemed to have such actual knowledge and may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders.

Section 7.07     [Intentionally Omitted.]

Section 7.08     Compensation and Indemnity.

(a)        The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder pursuant to a written fee agreement executed by the Trustee and the Company. The Trustee’s compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses properly incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

(b)        The Company will indemnify the Trustee (which for purposes of this Section 7.08, shall be deemed to include its officers, directors, employees and agents) against any and all losses, liabilities or expenses (including the fees and expenses of counsel) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.08) and defending itself against any claim (whether asserted by the Company, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable solely to its gross negligence, willful misconduct or fraud by a court of competent jurisdiction in a final non-appealable order. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company of its obligations hereunder. The Company will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. The Company shall not need to pay for any settlement made without its consent, which consent will not be unreasonably withheld.

(c)        The obligations of the Company under this Section 7.08 will survive the satisfaction and discharge of this Indenture, and the resignation or removal of the Trustee and/or any Agent, but only in relation to anything done or omitted to be done by such Trustee and/or any such Agent on or prior to such resignation or removal.

(d)        To secure the Company’s payment obligations in this Section 7.08, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture.

 

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(e)        When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(8) or Section 6.01(a)(9) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

Section 7.09     Replacement of Trustee.

(a)        A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.09.

(b)        The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

(1)        the Trustee fails to comply with Section 7.11 hereof;

(2)        the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(3)        a custodian or public officer takes charge of the Trustee or its property; or

(4)        the Trustee becomes incapable of acting.

(c)        If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one (1) year after the successor Trustee takes office, the holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

(d)        If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee at the sole expense of the Company.

(e)        If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.11 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(f)        A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will deliver a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.08 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.09, the Company’s obligations under Section 7.08 hereof will continue for the benefit of the retiring Trustee.

 

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Section 7.10     Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee.

Section 7.11     Eligibility; Disqualification.

There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof, the United Kingdom or Hong Kong that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by the relevant authorities in such jurisdiction and that is a corporation which is generally recognized as a corporation which customarily performs such corporate trustee roles and provides such corporate trustee services in transactions similar in nature to the offering of the Notes. No obligor under the Notes or Person directly controlling, controlled by, or under common control with such obligor shall serve as trustee under the Indenture.

Section 7.12     Appointment of Co-Trustee.

(a)        Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction or otherwise, the Trustee shall have the power and may execute and deliver all instruments necessary to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustees, of all or any part of this Indenture, and to vest in such Person or Persons, in such capacity and for the benefit of the Holders, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 7.09 and no notice to the Holders of the appointment of any co-trustee or separate trustee shall be required.

(b)        Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(1)        All rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee.

(2)        No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

(3)        The Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c)        Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Section 7.12. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection or rights (including the rights to compensation, reimbursement and indemnification hereunder) to, the Trustee. Every such instrument shall be filed with the Trustee.

 

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(d)        Any separate trustee or co-trustee may at any time constitute the Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies, and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

Section 7.13     [Intentionally Omitted].

Section 7.14     Resignation of Agents.

Any Agent may resign and be discharged from its duties under this Indenture at any time by giving thirty (30) days’ prior written notice of such resignation to the Trustee and the Company. The Trustee or the Company may remove any Agent at any time by giving thirty (30) days’ prior written notice to such Agent. Upon such notice, a successor Agent shall be appointed by the Company, who shall provide written notice of such appointment to the Trustee. Such successor Agent shall become the Agent hereunder upon the resignation or removal date specified in such notice. If the Company is unable to replace the resigning Agent within thirty (30) days after such notice, the Agent shall deliver any funds then held hereunder in its possession to the Trustee or (i) such Agent may appoint as its successor Agent, any reputable and experienced financial institution acceptable to the Trustee and the Company or (ii) apply to a court of competent jurisdiction for the appointment of a successor Agent or for other appropriate relief. The reasonable costs and expenses (including its counsels’ fees and expenses) properly incurred by the Agent in connection with such court proceedings shall be paid by the Company. Upon receipt of the identity of the successor Agent, the Agent shall deliver any funds then held hereunder to the successor Agent, less the Agent’s fees, costs and expenses or other obligations owed to the Agent. Upon its resignation and delivery of any funds, the Agent shall be discharged of and from any and all further obligations arising in connection with this Indenture, but shall continue to enjoy the benefit of Section 7.08.

Section 7.15     Rights of Trustee in Other Roles.

All rights, powers and indemnities contained in this Article 7 shall apply to the Trustee in its other roles hereunder and the Agents, provided, however, that each Agent is an agent and not a fiduciary.

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01     Option to Effect Legal Defeasance or Covenant Defeasance.

The Company may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officer’s Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

 

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Section 8.02     Legal Defeasance and Discharge.

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its Obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which will thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder:

(1)        the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof;

(2)        the Company’s Obligations with respect to such Notes under Article 2 and Section 4.02 hereof;

(3)        the rights, powers, trusts, duties and immunities of the Trustee, the Paying Agent, the Registrar and the Transfer Agent hereunder, and the Company’s Obligations in connection therewith; and

(4)        this Article 8.

Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03     Covenant Defeasance.

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.08 and 4.09 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, “Covenant Defeasance”), and the Notes will thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes will be unaffected thereby. In addition, upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(a)(3) through 6.01(a)(6) hereof will not constitute Events of Default; provided that a failure by the Company to comply with its obligations under the provisions of Section 4.10 will constitute an Event of Default.

 

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Section 8.04     Conditions to Legal or Covenant Defeasance.

In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:

(1)        the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination of cash in U.S. dollars and non-callable U.S. Government Obligations, in amounts as will be sufficient, in the opinion of an internationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium, and Additional Amounts, if any, on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date;

(2)        in the case of an election under Section 8.02 hereof, the Company must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that:

(A)        the Company has received from, or there has been published by, the U.S. Internal Revenue Service a ruling; or

(B)        since the date of this Indenture, there has been a change in the applicable federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3)        in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4)        no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound;

(5)        such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(6)        the Company must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and

 

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(7)        the Company must deliver to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

(8)        The Trustee shall be entitled to its usual fees and, in addition, any fees and expenses properly incurred or charged by the Trustee and its counsel in connection with defeasance, satisfaction and discharge, and investment or custody services provided hereunder.

Section 8.05     Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 8.06 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the holders of such Notes of all sums due and to become due thereon in respect of principal, premium, and Additional Amounts, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Obligations deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the holders of the outstanding Notes.

Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable U.S. Government Obligations held by it as provided in Section 8.04 hereof which, in the opinion of an internationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06     Repayment to Company.

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Additional Amounts, if any, or interest on, any Note and remaining unclaimed for two (2) years after such principal, premium, or Additional Amounts, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than thirty (30) days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

 

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Section 8.07     Reinstatement.

If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable U.S. Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Indenture and the Notes will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Additional Amounts, if any, or interest on, any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01     Without Consent of Holders of Notes.

Notwithstanding Section 9.02 of this Indenture, the Company, the Trustee, and each Agent, may amend or supplement this Indenture and the Notes without the consent of any Holder:

(1)        to cure any ambiguity, defect or inconsistency;

(2)        to provide for uncertificated Notes in addition to or in place of certificated Notes; provided that such uncertificated Notes are in registered form for U.S. federal income tax purposes;

(3)        to provide for the assumption of the Company’s Obligations to Holders in the case of a merger or consolidation or sale of all or substantially all of the Company’s assets;

(4)        to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;

(5)        to conform the text of this Indenture to any provision of the “Description of Notes” section of the Offering Memorandum, to the extent that such provision in that “Description of Notes” section of the Offering Memorandum was intended to be a verbatim recitation of a provision of the Notes or this Indenture; or

(6)        to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date of this Indenture;

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Sections 7.02, 9.06 and 13.04 hereof, the Trustee and each Agent will join with the Company in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but neither the Trustee nor any Agent will be obligated to (although they may at their discretion) enter into such amended or supplemental indenture that affects their own rights, duties or immunities under this Indenture or otherwise.

 

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Section 9.02     With Consent of Holders of Notes.

Except as provided below in this Section 9.02, the Company, the Trustee and each Agent may amend or supplement this Indenture (including, without limitation, Section 4.08 hereof) and the Notes, with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium or Additional Amounts, if any, or interest on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes, may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes).

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon delivery to the Trustee of evidence satisfactory to the Trustee of the consent of the holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02, 9.06 and 13.04 hereof, the Trustee and each Agent will join with the Company in the execution of such amended or supplemental indenture authorized or permitted by the terms of this Indenture unless such amended or supplemental indenture directly affects either the Trustee’s or any Agent’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee and each Agent (as the case may be) may in their discretion, but will not be obligated to, enter into such amended or supplemental indenture.

It is not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it is sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of Holders of 90% of the aggregate principal amount then outstanding of Notes (including the Additional Notes) affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes (including the Additional Notes) held by a non-consenting Holder):

(1)        reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2)        reduce the principal of, premium, if any, or change the fixed maturity of any Note or alter or waive any provisions with respect to the redemption of the Notes (except as provided above with respect to Section 4.08 hereof);

(3)        reduce the rate of or change the time for payment of interest, including default interest, on any Note;

 

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(4)        waive a Default or Event of Default in the payment of principal of, or interest, premium or Additional Amounts, if any, on, the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration);

(5)        make any Note payable in money other than that stated in the Notes;

(6)        make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest, premium or Additional Amounts, if any, on, the Notes;

(7)        waive a redemption payment with respect to any Note (other than a payment required by Section 4.08 hereof); or

(8)        make any change in the preceding amendment and waiver provisions.

Section 9.03    Supplemental Indenture.

Every amendment or supplement to this Indenture or the Notes will be set forth in an amended or supplemental indenture.

Section 9.04     Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by such Holder and every subsequent holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

Section 9.05     Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06     Trustee to Sign Amendments, etc.

The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee will (subject to Section 7.01 hereof and in addition to Section 7.02 hereof) be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture, that the supplemental indenture is legal, valid, binding and enforceable against the Company in accordance with its terms and such other matters as the Trustee may request. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

 

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ARTICLE 10

[INTENTIONALLY OMITTED]

ARTICLE 11

[INTENTIONALLY OMITTED]

ARTICLE 12

SATISFACTION AND DISCHARGE

Section 12.01     Satisfaction and Discharge.

This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when:

(1)        either:

(A)        all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or

(B)        all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one (1) year and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination of cash in U.S. dollars and non-callable U.S. Government Obligations, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Additional Amounts, if any, and accrued interest to but excluding the date of maturity or redemption;

(2)        no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound;

(3)        the Company has paid or caused to be paid all sums payable by it under this Indenture; and

(4)        the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be.

In addition, the Company must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

 

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Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section 12.01, the provisions of Sections 12.02 and 8.06 hereof will survive.

Section 12.02     Application of Trust Money.

Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Amounts, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any cash in U.S. dollars or non-callable U.S. Government Obligations in accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof; provided that if the Company has made any payment of principal of, premium or Additional Amounts, if any, or interest on, any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the cash in U.S. dollars or non-callable U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 13

MISCELLANEOUS

Section 13.01     [Intentionally Omitted].

Section 13.02     Notices.

Any notice or communication by the Company or the Trustee to the others is duly given if in writing, in the English language, and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others’ address:

If to the Company:

Melco Resorts Finance Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue, George Town

Grand Cayman KY1-9005

Cayman Islands

c/o Melco Resorts & Entertainment Limited

36th Floor, The Centrium

60 Wyndham Street

Central, Hong Kong

Facsimile No.: +852 2537-3618

Attention: Company Secretary

 

65

Latham & Watkins LLP

18th Floor, One Exchange Square

8 Connaught Place

Central, Hong Kong

Facsimile No.: +852.2912.2600

Attention: Ji-Hyun Helena Kim

If to the Trustee, Paying Agent, Transfer Agent or Registrar:

Deutsche Bank Trust Company Americas

Trust and Agency Services

60 Wall Street, 16th Floor

Mail Stop: NYC60-1630

New York, New York 10005

USA

Attn: Corporates Team, Melco Resorts

Facsimile: (732) 578-4635

The Company, the Trustee and any Agent, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time.

Section 13.03     Communication by Holders of Notes with Other Holders of Notes.

Holders may communicate with other Holders with respect to their rights under this Indenture or the Notes.

Section 13.04     Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(1)        an Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

 

66

(2)        an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

Section 13.05     Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture must include:

(1)        a statement that the Person making such certificate or opinion has read such covenant or condition;

(2)        a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3)        a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

(4)        a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.

Section 13.06     Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar, Transfer Agent or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 13.07     No Personal Liability of Directors, Officers, Employees and Stockholders.

No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, will have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Section 13.08     Governing Law.

THE LAWS OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES.

Section 13.09     No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

 

67

Section 13.10     Successors.

All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee and each Agent in this Indenture will bind their respective successors.

Section 13.11     Severability.

In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 13.12     Counterpart Originals.

The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement.

Section 13.13     Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof.

Section 13.14     Patriot Act

In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including, without limitation, those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA PATRIOT Act of the United States (“Applicable Law”), the Trustee and Agents are required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Trustee and Agents. Accordingly, each of the parties agree to provide to the Trustee and Agents, upon their request from time to time such identifying information and documentation as may be available for such party in order to enable the Trustee and Agents to comply with Applicable Law.

Section 13.15     Submission to Jurisdiction; Waiver of Jury Trial

THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES AND ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK AND IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT OR PROCEEDING IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. THE COMPANY IRREVOCABLY APPOINTS LAW DEBENTURE CORPORATE SERVICES INC., 801 2ND AVENUE, SUITE 403, NEW YORK, NEW YORK, 10017, AS ITS AUTHORIZED AGENT IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK UPON WHICH PROCESS MAY BE SERVED IN ANY SUCH SUIT OR PROCEEDING, AND AGREES THAT SERVICE OF PROCESS UPON SUCH AGENT, AND WRITTEN NOTICE OF SAID SERVICE TO THE COMPANY BY THE PERSON SERVING THE SAME TO THE ADDRESS PROVIDED IN SECTION 13.02, SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE COMPANY IN ANY SUCH SUIT OR PROCEEDING. THE COMPANY FURTHER AGREES TO TAKE ANY AND ALL ACTION AS MAY BE NECESSARY TO MAINTAIN SUCH DESIGNATION AND APPOINTMENT OF SUCH AGENT IN FULL FORCE AND EFFECT FOR A PERIOD OF EIGHT YEARS FROM THE DATE OF THIS INDENTURE.

 

68

EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION 13.15 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS INDENTURE. IN THE EVENT OF LITIGATION, THIS INDENTURE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.

[Signatures on following page]

 

69

SIGNATURES

Dated as of April 26, 2019

 

The Company

MELCO RESORTS FINANCE LIMITED

By

  

/s/ Chung Yuk Man

Name: Chung Yuk Man

Title: Director

[Signature page to Indenture]

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Trustee

By: Deutsche Bank National Trust Company

By:

  

/s/ Bridgette Casasnovas

 

Name: Bridgette Casasnovas

 

Title: Vice President

By:

  

/s/ Robert S. Peschler

 

Name: ROBERT S. PESCHLER

 

Title: VICE PRESIDENT

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Paying Agent, Registrar and Transfer Agent

By: Deutsche Bank National Trust Company

By:

  

/s/ Bridgette Casasnovas

 

Name: Bridgette Casasnovas

 

Title: Vice President

By:

  

/s/ Robert S. Peschler

 

Name: ROBERT S. PESCHLER

 

Title: VICE PRESIDENT

[Signature page to Indenture]

EXHIBIT A

[Face of Note]

 

 

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

CUSIP:

ISIN:

COMMON CODE:

5.250% Senior Notes due 2026

 

No.         

    US$                    

MELCO RESORTS FINANCE LIMITED

Promises to pay to Cede & Co. or its registered assigns, the principal sum of                      [NUMBER IN WORDS] U.S. DOLLARS on April 26, 2026.

Interest Payment Dates:  April 26 and October 26

Record Dates:  April 11 and October 11

Dated:                         , 20    

 

A-1

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by the duly authorized officer referred to below.

Dated:                         , 20    

 

MELCO RESORTS FINANCE LIMITED, as Company

By:

    
 

Name:

 

Title:

 

A-2

Certificate of Authentication

This is one of the Notes referred to in the within-mentioned Indenture.

Dated:                         , 20    

 

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee

By:

    

Name:

  

Title:

  

 

A-3

[Back of Note]

MELCO RESORTS FINANCE LIMITED

5.250% Senior Notes due 2026

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

(1)        INTEREST.      Melco Resorts Finance Limited, a Cayman Islands exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”), promises to pay or cause to be paid interest on the principal amount of this Note at 5.250% per annum from                 , 20     until maturity. The Company will pay interest and Additional Amounts, if any, semi-annually in arrears on April 26 and October 26 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be                 , 20    . The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Amounts (without regard to any applicable grace period) at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year comprising twelve 30-day months.

(2)        METHOD OF PAYMENT.     The Company will pay interest on the Notes (except defaulted interest) and Additional Amounts, if any, to the Persons who are registered Holders of Notes at the close of business on April 11 or October 11 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, and Additional Amounts, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Additional Amounts, if any, may be made by check mailed to the Holders at their address set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Amounts, if any, on, all Global Notes and all other Notes, the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent, and shall so notify the Trustee and each Paying Agent thereof. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

(3)        PAYING AGENT AND REGISTRAR.     Initially, Deutsche Bank Trust Company Americas will act as Paying Agent, Transfer Agent and Registrar. The Company may change the Paying Agent, Transfer Agent or Registrar without notice to any holders of the Notes. The Company or any of its Subsidiaries may act in any such capacity.

(4)        INDENTURE.      The Company issued the Notes under an Indenture dated as of April 26, 2019 (the “Indenture”) among the Company, the Trustee, the Paying Agent, the Registrar and the Transfer Agent. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder.

 

A-4

(5)        OPTIONAL REDEMPTION.

(a)        Except as set forth in subparagraphs (b) and (c) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to April 26, 2022. On or after April 26, 2022, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, and Additional Amounts if any, on the Notes redeemed, to but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on April 26 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

 

Year

    Percentage  

2022

      102.625 % 

2023

      101.313 % 

2024 and thereafter

      100.000 % 

Any such redemption may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent. If such redemption is so subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Company’s discretion, the redemption date may be delayed until such time (provided, however, that any delayed redemption date shall not be more than 60 days after the date the relevant notice of redemption was sent) as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date or by the redemption date as so delayed. In addition, the Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person.

Unless the Company defaults in the payment of the redemption price or fails to satisfy the conditions precedent to the redemption and thereby terminates the redemption, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(b)        Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to April 26, 2022, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 105.250% of the principal amount thereof, plus accrued and unpaid interest and Additional Amounts, if any, to but excluding the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of the Notes originally issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and that such redemption occurs within 45 days of the date of the closing of such Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Equity Offering, and any such redemption or notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Equity Offering.

 

A-5

(c)        At any time prior to April 26, 2022, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent.

(d)        The Notes may also be redeemed in the circumstances described in Section 3.09 and 3.10 of the Indenture.

(6)        MANDATORY REDEMPTION.     The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

(7)        REPURCHASE AT THE OPTION OF HOLDER.     The Notes may be subject to a Change of Control Offer or a Special Put Option Offer, as further described in Sections 4.08 and 4.10 of the Indenture.

(8)        NOTICE OF REDEMPTION.     Subject to the second paragraph of Section 5(b) above, notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction or discharge of the Indenture. Notes in denominations larger than US$200,000 may be redeemed in part but only in integral multiples of US$1,000 provided that the unredeemed part has a minimum denomination of US$200,000, unless all of the Notes held by a Holder are to be redeemed.

(9)        DENOMINATIONS, TRANSFER, EXCHANGE.     The Notes are in registered form without coupons in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

(10)        PERSONS DEEMED OWNERS.     The registered Holder may be treated as its owner for all purposes.

(11)        AMENDMENT, SUPPLEMENT AND WAIVER.     The Indenture or the Notes, may be amended as set forth in the Indenture.

(12)        DEFAULTS AND REMEDIES.     The events listed in Section 6.01 of the Indenture shall constitute “Events of Default” for the purpose of this Note.

 

A-6

(13)        TRUSTEE DEALINGS WITH COMPANY.     The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

(14)        NO RECOURSE AGAINST OTHERS.     A director, officer, employee, incorporator or stockholder of the Company, as such, will not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

(15)        AUTHENTICATION.      This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

(16)        ABBREVIATIONS.      Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(17)        CUSIP NUMBERS.     Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

(18)        GOVERNING LAW.     THE LAWS OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THIS NOTE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

Melco Resorts Finance Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue, George Town

Grand Cayman KY1-9005

Cayman Islands

c/o Melco Resorts & Entertainment Limited

36th Floor, The Centrium

60 Wyndham Street

Central

Hong Kong

Attention: Company Secretary

 

A-7

ASSIGNMENT FORM

To assign this Note, fill in the form below:

 

(I) or (we) assign and transfer this Note to:

     
   (Insert assignee’s legal name)
 

 

(Insert assignee’s soc. sec. or tax I.D. no.)

 

 

 

 

 

 

 

 

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                                                                                                to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:                                 

 

Your Signature:

    
(Sign exactly as your name appears on the face of this
Note)

Signature Guarantee*:                                         

 

*

    Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

 

A-8

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Sections 4.08 or 4.10 of the Indenture, check the appropriate box below:

 

Section 4.08   Section 4.10

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.08 or Section 4.10 of the Indenture, state the amount you elect to have purchased:

US$                             

Date:                             

 

Your Signature:

    
(Sign exactly as your name appears on the face of this
Note)

 

Tax Identification No.:

    

Signature Guarantee*:                                                      

 

*

    Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

 

A-9

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

 

Date of Exchange

   Amount of
decrease in
Principal Amount
of
this Global Note		   Amount of
increase in
Principal Amount
of
this Global Note		   Principal Amount
of this Global Note
following such
decrease
(or increase)		   Signature of
authorized officer
of Trustee or
Custodian

 

A-10

EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

[Company address block]

[Registrar address block]

Re: 5.250% Senior Notes due 2026 of Melco Resorts Finance Limited

Reference is hereby made to the Indenture, dated as of April 26, 2019 (the “Indenture”), among Melco Resorts Finance Limited, as issuer (the “Company”) and Deutsche Bank Trust Company Americas, as trustee, paying agent, registrar and transfer agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                 , (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of US$                         in such Note[s] or interests (the “Transfer”), to                                               (the “Transferee”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. ☐  Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive Note pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

2. ☐  Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

 

B-1

3. ☐  Check and complete if Transferee will take delivery of a beneficial interest in a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

(a)        ☐ such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or

(b)        ☐ such Transfer is being effected to the Company or a subsidiary thereof;

or

(c)        ☐ such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.

4. ☐  Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

(a) ☐  Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(b) ☐  Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(c) ☐  Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

 

B-2

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

 

 

        [Insert Name of Transferor]

 

By:

    
 

Name:

 

Title:

Dated:                                         

 

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

 

  1.

The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

 

  (a)

☐     a beneficial interest in the:

 

  (i)

    ☐ 144A Global Note (CUSIP                         ), or

 

  (ii)

    ☐ Regulation S Global Note (CUSIP                         ); or

 

  (b)  

☐     a Restricted Definitive Note.

 

  2.

After the Transfer the Transferee will hold:

[CHECK ONE]

 

  (a)  ☐

    a beneficial interest in the:

 

  (i)

    ☐ 144A Global Note (CUSIP                         ), or

 

  (ii)

    ☐ Regulation S Global Note (CUSIP                         ), or

 

  (iii)

    ☐ Unrestricted Global Note (CUSIP                         ); or

 

  (b)  ☐

    a Restricted Definitive Note; or

 

  (c)  ☐

    an Unrestricted Definitive Note,

in accordance with the terms of the Indenture.

 

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

[Company address block]

[Registrar address block]

Re: 5.250% Senior Notes due 2026 of Melco Resorts Finance Limited

(CUSIP                         )

Reference is hereby made to the Indenture, dated as of April 26, 2019 (the “Indenture”), among Melco Resorts Finance Limited, as issuer (the “Company”) and Deutsche Bank Trust Company Americas, as trustee, paying agent, registrar and transfer agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                                             , (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of US$                         in such Note[s] or interests (the “Exchange”). In connection with the Exchange, the Owner hereby certifies that:

1.         Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note

(a)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the “Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(b)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(c)   ☐ Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner’s Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

 

C-1

(d)   ☐ Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2.         Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

(a)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

(b)   ☐ Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE] ☐ 144A Global Note, ☐ Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

 

 

[Insert Name of Transferor]

By:

    
 

Name:

 

Title:

                                                                                                                                                                                Dated:                                                  

 

C-2

EX-2.29

Exhibit 2.29

EXECUTION VERSION

MELCO RESORTS FINANCE LIMITED

as Company

5.625% SENIOR NOTES DUE 2027

 

 

INDENTURE

July 17, 2019

 

 

and

DEUTSCHE BANK TRUST COMPANY AMERICAS

as Trustee, Paying Agent, Registrar and Transfer Agent

TABLE OF CONTENTS

 

          Page
ARTICLE 1
DEFINITIONS

Section 1.01

    Definitions    4

Section 1.02

    Other Definitions    16

Section 1.03

    Rules of Construction    16
     
ARTICLE 2
THE NOTES

Section 2.01

    Form and Dating    17

Section 2.02

    Execution and Authentication    17

Section 2.03

    Registrar and Paying Agent    18

Section 2.04

    Paying Agent to Hold Money in Trust    18

Section 2.05

    Holder Lists    19

Section 2.06

    Transfer and Exchange    19

Section 2.07

    Replacement Notes    28

Section 2.08

    Outstanding Notes    29

Section 2.09

    Treasury Notes    29

Section 2.10

    Temporary Notes    29

Section 2.11

    Cancellation    29

Section 2.12

    Defaulted Interest    30

Section 2.13

    Additional Amounts    30

Section 2.14

    Agents    32
     
ARTICLE 3
REDEMPTION AND PREPAYMENT

Section 3.01

    Notices to Trustee    33

Section 3.02

    Selection of Notes to Be Redeemed or Purchased    33

Section 3.03

    Notice of Redemption    33

Section 3.04

    Effect of Notice of Redemption    34

Section 3.05

    Deposit of Redemption or Purchase Price    35

Section 3.06

    Notes Redeemed or Purchased in Part    35

Section 3.07

    Optional Redemption    35

Section 3.08

    Mandatory Redemption    36

Section 3.09

    Redemption for Taxation Reasons    36

Section 3.10

    Gaming Redemption    37
     
ARTICLE 4
COVENANTS

Section 4.01

    Payment of Notes    38

Section 4.02

    Maintenance of Office or Agency    38

Section 4.03

    Reports    39

Section 4.04

    Compliance Certificate    40

Section 4.05

    Taxes    41

Section 4.06

    Stay, Extension and Usury Laws    41

Section 4.07

    Corporate Existence    41

Section 4.08

    Offer to Repurchase upon Change of Control    41

Section 4.09

    Listing    43

Section 4.10

    Special Put Option      43  
     
ARTICLE 5

 

SUCCESSORS

 

Section 5.01

    Merger, Consolidation, or Sale of Assets      45  

Section 5.02

    Successor Corporation Substituted      45  
     
ARTICLE 6

 

DEFAULTS AND REMEDIES

 

Section 6.01

    Events of Default      45  

Section 6.02

    Acceleration      47  

Section 6.03

    Other Remedies      47  

Section 6.04

    Waiver of Past Defaults      47  

Section 6.05

    Control by Majority      48  

Section 6.06

    Limitation on Suits      48  

Section 6.07

    Rights of Holders to Receive Payment      48  

Section 6.08

    Collection Suit by Trustee      49  

Section 6.09

    Trustee May File Proofs of Claim      49  

Section 6.10

    Priorities      49  

Section 6.11

    Undertaking for Costs      50  
     
ARTICLE 7

 

TRUSTEE

 

Section 7.01

    Duties of Trustee      50  

Section 7.02

    Rights of Trustee      51  

Section 7.03

    [Intentionally Omitted.]      53  

Section 7.04

    Individual Rights of Trustee      53  

Section 7.05

    Trustee’s Disclaimer      53  

Section 7.06

    Notice of Defaults      54  

Section 7.07

    [Intentionally Omitted.]      54  

Section 7.08

    Compensation and Indemnity      54  

Section 7.09

    Replacement of Trustee      55  

Section 7.10

    Successor Trustee by Merger, etc      56  

Section 7.11

    Eligibility; Disqualification      56  

Section 7.12

    Appointment of Co-Trustee      56  

Section 7.13

    [Intentionally Omitted]      57  

Section 7.14

    Resignation of Agents      57  

Section 7.15

    Rights of Trustee in Other Roles      57  
     
ARTICLE 8

 

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

Section 8.01

    Option to Effect Legal Defeasance or Covenant Defeasance      57  

Section 8.02

    Legal Defeasance and Discharge      58  

Section 8.03

    Covenant Defeasance      58  

Section 8.04

    Conditions to Legal or Covenant Defeasance      59  

Section 8.05

    Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions      60  

Section 8.06

    Repayment to Company      60  

Section 8.07

    Reinstatement      61  

 

ii

ARTICLE 9

 

AMENDMENT, SUPPLEMENT AND WAIVER

 

Section 9.01

    Without Consent of Holders of Notes      61  

Section 9.02

    With Consent of Holders of Notes      62  

Section 9.03

    Supplemental Indenture      63  

Section 9.04

    Revocation and Effect of Consents      63  

Section 9.05

    Notation on or Exchange of Notes      63  

Section 9.06

    Trustee to Sign Amendments, etc      63  
     
ARTICLE 10

 

[INTENTIONALLY OMITTED]

 

     
ARTICLE 11

 

     
ARTICLE 12

 

SATISFACTION AND DISCHARGE

 

Section 12.01

    Satisfaction and Discharge      64  

Section 12.02

    Application of Trust Money      65  
     
ARTICLE 13

 

MISCELLANEOUS

 

Section 13.01

    [Intentionally Omitted]      65  

Section 13.02

    Notices      65  

Section 13.03

    Communication by Holders of Notes with Other Holders of Notes      66  

Section 13.04

    Certificate and Opinion as to Conditions Precedent      66  

Section 13.05

    Statements Required in Certificate or Opinion      67  

Section 13.06

    Rules by Trustee and Agents      67  

Section 13.07

    No Personal Liability of Directors, Officers, Employees and Stockholders      67  

Section 13.08

    Governing Law      67  

Section 13.09

    No Adverse Interpretation of Other Agreements      67  

Section 13.10

    Successors      68  

Section 13.11

    Severability      68  

Section 13.12

    Counterpart Originals      68  

Section 13.13

    Table of Contents, Headings, etc      68  

Section 13.14

    Patriot Act      68  

Section 13.15

    Submission to Jurisdiction; Waiver of Jury Trial      68  
     
EXHIBITS

 

Exhibit A

    FORM OF NOTE      A-1  

Exhibit B

    FORM OF CERTIFICATE OF TRANSFER      B-1  

Exhibit C

    FORM OF CERTIFICATE OF EXCHANGE      C-1  

 

iii

INDENTURE dated as of July 17, 2019, between Melco Resorts Finance Limited, an exempted company incorporated with limited liability in the Cayman Islands (the “Company”) and Deutsche Bank Trust Company Americas, a New York banking corporation, as Trustee, Paying Agent, Registrar and Transfer Agent.

Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined herein) of the 5.625% Senior Notes due 2027 (the “Notes”):

ARTICLE 1

DEFINITIONS

 

  Section

1.01     Definitions.

“144A Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“Additional Notes” means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.02 hereof, as part of the same series as the Initial Notes; provided that any Additional Notes that are not fungible with the Notes for U.S. federal income tax purposes shall have a separate CUSIP number than any previously issued Notes, unless the Notes and the Additional Notes are issued with no more than a de minimis amount of original issue discount for U.S. federal income tax purposes, but shall otherwise be treated as a single class with all other Notes issued under this Indenture.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Agent” means any Registrar, co-registrar, Paying Agent, Transfer Agent or additional paying agents or transfer agents.

“Applicable Premium” means, with respect to any Note on any redemption date, the greater of:

(1)        1.0% of the principal amount of the Note; or

(2)        the excess of: (a) the present value at such redemption date of (i) the redemption price of the Note at July 17, 2022 (such redemption price being set forth in the table appearing in Section 3.07 hereof) plus (ii) all required interest payments due on the Note through July 17, 2022 (excluding accrued but unpaid interest to but excluding the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the principal amount of the Note. For the avoidance of doubt, the calculation of the Applicable Premium shall not be a duty or obligation of the Trustee, the Paying Agent, the Registrar or the Transfer Agent.

 

4

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

“Bankruptcy Law” means (i) the United States Bankruptcy Code of 1978 or any similar U.S. federal or state law for the relief of debtors, (ii) the provisions of the Code of Civil Procedure of Macau that deal with the placement of a debtor into liquidation, the administration and disposal of its assets, the distribution of the proceeds thereof and the alternatives to such liquidation, or any laws of similar effect, and (iii) the provisions of Part V of the Companies Law (Revised) of the Cayman Islands that deal with the winding up or liquidation of a company or any other Cayman Islands law of similar effect.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

“Board of Directors” means:

(1)        with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

(2)        with respect to a partnership, the board of directors of the general partner of the partnership;

(3)        with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

(4)        with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means any day other than a Legal Holiday.

“Capital Stock” means:

(1)        in the case of a corporation, corporate stock;

(2)        in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3)        in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

(4)        any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

 

5

“Change of Control” means the occurrence of any of the following:

(1)        the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d) of the Exchange Act) (other than a Sponsor or a Related Party of a Sponsor);

(2)        the adoption of a plan relating to the liquidation or dissolution of the Company;

(3)        either (i) the Sponsor ceases collectively to beneficially own, directly or indirectly, at least 30% of the outstanding Capital Stock of the Parent (including any and all agreements, warrants, rights or options to acquire any Capital Stock) (measured in each case, by both voting power and size of equity interests), or (ii) the Parent ceases to beneficially own, directly or indirectly, at least 51% of the outstanding Capital Stock of Melco Resorts Macau (including any and all agreements, warrants, rights or options to acquire any Capital Stock) (measured in each case, by both voting power and size of equity interests); or

(4)        the first day on which Parent ceases to own, directly or indirectly, 100% of the outstanding Equity Interests of the Company.

“Change of Control Triggering Event” means the occurrence of a Change of Control and a Ratings Decline.

“Clearstream” means Clearstream Banking, société anonyme.

“Company” means Melco Resorts Finance Limited, and any and all successors thereto.

“Corporate Trust Office of the Trustee” will be the designated corporate trust office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of original execution of this Indenture is located at (i) for purposes of surrender, transfer or exchange of any Notes, Deutsche Bank Trust Company Americas, c/o DB Services Americas, Inc., 5022 Gate Parkway, Suite 200, Jacksonville, FL 32256, Attn: Transfer Department and (ii) for all other purposes, Deutsche Bank Trust Company Americas, Trust and Agency Services, 60 Wall Street, 24th Floor, MS NYC 60-2407, New York, New York 10005, USA, Attention: Corporate Team/Melco Resorts Finance Limited or at any other time at such other address as the Trustee may designate from time to time by notice to the parties hereto or at the designated corporate trust office of any successor trustee as to which such successor trustee may notify the parties hereto in writing.

“Custodian” means Deutsche Bank Trust Company Americas, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

 

6

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Equity Offering” means any public sale or private issuance of Capital Stock (other than Disqualified Stock) of (1) the Company or (2) a direct or indirect parent of the Company to the extent the net proceeds from such issuance are contributed in cash to the common equity capital of the Company (in each case other than pursuant to a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).

“Euroclear” means Euroclear Bank SA/NV.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“GAAP” means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

“Gaming Authorities” means, in any jurisdiction in which the Company or any of its Subsidiaries or the Sponsor manages or conducts any casino, gaming business or activities, the applicable gaming board, commission, or other governmental gaming regulatory body or agency which (a) has, or may at any time after issuance of the Notes have, jurisdiction over the gaming activities of the Company or any of its Subsidiaries, or any successor to such authority or (b) is, or may at any time after the issuance of the Notes be, responsible for interpreting, administering and enforcing the Gaming Laws.

“Gaming Laws” means all applicable constitutions, treatises, resolutions, laws, regulations, instructions and statutes pursuant to which any Gaming Authority possesses regulatory, licensing or permit authority over gaming, gambling or casino activities, and all rules, rulings, orders, ordinances, regulations of any Gaming Authority applicable to the gambling, casino, gaming businesses or activities of Melco Resorts Macau (or any other operator of the casino including the Sponsor or any of its Affiliates) or the Company or any of its Subsidiaries or the Sponsor in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities.

“Gaming License” means the license, concession, subconcession or other authorization from any Government Authority which authorizes, permits, concedes or allows the Company or any of its Subsidiaries, at the relevant time, to own or manage casino or gaming areas or operate casino games of fortune and chance.

 

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“Global Note Legend” means the legend set forth in Section 2.06(f)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the Depositary or its nominee, substantially in the form of Exhibit A hereto and that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, issued in accordance with Sections 2.01, 2.06(b)(3), 2.06(b)(4), and with Section 2.06(d)(2) or 2.06(f) hereof.

“Governmental Authority” means the government of the Macau SAR or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1)        interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

(2)        other agreements or arrangements designed to manage interest rates or interest rate risk; and

(3)        other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“Holder” means a Person in whose name a Note is registered.

“Incur” means, with respect to any Indebtedness, Capital Stock or other Obligation of any Person, to create, issue, assume, guarantee, incur (by conversion, exchange, or otherwise) or otherwise become liable in respect of such Indebtedness, Capital Stock or other Obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other Obligation on the balance sheet of such Person. Indebtedness or Capital Stock otherwise Incurred by a Person before it becomes a Subsidiary of the Company shall be deemed to be Incurred at the time at which such Person becomes a Subsidiary of the Company. The accretion of original issue discount, the accrual of interest, the accrual of dividends, the payment of interest in the form of additional Indebtedness and the payment of dividends on preferred stock in the form of additional shares of preferred stock shall not be considered an Incurrence of Indebtedness.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:

(1)        in respect of borrowed money;

 

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(2)        evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3)        in respect of banker’s acceptances;

(4)        representing capital lease obligations;

(5)        representing the balance deferred and unpaid of the purchase price of any property or services due more than one year after such property is acquired or such services are completed; or

(6)        representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

Notwithstanding the foregoing, “Indebtedness” will not include Shareholder Subordinated Debt (other than for purposes of    the definition of “Shareholder Subordinated Debt”). In addition, “Indebtedness” will not include (i) any capital commitments, deposits or advances from customers or any contingent obligations to refund payments (including deposits) to customers (or any guarantee thereof), or (ii) obligations of the Company or any of its Subsidiaries to pay the deferred and unpaid purchase price of property or services due to suppliers of equipment or other assets (including parts thereof) not more than one year after such property is acquired or such services are completed and the amount of unpaid purchase price retained by the Company or any of its Subsidiaries in the ordinary course of business in connection with an acquisition of equipment or other assets (including parts thereof) pending full operation or contingent on certain conditions during a warranty period of such equipment or assets in accordance with the terms of the acquisition; provided that, in each case, such Indebtedness is not reflected as borrowings on the consolidated balance sheet of the Company (contingent obligations and commitments referred to in a footnote to financial statements and not otherwise reflected as borrowings on the balance sheet will not be deemed to be reflected on such balance sheet); or (iii) any lease of property which would be considered an operating lease under GAAP and any guarantee given by the Company or any of its Subsidiaries in the ordinary course of business solely in connection with, or in respect of, the obligations of the Company and its Subsidiaries under any operating lease.

The amount of Indebtedness of any Person at any time shall be the outstanding balance at such time of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that:

(A)        the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP;

(B)        money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest; and

 

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(C)        the amount of or the principal amount of Indebtedness with respect to any Hedging Obligation shall be equal to the net amount payable if such Hedging Obligation terminated at or prior to that time due to a default by such Person.

“Indenture” means this Indenture, as amended or supplemented from time to time.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

“Initial Notes” means the first US$600,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof.

“Initial Purchasers” means Deutsche Bank AG, Singapore Branch, Australia and New Zealand Banking Group Limited, Bank of Communications Co., Ltd. Macau Branch, BOCI Asia Limited, Industrial and Commercial Bank of China (Macau) Limited, Mizuho Securities Asia Limited and Morgan Stanley & Co. LLC.

“Investment Grade” means a rating of BBB- or better by S&P (or its equivalent under any successor rating category of S&P), a rating of BBB- or better by Fitch (or its equivalent under any successor rating category of Fitch), a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating category of Moody’s), and the equivalent ratings of any other “nationally recognized statistical rating organization” that is registered as such pursuant to Section 15E of the Exchange Act and Rule 17g thereunder selected by the Company as having been substituted as a Rating Agency for S&P, Fitch or Moody’s, as the case may be.

“Issue Date” means the date on which the Notes (other than any Additional Notes) are originally issued.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the Cayman Islands, The City of New York, Hong Kong, Macau or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Melco Resorts Macau” means Melco Resorts (Macau) Limited, formerly known as Melco Crown (Macau) Limited.

“Moody’s” means Moody’s Investors Service, Inc. and any of its successors.

“Non-U.S. Person” means a Person who is not a U.S. Person.

“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes.

 

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“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Memorandum” means the offering memorandum dated July 10, 2019 in respect of the Notes.

“Officer” means the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, any Executive Vice President, Senior Vice President or Vice President, Treasurer or Secretary of the Company, or any Director of the Board of the Company or any Person acting in that capacity.

“Officer’s Certificate” means a certificate signed on behalf of the Company by an Officer of the Company which meets the requirements of Section 13.05 hereof.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee, or the Registrar (as applicable), that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company.

“Parent” means Melco Resorts & Entertainment Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands.

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Private Placement Legend” means the legend set forth in Section 2.06(f)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Rating Agencies” means any of (i) S&P, (ii) Moody’s, (iii) Fitch or (iv) if any or all of them shall not make a rating of the Notes publicly available, any other “nationally recognized statistical rating organization” that is registered as such pursuant to Section 15E of the Exchange Act and Rule 17g thereunder selected by the Company as a replacement agency.

“Rating Category” means (1) with respect to S&P, any of the following categories: “AAA,” “AA,” “A,” “BBB,” “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories); (2) with respect to Moody’s, any of the following categories: “Aaa,” “Aa,” “A,” “Baa,” “Ba,” “B,” “Caa,” “Ca,” “C” and “D” (or equivalent successor categories); (3) with respect to Fitch, any of the following categories “AAA,” “AA,” “A,” “BBB,” “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories) and (4) the equivalent of any such category of S&P, Moody’s or Fitch used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (“+” and “-” for S&P and Fitch; “1,” “2” and “3” for Moody’s; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from “BB+” to “BB,” as well as from “B+” to “B-,” will constitute a decrease of one gradation).

 

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“Rating Date” means that date which is 90 days prior to the earlier of (x) a Change of Control and (y) a public notice of the occurrence of a Change of Control or of the intention by the Company or any other Person or Persons to effect a Change of Control.

“Ratings Decline” means the occurrence on, or within six months after, the date, or public notice of the occurrence of any of the events set forth in clauses (1) to (4) of the definition of Change of Control or the announcement by the Company or any other Person or Persons of the intention by the Company or such other Person or Persons to effect a Change of Control (which period will be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the events listed below:

(1)         in the event either the Notes or the Company is rated by two Rating Agencies on the Rating Date as Investment Grade, such rating of the Notes or the Company by either such Rating Agency shall be below Investment Grade;

(2)         in the event either the Notes or the Company is rated by one, and only one, of the Rating Agencies on the Rating Date as Investment Grade, such rating of the Notes or the Company by such Rating Agency shall be below Investment Grade; or

(3)         in the event either the Notes or the Company is rated below Investment Grade by any two Rating Agencies on the Rating Date, such rating of the Notes or the Company by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories); provided that, for a decline that occurs during the review period subsequent to the initial occurrence, public notice or notice of intention, such decline will only qualify as a Ratings Decline if (i) such Rating Agencies’ published report refers to the Change of Control as a factor, or one of the factors in the downgrade, and (ii) such Rating Agencies have not previously affirmed their ratings following the initial occurrence, public notice or notice of intention.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of Regulation S.

“Related Party” means:

(1)         any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of the Sponsor; or

(2)         any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of the Sponsor and/or such other Persons referred to in the immediately preceding clause (1).

“Responsible Officer” when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee (or any successor of the Trustee) who shall have direct responsibility for the administration of the Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

 

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“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“Restricted Period” means the 40-day distribution compliance period as defined in Regulation S.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“S&P” means Standard & Poor’s Ratings Group and any of its successors.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Senior Credit Agreement” means the credit facilities entered into pursuant to an amendment and restatement agreement dated June 19, 2015, as amended from time to time, between, among others, Melco Resorts Macau, Deutsche Bank AG, Hong Kong Branch as agent and DB Trustees (Hong Kong) Limited as security agent, in a total amount of HK$13.65 billion (equivalent to approximately US$1.75 billion), comprising a HK$3.90 billion (equivalent to approximately US$500 million) term loan facility and a HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility and any incremental facilities thereunder, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such agreement may be further amended, modified or extended from time to time in compliance with the terms of the Indenture, and any refinancing thereof.

“SGX-ST” means the Singapore Exchange Securities Trading Limited or its successor.

“Shareholder Subordinated Debt” means, collectively, any debt provided to the Company by any direct or indirect parent holding company of the Company (or the Sponsor), in exchange for or pursuant to any security, instrument or agreement other than Capital Stock, together with any such security, instrument or agreement and any other security or instrument other than Capital Stock issued in payment of any obligation under any Shareholder Subordinated Debt; provided that such Shareholder Subordinated Debt:

(1)         does not (including upon the happening of any event) mature or require any amortization or other payment of principal prior to the first anniversary of the maturity of the Notes (other than through conversion or exchange of any such security or instrument for Equity Interests of the Company (other than Disqualified Stock) or for any other security or instrument meeting the requirements of the definition);

 

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(2)         does not (including upon the happening of any event) require the payment of cash interest prior to the first anniversary of the maturity of the Notes;

(3)         does not (including upon the happening of any event) provide for the acceleration of its maturity nor confer on its shareholders any right (including upon the happening of any event) to declare a default or event of default or take any enforcement action, in each case, prior to the first anniversary of the maturity of the Notes;

(4)         is not secured by a Lien on any assets of the Company or any of its Subsidiaries and is not guaranteed by any Subsidiary of the Company;

(5)         is subordinated in right of payment to the prior payment in full in cash of the Notes in the event of any default, bankruptcy, reorganization, liquidation, winding up or other disposition of assets of the Company;

(6)         does not (including upon the happening of any event) restrict the payment of amounts due in respect of the Notes or compliance by the Company with its Obligations under the Notes and this Indenture; and

(7)         is not (including upon the happening of any event) mandatorily convertible or exchangeable, or convertible or exchangeable at the option of the holder, in whole or in part, prior to the date on which the Notes mature other than into or for Capital Stock (other than Disqualified Stock) of the Company.

“Significant Subsidiary” means any Subsidiary that contributed at least (i) 10% of the total consolidated net income of the Company and its Subsidiaries for the most recently completed fiscal year, or (ii) 10% of the total consolidated assets of the Company and its Subsidiaries as of the end of the most recently completed fiscal year.

“Special Put Option Triggering Event” means:

(1)         any event after which none of the Company or any Subsidiary of the Company has such licenses, concessions, subconcessions or other permits or authorizations as are necessary for the Company and its Subsidiaries to own or manage casino or gaming areas or operate casino games of fortune and chance in Macau in substantially the same manner and scope as the Company and its Subsidiaries are entitled to at the Issue Date, for a period of ten consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole; or

(2)         the termination, rescission, revocation or modification of any Gaming License which has had a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole.

“Sponsor” means Melco International Development Limited.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the Issue Date, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subsidiary” means, with respect to any specified Person:

 

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(1)         any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholder’s agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2)         any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to July 17, 2022; provided, however, that if the period from the redemption date to July 17, 2022 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

“Trustee” means Deutsche Bank Trust Company Americas until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“Unrestricted Definitive Note” means a Definitive Note that does not bear and is not required to bear the Private Placement Legend.

“Unrestricted Global Note” means a Global Note that does not bear and is not required to bear the Private Placement Legend.

“U.S. Government Obligations” means securities that are:

(1)         direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

(2)         obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in each case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt.

“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

 

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“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

Section 1.02     Other Definitions.

 

Term

    Defined in
Section		  

“Additional Amounts”

      2.13  

“Applicable Law”

      13.14  

“Authentication Order”

      2.02  

“Change of Control Offer”

      4.08  

“Change of Control Payment”

      4.08  

“Change of Control Payment Date”

      4.08  

“Covenant Defeasance”

      8.03  

“DTC”

      2.03  

“Event of Default”

      6.01  

“Legal Defeasance”

      8.02  

“Paying Agent”

      2.03  

“Registrar”

      2.03  

“Relevant Jurisdiction”

      2.13  

“Special Put Option Offer”

      4.10  

“Special Put Option Payment”

      4.10  

“Taxes”

      2.13  

“Transfer Agent”

      2.03  

Section 1.03     Rules of Construction.

Unless the context otherwise requires:

(1)         a term has the meaning assigned to it;

(2)         an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3)         “or” is not exclusive;

(4)         words in the singular include the plural, and in the plural include the singular;

(5)         “will” shall be interpreted to express a command;

(6)         provisions apply to successive events and transactions; and

(7)        references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.

 

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ARTICLE 2

THE NOTES

Section 2.01     Form and Dating.

(a)         General. The Notes and the Trustee’s certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof.

The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b)         Global Notes. Notes issued in global form will be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Registrar, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

(c)         Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions—Clearstream Banking, Luxembourg” and “Customer Handbook” of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Global Note that are held by Participants through Euroclear or Clearstream.

Section 2.02     Execution and Authentication.

At least one Officer must sign the Notes for the Company by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.

A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee will, upon receipt of a written order of the Company signed by an Officer (an “Authentication Order”), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Company pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof.

 

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The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03     Registrar and Paying Agent.

The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”). The Company will also maintain a transfer agent (the “Transfer Agent”). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Company may change any Paying Agent, Transfer Agent or Registrar without notice to any Holder and shall so notify the Trustee and each Paying Agent thereof in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar, Transfer Agent or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent, Transfer Agent or Registrar.

The Company initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Company initially appoints Deutsche Bank Trust Company Americas to act as the Registrar, Transfer Agent and Paying Agent and to act as Custodian, with respect to the Global Notes.

If and for so long as the Notes are listed on the SGX-ST, and the rules of the SGX-ST so require, in the event that the Global Notes are exchanged for certificated Notes, the Company will appoint and maintain a paying agent in Singapore where the certificated Notes may be presented or surrendered for payment or redemption. In the event that the Global Notes are exchanged for certificated Notes, an announcement of such exchange shall be made by or on behalf of the Company through the SGX-ST and such announcement will include all material information with respect to the delivery of the certificated Notes, including details of the Singapore paying agent by way of an announcement to the SGX-ST, for so long as the Notes are listed on the SGX-ST.

Section 2.04     Paying Agent to Hold Money in Trust.

The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Amounts, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes.

 

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Section 2.05     Holder Lists.

The Registrar will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders. If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes.

Section 2.06     Transfer and Exchange.

(a)         Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if:

(1)         the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary;

(2)         the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or

(3)         there has occurred and is continuing a Default or Event of Default with respect to the Notes.

Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

(b)         Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(1)         Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).

 

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(2)         All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either:

(A) both:

(i)         a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii)         instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or

(B)     both:

(i)         a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii)         instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above.

Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(g) hereof.

(3)         Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(A)         if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and

(B)         if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.

 

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(4)         Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(i)         if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(ii)         if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to the paragraph above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to the paragraph above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

(c)        Transfer or Exchange of Beneficial Interests for Definitive Notes.

(1)         Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A)         if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

(B)         if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

 

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(C)         if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D)         if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E)         if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F)         if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(2)         Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if the Registrar receives the following:

(i)         if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(ii)         if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

 

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(3)         Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount.     Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will not bear the Private Placement Legend.

(d)        Transfer and Exchange of Definitive Notes for Beneficial Interests.

(1)         Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A)         if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B)         if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C)         if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D)        if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E)         if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F)         if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

 

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the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Note.

(2)         Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following:

(i)         if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(ii)         if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(3)         Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (1)(B), (1)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e)         Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

 

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(1)         Restricted Definitive Notes to Restricted Definitive Notes.     Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(A)         if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B)         if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C)         if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates required by item (3) thereof, if applicable.

(2)         Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:

(i)         if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(ii)         if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(3)         Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f)         Legends.     The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

 

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(1)         Private Placement Legend.

(A)         Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER FOR THE BENEFIT OF THE COMPANY AND ANY OF ITS SUCCESSORS IN INTEREST (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS [IN THE CASE OF RULE 144A NOTES: ONE YEAR] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY [RULE 144A] [REGULATION S] UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE DATE OF ORIGINAL ISSUE AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THE NOTES (OR ANY PREDECESSOR THERETO) (THE “RESALE RESTRICTION TERMINATION DATE”) RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE OR A BENEFICIAL INTEREST IN THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON THAT THE SELLER, AND ANY PERSON ACTING ON ITS BEHALF, REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF SUCH CASES IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (D) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THAT AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, THE TRUSTEE AND THE REGISTRAR IS COMPLETED AND DELIVERED BY THE TRANSFEROR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES,” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.”

(B)         Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2), (d)(2), (d)(3), (e)(2) or (e)(3) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend.

 

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(2)         Global Note Legend. Each Global Note will bear a legend in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

(g)         Cancellation and/or Adjustment of Global Notes.     At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Registrar at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Registrar at the direction of the Trustee to reflect such increase.

(h)         General Provisions Relating to Transfers and Exchanges.

(1)         To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.

 

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(2)         No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.06, 3.06, 4.08, 4.10 and 9.05 hereof).

(3)         The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(4)         All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(5)        Neither the Registrar nor the Company will be required:

(A)         to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;

(B)         to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or

(C)         to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(6)         Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

(7)         The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(8)         All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

Section 2.07     Replacement Notes.

If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee’s requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge the Holder for its expenses in replacing a Note, including, but not limited to the reasonable expenses of counsel and any tax that may be imposed with respect to replacement of such Note.

 

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Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

Section 2.08     Outstanding Notes.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.

Section 2.09     Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or any of its Subsidiaries, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any of its Subsidiaries, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.

Section 2.10     Temporary Notes.

Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes.

Holders of temporary Notes will be entitled to all of the benefits of this Indenture.

Section 2.11     Cancellation.

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the Trustee’s record retention requirements). Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

 

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Section 2.12     Defaulted Interest.

If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than ten (10) days prior to the related payment date for such defaulted interest. At least fifteen (15) days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

Section 2.13     Additional Amounts.

(a)         All payments by or on behalf of the Company of principal of, and premium, if any, and interest on the Notes will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by the Cayman Islands, Macau, any jurisdiction in which the Company is resident for tax purposes or any jurisdiction from or through which payments are made by or on behalf of the Company (or any political subdivision or taxing authority thereof or therein) (each, as applicable, a “Relevant Jurisdiction”), unless such withholding or deduction is required by law. In such event, the Company will make such withholding or deduction, make payment of the amount so withheld or deducted to the appropriate Governmental Authority as required by applicable law and will pay such additional amounts (“Additional Amounts”) as will result in receipt by the Holder of such amounts as would have been received by such holder had no such withholding or deduction been required; provided that no Additional Amounts will be payable with respect to any Note for or on account of:

(1)     any Taxes that would not have been imposed but for:

(A)         the existence of any present or former connection between the Holder or beneficial owner of such Note, as the case may be, and the Relevant Jurisdiction including, without limitation, such holder or beneficial owner being or having been a citizen or resident of such Relevant Jurisdiction, being or having been treated as a resident of such Relevant Jurisdiction or being or having been present or engaged in a trade or business in such Relevant Jurisdiction or having or having had a permanent establishment in such Relevant Jurisdiction, other than merely holding such Note or the receipt of payments thereunder;

(B)         the presentation of such Note (where presentation is required) more than thirty (30) days after the later of the date on which the payment of the principal of, premium, if any, or interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30-day period;

 

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(C)         the failure of the Holder or beneficial owner of such Note to comply with a timely request of the Company addressed to such Holder or beneficial owner to provide information concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Jurisdiction; or

(D)         the presentation of such Note (where presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;

(2)         any estate, inheritance, gift, sale, transfer, excise, personal property, net income or similar Tax;

(3)         any Tax arising pursuant to Sections 1471 – 1474 of the U.S. Internal Revenue Code of 1986, as amended, and any successor or amended version that is substantively comparable and not materially more onerous to comply with, any official interpretations thereof, current or future regulations or agreements entered pursuant thereto, any U.S. or non-U.S. law enacted in connection with an intergovernmental agreement related thereto, or any rules, regulations, or administrative guidance of any kind relating to any of the foregoing;

(4)         any Taxes that are payable other than (i) by withholding or deduction from payments of principal of, or premium (if any) or interest on the Note, or (ii) by direct payment by the Company in respect of claims made against the Company; or

(5)        any combination of Taxes referred to in the preceding clauses (1), (2), (3) and (4); or

(b)         with respect to any payment of the principal of, or premium, if any, or interest on, such Note to or for the account of a fiduciary, partnership or other fiscally transparent entity or any other person (other than the sole beneficial owner of such payment) to the extent that a beneficiary or settlor with respect to that fiduciary, or a partner or member of that partnership or fiscally transparent entity or a beneficial owner with respect to such other person, as the case may be, who would not have been entitled to such Additional Amounts had such beneficiary, settlor, partner, member or beneficial owner held directly the Note with respect to which such payment was made.

(c)         In addition to the foregoing, the Company will also pay and indemnify the Holder for any present or future stamp, issue, registration, court or documentary taxes, or any other excise or property taxes, charges or similar levies (including penalties, interest and other reasonable expenses related thereto) which are levied by any Relevant Jurisdiction on the execution, delivery, issuance, or registration of any of the Notes, this Indenture or any other document or instrument referred to herein, or the receipt of any payments with respect thereto, or enforcement of, any of the Notes. The Company will use all reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any taxes so deducted or withheld from each Relevant Jurisdiction imposing such taxes, in such form as provided in the ordinary course by the Relevant Jurisdiction and as is reasonably available to the Company, and will provide such certified copies to the Trustee and the Paying Agent. Such copies shall be made available to the Holders upon request and will be made available at the offices of the Paying Agent. The Company will attach to each certified copy a certificate stating (x) that the amount of withholding taxes evidenced by the certified copy was paid in connection with payments in respect of the principal amount of Notes then outstanding and (y) the amount of such withholding taxes paid per $1,000 principal amount of the Notes.

 

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(d)         Whenever there is mentioned in any context the payment of principal of, and any premium or interest, on any Note, such mention will be deemed to include payment of Additional Amounts provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

Section 2.14     Agents.

 

  (a)

Actions of Agents. The rights, powers, duties and obligations and actions of each Agent under this Indenture are several and not joint or joint and several.

 

  (b)

Agents of Trustee. The Company and the Agents acknowledge and agree that in the event of a Default or Event of Default, the Trustee may, by notice in writing to the Company and the Agents, require that the Agents act as agents of, and take instructions exclusively from, the Trustee. Prior to receiving such written notice from the Trustee, the Agents shall be the agents of the Company and need have no concern for the interests of the Holders.

 

  (c)

Funds held by Agents. The Agents will hold all funds as banker subject to the terms of this Indenture and as a result such money need not be segregated from other funds except to the extent required by law.

 

  (d)

Publication of Notices. For so long as the Notes are held as Book-Entry Interests in Global Notes, any obligation the Agents may have to publish a notice to Holders on behalf of the Company will be satisfied upon delivery of the notice to DTC.

 

  (e)

In the event that instructions given to any Agent are not reasonably clear, then such Agent shall be entitled to seek clarification from the Company or other party entitled to give the Agents instructions under this Indenture. If an Agent has sought clarification in accordance with this Section 2.14, then such Agent shall be entitled to take no action until such clarification is provided, and shall not incur any liability for not taking any action pending receipt of such clarification.

 

  (f)

Save as provided in this Section 2.14, no Agent shall be under any duty or other obligation towards, or have any relationship of agency or trust for or with, any person other than the Company.

 

  (g)

No Agent shall be required to make any payment under this Indenture unless and until it has received the full amount to be paid in accordance with the terms of this Indenture. To the extent that an Agent has made a payment for which it did not receive the full amount, the Company will reimburse the Agent the full amount of any shortfall.

 

  (h)

The roles, duties and functions of the Agents are of an administrative nature and each Agent shall only perform those acts and duties as specifically set out in this Indenture and no other acts, covenants, obligations or duties shall be implied or read into this Indenture against any of the Agents.

 

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ARTICLE 3

REDEMPTION AND PREPAYMENT

Section 3.01     Notices to Trustee.

If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, the Registrar and the Paying Agent, at least 30 days but not more than 60 days before a redemption date, an Officer’s Certificate setting forth:

(1)        the clause of this Indenture pursuant to which the redemption shall occur;

(2)        the redemption date;

(3)        the principal amount of Notes to be redeemed; and

(4)        the redemption price.

Section 3.02     Selection of Notes to Be Redeemed or Purchased.

If fewer than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee, the Paying Agent or the Registrar (as applicable) will select Notes for redemption or purchase (i) in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed and any applicable depositary procedures, (ii) by lot or such other similar method in accordance with the applicable procedures of the Depositary or any other applicable clearing system (if the Notes are Global Notes), or (iii) if there are no such requirements of such exchange or the Notes are not then listed on a national securities exchange or cleared through the Depositary or any other applicable clearing system, on a pro rata basis. No Notes of a principal amount of US$200,000 or less may be redeemed or purchased in part, and if Notes are redeemed or purchased in part, the remaining outstanding amount must be at least equal to US$200,000 and integral multiples of US$1,000 in excess thereof. None of the Trustee, the Paying Agent or the Registrar will be liable for any selections made by it under this paragraph.

In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Registrar from the outstanding Notes not previously called for redemption or purchase.

The Registrar will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of US$200,000 or integral multiples of US$1,000 in excess thereof; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03     Notice of Redemption.

Subject to the provisions set forth in the second paragraph of Section 3.07(d), at least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date (with prior notice to the Trustee) if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 hereof or less than 30 days prior to a redemption date as provided under Section 3.10 hereof.

 

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The notice will identify the Notes to be redeemed and will state:

(1)        the redemption date;

(2)        the redemption price;

(3)        if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note; provided that the unredeemed portion has a minimum denomination of US$200,000;

(4)        the name and address of the Paying Agent;

(5)        that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(6)        that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

(7)        the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;

(8)        that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes; and

(9)        whether the redemption is conditioned on any events and, if so, a reasonably detailed explanation of such conditions.

At the Company’s written request, the Paying Agent will give the notice of redemption in the Company’s name and at its expense; provided, however, that the Company has delivered to the Paying Agent, at least three Business Days prior to the date that the notice of redemption is to be delivered to Holders, an Officer’s Certificate requesting that the Paying Agent give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.04     Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the redemption price stated in the notice; provided that any notice of redemption given in respect of the redemption referred to in Section 5 of the Notes may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, to the extent permitted by Section 3.07 of the Indenture and Section 5 of the Notes.

 

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Section 3.05     Deposit of Redemption or Purchase Price.

No later than 10 a.m. New York time one Business Days prior to the redemption or purchase date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest and Additional Amounts, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Additional Amounts, if any, on all Notes to be redeemed or purchased.

If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06     Notes Redeemed or Purchased in Part.

Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.

Section 3.07     Optional Redemption.

(a)        At any time prior to July 17, 2022, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 105.625% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that:

(1)        at least 65% of the aggregate principal amount of Notes originally issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and

(2)        the redemption occurs within 45 days of the date of the closing of such Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Equity Offering, and any such redemption or notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Equity Offering.

(b)        At any time prior to July 17, 2022, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the discretion of the Company, be subject to satisfaction of one or more conditions precedent.

 

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(c)        Except pursuant to the two preceding paragraphs and Sections 3.09 and 3.10, the Notes will not be redeemable at the Company’s option prior to July 17, 2022.

(d)        On or after July 17, 2022, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, and Additional Amounts, if any, on the Notes redeemed, to but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on July 17 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

 

Year

    Percentage  

2022

      102.813%  

2023

      101.406%  

2024 and thereafter

      100.000%  

Any such redemption may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent. If such redemption is so subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Company’s discretion, the redemption date may be delayed until such time (provided, however, that any delayed redemption date shall not be more than 60 days after the date the relevant notice of redemption was sent) as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date or by the redemption date as so delayed. In addition, the Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person.

Unless the Company defaults in the payment of the redemption price or fails to satisfy the conditions precedent to the redemption and thereby terminates the redemption, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(e)        Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08     Mandatory Redemption.

The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Company may be required to offer to purchase Notes as described in Sections 4.08 and 4.10 hereof. The Company may at any time and from time to time purchase Notes in the open market or otherwise.

Section 3.09     Redemption for Taxation Reasons.

The Notes may be redeemed, at the option of the Company, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to Holders (which notice will be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to but excluding the date fixed by the Company for redemption (the “Tax Redemption Date”) if, as a result of:

 

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(1)        any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Jurisdiction affecting taxation; or

(2)        any change in, or amendment to, an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment or order by a court of competent jurisdiction),

which change or amendment becomes effective on or after the date of this Indenture with respect to any payment due or to become due under the Notes or this Indenture, the Company is, or on the next interest payment date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the Company, taking reasonable measures available to it; provided that for the avoidance of doubt, changing the jurisdiction of the Company is not a reasonable measure for the purposes of this Section 3.09; provided further that no such notice of redemption will be given earlier than 90 days prior to the earliest date on which the Company would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

Prior to the mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company will deliver to the Trustee:

(1)        an Officer’s Certificate stating that such change or amendment referred to in the prior paragraph has occurred, and describing the facts related thereto and stating that such requirement cannot be avoided by the Company, taking reasonable measures available to it; and

(2)        an Opinion of Counsel or an opinion of a tax consultant of recognized international standing stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in the prior paragraph.

The Trustee will accept and shall be entitled to rely on such Officer’s Certificate and Opinion of Counsel or opinion of tax consultant as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it will be conclusive and binding on the Holders.

Any Notes that are redeemed pursuant to this Section 3.09 will be cancelled.

Section 3.10     Gaming Redemption.

Each Holder, by accepting a Note, shall be deemed to have agreed that if the Gaming Authority of any jurisdiction in which the Company, any of its Subsidiaries or the Sponsor conducts or proposes to conduct gaming requires that a person who is a holder or the beneficial owner of Notes be licensed, qualified or found suitable under applicable Gaming Laws, such holder or beneficial owner, as the case may be, shall apply for a license, qualification or a finding of suitability within the required time period. If such Person fails to apply or become licensed or qualified or is found unsuitable, the Company shall have the right, at its option:

(1)        to require such Person to dispose of its Notes or beneficial interest therein within 30 days of receipt of notice of the Company’s election or such earlier date as may be requested or prescribed by such Gaming Authority; or

 

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(2)        to redeem such Notes, which redemption may be less than 30 days following the notice of redemption if so requested or prescribed by the applicable gaming authority, at a redemption price equal to:

(A)        the lesser of:

 

  (1)

the person’s cost, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; and

 

  (2)

100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; or

(B)        such other amount as may be required by applicable law or order of the applicable Gaming Authority.

The Company shall notify the Trustee in writing of any such redemption as soon as practicable. Neither the Company nor the Trustee shall be responsible for any costs or expenses any Holder may incur in connection with such Holder’s application for a license, qualification or a finding of suitability.

ARTICLE 4

COVENANTS

Section 4.01     Payment of Notes.

The Company will pay or cause to be paid the principal of, premium, if any, and interest and Additional Amounts, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Additional Amounts, if any, will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. New York Time one Business Day prior to the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due.

The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Amounts (without regard to any applicable grace period) at the same rate to the extent lawful.

Subject to actual receipt of funds as provided in this Section 4.01 by the Paying Agent, such Paying Agent shall make payments on the Notes in accordance with the provisions of this Indenture

Section 4.02     Maintenance of Office or Agency.

The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

 

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The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Company hereby designates Deutsche Bank Trust Company Americas as one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03     Reports.

(a)        The Company will furnish to the Trustee and the Holders or, at the written request and expense of the Company, cause the Trustee to furnish to the Holders, and make available to potential investors:

(1)        within 120 days after the end of the Company’s fiscal year, annual reports of the Company containing: (a) information with a level of detail that is substantially comparable to the sections in the Offering Memorandum entitled “Selected Consolidated Financial Information”, “Business”, “Management”, “Related Party Transactions” and “Description of Other Material Indebtedness”; (b) the Company’s audited consolidated (i) balance sheet as of the end of the two most recent fiscal years and (ii) statement of operations and statement of cash flow for the two most recent fiscal years, in each case prepared in accordance with GAAP and including complete footnotes to such financial statements and the report of the independent auditors on the financial statements; (c) an operating and financial review of the two most recent fiscal years for the Company and its Subsidiaries, including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and any material changes between such two fiscal years and (ii) any material developments in the business of the Company and its Subsidiaries; and (d) pro forma statement of operations and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal year, unless pro forma information has been provided in a previous report pursuant to paragraph (2)(c) below;

(2)        within 60 days after the end of each day of the first three fiscal quarters in each fiscal year of the Company, quarterly reports containing: (a) the Company’s unaudited condensed consolidated (i) balance sheet as of the end of such quarter and (ii) statement of operations and cash flow for the quarterly and year to date periods ending on the most recent balance sheet date, and the comparable prior year periods, in each case prepared in accordance with GAAP; (b) an operating and financial review of such periods for the Company and its Subsidiaries including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and material changes between the current period and the period of the prior year and (ii) any material developments in the business of the Company and its Subsidiaries; (c) pro forma statement of operations and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal quarter; provided that the Company may provide any such pro forma information relating to a material acquisition within 75 days following such quarterly report in the form of a report provided pursuant to clause (3) below; and

 

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(3)        promptly from time to time after the occurrence of any of the events listed in (a) to (d) of this clause (3) information with respect to (a) any change in the independent accountants of the Company or any of its Significant Subsidiaries, (b) any material acquisition or disposition, (c) any material event that the Company or any of its Subsidiaries announces publicly and (d) any information that the Company is required to make publicly available under the requirements of the Singapore Exchange Securities Trading Limited or such other exchanges on which the securities of the Company or its Subsidiaries are then listed.

The Company may satisfy the requirement to furnish reports or information as described in (1), (2) and (3) above by furnishing, or making available, such required report or information on the website of the SEC or SGX-ST; provided that the Trustee shall have no responsibility whatsoever to determine whether such report or information has been furnished or made available on such website.

(b)        In addition, so long as any Notes remain outstanding, the Company shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(c)        Delivery of such reports, information and documents to the Trustee shall be for informational purposes only and the Trustee’s receipt of such reports, information and documents shall not constitute notice of any information contained therein, including the Company’s compliance with any of the covenants hereunder (as to which the Trustee is entitled to rely exclusively on the Officer’s Certificate).

Section 4.04     Compliance Certificate.

(a)        The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year or at any other times upon the written request of the Trustee, an Officer’s Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b)        So long as any of the Notes are outstanding, the Company will deliver to the Trustee, as soon as possible and in any event within five (5) Business Days after the Company becomes aware of any Default or Event of Default, an Officer’s Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. The Trustee shall not be deemed to have a duty to monitor compliance by the Company, nor to have knowledge of a Default or an Event of Default unless a Responsible Officer of the Trustee receives written notice thereof, stating that it is a notice of default and referencing the applicable section of this Indenture.

 

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Section 4.05     Taxes.

The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies required to be paid by the Company or such Subsidiaries except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders.

Section 4.06     Stay, Extension and Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07     Corporate Existence.

Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:

(1)        its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and

(2)        the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders.

Section 4.08     Offer to Repurchase upon Change of Control.

(a)        Upon the occurrence of a Change of Control Triggering Event, each Holder will have the right to require the Company to repurchase all or any part of such Holder’s Notes pursuant to a Change of Control Offer (as defined below) on the terms set forth below. In the Change of Control Offer, the Company will offer to purchase the Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), except to the extent the Company has previously or concurrently elected to redeem the Notes in full pursuant to Section 3.07 hereof or Section 3.09 hereof. Within twenty (20) days following any Change of Control Triggering Event, except to the extent that the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof, the Company shall mail a notice (a “Change of Control Offer”) to each Holder with a copy to the Trustee stating:

(1)        that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Company to repurchase such Holder’s Notes at a repurchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of holders of record on a record date to receive interest on the relevant interest payment date) (the “Change of Control Payment”);

 

41

(2)        the circumstances and relevant facts and financial information regarding such Change of Control;

(3)        the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”);

(4)        that any Note not tendered will continue to accrue interest;

(5)        that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;

(6)        the Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(7)        the Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased, and

(8)        that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that the unpurchased portion has a minimum denomination of US$200,000.

(b)        On the Change of Control Payment Date, the Company will, to the extent lawful:

(1)        accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

(2)        deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

(3)        deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that the unpurchased portion has a minimum denomination of US$200,000. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

 

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(c)        Notwithstanding anything to the contrary in this Section 4.08, the Company will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.08 and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given in accordance with the terms of Section 3.03 hereof or Section 3.09 hereof, pursuant to which the Company exercised its right to redeem the Notes in full, unless and until there is a default in payment of the applicable redemption price.

(d)        A Change of Control Offer may be made in advance of a Change of Control Triggering Event, and conditioned upon such Change of Control Triggering Event, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

(e)        Notes repurchased by the Company pursuant to a Change of Control Offer will have the status of Notes issued but not outstanding or will be retired and cancelled at the option of the Company. Subject to Section 2.09 hereof, Notes purchased by a third party pursuant to the preceding paragraph will have the status of Notes issued and outstanding.

(f)        The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of the Notes pursuant to this Section 4.08. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.08, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.08 by virtue of such compliance.

Section 4.09     Listing.

The Company will use its commercially reasonable efforts to list and maintain the listing and quotation of the Notes on the Official List of the Singapore Exchange Securities Trading Limited or another comparable exchange.

Section 4.10     Special Put Option.

(a)        Upon a Special Put Option Triggering Event, each Holder will have the right to require the Company to repurchase all or any part of such Holder’s Notes pursuant to a Special Put Option Offer (as defined below) as set forth below. In the Special Put Option Offer, the Company will offer to purchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date), except to the extent the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof. Within ten (10) days following the occurrence of a Special Put Option Triggering Event, except to the extent that the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof or Section 3.09 hereof, the Company shall mail a notice (a “Special Put Option Offer”) to each Holder with a copy to the Trustee and the Paying Agent stating:

 

  (1)

that a Special Put Option Triggering Event has occurred and that such Holder has the right to require the Company to repurchase such Holder’s Notes at a repurchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date);

 

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  (2)

the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and

 

  (3)

the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes repurchased.

(b)        On the date of repurchase pursuant to a Special Put Option Offer, the Company will, to the extent lawful:

 

  (1)

accept for payment all Notes or portions of Notes properly tendered pursuant to the Special Put Option Offer;

 

  (2)

deposit with the Paying Agent an amount equal to the repurchase price, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (the “Special Put Option Payment”), in respect of all Notes or portions of Notes properly tendered; and

 

  (3)

deliver or cause to be delivered to the Trustee, the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes properly tendered the Special Put Option Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any.

(c)        Notwithstanding anything to the contrary in this Section 4.10, the Company will not be required to make a Special Put Option Offer upon a Special Put Option Triggering Event if (1) a third party makes the Special Put Option Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Special Put Option Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Special Put Option Offer, or (2) notice of redemption has been given in accordance with the terms of the Indenture, as described above under Section 3.07 hereof or Section 3.09 hereof pursuant to which the Company has exercised its right to redeem the Notes in full, unless and until there is a default in payment of the applicable redemption price.

(d)        Notes repurchased by the Company pursuant to a Special Put Option Offer will have the status of Notes issued but not outstanding or will be retired and cancelled at the option of the Company. Subject to Section 2.09 hereof, Notes purchased by a third party pursuant to the preceding paragraph will have the status of Notes issued and outstanding.

(e)        The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this provision. To the extent that the provisions of any securities laws or regulations conflict with provisions of this provision, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof.

(f)        The provisions described above that require the Company to make a Special Put Option Offer following a Special Put Option Triggering Event will be applicable whether or not any other provisions of this Indenture are applicable.

 

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ARTICLE 5

SUCCESSORS

Section 5.01     Merger, Consolidation, or Sale of Assets.

(a)        The Company will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company survives); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person unless:

(1)        either:

(A)        if the transaction or series of transactions is a consolidation of the Company with or a merger of the Company with or into any other Person, the Company shall be the surviving corporation of such merger or consolidation; or

(B)        the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made shall be a corporation organized and existing under the laws of the British Virgin Islands, Cayman Islands, Hong Kong, Macau, Singapore, United States, any state of the United States or the District of Columbia, and such Person shall expressly assume all the Obligations of the Company under the Notes and this Indenture pursuant to supplemental indentures or other documents or agreements reasonably satisfactory to the Trustee; and

(2)        immediately after such transaction, no Default or Event of Default exists.

Section 5.02    Successor Corporation Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the “Company” shall refer instead to the successor Person and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company’s assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01     Events of Default.

(a)        Each of the following is an “Event of Default”:

(1)        default for 30 days in the payment when due of interest on the Notes;

 

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(2)        default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes;

(3)        failure by the Company to comply with its obligations under the provisions of Sections 4.08, 4.10 or 5.01 hereof;

(4)        failure by the Company for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in this Indenture;

(5)        default under any mortgage, indenture or instrument (other than the Senior Credit Agreement) under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness (or guarantee) now exists, or is created after the date of this Indenture, if such default results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates US$50.0 million or more, if such acceleration is not annulled within 30 days after written notice as provided in this Indenture;

(6)        default under the Senior Credit Agreement that results in the acceleration thereof prior to the final maturity thereof;

(7)        failure by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary to pay final judgments entered by a court or courts of competent jurisdiction (other than any judgment as to which a reputable third party insurer has accepted full responsibility and coverage) aggregating in excess of US$50.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(8)        the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:

(A)        commences a voluntary case,

(B)        consents to the entry of an order for relief against it in an involuntary case,

(C)        consents to the appointment of a custodian of it or for all or substantially all of its property,

(D)        makes a general assignment for the benefit of its creditors, or

(E)        generally is not paying its debts as they become due;

(9)        a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

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(A)        is for relief against the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary in an involuntary case;

(B)        appoints a custodian of the Company or of any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary; or

(C)        orders the liquidation of the Company or of any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary.

Section 6.02     Acceleration.

In the case of an Event of Default specified in Section 6.01(a)(8) or 6.01(a)(9) hereof, with respect to the Company, any Subsidiary of the Company that is a Significant Subsidiary or any group of Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately.

The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration of the Notes or waive any existing Default or Event of Default and its consequences under this Indenture except with respect to a continuing Default or Event of Default in the payment of principal, interest, premium or Additional Amounts, if any, on the Notes; provided, however, that Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration.

Section 6.03     Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Additional Amounts, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04     Waiver of Past Defaults.

Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder; provided that Holders of not less than 90% of the aggregate principal amount of the then outstanding Notes shall be required to waive a continuing Default or Event of Default in the payment of the principal of, premium, Additional Amounts, if any, or interest on, the Notes; provided further, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

 

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Section 6.05     Control by Majority.

Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability.

Section 6.06     Limitation on Suits.

(a)        Subject to the provisions of this Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any Holders unless such Holders have offered to the Trustee indemnity and/or security to its satisfaction against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest or Additional Amounts, if any, when due, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:

(1)        such Holder has previously given the Trustee written notice that an Event of Default is continuing;

(2)        Holders of at least 25% in aggregate principal amount of the then outstanding Notes have made a written request to the Trustee to pursue the remedy;

(3)        such Holders have offered the Trustee security and/or indemnity satisfactory to the Trustee against any loss, liability or expense;

(4)        the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security and/or indemnity to its satisfaction; and

(5)        during such 60-day period, Holders of a majority in aggregate principal amount of the then outstanding Notes have not given the Trustee a direction inconsistent with such request.

(b)        A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

Section 6.07     Rights of Holders to Receive Payment.

Subject to Section 9.02 hereof, the right of any Holder to receive payment of principal, premium, Additional Amounts, if any, and interest on the Notes, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of Holders of not less than 90% of the aggregate principal of the then outstanding Notes; provided that a Holder shall not have the right to institute any such suit for the enforcement of payment if and to the extent that the institution or prosecution thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture upon any property subject to such Lien.

 

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Section 6.08     Collection Suit by Trustee.

If an Event of Default specified in Section 6.01(a)(1) or (a)(2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, Additional Amounts, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and premium, if any and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09     Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.08 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.08 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10     Priorities.

If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

First:        to the Trustee, the Agents, and their respective agents and attorneys for amounts due under Section 7.08 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee or any Agent, and the costs and expenses of collection;

Second:        to Holders for amounts due and unpaid on the Notes for principal, premium, Additional Amounts, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, Additional Amounts, if any, and interest, respectively; and

 

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Third:        to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

Section 6.11     Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes.

ARTICLE 7

TRUSTEE

Section 7.01     Duties of Trustee.

(a)        If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)        Except during the continuance of an Event of Default:

(1)        the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)        in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(3)        the Trustee shall not be charged with knowledge of any Default or Event of Default unless the Company has delivered written notice of such default or Event of Default to a Responsible Officer at the Corporate Trust Office of the Trustee referencing the applicable provision of this Indenture.

(c)        The Trustee may not be relieved from liabilities for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct, except that:

(1)        this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

 

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(2)        the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer; and

(3)        the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d)        Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01.

(e)        No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability.

(f)        The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02     Rights of Trustee.

(a)        The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b)        Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel. The Trustee may engage and consult with professional advisors and counsel selected by it and the Trustee may rely conclusively upon advice of such professional advisors and counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon by the Trustee and any of its directors, officers, employees or agents duly appointed.

(c)        The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. The Trustee shall have no duty to monitor the performance of such agents.

(d)        The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. The Trustee shall not be required to take action at the direction of the Company or Holders which conflicts with the requirements of this Indenture, or for which it is not indemnified and/or secured to its satisfaction, or which involves undue risk or would be contrary to applicable law or regulation.

(e)        Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company.

(f)        The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security satisfactory to the Trustee in its sole discretion against the losses, liabilities and expenses that might be incurred by it in compliance with such request or direction.

(g)        In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

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(h)        The recitals contained herein and in the Notes are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Indenture or the Notes.

(i)        The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(j)        In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(k)        The rights, privileges, indemnity, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified and/or secured, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder; provided, however, any such agent or custodian shall not be deemed to be a fiduciary;

(l)        The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture;

(m)        So long as any of the Notes remains outstanding, the Company shall provide the Agents with a sufficient number of copies of this Indenture and each of the documents sent to the Trustee or which are required to be made available by stock exchange regulations or stated in the Offering Memorandum relating to the Notes, to be available and, subject to being provided with such copies, each of the Agents will procure that such copies shall be available at its specified office during normal office hours for examination by the Holders and that copies thereof will be furnished to the Holders upon written request at their own expense;

(n)        If the Trustee shall be uncertain as to its duties or rights hereunder, it shall be entitled to refrain from taking action until directed in writing by a final order or judgment of a court of competent jurisdiction.

(o)        If the Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of Holders, each representing less than a majority in aggregate principal amount of the Notes then outstanding, pursuant to the provisions of this Indenture, the Trustee, in its sole discretion, may determine what action, if any, to take and shall not incur any liability for its failure to act until such inconsistency or conflict is, in its sole opinion, resolved.

 

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(p)        Notwithstanding any other provision of this Indenture, the Trustee and the Paying Agent shall be entitled to make a deduction or withholding from any payment which they make under this Indenture for or on account of any present or future taxes, duties or charges if and to the extent so required by applicable law, in which event the Trustee or the Paying Agent, as applicable, shall make such payment after such withholding or deduction has been made and shall account to the relevant authorities for the amount so withheld or deducted.

(q)        The Trustee shall (except as expressly otherwise provided herein) as regards all the trusts, powers, authorities and discretions vested in it by this Indenture or by applicable law, have absolute and uncontrolled discretion as to the exercise or non-exercise thereof and, absent any wilful misconduct, gross negligence or fraud on the part of the Trustee, the Trustee shall not be responsible for any loss, damage, cost, claim or any other liability or inconvenience that may result from the exercise or non-exercise thereof.

(r)        Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice of the Company mentioned herein shall be sufficiently evidenced if in writing and signed by an Officer of the Company and any resolution of the Board of Directors shall be sufficiently evidenced by a board resolution.

(s)        The Trustee shall have no duty to inquire as to the performance of the covenants of the Company. Delivery of reports, information and documents to the Trustee under Section 4.03 hereof shall be for informational purposes only as regards the Trustee and the Trustee’s receipt of such reports, information and documents shall not constitute constructive notice of any information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).

(t)        The Trustee shall not have any obligation or duty to monitor, determine or inquire as to compliance, and shall not be responsible or liable for compliance with restrictions on transfer, exchange, redemption, purchase or repurchase, as applicable, of minimum denominations imposed under this Indenture or under applicable law or regulation with respect to any transfer, exchange, redemption, purchase or repurchase, as applicable, of any interest in any Global Notes.

(u)        The Trustee may assume without inquiry in the absence of actual knowledge that the Company is duly complying with its obligations contained in this Indenture required to be performed and observed by it, and that no Default or Event of Default or other event which would require repayment of the Notes has occurred.

Section 7.03     [Intentionally Omitted.]

Section 7.04     Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. The Trustee is also subject to Section 7.11 hereof.

Section 7.05     Trustee’s Disclaimer.

The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the proceeds from the Notes or any money paid to the Company or upon the Company’s direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. The Trustee shall not be deemed to be required to calculate any Fixed Charges, Treasury Rates, Additional Amounts, any make-whole amount, any Fixed Charge Coverage Ratio or other coverage ratio, or otherwise.

 

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Section 7.06     Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders a notice of the Default or Event of Default within ninety (90) days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, Additional Amounts, if any, or interest on, any Note, the Trustee shall not be deemed to have such actual knowledge and may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders.

Section 7.07     [Intentionally Omitted.]

Section 7.08     Compensation and Indemnity.

(a)        The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder pursuant to a written fee agreement executed by the Trustee and the Company. The Trustee’s compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses properly incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

(b)        The Company will indemnify the Trustee (which for purposes of this Section 7.08, shall be deemed to include its officers, directors, employees and agents) against any and all losses, liabilities or expenses (including the fees and expenses of counsel) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.08) and defending itself against any claim (whether asserted by the Company, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable solely to its gross negligence, willful misconduct or fraud by a court of competent jurisdiction in a final non-appealable order. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company of its obligations hereunder. The Company will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. The Company shall not need to pay for any settlement made without its consent, which consent will not be unreasonably withheld.

(c)        The obligations of the Company under this Section 7.08 will survive the satisfaction and discharge of this Indenture, and the resignation or removal of the Trustee and/or any Agent, but only in relation to anything done or omitted to be done by such Trustee and/or any such Agent on or prior to such resignation or removal.

(d)        To secure the Company’s payment obligations in this Section 7.08, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture.

 

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(e)        When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(8) or Section 6.01(a)(9) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

Section 7.09     Replacement of Trustee.

(a)        A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.09.

(b)        The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

(1)        the Trustee fails to comply with Section 7.11 hereof;

(2)        the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(3)        a custodian or public officer takes charge of the Trustee or its property; or

(4)        the Trustee becomes incapable of acting.

(c)        If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one (1) year after the successor Trustee takes office, the holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

(d)        If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee at the sole expense of the Company.

(e)        If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.11 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(f)        A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will deliver a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.08 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.09, the Company’s obligations under Section 7.08 hereof will continue for the benefit of the retiring Trustee.

 

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Section 7.10     Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee.

Section 7.11     Eligibility; Disqualification.

There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof, the United Kingdom or Hong Kong that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by the relevant authorities in such jurisdiction and that is a corporation which is generally recognized as a corporation which customarily performs such corporate trustee roles and provides such corporate trustee services in transactions similar in nature to the offering of the Notes. No obligor under the Notes or Person directly controlling, controlled by, or under common control with such obligor shall serve as trustee under the Indenture.

Section 7.12     Appointment of Co-Trustee.

(a)        Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction or otherwise, the Trustee shall have the power and may execute and deliver all instruments necessary to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustees, of all or any part of this Indenture, and to vest in such Person or Persons, in such capacity and for the benefit of the Holders, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 7.09 and no notice to the Holders of the appointment of any co-trustee or separate trustee shall be required.

(b)        Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(1)        All rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee.

(2)        No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

(3)        The Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c)        Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Section 7.12. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection or rights (including the rights to compensation, reimbursement and indemnification hereunder) to, the Trustee. Every such instrument shall be filed with the Trustee.

 

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(d)        Any separate trustee or co-trustee may at any time constitute the Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies, and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

Section 7.13     [Intentionally Omitted].

Section 7.14     Resignation of Agents.

Any Agent may resign and be discharged from its duties under this Indenture at any time by giving thirty (30) days’ prior written notice of such resignation to the Trustee and the Company. The Trustee or the Company may remove any Agent at any time by giving thirty (30) days’ prior written notice to such Agent. Upon such notice, a successor Agent shall be appointed by the Company, who shall provide written notice of such appointment to the Trustee. Such successor Agent shall become the Agent hereunder upon the resignation or removal date specified in such notice. If the Company is unable to replace the resigning Agent within thirty (30) days after such notice, the Agent shall deliver any funds then held hereunder in its possession to the Trustee or (i) such Agent may appoint as its successor Agent, any reputable and experienced financial institution acceptable to the Trustee and the Company or (ii) apply to a court of competent jurisdiction for the appointment of a successor Agent or for other appropriate relief. The reasonable costs and expenses (including its counsels’ fees and expenses) properly incurred by the Agent in connection with such court proceedings shall be paid by the Company. Upon receipt of the identity of the successor Agent, the Agent shall deliver any funds then held hereunder to the successor Agent, less the Agent’s fees, costs and expenses or other obligations owed to the Agent. Upon its resignation and delivery of any funds, the Agent shall be discharged of and from any and all further obligations arising in connection with this Indenture, but shall continue to enjoy the benefit of Section 7.08.

Section 7.15     Rights of Trustee in Other Roles.

All rights, powers and indemnities contained in this Article 7 shall apply to the Trustee in its other roles hereunder and the Agents; provided, however, that each Agent is an agent and not a fiduciary.

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01     Option to Effect Legal Defeasance or Covenant Defeasance.

The Company may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officer’s Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

 

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Section 8.02     Legal Defeasance and Discharge.

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its Obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which will thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder:

(1)        the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof;

(2)        the Company’s Obligations with respect to such Notes under Article 2 and Section 4.02 hereof;

(3)        the rights, powers, trusts, duties and immunities of the Trustee, the Paying Agent, the Registrar and the Transfer Agent hereunder, and the Company’s Obligations in connection therewith; and

(4)        this Article 8.

Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03     Covenant Defeasance.

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.08 and 4.09 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, “Covenant Defeasance”), and the Notes will thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes will be unaffected thereby. In addition, upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(a)(3) through 6.01(a)(6) hereof will not constitute Events of Default; provided that a failure by the Company to comply with its obligations under the provisions of Section 4.10 will constitute an Event of Default.

 

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Section 8.04     Conditions to Legal or Covenant Defeasance.

In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:

(1)        the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination of cash in U.S. dollars and non-callable U.S. Government Obligations, in amounts as will be sufficient, in the opinion of an internationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium, and Additional Amounts, if any, on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date;

(2)        in the case of an election under Section 8.02 hereof, the Company must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that:

(A)        the Company has received from, or there has been published by, the U.S. Internal Revenue Service a ruling; or

(B)        since the date of this Indenture, there has been a change in the applicable federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3)        in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4)        no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound;

(5)        such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(6)        the Company must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and

 

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(7)        the Company must deliver to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

(8)        The Trustee shall be entitled to its usual fees and, in addition, any fees and expenses properly incurred or charged by the Trustee and its counsel in connection with defeasance, satisfaction and discharge, and investment or custody services provided hereunder.

Section 8.05     Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 8.06 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the holders of such Notes of all sums due and to become due thereon in respect of principal, premium, and Additional Amounts, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Obligations deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the holders of the outstanding Notes.

Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable U.S. Government Obligations held by it as provided in Section 8.04 hereof which, in the opinion of an internationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06     Repayment to Company.

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Additional Amounts, if any, or interest on, any Note and remaining unclaimed for two (2) years after such principal, premium, or Additional Amounts, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than thirty (30) days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

 

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Section 8.07     Reinstatement.

If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable U.S. Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Indenture and the Notes will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Additional Amounts, if any, or interest on, any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01     Without Consent of Holders of Notes.

Notwithstanding Section 9.02 of this Indenture, the Company, the Trustee, and each Agent, may amend or supplement this Indenture and the Notes without the consent of any Holder:

(1)        to cure any ambiguity, defect or inconsistency;

(2)        to provide for uncertificated Notes in addition to or in place of certificated Notes; provided that such uncertificated Notes are in registered form for U.S. federal income tax purposes;

(3)        to provide for the assumption of the Company’s Obligations to Holders in the case of a merger or consolidation or sale of all or substantially all of the Company’s assets;

(4)        to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;

(5)        to conform the text of this Indenture to any provision of the “Description of Notes” section of the Offering Memorandum, to the extent that such provision in that “Description of Notes” section of the Offering Memorandum was intended to be a verbatim recitation of a provision of the Notes or this Indenture; or

(6)        to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date of this Indenture;

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Sections 7.02, 9.06 and 13.04 hereof, the Trustee and each Agent will join with the Company in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but neither the Trustee nor any Agent will be obligated to (although they may at their discretion) enter into such amended or supplemental indenture that affects their own rights, duties or immunities under this Indenture or otherwise.

 

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Section 9.02     With Consent of Holders of Notes.

Except as provided below in this Section 9.02, the Company, the Trustee and each Agent may amend or supplement this Indenture (including, without limitation, Section 4.08 hereof) and the Notes, with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium or Additional Amounts, if any, or interest on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes, may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes).

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon delivery to the Trustee of evidence satisfactory to the Trustee of the consent of the holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02, 9.06 and 13.04 hereof, the Trustee and each Agent will join with the Company in the execution of such amended or supplemental indenture authorized or permitted by the terms of this Indenture unless such amended or supplemental indenture directly affects either the Trustee’s or any Agent’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee and each Agent (as the case may be) may in their discretion, but will not be obligated to, enter into such amended or supplemental indenture.

It is not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it is sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of Holders of 90% of the aggregate principal amount then outstanding of Notes (including the Additional Notes) affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes (including the Additional Notes) held by a non-consenting Holder):

(1)        reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2)        reduce the principal of, premium, if any, or change the fixed maturity of any Note or alter or waive any provisions with respect to the redemption of the Notes (except as provided above with respect to Section 4.08 hereof);

(3)        reduce the rate of or change the time for payment of interest, including default interest, on any Note;

 

62

(4)        waive a Default or Event of Default in the payment of principal of, or interest, premium or Additional Amounts, if any, on, the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration);

(5)        make any Note payable in money other than that stated in the Notes;

(6)        make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest, premium or Additional Amounts, if any, on, the Notes;

(7)        waive a redemption payment with respect to any Note (other than a payment required by Section 4.08 hereof); or

(8)        make any change in the preceding amendment and waiver provisions.

Section 9.03    Supplemental Indenture.

Every amendment or supplement to this Indenture or the Notes will be set forth in an amended or supplemental indenture.

Section 9.04     Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by such Holder and every subsequent holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

Section 9.05     Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06     Trustee to Sign Amendments, etc.

The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee will (subject to Section 7.01 hereof and in addition to Section 7.02 hereof) be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture, that the supplemental indenture is legal, valid, binding and enforceable against the Company in accordance with its terms and such other matters as the Trustee may request. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

 

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ARTICLE 10

[INTENTIONALLY OMITTED]

ARTICLE 11

[INTENTIONALLY OMITTED]

ARTICLE 12

SATISFACTION AND DISCHARGE

Section 12.01     Satisfaction and Discharge.

This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when:

(1)        either:

(A)        all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or

(B)        all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one (1) year and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination of cash in U.S. dollars and non-callable U.S. Government Obligations, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Additional Amounts, if any, and accrued interest to but excluding the date of maturity or redemption;

(2)        no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound;

(3)        the Company has paid or caused to be paid all sums payable by it under this Indenture; and

(4)        the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be.

In addition, the Company must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

 

64

Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section 12.01, the provisions of Sections 12.02 and 8.06 hereof will survive.

Section 12.02     Application of Trust Money.

Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Amounts, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any cash in U.S. dollars or non-callable U.S. Government Obligations in accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof; provided that if the Company has made any payment of principal of, premium or Additional Amounts, if any, or interest on, any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the cash in U.S. dollars or non-callable U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 13

MISCELLANEOUS

Section 13.01     [Intentionally Omitted].

Section 13.02     Notices.

Any notice or communication by the Company or the Trustee to the others is duly given if in writing, in the English language, and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others’ address:

If to the Company:

Melco Resorts Finance Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue, George Town

Grand Cayman KY1-9005

Cayman Islands

c/o Melco Resorts & Entertainment Limited

36th Floor, The Centrium

60 Wyndham Street

Central, Hong Kong

Facsimile No.: +852 2537-3618

Attention: Company Secretary

 

65

Latham & Watkins LLP

18th Floor, One Exchange Square

8 Connaught Place

Central, Hong Kong

Facsimile No.: +852.2912.2600

Attention: Ji-Hyun Helena Kim

If to the Trustee, Paying Agent, Transfer Agent or Registrar:

Deutsche Bank Trust Company Americas

Trust and Agency Services

60 Wall Street, 24th Floor

Mail Stop: NYC60-2407

New York, New York 10005

USA

Attn: Corporates Team, Melco Resorts

Facsimile: (732) 578-4635

The Company, the Trustee and any Agent, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time.

Section 13.03     Communication by Holders of Notes with Other Holders of Notes.

Holders may communicate with other Holders with respect to their rights under this Indenture or the Notes.

Section 13.04     Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(1)        an Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

 

66

(2)        an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

Section 13.05     Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture must include:

(1)        a statement that the Person making such certificate or opinion has read such covenant or condition;

(2)        a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3)        a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

(4)        a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.

Section 13.06     Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar, Transfer Agent or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 13.07     No Personal Liability of Directors, Officers, Employees and Stockholders.

No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, will have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Section 13.08     Governing Law.

THE LAWS OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES.

Section 13.09     No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

 

67

Section 13.10     Successors.

All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee and each Agent in this Indenture will bind their respective successors.

Section 13.11     Severability.

In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 13.12     Counterpart Originals.

The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement.

Section 13.13     Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof.

Section 13.14     Patriot Act

In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including, without limitation, those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA PATRIOT Act of the United States (“Applicable Law”), the Trustee and Agents are required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Trustee and Agents. Accordingly, each of the parties hereto agrees to provide to the Trustee and Agents, upon their request from time to time such identifying information and documentation as may be available for such party in order to enable the Trustee and Agents to comply with Applicable Law.

Section 13.15     Submission to Jurisdiction; Waiver of Jury Trial

THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES AND ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK AND IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT OR PROCEEDING IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. THE COMPANY IRREVOCABLY APPOINTS LAW DEBENTURE CORPORATE SERVICES INC., 801 2ND AVENUE, SUITE 403, NEW YORK, NY10017, AS ITS AUTHORIZED AGENT IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK UPON WHICH PROCESS MAY BE SERVED IN ANY SUCH SUIT OR PROCEEDING, AND AGREES THAT SERVICE OF PROCESS UPON SUCH AGENT, AND WRITTEN NOTICE OF SAID SERVICE TO THE COMPANY BY THE PERSON SERVING THE SAME TO THE ADDRESS PROVIDED IN SECTION 13.02, SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE COMPANY IN ANY SUCH SUIT OR PROCEEDING. THE COMPANY FURTHER AGREES TO TAKE ANY AND ALL ACTION AS MAY BE NECESSARY TO MAINTAIN SUCH DESIGNATION AND APPOINTMENT OF SUCH AGENT IN FULL FORCE AND EFFECT FOR A PERIOD OF EIGHT YEARS FROM THE DATE OF THIS INDENTURE.

 

68

EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION 13.15 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY EXCEPTIONS.    EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.     THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS INDENTURE. IN THE EVENT OF LITIGATION, THIS INDENTURE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.

[Signatures on following page]

 

69

SIGNATURES

Dated as of July 17, 2019

 

The Company

MELCO RESORTS FINANCE LIMITED

By:

  

/s/ Chung Yuk Man

 

Name: Chung Yuk Man

 

Title: Director

[Signature page to Indenture]

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Trustee

By:

  

/s/ Bridgette Casasnovas

 

Name: Bridgette Casasnovas

 

Title: Vice President

By:

  

/s/ Annie Jaghatspanyan

 

Name: Annie Jaghatspanyan

 

Title: Vice President

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Paying Agent, Registrar and Transfer Agent

By:

  

/s/ Bridgette Casasnovas

 

Name: Bridgette Casasnovas

 

Title: Vice President

By:

  

/s/ Annie Jaghatspanyan

 

Name: Annie Jaghatspanyan

 

Title: Vice President

[Signature page to Indenture]

EXHIBIT A

[Face of Note]

 

 

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

CUSIP:

ISIN:

COMMON CODE:

5.625% Senior Notes due 2027

 

No.         

    US$                    

MELCO RESORTS FINANCE LIMITED

Promises to pay to Cede & Co. or its registered assigns, the principal sum of US$                     [NUMBER IN WORDS U.S. DOLLARS] on July 17, 2027.

Interest Payment Dates:  January 17 and July 17

Record Dates:  January 2 and July 2

Dated:                         , 20    

 

A-1

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by the duly authorized officer referred to below.

Dated:                         , 20    

 

MELCO RESORTS FINANCE LIMITED, as Company

By:

    
 

Name:

 

Title:

 

A-2

Certificate of Authentication

This is one of the Notes referred to in the within-mentioned Indenture.

Dated:                         , 20    

 

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee

By:

    
 

Name:

 

Title:

 

A-3

[Back of Note]

MELCO RESORTS FINANCE LIMITED

5.625% Senior Notes due 2027

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

(1)        INTEREST.      Melco Resorts Finance Limited, a Cayman Islands exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”), promises to pay or cause to be paid interest on the principal amount of this Note at 5.625% per annum from                 , 20     until maturity. The Company will pay interest and Additional Amounts, if any, semi-annually in arrears on January 17 and July 17 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be                 , 20    . The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Amounts (without regard to any applicable grace period) at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year comprising twelve 30-day months.

(2)        METHOD OF PAYMENT.     The Company will pay interest on the Notes (except defaulted interest) and Additional Amounts, if any, to the Persons who are registered Holders of Notes at the close of business on January 2 or July 2 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, and Additional Amounts, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Additional Amounts, if any, may be made by check mailed to the Holders at their address set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Amounts, if any, on, all Global Notes and all other Notes, the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent, and shall so notify the Trustee and each Paying Agent thereof. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

(3)        PAYING AGENT AND REGISTRAR.     Initially, Deutsche Bank Trust Company Americas will act as Paying Agent, Transfer Agent and Registrar. The Company may change the Paying Agent, Transfer Agent or Registrar without notice to any holders of the Notes. The Company or any of its Subsidiaries may act in any such capacity.

(4)        INDENTURE.      The Company issued the Notes under an Indenture dated as of July 17, 2019 (the “Indenture”) among the Company, the Trustee, the Paying Agent, the Registrar and the Transfer Agent. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder.

 

A-4

(5)        OPTIONAL REDEMPTION.

(a)        Except as set forth in subparagraphs (b) and (c) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to July 17, 2022. On or after July 17, 2022, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, and Additional Amounts if any, on the Notes redeemed, to but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on July 17 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

 

Year

    Percentage  

2022

      102.813 % 

2023

      101.406 % 

2024 and thereafter

      100.000 % 

Any such redemption may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent. If such redemption is so subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Company’s discretion, the redemption date may be delayed until such time (provided, however, that any delayed redemption date shall not be more than 60 days after the date the relevant notice of redemption was sent) as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date or by the redemption date as so delayed. In addition, the Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person.

Unless the Company defaults in the payment of the redemption price or fails to satisfy the conditions precedent to the redemption and thereby terminates the redemption, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(b)        Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to July 17, 2022, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 105.625% of the principal amount thereof, plus accrued and unpaid interest and Additional Amounts, if any, to but excluding the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of the Notes originally issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and that such redemption occurs within 45 days of the date of the closing of such Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Equity Offering, and any such redemption or notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Equity Offering.

 

A-5

(c)        At any time prior to July 17, 2022, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent.

(d)        The Notes may also be redeemed in the circumstances described in Section 3.09 and 3.10 of the Indenture.

(6)        MANDATORY REDEMPTION.     The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

(7)        REPURCHASE AT THE OPTION OF HOLDER.     The Notes may be subject to a Change of Control Offer or a Special Put Option Offer, as further described in Sections 4.08 and 4.10 of the Indenture.

(8)        NOTICE OF REDEMPTION.     Subject to the second paragraph of Section 5(b) above, notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction or discharge of the Indenture. Notes in denominations larger than US$200,000 may be redeemed in part but only in integral multiples of US$1,000; provided that the unredeemed part has a minimum denomination of US$200,000, unless all of the Notes held by a Holder are to be redeemed.

(9)        DENOMINATIONS, TRANSFER, EXCHANGE.     The Notes are in registered form without coupons in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

(10)        PERSONS DEEMED OWNERS.     The registered Holder may be treated as its owner for all purposes.

(11)        AMENDMENT, SUPPLEMENT AND WAIVER.     The Indenture or the Notes, may be amended as set forth in the Indenture.

(12)        DEFAULTS AND REMEDIES.     The events listed in Section 6.01 of the Indenture shall constitute “Events of Default” for the purpose of this Note.

 

A-6

(13)        TRUSTEE DEALINGS WITH COMPANY.     The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

(14)        NO RECOURSE AGAINST OTHERS.     A director, officer, employee, incorporator or stockholder of the Company, as such, will not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

(15)        AUTHENTICATION.      This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

(16)        ABBREVIATIONS.      Customary abbreviations may be used in the name of a Holder or an assignee, such as:     TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(17)        CUSIP NUMBERS.     Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

(18)        GOVERNING LAW.     THE LAWS OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THIS NOTE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

Melco Resorts Finance Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue, George Town

Grand Cayman KY1-9005

Cayman Islands

c/o Melco Resorts & Entertainment Limited

36th Floor, The Centrium

60 Wyndham Street

Central

Hong Kong

Attention: Company Secretary

 

A-7

ASSIGNMENT FORM

To assign this Note, fill in the form below:

 

(I) or (we) assign and transfer this Note to:

     
   (Insert assignee’s legal name)
 

 

(Insert assignee’s soc. sec. or tax I.D. no.)

 

 

 

 

 

 

 

 

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                                                                                                                                                                                                  to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:                                 

 

Your Signature:

    
(Sign exactly as your name appears on the face of this Note)

Signature Guarantee*:                                                          

 

*

    Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

 

A-8

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Sections 4.08 or 4.10 of the Indenture, check the appropriate box below:

 

Section 4.08   Section 4.10

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.08 or Section 4.10 of the Indenture, state the amount you elect to have purchased:

US$                             

Date:                             

 

Your Signature:

    
(Sign exactly as your name appears on the face of this Note)

 

Tax Identification No.:

    

Signature Guarantee*:                                                      

 

*

    Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

 

A-9

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

 

Date of Exchange

   Amount of
decrease in
Principal Amount
of
this Global Note		   Amount of
increase in
Principal Amount
of
this Global Note		   Principal Amount
of this Global Note
following such
decrease
(or increase)		   Signature of
authorized officer
of Trustee or
Custodian

 

A-10

EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

[Company address block]

[Registrar address block]

Re: 5.625% Senior Notes due 2027 of Melco Resorts Finance Limited

Reference is hereby made to the Indenture, dated as of July 17, 2019 (the “Indenture”), among Melco Resorts Finance Limited, as issuer (the “Company”) and Deutsche Bank Trust Company Americas, as trustee, paying agent, registrar and transfer agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                 , (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of US$                         in such Note[s] or interests (the “Transfer”), to                                               (the “Transferee”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. ☐  Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive Note pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

2. ☐  Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

 

B-1

3. ☐  Check and complete if Transferee will take delivery of a beneficial interest in a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

(a)        ☐ such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or

(b)        ☐ such Transfer is being effected to the Company or a subsidiary thereof;

or

(c)        ☐ such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.

4. ☐  Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

(a) ☐  Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(b) ☐  Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(c) ☐  Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

 

B-2

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

 

 

        [Insert Name of Transferor]

 

By:

    
 

Name:

 

Title:

Dated:                                         

 

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

 

  1.

The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

 

  (a)

☐     a beneficial interest in the:

 

  (i)

    ☐ 144A Global Note (CUSIP                         ), or

 

  (ii)

    ☐ Regulation S Global Note (CUSIP                         ); or

 

  (b)  

☐     a Restricted Definitive Note.

 

  2.

After the Transfer the Transferee will hold:

[CHECK ONE]

 

  (a)  ☐

    a beneficial interest in the:

 

  (i)

    ☐ 144A Global Note (CUSIP                         ), or

 

  (ii)

    ☐ Regulation S Global Note (CUSIP                         ), or

 

  (iii)

    ☐ Unrestricted Global Note (CUSIP                         ); or

 

  (b)  ☐

    a Restricted Definitive Note; or

 

  (c)  ☐

    an Unrestricted Definitive Note,

in accordance with the terms of the Indenture.

 

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

[Company address block]

[Registrar address block]

Re: 5.625% Senior Notes due 2027 of Melco Resorts Finance Limited

(CUSIP                         )

Reference is hereby made to the Indenture, dated as of July 17, 2019 (the “Indenture”), among Melco Resorts Finance Limited, as issuer (the “Company”) and Deutsche Bank Trust Company Americas, as trustee, paying agent, registrar and transfer agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                                             , (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of US$                         in such Note[s] or interests (the “Exchange”). In connection with the Exchange, the Owner hereby certifies that:

1.         Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note

(a)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the “Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(b)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(c)   ☐ Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner’s Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

 

C-1

(d)   ☐ Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2.         Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

(a)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

(b)   ☐ Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE] ☐ 144A Global Note, ☐ Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

 

 

[Insert Name of Transferor]

By:

    
 

Name:

 

Title:

                                                                                                                                                                                Dated:                                                  

 

C-2

EX-2.30

Exhibit 2.30

EXECUTION VERSION

Contract Register No. 201912003

NetDoc ID 3438-4941-8254 v.2

MELCO RESORTS FINANCE LIMITED

as Company

5.375% SENIOR NOTES DUE 2029

 

 

INDENTURE

December 4, 2019

 

 

and

DEUTSCHE BANK TRUST COMPANY AMERICAS

as Trustee, Paying Agent, Registrar and Transfer Agent

TABLE OF CONTENTS

 

          Page
ARTICLE 1
DEFINITIONS

Section 1.01

    Definitions    4

Section 1.02

    Other Definitions    16

Section 1.03

    Rules of Construction    16
     
ARTICLE 2
THE NOTES

Section 2.01

    Form and Dating    17

Section 2.02

    Execution and Authentication    17

Section 2.03

    Registrar and Paying Agent    18

Section 2.04

    Paying Agent to Hold Money in Trust    18

Section 2.05

    Holder Lists    19

Section 2.06

    Transfer and Exchange    19

Section 2.07

    Replacement Notes    28

Section 2.08

    Outstanding Notes    29

Section 2.09

    Treasury Notes    29

Section 2.10

    Temporary Notes    29

Section 2.11

    Cancellation    29

Section 2.12

    Defaulted Interest    30

Section 2.13

    Additional Amounts    30

Section 2.14

    Agents    32
     
ARTICLE 3
REDEMPTION AND PREPAYMENT

Section 3.01

    Notices to Trustee    33

Section 3.02

    Selection of Notes to Be Redeemed or Purchased    33

Section 3.03

    Notice of Redemption    33

Section 3.04

    Effect of Notice of Redemption    34

Section 3.05

    Deposit of Redemption or Purchase Price    35

Section 3.06

    Notes Redeemed or Purchased in Part    35

Section 3.07

    Optional Redemption    35

Section 3.08

    Mandatory Redemption    36

Section 3.09

    Redemption for Taxation Reasons    36

Section 3.10

    Gaming Redemption    37
     
ARTICLE 4
COVENANTS

Section 4.01

    Payment of Notes    38

Section 4.02

    Maintenance of Office or Agency    38

Section 4.03

    Reports    39

Section 4.04

    Compliance Certificate    40

Section 4.05

    Taxes    41

Section 4.06

    Stay, Extension and Usury Laws    41

Section 4.07

    Corporate Existence    41

Section 4.08

    Offer to Repurchase upon Change of Control    41

Section 4.09

    Listing    43

Section 4.10

    Special Put Option      43  
     
ARTICLE 5

 

SUCCESSORS

 

Section 5.01

    Merger, Consolidation, or Sale of Assets      45  

Section 5.02

    Successor Corporation Substituted      45  
     
ARTICLE 6

 

DEFAULTS AND REMEDIES

 

Section 6.01

    Events of Default      45  

Section 6.02

    Acceleration      47  

Section 6.03

    Other Remedies      47  

Section 6.04

    Waiver of Past Defaults      47  

Section 6.05

    Control by Majority      48  

Section 6.06

    Limitation on Suits      48  

Section 6.07

    Rights of Holders to Receive Payment      48  

Section 6.08

    Collection Suit by Trustee      49  

Section 6.09

    Trustee May File Proofs of Claim      49  

Section 6.10

    Priorities      49  

Section 6.11

    Undertaking for Costs      50  
     
ARTICLE 7

 

TRUSTEE

 

Section 7.01

    Duties of Trustee      50  

Section 7.02

    Rights of Trustee      51  

Section 7.03

    [Intentionally Omitted.]      53  

Section 7.04

    Individual Rights of Trustee      53  

Section 7.05

    Trustee’s Disclaimer      53  

Section 7.06

    Notice of Defaults      54  

Section 7.07

    [Intentionally Omitted.]      54  

Section 7.08

    Compensation and Indemnity      54  

Section 7.09

    Replacement of Trustee      55  

Section 7.10

    Successor Trustee by Merger, etc      56  

Section 7.11

    Eligibility; Disqualification      56  

Section 7.12

    Appointment of Co-Trustee      56  

Section 7.13

    [Intentionally Omitted]      57  

Section 7.14

    Resignation of Agents      57  

Section 7.15

    Rights of Trustee in Other Roles      57  
     
ARTICLE 8

 

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

Section 8.01

    Option to Effect Legal Defeasance or Covenant Defeasance      57  

Section 8.02

    Legal Defeasance and Discharge      58  

Section 8.03

    Covenant Defeasance      58  

Section 8.04

    Conditions to Legal or Covenant Defeasance      59  

Section 8.05

    Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions      60  

Section 8.06

    Repayment to Company      60  

Section 8.07

    Reinstatement      61  

 

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ARTICLE 9

 

AMENDMENT, SUPPLEMENT AND WAIVER

 

Section 9.01

    Without Consent of Holders of Notes      61  

Section 9.02

    With Consent of Holders of Notes      62  

Section 9.03

    Supplemental Indenture      63  

Section 9.04

    Revocation and Effect of Consents      63  

Section 9.05

    Notation on or Exchange of Notes      63  

Section 9.06

    Trustee to Sign Amendments, etc      63  
     
ARTICLE 10

 

[INTENTIONALLY OMITTED]

 

     
ARTICLE 11

 

     
ARTICLE 12

 

SATISFACTION AND DISCHARGE

 

Section 12.01

    Satisfaction and Discharge      64  

Section 12.02

    Application of Trust Money      65  
     
ARTICLE 13

 

MISCELLANEOUS

 

Section 13.01

    [Intentionally Omitted]      65  

Section 13.02

    Notices      65  

Section 13.03

    Communication by Holders of Notes with Other Holders of Notes      66  

Section 13.04

    Certificate and Opinion as to Conditions Precedent      66  

Section 13.05

    Statements Required in Certificate or Opinion      67  

Section 13.06

    Rules by Trustee and Agents      67  

Section 13.07

    No Personal Liability of Directors, Officers, Employees and Stockholders      67  

Section 13.08

    Governing Law      67  

Section 13.09

    No Adverse Interpretation of Other Agreements      67  

Section 13.10

    Successors      68  

Section 13.11

    Severability      68  

Section 13.12

    Counterpart Originals      68  

Section 13.13

    Table of Contents, Headings, etc      68  

Section 13.14

    Patriot Act      68  

Section 13.15

    Submission to Jurisdiction; Waiver of Jury Trial      68  
     
EXHIBITS

 

Exhibit A

    FORM OF NOTE      A-1  

Exhibit B

    FORM OF CERTIFICATE OF TRANSFER      B-1  

Exhibit C

    FORM OF CERTIFICATE OF EXCHANGE      C-1  

 

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INDENTURE dated as of December 4, 2019, between Melco Resorts Finance Limited, an exempted company incorporated with limited liability in the Cayman Islands (the “Company”) and Deutsche Bank Trust Company Americas, a New York banking corporation, as Trustee, Paying Agent, Registrar and Transfer Agent.

Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined herein) of the 5.375% Senior Notes due 2029 (the “Notes”):

ARTICLE 1

DEFINITIONS

 

  Section

1.01    Definitions.

“144A Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“Additional Notes” means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.02 hereof, as part of the same series as the Initial Notes; provided that any Additional Notes that are not fungible with the Notes for U.S. federal income tax purposes shall have a separate CUSIP number than any previously issued Notes, unless the Notes and the Additional Notes are issued with no more than a de minimis amount of original issue discount for U.S. federal income tax purposes, but shall otherwise be treated as a single class with all other Notes issued under this Indenture.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Agent” means any Registrar, co-registrar, Paying Agent, Transfer Agent or additional paying agents or transfer agents.

“Applicable Premium” means, with respect to any Note on any redemption date, the greater of:

(1)        1.0% of the principal amount of the Note; or

(2)        the excess of: (a) the present value at such redemption date of (i) the redemption price of the Note at December 4, 2024 (such redemption price being set forth in the table appearing in Section 3.07 hereof) plus (ii) all required interest payments due on the Note through December 4, 2024 (excluding accrued but unpaid interest to but excluding the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the principal amount of the Note. For the avoidance of doubt, the calculation of the Applicable Premium shall not be a duty or obligation of the Trustee, the Paying Agent, the Registrar or the Transfer Agent.

 

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“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

“Bankruptcy Law” means (i) the United States Bankruptcy Code of 1978 or any similar U.S. federal or state law for the relief of debtors, (ii) the provisions of the Code of Civil Procedure of Macau that deal with the placement of a debtor into liquidation, the administration and disposal of its assets, the distribution of the proceeds thereof and the alternatives to such liquidation, or any laws of similar effect, and (iii) the provisions of Part V of the Companies Law (Revised) of the Cayman Islands that deal with the winding up or liquidation of a company or any other Cayman Islands law of similar effect.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

“Board of Directors” means:

(1)         with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

(2)         with respect to a partnership, the board of directors of the general partner of the partnership;

(3)         with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

(4)         with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means any day other than a Legal Holiday.

“Capital Stock” means:

(1)        in the case of a corporation, corporate stock;

(2)         in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3)        in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

(4)         any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

 

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“Change of Control” means the occurrence of any of the following:

(1)         the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d) of the Exchange Act) (other than a Sponsor or a Related Party of a Sponsor);

(2)        the adoption of a plan relating to the liquidation or dissolution of the Company;

(3)        either (i) the Sponsor ceases collectively to beneficially own, directly or indirectly, at least 30% of the outstanding Capital Stock of the Parent (including any and all agreements, warrants, rights or options to acquire any Capital Stock) (measured in each case, by both voting power and size of equity interests), or (ii) the Parent ceases to beneficially own, directly or indirectly, at least 51% of the outstanding Capital Stock of Melco Resorts Macau (including any and all agreements, warrants, rights or options to acquire any Capital Stock) (measured in each case, by both voting power and size of equity interests); or

(4)         the first day on which Parent ceases to own, directly or indirectly, 100% of the outstanding Equity Interests of the Company.

“Change of Control Triggering Event” means the occurrence of a Change of Control and a Ratings Decline.

“Clearstream” means Clearstream Banking S.A.

“Company” means Melco Resorts Finance Limited, and any and all successors thereto.

“Corporate Trust Office of the Trustee” will be the designated corporate trust office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of original execution of this Indenture is located at (i) for purposes of surrender, transfer or exchange of any Notes, Deutsche Bank Trust Company Americas, c/o DB Services Americas, Inc., 5022 Gate Parkway, Suite 200, Jacksonville, FL 32256, Attn: Transfer Department and (ii) for all other purposes, Deutsche Bank Trust Company Americas, Trust and Agency Services, 60 Wall Street, 24th Floor, MS NYC 60-2407, New York, New York 10005, USA, Attention: Corporate Team/Melco Resorts Finance Limited or at any other time at such other address as the Trustee may designate from time to time by notice to the parties hereto or at the designated corporate trust office of any successor trustee as to which such successor trustee may notify the parties hereto in writing.

“Custodian” means Deutsche Bank Trust Company Americas, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

 

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“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Equity Offering” means any public sale or private issuance of Capital Stock (other than Disqualified Stock) of (1) the Company or (2) a direct or indirect parent of the Company to the extent the net proceeds from such issuance are contributed in cash to the common equity capital of the Company (in each case other than pursuant to a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).

“Euroclear” means Euroclear Bank SA/NV.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“GAAP” means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

“Gaming Authorities” means, in any jurisdiction in which the Company or any of its Subsidiaries or the Sponsor manages or conducts any casino, gaming business or activities, the applicable gaming board, commission, or other governmental gaming regulatory body or agency which (a) has, or may at any time after issuance of the Notes have, jurisdiction over the gaming activities of the Company or any of its Subsidiaries, or any successor to such authority or (b) is, or may at any time after the issuance of the Notes be, responsible for interpreting, administering and enforcing the Gaming Laws.

“Gaming Laws” means all applicable constitutions, treatises, resolutions, laws, regulations, instructions and statutes pursuant to which any Gaming Authority possesses regulatory, licensing or permit authority over gaming, gambling or casino activities, and all rules, rulings, orders, ordinances, regulations of any Gaming Authority applicable to the gambling, casino, gaming businesses or activities of Melco Resorts Macau (or any other operator of the casino including the Sponsor or any of its Affiliates) or the Company or any of its Subsidiaries or the Sponsor in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities.

“Gaming License” means the license, concession, subconcession or other authorization from any Government Authority which authorizes, permits, concedes or allows the Company or any of its Subsidiaries, at the relevant time, to own or manage casino or gaming areas or operate casino games of fortune and chance.

 

7

“Global Note Legend” means the legend set forth in Section 2.06(f)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the Depositary or its nominee, substantially in the form of Exhibit A hereto and that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, issued in accordance with Sections 2.01, 2.06(b)(3), 2.06(b)(4), and with Section 2.06(d)(2) or 2.06(f) hereof.

“Governmental Authority” means the government of the Macau SAR or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1)        interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

(2)        other agreements or arrangements designed to manage interest rates or interest rate risk; and

(3)        other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“Holder” means a Person in whose name a Note is registered.

“Incur” means, with respect to any Indebtedness, Capital Stock or other Obligation of any Person, to create, issue, assume, guarantee, incur (by conversion, exchange, or otherwise) or otherwise become liable in respect of such Indebtedness, Capital Stock or other Obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other Obligation on the balance sheet of such Person. Indebtedness or Capital Stock otherwise Incurred by a Person before it becomes a Subsidiary of the Company shall be deemed to be Incurred at the time at which such Person becomes a Subsidiary of the Company. The accretion of original issue discount, the accrual of interest, the accrual of dividends, the payment of interest in the form of additional Indebtedness and the payment of dividends on preferred stock in the form of additional shares of preferred stock shall not be considered an Incurrence of Indebtedness.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:

(1)        in respect of borrowed money;

 

8

(2)        evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3)        in respect of banker’s acceptances;

(4)        representing capital lease obligations;

(5)        representing the balance deferred and unpaid of the purchase price of any property or services due more than one year after such property is acquired or such services are completed; or

(6)        representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

Notwithstanding the foregoing, “Indebtedness” will not include Shareholder Subordinated Debt (other than for purposes of the definition of “Shareholder Subordinated Debt”). In addition, “Indebtedness” will not include (i) any capital commitments, deposits or advances from customers or any contingent obligations to refund payments (including deposits) to customers (or any guarantee thereof), or (ii) obligations of the Company or any of its Subsidiaries to pay the deferred and unpaid purchase price of property or services due to suppliers of equipment or other assets (including parts thereof) not more than one year after such property is acquired or such services are completed and the amount of unpaid purchase price retained by the Company or any of its Subsidiaries in the ordinary course of business in connection with an acquisition of equipment or other assets (including parts thereof) pending full operation or contingent on certain conditions during a warranty period of such equipment or assets in accordance with the terms of the acquisition; provided that, in each case, such Indebtedness is not reflected as borrowings on the consolidated balance sheet of the Company (contingent obligations and commitments referred to in a footnote to financial statements and not otherwise reflected as borrowings on the balance sheet will not be deemed to be reflected on such balance sheet); or (iii) any lease of property which would be considered an operating lease under GAAP and any guarantee given by the Company or any of its Subsidiaries in the ordinary course of business solely in connection with, or in respect of, the obligations of the Company and its Subsidiaries under any operating lease.

The amount of Indebtedness of any Person at any time shall be the outstanding balance at such time of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that:

(A)        the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP;

(B)        money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest; and

 

9

(C)         the amount of or the principal amount of Indebtedness with respect to any Hedging Obligation shall be equal to the net amount payable if such Hedging Obligation terminated at or prior to that time due to a default by such Person.

“Indenture” means this Indenture, as amended or supplemented from time to time.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

“Initial Notes” means the first US$900,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof.

“Initial Purchasers” means Deutsche Bank AG, Singapore Branch, Morgan Stanley & Co. LLC, Australia and New Zealand Banking Group Limited, Bank of Communications Co., Ltd. Macau Branch, BOCI Asia Limited, Industrial and Commercial Bank of China (Macau) Limited and Mizuho Securities Asia Limited.

“Investment Grade” means a rating of BBB- or better by S&P (or its equivalent under any successor rating category of S&P), a rating of BBB- or better by Fitch (or its equivalent under any successor rating category of Fitch), a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating category of Moody’s), and the equivalent ratings of any other “nationally recognized statistical rating organization” that is registered as such pursuant to Section 15E of the Exchange Act and Rule 17g thereunder selected by the Company as having been substituted as a Rating Agency for S&P, Fitch or Moody’s, as the case may be.

“Issue Date” means the date on which the Notes (other than any Additional Notes) are originally issued.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the Cayman Islands, The City of New York, Hong Kong, Macau or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Melco Resorts Macau” means Melco Resorts (Macau) Limited, formerly known as Melco Crown (Macau) Limited.

“Moody’s” means Moody’s Investors Service, Inc. and any of its successors.

“Non-U.S. Person” means a Person who is not a U.S. Person.

“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes.

 

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“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Memorandum” means the offering memorandum dated November 26, 2019 in respect of the Notes.

“Officer” means the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, any Executive Vice President, Senior Vice President or Vice President, Treasurer or Secretary of the Company, or any Director of the Board of the Company or any Person acting in that capacity.

“Officer’s Certificate” means a certificate signed on behalf of the Company by an Officer of the Company which meets the requirements of Section 13.05 hereof.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee, or the Registrar (as applicable), that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company.

“Parent” means Melco Resorts & Entertainment Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands.

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Private Placement Legend” means the legend set forth in Section 2.06(f)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Rating Agencies” means any of (i) S&P, (ii) Moody’s, (iii) Fitch or (iv) if any or all of them shall not make a rating of the Notes publicly available, any other “nationally recognized statistical rating organization” that is registered as such pursuant to Section 15E of the Exchange Act and Rule 17g thereunder selected by the Company as a replacement agency.

“Rating Category” means (1) with respect to S&P, any of the following categories: “AAA,” “AA,” “A,” “BBB,” “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories); (2) with respect to Moody’s, any of the following categories: “Aaa,” “Aa,” “A,” “Baa,” “Ba,” “B,” “Caa,” “Ca,” “C” and “D” (or equivalent successor categories); (3) with respect to Fitch, any of the following categories “AAA,” “AA,” “A,” “BBB,” “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories) and (4) the equivalent of any such category of S&P, Moody’s or Fitch used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (“+” and “-” for S&P and Fitch; “1,” “2” and “3” for Moody’s; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from “BB+” to “BB,” as well as from “B+” to “B-,” will constitute a decrease of one gradation).

 

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“Rating Date” means that date which is 90 days prior to the earlier of (x) a Change of Control and (y) a public notice of the occurrence of a Change of Control or of the intention by the Company or any other Person or Persons to effect a Change of Control.

“Ratings Decline” means the occurrence on, or within six months after, the date, or public notice of the occurrence of any of the events set forth in clauses (1) to (4) of the definition of Change of Control or the announcement by the Company or any other Person or Persons of the intention by the Company or such other Person or Persons to effect a Change of Control (which period will be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the events listed below:

(1)         in the event either the Notes or the Company is rated by two Rating Agencies on the Rating Date as Investment Grade, such rating of the Notes or the Company by either such Rating Agency shall be below Investment Grade;

(2)         in the event either the Notes or the Company is rated by one, and only one, of the Rating Agencies on the Rating Date as Investment Grade, such rating of the Notes or the Company by such Rating Agency shall be below Investment Grade; or

(3)         in the event either the Notes or the Company is rated below Investment Grade by any two Rating Agencies on the Rating Date, such rating of the Notes or the Company by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories); provided that, for a decline that occurs during the review period subsequent to the initial occurrence, public notice or notice of intention, such decline will only qualify as a Ratings Decline if (i) such Rating Agencies’ published report refers to the Change of Control as a factor, or one of the factors in the downgrade, and (ii) such Rating Agencies have not previously affirmed their ratings following the initial occurrence, public notice or notice of intention.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of Regulation S.

“Related Party” means:

(1)         any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of the Sponsor; or

(2)         any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of the Sponsor and/or such other Persons referred to in the immediately preceding clause (1).

“Responsible Officer” when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee (or any successor of the Trustee) who shall have direct responsibility for the administration of the Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

 

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“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“Restricted Period” means the 40-day distribution compliance period as defined in Regulation S.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“S&P” means Standard & Poor’s Ratings Group and any of its successors.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Senior Credit Agreement” means the credit facilities entered into pursuant to an amendment and restatement agreement dated June 19, 2015, as amended from time to time, between, among others, Melco Resorts Macau, Deutsche Bank AG, Hong Kong Branch as agent and DB Trustees (Hong Kong) Limited as security agent, in a total amount of HK$13.65 billion (equivalent to approximately US$1.75 billion), comprising a HK$3.90 billion (equivalent to approximately US$500 million) term loan facility and a HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility and any incremental facilities thereunder, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such agreement may be further amended, modified or extended from time to time in compliance with the terms of the Indenture, and any refinancing thereof.

“SGX-ST” means the Singapore Exchange Securities Trading Limited or its successor.

“Shareholder Subordinated Debt” means, collectively, any debt provided to the Company by any direct or indirect parent holding company of the Company (or the Sponsor), in exchange for or pursuant to any security, instrument or agreement other than Capital Stock, together with any such security, instrument or agreement and any other security or instrument other than Capital Stock issued in payment of any obligation under any Shareholder Subordinated Debt; provided that such Shareholder Subordinated Debt:

(1)         does not (including upon the happening of any event) mature or require any amortization or other payment of principal prior to the first anniversary of the maturity of the Notes (other than through conversion or exchange of any such security or instrument for Equity Interests of the Company (other than Disqualified Stock) or for any other security or instrument meeting the requirements of the definition);

 

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(2)         does not (including upon the happening of any event) require the payment of cash interest prior to the first anniversary of the maturity of the Notes;

(3)         does not (including upon the happening of any event) provide for the acceleration of its maturity nor confer on its shareholders any right (including upon the happening of any event) to declare a default or event of default or take any enforcement action, in each case, prior to the first anniversary of the maturity of the Notes;

(4)         is not secured by a Lien on any assets of the Company or any of its Subsidiaries and is not guaranteed by any Subsidiary of the Company;

(5)         is subordinated in right of payment to the prior payment in full in cash of the Notes in the event of any default, bankruptcy, reorganization, liquidation, winding up or other disposition of assets of the Company;

(6)         does not (including upon the happening of any event) restrict the payment of amounts due in respect of the Notes or compliance by the Company with its Obligations under the Notes and this Indenture; and

(7)         is not (including upon the happening of any event) mandatorily convertible or exchangeable, or convertible or exchangeable at the option of the holder, in whole or in part, prior to the date on which the Notes mature other than into or for Capital Stock (other than Disqualified Stock) of the Company.

“Significant Subsidiary” means any Subsidiary that contributed at least (i) 10% of the total consolidated net income of the Company and its Subsidiaries for the most recently completed fiscal year, or (ii) 10% of the total consolidated assets of the Company and its Subsidiaries as of the end of the most recently completed fiscal year.

“Special Put Option Triggering Event” means:

(1)         any event after which none of the Company or any Subsidiary of the Company has such licenses, concessions, subconcessions or other permits or authorizations as are necessary for the Company and its Subsidiaries to own or manage casino or gaming areas or operate casino games of fortune and chance in Macau in substantially the same manner and scope as the Company and its Subsidiaries are entitled to at the Issue Date, for a period of ten consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole; or

(2)         the termination, rescission, revocation or modification of any Gaming License which has had a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole.

“Sponsor” means Melco International Development Limited.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the Issue Date, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subsidiary” means, with respect to any specified Person:

 

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(1)         any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholder’s agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2)         any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to December 4, 2024; provided, however, that if the period from the redemption date to December 4, 2024 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

“Trustee” means Deutsche Bank Trust Company Americas until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“Unrestricted Definitive Note” means a Definitive Note that does not bear and is not required to bear the Private Placement Legend.

“Unrestricted Global Note” means a Global Note that does not bear and is not required to bear the Private Placement Legend.

“U.S. Government Obligations” means securities that are:

(1)         direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

(2)        obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in each case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt.

“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

 

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“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

Section 1.02    Other Definitions.

 

Term

    Defined in
Section		  

“Additional Amounts”

      2.13  

“Applicable Law”

      13.14  

“Authentication Order”

      2.02  

“Change of Control Offer”

      4.08  

“Change of Control Payment”

      4.08  

“Change of Control Payment Date”

      4.08  

“Covenant Defeasance”

      8.03  

“DTC”

      2.03  

“Event of Default”

      6.01  

“Legal Defeasance”

      8.02  

“Paying Agent”

      2.03  

“Registrar”

      2.03  

“Relevant Jurisdiction”

      2.13  

“Special Put Option Offer”

      4.10  

“Special Put Option Payment”

      4.10  

“Taxes”

      2.13  

“Transfer Agent”

      2.03  

Section 1.03    Rules of Construction.

Unless the context otherwise requires:

(1)        a term has the meaning assigned to it;

(2)         an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3)        “or” is not exclusive;

(4)        words in the singular include the plural, and in the plural include the singular;

(5)         “will” shall be interpreted to express a command;

(6)        provisions apply to successive events and transactions; and

(7)         references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.

 

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ARTICLE 2

THE NOTES

Section 2.01    Form and Dating.

(a)         General. The Notes and the Trustee’s certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof.

The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b)         Global Notes. Notes issued in global form will be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Registrar, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

(c)         Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions—Clearstream Banking, Luxembourg” and “Customer Handbook” of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Global Note that are held by Participants through Euroclear or Clearstream.

Section 2.02    Execution and Authentication.

At least one Officer must sign the Notes for the Company by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.

A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee will, upon receipt of a written order of the Company signed by an Officer (an “Authentication Order”), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Company pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof.

 

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The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.     An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03    Registrar and Paying Agent.

The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”). The Company will also maintain a transfer agent (the “Transfer Agent”). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Company may change any Paying Agent, Transfer Agent or Registrar without notice to any Holder and shall so notify the Trustee and each Paying Agent thereof in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar, Transfer Agent or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent, Transfer Agent or Registrar.

The Company initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Company initially appoints Deutsche Bank Trust Company Americas to act as the Registrar, Transfer Agent and Paying Agent and to act as Custodian, with respect to the Global Notes.

If and for so long as the Notes are listed on the SGX-ST, and the rules of the SGX-ST so require, in the event that the Global Notes are exchanged for certificated Notes, the Company will appoint and maintain a paying agent in Singapore where the certificated Notes may be presented or surrendered for payment or redemption. In the event that the Global Notes are exchanged for certificated Notes, an announcement of such exchange shall be made by or on behalf of the Company through the SGX-ST and such announcement will include all material information with respect to the delivery of the certificated Notes, including details of the Singapore paying agent by way of an announcement to the SGX-ST, for so long as the Notes are listed on the SGX-ST.

Section 2.04    Paying Agent to Hold Money in Trust.

The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Amounts, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes.

 

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Section 2.05    Holder Lists.

The Registrar will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders. If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes.

Section 2.06    Transfer and Exchange.

(a)         Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if:

(1)         the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary;

(2)         the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or

(3)         there has occurred and is continuing a Default or Event of Default with respect to the Notes.

Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

(b)         Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(1)         Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).

 

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(2)         All Other Transfers and Exchanges of Beneficial Interests in Global Notes.    In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either:

(A)    both:

(i)         a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii)     instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or

(B)    both:

(i)         a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii)         instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above.

Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(g) hereof.

(3)         Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(A)         if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and

(B)         if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.

 

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(4)         Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(i)         if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(ii)        if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to the paragraph above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to the paragraph above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

(c)        Transfer or Exchange of Beneficial Interests for Definitive Notes.

(1)         Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A)         if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

(B)         if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

 

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(C)         if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D)         if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E)         if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F)         if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(2)         Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if the Registrar receives the following:

(i)         if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(ii)        if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

 

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(3)         Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will not bear the Private Placement Legend.

(d)        Transfer and Exchange of Definitive Notes for Beneficial Interests.

(1)         Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A)         if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B)         if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C)         if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D)         if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E)         if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F)         if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

 

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the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Note.

(2)         Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following:

(i)         if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(ii)         if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(3)         Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (1)(B), (1)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e)         Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

 

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(1)         Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(A)         if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B)         if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C)         if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates required by item (3) thereof, if applicable.

(2)         Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:

(i)        if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(ii)        if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in such case set forth in this paragraph, if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(3)         Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f)        Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

 

25

(1)         Private Placement Legend.

(A)         Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER FOR THE BENEFIT OF THE COMPANY AND ANY OF ITS SUCCESSORS IN INTEREST (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS [IN THE CASE OF RULE 144A NOTES: ONE YEAR] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY [RULE 144A] [REGULATION S] UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE DATE OF ORIGINAL ISSUE AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THE NOTES (OR ANY PREDECESSOR THERETO) (THE “RESALE RESTRICTION TERMINATION DATE”) RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE OR A BENEFICIAL INTEREST IN THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON THAT THE SELLER, AND ANY PERSON ACTING ON ITS BEHALF, REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF SUCH CASES IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (D) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THAT AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, THE TRUSTEE AND THE REGISTRAR IS COMPLETED AND DELIVERED BY THE TRANSFEROR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES,” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.”

(B)         Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2), (d)(2), (d)(3), (e)(2) or (e)(3) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend.

 

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(2)         Global Note Legend. Each Global Note will bear a legend in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

(g)         Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Registrar at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Registrar at the direction of the Trustee to reflect such increase.

(h)         General Provisions Relating to Transfers and Exchanges.

(1)         To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.

 

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(2)         No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.06, 3.06, 4.08, 4.10 and 9.05 hereof).

(3)         The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(4)         All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(5)        Neither the Registrar nor the Company will be required:

(A)         to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;

(B)         to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or

(C)         to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(6)         Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

(7)        The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(8)         All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

Section 2.07    Replacement Notes.

If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee’s requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge the Holder for its expenses in replacing a Note, including, but not limited to the reasonable expenses of counsel and any tax that may be imposed with respect to replacement of such Note.

 

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Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

Section 2.08    Outstanding Notes.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.

Section 2.09    Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or any of its Subsidiaries, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any of its Subsidiaries, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.

Section 2.10    Temporary Notes.

Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes.

Holders of temporary Notes will be entitled to all of the benefits of this Indenture.

Section 2.11    Cancellation.

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the Trustee’s record retention requirements). Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

 

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Section 2.12    Defaulted Interest.

If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than ten (10) days prior to the related payment date for such defaulted interest. At least fifteen (15) days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

Section 2.13    Additional Amounts.

(a)         All payments by or on behalf of the Company of principal of, and premium, if any, and interest on the Notes will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by the Cayman Islands, Macau, any jurisdiction in which the Company is resident for tax purposes or any jurisdiction from or through which payments are made by or on behalf of the Company (or any political subdivision or taxing authority thereof or therein) (each, as applicable, a “Relevant Jurisdiction”), unless such withholding or deduction is required by law. In such event, the Company will make such withholding or deduction, make payment of the amount so withheld or deducted to the appropriate Governmental Authority as required by applicable law and will pay such additional amounts (“Additional Amounts”) as will result in receipt by the Holder of such amounts as would have been received by such holder had no such withholding or deduction been required; provided that no Additional Amounts will be payable with respect to any Note for or on account of:

(1)    any Taxes that would not have been imposed but for:

(A)         the existence of any present or former connection between the Holder or beneficial owner of such Note, as the case may be, and the Relevant Jurisdiction including, without limitation, such holder or beneficial owner being or having been a citizen or resident of such Relevant Jurisdiction, being or having been treated as a resident of such Relevant Jurisdiction or being or having been present or engaged in a trade or business in such Relevant Jurisdiction or having or having had a permanent establishment in such Relevant Jurisdiction, other than merely holding such Note or the receipt of payments thereunder;

(B)         the presentation of such Note (where presentation is required) more than thirty (30) days after the later of the date on which the payment of the principal of, premium, if any, or interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30-day period;

 

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(C)         the failure of the Holder or beneficial owner of such Note to comply with a timely request of the Company (or other applicable withholding agent) addressed to such Holder or beneficial owner to provide information concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Jurisdiction; or

(D)         the presentation of such Note (where presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;

(2)         any estate, inheritance, gift, sale, transfer, excise, personal property, net income or similar Tax;

(3)         any Tax arising pursuant to Sections 1471 – 1474 of the U.S. Internal Revenue Code of 1986, as amended, and any successor or amended version that is substantively comparable and not materially more onerous to comply with, any official interpretations thereof, current or future regulations or agreements entered pursuant thereto, any U.S. or non-U.S. law enacted in connection with an intergovernmental agreement related thereto, or any rules, regulations, or administrative guidance of any kind relating to any of the foregoing;

(4)         any Taxes that are payable other than (i) by withholding or deduction from payments of principal of, or premium (if any) or interest on the Note, or (ii) by direct payment by the Company in respect of claims made against the Company; or

(5)        any combination of Taxes referred to in the preceding clauses (1), (2), (3) and (4); or

(b)         with respect to any payment of the principal of, or premium, if any, or interest on, such Note to or for the account of a fiduciary, partnership or other fiscally transparent entity or any other person (other than the sole beneficial owner of such payment) to the extent that a beneficiary or settlor with respect to that fiduciary, or a partner or member of that partnership or fiscally transparent entity or a beneficial owner with respect to such other person, as the case may be, who would not have been entitled to such Additional Amounts had such beneficiary, settlor, partner, member or beneficial owner held directly the Note with respect to which such payment was made.

(c)         In addition to the foregoing, the Company will also pay and indemnify the Holder for any present or future stamp, issue, registration, court or documentary taxes, or any other excise or property taxes, charges or similar levies (including penalties and interest) which are levied by any Relevant Jurisdiction on the execution, delivery, issuance, or registration of any of the Notes, this Indenture or any other document or instrument referred to herein, or the receipt of any payments with respect thereto, or enforcement of, any of the Notes. The Company will use all reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any taxes so deducted or withheld from each Relevant Jurisdiction imposing such taxes, in such form as provided in the ordinary course by the Relevant Jurisdiction and as is reasonably available to the Company, and will provide such certified copies to the Trustee and the Paying Agent. Such copies shall be made available to the Holders upon request and will be made available at the offices of the Paying Agent. The Company will attach to each certified copy a certificate stating (x) that the amount of withholding taxes evidenced by the certified copy was paid in connection with payments in respect of the principal amount of Notes then outstanding and (y) the amount of such withholding taxes paid per $1,000 principal amount of the Notes.

 

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(d)         Whenever there is mentioned in any context the payment of principal of, and any premium or interest, on any Note, such mention will be deemed to include payment of Additional Amounts provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

Section 2.14    Agents.

 

  (a)

Actions of Agents. The rights, powers, duties and obligations and actions of each Agent under this Indenture are several and not joint or joint and several.

 

  (b)

Agents of Trustee. The Company and the Agents acknowledge and agree that in the event of a Default or Event of Default, the Trustee may, by notice in writing to the Company and the Agents, require that the Agents act as agents of, and take instructions exclusively from, the Trustee. Prior to receiving such written notice from the Trustee, the Agents shall be the agents of the Company and need have no concern for the interests of the Holders.

 

  (c)

Funds held by Agents. The Agents will hold all funds as banker subject to the terms of this Indenture and as a result such money need not be segregated from other funds except to the extent required by law.

 

  (d)

Publication of Notices. For so long as the Notes are held as Book-Entry Interests in Global Notes, any obligation the Agents may have to publish a notice to Holders on behalf of the Company will be satisfied upon delivery of the notice to DTC.

 

  (e)

In the event that instructions given to any Agent are not reasonably clear, then such Agent shall be entitled to seek clarification from the Company or other party entitled to give the Agents instructions under this Indenture. If an Agent has sought clarification in accordance with this Section 2.14, then such Agent shall be entitled to take no action until such clarification is provided, and shall not incur any liability for not taking any action pending receipt of such clarification.

 

  (f)

Save as provided in this Section 2.14, no Agent shall be under any duty or other obligation towards, or have any relationship of agency or trust for or with, any person other than the Company.

 

  (g)

No Agent shall be required to make any payment under this Indenture unless and until it has received the full amount to be paid in accordance with the terms of this Indenture. To the extent that an Agent has made a payment for which it did not receive the full amount, the Company will reimburse the Agent the full amount of any shortfall.

 

  (h)

The roles, duties and functions of the Agents are of an administrative nature and each Agent shall only perform those acts and duties as specifically set out in this Indenture and no other acts, covenants, obligations or duties shall be implied or read into this Indenture against any of the Agents.

 

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ARTICLE 3

REDEMPTION AND PREPAYMENT

Section 3.01    Notices to Trustee.

If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, the Registrar and the Paying Agent, at least 30 days but not more than 60 days before a redemption date, an Officer’s Certificate setting forth:

(1)        the clause of this Indenture pursuant to which the redemption shall occur;

(2)        the redemption date;

(3)        the principal amount of Notes to be redeemed; and

(4)        the redemption price.

Section 3.02    Selection of Notes to Be Redeemed or Purchased.

If fewer than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee, the Paying Agent or the Registrar (as applicable) will select Notes for redemption or purchase (i) in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed and any applicable depositary procedures, (ii) by lot or such other similar method in accordance with the applicable procedures of the Depositary or any other applicable clearing system (if the Notes are Global Notes), or (iii) if there are no such requirements of such exchange or the Notes are not then listed on a national securities exchange or cleared through the Depositary or any other applicable clearing system, on a pro rata basis. No Notes of a principal amount of US$200,000 or less may be redeemed or purchased in part, and if Notes are redeemed or purchased in part, the remaining outstanding amount must be at least equal to US$200,000 and integral multiples of US$1,000 in excess thereof. None of the Trustee, the Paying Agent or the Registrar will be liable for any selections made by it under this paragraph.

In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Registrar from the outstanding Notes not previously called for redemption or purchase.

The Registrar will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of US$200,000 or integral multiples of US$1,000 in excess thereof; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03    Notice of Redemption.

Subject to the provisions set forth in the second paragraph of Section 3.07(d), at least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date (with prior notice to the Trustee) if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 hereof or less than 30 days prior to a redemption date as provided under Section 3.10 hereof.

 

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The notice will identify the Notes to be redeemed and will state:

(1)        the redemption date;

(2)        the redemption price;

(3)         if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note; provided that the unredeemed portion has a minimum denomination of US$200,000;

(4)        the name and address of the Paying Agent;

(5)         that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(6)         that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

(7)        the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;

(8)        that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes; and

(9)         whether the redemption is conditioned on any events and, if so, a reasonably detailed explanation of such conditions.

At the Company’s written request, the Paying Agent will give the notice of redemption in the Company’s name and at its expense; provided, however, that the Company has delivered to the Paying Agent, at least three Business Days prior to the date that the notice of redemption is to be delivered to Holders, an Officer’s Certificate requesting that the Paying Agent give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.04    Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the redemption price stated in the notice; provided that any notice of redemption given in respect of the redemption referred to in Section 5 of the Notes may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, to the extent permitted by Section 3.07 of the Indenture and Section 5 of the Notes.

 

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Section 3.05    Deposit of Redemption or Purchase Price.

No later than 10 a.m. New York time one Business Days prior to the redemption or purchase date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest and Additional Amounts, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Additional Amounts, if any, on all Notes to be redeemed or purchased.

If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06    Notes Redeemed or Purchased in Part.

Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.

Section 3.07    Optional Redemption.

(a)         At any time prior to December 4, 2024, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 105.375% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that:

(1)         at least 65% of the aggregate principal amount of Notes originally issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and

(2)        the redemption occurs within 45 days of the date of the closing of such Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Equity Offering, and any such redemption or notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Equity Offering.

(b)         At any time prior to December 4, 2024, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the discretion of the Company, be subject to satisfaction of one or more conditions precedent.

 

35

(c)        Except pursuant to the two preceding paragraphs and Sections 3.09 and 3.10, the Notes will not be redeemable at the Company’s option prior to December 4, 2024.

(d)         On or after December 4, 2024, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, and Additional Amounts, if any, on the Notes redeemed, to but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on December 4 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

 

Year

    Percentage  

2024

      102.688%  

2025

      101.792%  

2026

      100.896%  

2027 and thereafter

      100.000%  

Any such redemption may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent. If such redemption is so subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Company’s discretion, the redemption date may be delayed until such time (provided, however, that any delayed redemption date shall not be more than 60 days after the date the relevant notice of redemption was sent) as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date or by the redemption date as so delayed. In addition, the Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person.

Unless the Company defaults in the payment of the redemption price or fails to satisfy the conditions precedent to the redemption and thereby terminates the redemption, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(e)        Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08    Mandatory Redemption.

The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Company may be required to offer to purchase Notes as described in Sections 4.08 and 4.10 hereof. The Company may at any time and from time to time purchase Notes in the open market or otherwise.

Section 3.09    Redemption for Taxation Reasons.

The Notes may be redeemed, at the option of the Company, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to Holders (which notice will be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to but excluding the date fixed by the Company for redemption (the “Tax Redemption Date”) if, as a result of:

 

36

(1)         any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) or treaties of a Relevant Jurisdiction affecting taxation; or

(2)         any change in, or amendment to, an official position regarding the application or interpretation of such laws, treaties, regulations or rulings (including a holding, judgment or order by a court of competent jurisdiction),

which change or amendment becomes effective on or after the date of this Indenture with respect to any payment due or to become due under the Notes or this Indenture, the Company is, or on the next interest payment date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the Company, taking reasonable measures available to it; provided that for the avoidance of doubt, changing the jurisdiction of the Company is not a reasonable measure for the purposes of this Section 3.09; provided further that no such notice of redemption will be given earlier than 90 days prior to the earliest date on which the Company would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

Prior to the mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company will deliver to the Trustee:

(1)         an Officer’s Certificate stating that such change or amendment referred to in the prior paragraph has occurred, and describing the facts related thereto and stating that such requirement cannot be avoided by the Company, taking reasonable measures available to it; and

(2)         an Opinion of Counsel or an opinion of a tax consultant of recognized international standing stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in the prior paragraph.

The Trustee will accept and shall be entitled to rely on such Officer’s Certificate and Opinion of Counsel or opinion of tax consultant as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it will be conclusive and binding on the Holders.

Any Notes that are redeemed pursuant to this Section 3.09 will be cancelled.

Section 3.10    Gaming Redemption.

Each Holder, by accepting a Note, shall be deemed to have agreed that if the Gaming Authority of any jurisdiction in which the Company, any of its Subsidiaries or the Sponsor conducts or proposes to conduct gaming requires that a person who is a holder or the beneficial owner of Notes be licensed, qualified or found suitable under applicable Gaming Laws, such holder or beneficial owner, as the case may be, shall apply for a license, qualification or a finding of suitability within the required time period. If such Person fails to apply or become licensed or qualified or is found unsuitable, the Company shall have the right, at its option:

(1)    to require such Person to dispose of its Notes or beneficial interest therein within 30 days of receipt of notice of the Company’s election or such earlier date as may be requested or prescribed by such Gaming Authority; or

 

37

(2)         to redeem such Notes, which redemption may be less than 30 days following the notice of redemption if so requested or prescribed by the applicable gaming authority, at a redemption price equal to:

(A)         the lesser of:

 

  (1)

the person’s cost, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; and

 

  (2)

100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; or

(B)         such other amount as may be required by applicable law or order of the applicable Gaming Authority.

The Company shall notify the Trustee in writing of any such redemption as soon as practicable. Neither the Company nor the Trustee shall be responsible for any costs or expenses any Holder may incur in connection with such Holder’s application for a license, qualification or a finding of suitability.

ARTICLE 4

COVENANTS

Section 4.01    Payment of Notes.

The Company will pay or cause to be paid the principal of, premium, if any, and interest and Additional Amounts, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Additional Amounts, if any, will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. New York Time one Business Day prior to the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due.

The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Amounts (without regard to any applicable grace period) at the same rate to the extent lawful.

Subject to actual receipt of funds as provided in this Section 4.01 by the Paying Agent, such Paying Agent shall make payments on the Notes in accordance with the provisions of this Indenture

Section 4.02    Maintenance of Office or Agency.

The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

 

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The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Company hereby designates Deutsche Bank Trust Company Americas as one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03    Reports.

(a)         The Company will furnish to the Trustee and the Holders or, at the written request and expense of the Company, cause the Trustee to furnish to the Holders, and make available to potential investors:

(1)         within 120 days after the end of the Company’s fiscal year, annual reports of the Company containing: (a) information with a level of detail that is substantially comparable to the sections in the Offering Memorandum entitled “Selected Consolidated Financial Information”, “Business”, “Management”, “Related Party Transactions” and “Description of Other Material Indebtedness”; (b) the Company’s audited consolidated (i) balance sheet as of the end of the two most recent fiscal years and (ii) statement of operations and statement of cash flow for the two most recent fiscal years, in each case prepared in accordance with GAAP and including complete footnotes to such financial statements and the report of the independent auditors on the financial statements; (c) an operating and financial review of the two most recent fiscal years for the Company and its Subsidiaries, including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and any material changes between such two fiscal years and (ii) any material developments in the business of the Company and its Subsidiaries; and (d) pro forma statement of operations and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal year, unless pro forma information has been provided in a previous report pursuant to paragraph (2)(c) below;

(2)         within 60 days after the end of each day of the first three fiscal quarters in each fiscal year of the Company, quarterly reports containing: (a) the Company’s unaudited condensed consolidated (i) balance sheet as of the end of such quarter and (ii) statement of operations and cash flow for the quarterly and year to date periods ending on the most recent balance sheet date, and the comparable prior year periods, in each case prepared in accordance with GAAP; (b) an operating and financial review of such periods for the Company and its Subsidiaries including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and material changes between the current period and the period of the prior year and (ii) any material developments in the business of the Company and its Subsidiaries; (c) pro forma statement of operations and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal quarter; provided that the Company may provide any such pro forma information relating to a material acquisition within 75 days following such quarterly report in the form of a report provided pursuant to clause (3) below; and

 

39

(3)         promptly from time to time after the occurrence of any of the events listed in (a) to (d) of this clause (3) information with respect to (a) any change in the independent accountants of the Company or any of its Significant Subsidiaries, (b) any material acquisition or disposition, (c) any material event that the Company or any of its Subsidiaries announces publicly and (d) any information that the Company is required to make publicly available under the requirements of the Singapore Exchange Securities Trading Limited or such other exchanges on which the securities of the Company or its Subsidiaries are then listed.

The Company may satisfy the requirement to furnish reports or information as described in (1), (2) and (3) above by furnishing, or making available, such required report or information on the website of the SEC or SGX-ST; provided that the Trustee shall have no responsibility whatsoever to determine whether such report or information has been furnished or made available on such website.

(b)         In addition, so long as any Notes remain outstanding, the Company shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(c)         Delivery of such reports, information and documents to the Trustee shall be for informational purposes only and the Trustee’s receipt of such reports, information and documents shall not constitute notice of any information contained therein, including the Company’s compliance with any of the covenants hereunder (as to which the Trustee is entitled to rely exclusively on the Officer’s Certificate).

Section 4.04     Compliance Certificate.

(a)         The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year or at any other times upon the written request of the Trustee, an Officer’s Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b)         So long as any of the Notes are outstanding, the Company will deliver to the Trustee, as soon as possible and in any event within five (5) Business Days after the Company becomes aware of any Default or Event of Default, an Officer’s Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. The Trustee shall not be deemed to have a duty to monitor compliance by the Company, nor to have knowledge of a Default or an Event of Default unless a Responsible Officer of the Trustee receives written notice thereof, stating that it is a notice of default and referencing the applicable section of this Indenture.

 

40

Section 4.05    Taxes.

The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies required to be paid by the Company or such Subsidiaries except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders.

Section 4.06    Stay, Extension and Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07    Corporate Existence.

Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:

(1)         its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and

(2)         the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders.

Section 4.08    Offer to Repurchase upon Change of Control.

(a)         Upon the occurrence of a Change of Control Triggering Event, each Holder will have the right to require the Company to repurchase all or any part of such Holder’s Notes pursuant to a Change of Control Offer (as defined below) on the terms set forth below. In the Change of Control Offer, the Company will offer to purchase the Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), except to the extent the Company has previously or concurrently elected to redeem the Notes in full pursuant to Section 3.07 hereof or Section 3.09 hereof. Within twenty (20) days following any Change of Control Triggering Event, except to the extent that the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof, the Company shall mail a notice (a “Change of Control Offer”) to each Holder with a copy to the Trustee stating:

(1)         that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Company to repurchase such Holder’s Notes at a repurchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of holders of record on a record date to receive interest on the relevant interest payment date) (the “Change of Control Payment”);

 

41

(2)        the circumstances and relevant facts and financial information regarding such Change of Control;

(3)         the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”);

(4)        that any Note not tendered will continue to accrue interest;

(5)         that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;

(6)         the Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(7)         the Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased, and

(8)         that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that the unpurchased portion has a minimum denomination of US$200,000.

(b)         On the Change of Control Payment Date, the Company will, to the extent lawful:

(1)         accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

(2)        deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

(3)         deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that the unpurchased portion has a minimum denomination of US$200,000. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

 

42

(c)         Notwithstanding anything to the contrary in this Section 4.08, the Company will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.08 and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given in accordance with the terms of Section 3.03 hereof or Section 3.09 hereof, pursuant to which the Company exercised its right to redeem the Notes in full, unless and until there is a default in payment of the applicable redemption price.

(d)         A Change of Control Offer may be made in advance of a Change of Control Triggering Event, and conditioned upon such Change of Control Triggering Event, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

(e)         Notes repurchased by the Company pursuant to a Change of Control Offer will have the status of Notes issued but not outstanding or will be retired and cancelled at the option of the Company. Subject to Section 2.09 hereof, Notes purchased by a third party pursuant to the preceding paragraph will have the status of Notes issued and outstanding.

(f)         The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of the Notes pursuant to this Section 4.08. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.08, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.08 by virtue of such compliance.

Section 4.09    Listing.

The Company will use its commercially reasonable efforts to list and maintain the listing and quotation of the Notes on the Official List of the Singapore Exchange Securities Trading Limited or another comparable exchange.

Section 4.10    Special Put Option.

(a)         Upon a Special Put Option Triggering Event, each Holder will have the right to require the Company to repurchase all or any part of such Holder’s Notes pursuant to a Special Put Option Offer (as defined below) as set forth below. In the Special Put Option Offer, the Company will offer to purchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date), except to the extent the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof. Within ten (10) days following the occurrence of a Special Put Option Triggering Event, except to the extent that the Company has exercised its right to redeem the Notes in full by delivery of a notice of redemption pursuant to Section 3.03 hereof or Section 3.09 hereof, the Company shall mail a notice (a “Special Put Option Offer”) to each Holder with a copy to the Trustee and the Paying Agent stating:

 

  (1)

that a Special Put Option Triggering Event has occurred and that such Holder has the right to require the Company to repurchase such Holder’s Notes at a repurchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date);

 

43

  (2)

the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and

 

  (3)

the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes repurchased.

(b)         On the date of repurchase pursuant to a Special Put Option Offer, the Company will, to the extent lawful:

 

  (1)

accept for payment all Notes or portions of Notes properly tendered pursuant to the Special Put Option Offer;

 

  (2)

deposit with the Paying Agent an amount equal to the repurchase price, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase (the “Special Put Option Payment”), in respect of all Notes or portions of Notes properly tendered; and

 

  (3)

deliver or cause to be delivered to the Trustee, the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes properly tendered the Special Put Option Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any.

(c)         Notwithstanding anything to the contrary in this Section 4.10, the Company will not be required to make a Special Put Option Offer upon a Special Put Option Triggering Event if (1) a third party makes the Special Put Option Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Special Put Option Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Special Put Option Offer, or (2) notice of redemption has been given in accordance with the terms of the Indenture, as described above under Section 3.07 hereof or Section 3.09 hereof pursuant to which the Company has exercised its right to redeem the Notes in full, unless and until there is a default in payment of the applicable redemption price.

(d)         Notes repurchased by the Company pursuant to a Special Put Option Offer will have the status of Notes issued but not outstanding or will be retired and cancelled at the option of the Company. Subject to Section 2.09 hereof, Notes purchased by a third party pursuant to the preceding paragraph will have the status of Notes issued and outstanding.

(e)    The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this provision. To the extent that the provisions of any securities laws or regulations conflict with provisions of this provision, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof.

(f)        The provisions described above that require the Company to make a Special Put Option Offer following a Special Put Option Triggering Event will be applicable whether or not any other provisions of this Indenture are applicable.

 

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ARTICLE 5

SUCCESSORS

Section 5.01    Merger, Consolidation, or Sale of Assets.

(a)         The Company will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company survives); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person unless:

(1)        either:

(A)         if the transaction or series of transactions is a consolidation of the Company with or a merger of the Company with or into any other Person, the Company shall be the surviving corporation of such merger or consolidation; or

(B)         the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made shall be a corporation organized and existing under the laws of the British Virgin Islands, Cayman Islands, Hong Kong, Macau, Singapore, United States, any state of the United States or the District of Columbia, and such Person shall expressly assume all the Obligations of the Company under the Notes and this Indenture pursuant to supplemental indentures or other documents or agreements reasonably satisfactory to the Trustee; and

(2)        immediately after such transaction, no Default or Event of Default exists.

Section 5.02    Successor Corporation Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the “Company” shall refer instead to the successor Person and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company’s assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01    Events of Default.

(a)         Each of the following is an “Event of Default”:

(1)        default for 30 days in the payment when due of interest on the Notes;

 

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(2)         default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes;

(3)        failure by the Company to comply with its obligations under the provisions of Sections 4.08, 4.10 or 5.01 hereof;

(4)         failure by the Company for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in this Indenture;

(5)         default under any mortgage, indenture or instrument (other than the Senior Credit Agreement) under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness (or guarantee) now exists, or is created after the date of this Indenture, if such default results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates US$50.0 million or more, if such acceleration is not annulled within 30 days after written notice as provided in this Indenture;

(6)         default under the Senior Credit Agreement that results in the acceleration thereof prior to the final maturity thereof;

(7)         failure by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary to pay final judgments entered by a court or courts of competent jurisdiction (other than any judgment as to which a reputable third party insurer has accepted full responsibility and coverage) aggregating in excess of US$50.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(8)         the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:

(A)        commences a voluntary case,

(B)        consents to the entry of an order for relief against it in an involuntary case,

(C)        consents to the appointment of a custodian of it or for all or substantially all of its property,

(D)        makes a general assignment for the benefit of its creditors, or

(E)        generally is not paying its debts as they become due;

(9)        a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

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(A)         is for relief against the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary in an involuntary case;

(B)         appoints a custodian of the Company or of any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary; or

(C)         orders the liquidation of the Company or of any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary.

Section 6.02    Acceleration.

In the case of an Event of Default specified in Section 6.01(a)(8) or 6.01(a)(9) hereof, with respect to the Company, any Subsidiary of the Company that is a Significant Subsidiary or any group of Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately.

The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration of the Notes or waive any existing Default or Event of Default and its consequences under this Indenture except with respect to a continuing Default or Event of Default in the payment of principal, interest, premium or Additional Amounts, if any, on the Notes; provided, however, that Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration.

Section 6.03    Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Additional Amounts, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04    Waiver of Past Defaults.

Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder; provided that Holders of not less than 90% of the aggregate principal amount of the then outstanding Notes shall be required to waive a continuing Default or Event of Default in the payment of the principal of, premium, Additional Amounts, if any, or interest on, the Notes; provided further, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

 

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Section 6.05    Control by Majority.

Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability.

Section 6.06    Limitation on Suits.

(a)         Subject to the provisions of this Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any Holders unless such Holders have offered to the Trustee indemnity and/or security to its satisfaction against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest or Additional Amounts, if any, when due, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:

(1)        such Holder has previously given the Trustee written notice that an Event of Default is continuing;

(2)        Holders of at least 25% in aggregate principal amount of the then outstanding Notes have made a written request to the Trustee to pursue the remedy;

(3)         such Holders have offered the Trustee security and/or indemnity satisfactory to the Trustee against any loss, liability or expense;

(4)         the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security and/or indemnity to its satisfaction; and

(5)         during such 60-day period, Holders of a majority in aggregate principal amount of the then outstanding Notes have not given the Trustee a direction inconsistent with such request.

(b)         A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

Section 6.07    Rights of Holders to Receive Payment.

Subject to Section 9.02 hereof, the right of any Holder to receive payment of principal, premium, Additional Amounts, if any, and interest on the Notes, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of Holders of not less than 90% of the aggregate principal of the then outstanding Notes; provided that a Holder shall not have the right to institute any such suit for the enforcement of payment if and to the extent that the institution or prosecution thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture upon any property subject to such Lien.

 

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Section 6.08    Collection Suit by Trustee.

If an Event of Default specified in Section 6.01(a)(1) or (a)(2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, Additional Amounts, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and premium, if any and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09    Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.08 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.08 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10    Priorities.

If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

First:         to the Trustee, the Agents, and their respective agents and attorneys for amounts due under Section 7.08 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee or any Agent, and the costs and expenses of collection;

Second:         to Holders for amounts due and unpaid on the Notes for principal, premium, Additional Amounts, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, Additional Amounts, if any, and interest, respectively; and

 

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Third:        to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

Section 6.11    Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes.

ARTICLE 7

TRUSTEE

Section 7.01    Duties of Trustee.

(a)         If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)        Except during the continuance of an Event of Default:

(1)         the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)         in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(3)         the Trustee shall not be charged with knowledge of any Default or Event of Default unless the Company has delivered written notice of such default or Event of Default to a Responsible Officer at the Corporate Trust Office of the Trustee referencing the applicable provision of this Indenture.

(c)         The Trustee may not be relieved from liabilities for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct, except that:

(1)        this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

 

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(2)        the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer; and

(3)        the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d)         Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01.

(e)         No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability.

(f)         The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02    Rights of Trustee.

(a)         The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b)         Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel. The Trustee may engage and consult with professional advisors and counsel selected by it and the Trustee may rely conclusively upon advice of such professional advisors and counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon by the Trustee and any of its directors, officers, employees or agents duly appointed.

(c)         The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. The Trustee shall have no duty to monitor the performance of such agents.

(d)         The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. The Trustee shall not be required to take action at the direction of the Company or Holders which conflicts with the requirements of this Indenture, or for which it is not indemnified and/or secured to its satisfaction, or which involves undue risk or would be contrary to applicable law or regulation.

(e)         Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company.

(f)         The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security satisfactory to the Trustee in its sole discretion against the losses, liabilities and expenses that might be incurred by it in compliance with such request or direction.

(g)         In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

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(h)         The recitals contained herein and in the Notes are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Indenture or the Notes.

(i)         The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(j)         In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(k)         The rights, privileges, indemnity, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified and/or secured, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder; provided, however, any such agent or custodian shall not be deemed to be a fiduciary;

(l)         The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture;

(m)         So long as any of the Notes remains outstanding, the Company shall provide the Agents with a sufficient number of copies of this Indenture and each of the documents sent to the Trustee or which are required to be made available by stock exchange regulations or stated in the Offering Memorandum relating to the Notes, to be available and, subject to being provided with such copies, each of the Agents will procure that such copies shall be available at its specified office during normal office hours for examination by the Holders and that copies thereof will be furnished to the Holders upon written request at their own expense;

(n)         If the Trustee shall be uncertain as to its duties or rights hereunder, it shall be entitled to refrain from taking action until directed in writing by a final order or judgment of a court of competent jurisdiction.

(o)         If the Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of Holders, each representing less than a majority in aggregate principal amount of the Notes then outstanding, pursuant to the provisions of this Indenture, the Trustee, in its sole discretion, may determine what action, if any, to take and shall not incur any liability for its failure to act until such inconsistency or conflict is, in its sole opinion, resolved.

 

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(p)         Notwithstanding any other provision of this Indenture, the Trustee and the Paying Agent shall be entitled to make a deduction or withholding from any payment which they make under this Indenture for or on account of any present or future taxes, duties or charges if and to the extent so required by applicable law, in which event the Trustee or the Paying Agent, as applicable, shall make such payment after such withholding or deduction has been made and shall account to the relevant authorities for the amount so withheld or deducted.

(q)         The Trustee shall (except as expressly otherwise provided herein) as regards all the trusts, powers, authorities and discretions vested in it by this Indenture or by applicable law, have absolute and uncontrolled discretion as to the exercise or non-exercise thereof and, absent any wilful misconduct, gross negligence or fraud on the part of the Trustee, the Trustee shall not be responsible for any loss, damage, cost, claim or any other liability or inconvenience that may result from the exercise or non-exercise thereof.

(r)         Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice of the Company mentioned herein shall be sufficiently evidenced if in writing and signed by an Officer of the Company and any resolution of the Board of Directors shall be sufficiently evidenced by a board resolution.

(s)         The Trustee shall have no duty to inquire as to the performance of the covenants of the Company. Delivery of reports, information and documents to the Trustee under Section 4.03 hereof shall be for informational purposes only as regards the Trustee and the Trustee’s receipt of such reports, information and documents shall not constitute constructive notice of any information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).

(t)         The Trustee shall not have any obligation or duty to monitor, determine or inquire as to compliance, and shall not be responsible or liable for compliance with restrictions on transfer, exchange, redemption, purchase or repurchase, as applicable, of minimum denominations imposed under this Indenture or under applicable law or regulation with respect to any transfer, exchange, redemption, purchase or repurchase, as applicable, of any interest in any Global Notes.

(u)         The Trustee may assume without inquiry in the absence of actual knowledge that the Company is duly complying with its obligations contained in this Indenture required to be performed and observed by it, and that no Default or Event of Default or other event which would require repayment of the Notes has occurred.

Section 7.03    [Intentionally Omitted.]

Section 7.04    Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. The Trustee is also subject to Section 7.11 hereof.

Section 7.05    Trustee’s Disclaimer.

The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the proceeds from the Notes or any money paid to the Company or upon the Company’s direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. The Trustee shall not be deemed to be required to calculate any Fixed Charges, Treasury Rates, Additional Amounts, any make-whole amount, any Fixed Charge Coverage Ratio or other coverage ratio, or otherwise.

 

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Section 7.06    Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders a notice of the Default or Event of Default within ninety (90) days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, Additional Amounts, if any, or interest on, any Note, the Trustee shall not be deemed to have such actual knowledge and may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders.

Section 7.07    [Intentionally Omitted.]

Section 7.08    Compensation and Indemnity.

(a)         The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder pursuant to a written fee agreement executed by the Trustee and the Company. The Trustee’s compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses properly incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

(b)         The Company will indemnify the Trustee (which for purposes of this Section 7.08, shall be deemed to include its officers, directors, employees and agents) against any and all losses, liabilities or expenses (including the fees and expenses of counsel) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.08) and defending itself against any claim (whether asserted by the Company, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable solely to its gross negligence, willful misconduct or fraud by a court of competent jurisdiction in a final non-appealable order. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company of its obligations hereunder. The Company will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. The Company shall not need to pay for any settlement made without its consent, which consent will not be unreasonably withheld.

(c)         The obligations of the Company under this Section 7.08 will survive the satisfaction and discharge of this Indenture, and the resignation or removal of the Trustee and/or any Agent, but only in relation to anything done or omitted to be done by such Trustee and/or any such Agent on or prior to such resignation or removal.

(d)         To secure the Company’s payment obligations in this Section 7.08, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture.

 

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(e)         When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(8) or Section 6.01(a)(9) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

Section 7.09    Replacement of Trustee.

(a)         A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.09.

(b)         The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

(1)        the Trustee fails to comply with Section 7.11 hereof;

(2)        the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(3)        a custodian or public officer takes charge of the Trustee or its property; or

(4)        the Trustee becomes incapable of acting.

(c)         If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one (1) year after the successor Trustee takes office, the holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

(d)         If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee at the sole expense of the Company.

(e)         If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.11 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(f)        A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will deliver a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.08 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.09, the Company’s obligations under Section 7.08 hereof will continue for the benefit of the retiring Trustee.

 

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Section 7.10    Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee.

Section 7.11    Eligibility; Disqualification.

There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof, the United Kingdom or Hong Kong that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by the relevant authorities in such jurisdiction and that is a corporation which is generally recognized as a corporation which customarily performs such corporate trustee roles and provides such corporate trustee services in transactions similar in nature to the offering of the Notes. No obligor under the Notes or Person directly controlling, controlled by, or under common control with such obligor shall serve as trustee under the Indenture.

Section 7.12    Appointment of Co-Trustee.

(a)         Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction or otherwise, the Trustee shall have the power and may execute and deliver all instruments necessary to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustees, of all or any part of this Indenture, and to vest in such Person or Persons, in such capacity and for the benefit of the Holders, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 7.09 and no notice to the Holders of the appointment of any co-trustee or separate trustee shall be required.

(b)         Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(1)         All rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee.

(2)         No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

(3)         The Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c)         Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Section 7.12. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection or rights (including the rights to compensation, reimbursement and indemnification hereunder) to, the Trustee. Every such instrument shall be filed with the Trustee.

 

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(d)         Any separate trustee or co-trustee may at any time constitute the Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies, and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

Section 7.13    [Intentionally Omitted].

Section 7.14    Resignation of Agents.

Any Agent may resign and be discharged from its duties under this Indenture at any time by giving thirty (30) days’ prior written notice of such resignation to the Trustee and the Company. The Trustee or the Company may remove any Agent at any time by giving thirty (30) days’ prior written notice to such Agent. Upon such notice, a successor Agent shall be appointed by the Company, who shall provide written notice of such appointment to the Trustee. Such successor Agent shall become the Agent hereunder upon the resignation or removal date specified in such notice. If the Company is unable to replace the resigning Agent within thirty (30) days after such notice, the Agent shall deliver any funds then held hereunder in its possession to the Trustee or (i) such Agent may appoint as its successor Agent, any reputable and experienced financial institution acceptable to the Trustee and the Company or (ii) apply to a court of competent jurisdiction for the appointment of a successor Agent or for other appropriate relief. The reasonable costs and expenses (including its counsels’ fees and expenses) properly incurred by the Agent in connection with such court proceedings shall be paid by the Company. Upon receipt of the identity of the successor Agent, the Agent shall deliver any funds then held hereunder to the successor Agent, less the Agent’s fees, costs and expenses or other obligations owed to the Agent. Upon its resignation and delivery of any funds, the Agent shall be discharged of and from any and all further obligations arising in connection with this Indenture, but shall continue to enjoy the benefit of Section 7.08.

Section 7.15    Rights of Trustee in Other Roles.

All rights, powers and indemnities contained in this Article 7 shall apply to the Trustee in its other roles hereunder and the Agents; provided, however, that each Agent is an agent and not a fiduciary.

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01    Option to Effect Legal Defeasance or Covenant Defeasance.

The Company may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officer’s Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

 

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Section 8.02    Legal Defeasance and Discharge.

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its Obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which will thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder:

(1)         the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof;

(2)        the Company’s Obligations with respect to such Notes under Article 2 and Section 4.02 hereof;

(3)         the rights, powers, trusts, duties and immunities of the Trustee, the Paying Agent, the Registrar and the Transfer Agent hereunder, and the Company’s Obligations in connection therewith; and

(4)        this Article 8.

Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03    Covenant Defeasance.

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.08 and 4.09 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, “Covenant Defeasance”), and the Notes will thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes will be unaffected thereby. In addition, upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(a)(3) through 6.01(a)(6) hereof will not constitute Events of Default; provided that a failure by the Company to comply with its obligations under the provisions of Section 4.10 will constitute an Event of Default.

 

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Section 8.04    Conditions to Legal or Covenant Defeasance.

In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:

(1)         the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination of cash in U.S. dollars and non-callable U.S. Government Obligations, in amounts as will be sufficient, in the opinion of an internationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium, and Additional Amounts, if any, on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date;

(2)         in the case of an election under Section 8.02 hereof, the Company must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that:

(A)        the Company has received from, or there has been published by, the U.S. Internal Revenue Service a ruling; or

(B)        since the date of this Indenture, there has been a change in the applicable federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3)         in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4)         no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound;

(5)         such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(6)         the Company must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and

 

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(7)         the Company must deliver to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

(8)         The Trustee shall be entitled to its usual fees and, in addition, any fees and expenses properly incurred or charged by the Trustee and its counsel in connection with defeasance, satisfaction and discharge, and investment or custody services provided hereunder.

Section 8.05    Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 8.06 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the holders of such Notes of all sums due and to become due thereon in respect of principal, premium, and Additional Amounts, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Obligations deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the holders of the outstanding Notes.

Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable U.S. Government Obligations held by it as provided in Section 8.04 hereof which, in the opinion of an internationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06    Repayment to Company.

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Additional Amounts, if any, or interest on, any Note and remaining unclaimed for two (2) years after such principal, premium, or Additional Amounts, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than thirty (30) days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

 

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Section 8.07    Reinstatement.

If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable U.S. Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Indenture and the Notes will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Additional Amounts, if any, or interest on, any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01    Without Consent of Holders of Notes.

Notwithstanding Section 9.02 of this Indenture, the Company, the Trustee, and each Agent, may amend or supplement this Indenture and the Notes without the consent of any Holder:

(1)        to cure any ambiguity, defect or inconsistency;

(2)         to provide for uncertificated Notes in addition to or in place of certificated Notes; provided that such uncertificated Notes are in registered form for U.S. federal income tax purposes;

(3)         to provide for the assumption of the Company’s Obligations to Holders in the case of a merger or consolidation or sale of all or substantially all of the Company’s assets;

(4)        to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;

(5)         to conform the text of this Indenture to any provision of the “Description of Notes” section of the Offering Memorandum, to the extent that such provision in that “Description of Notes” section of the Offering Memorandum was intended to be a verbatim recitation of a provision of the Notes or this Indenture; or

(6)         to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date of this Indenture;

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Sections 7.02, 9.06 and 13.04 hereof, the Trustee and each Agent will join with the Company in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but neither the Trustee nor any Agent will be obligated to (although they may at their discretion) enter into such amended or supplemental indenture that affects their own rights, duties or immunities under this Indenture or otherwise.

 

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Section 9.02    With Consent of Holders of Notes.

Except as provided below in this Section 9.02, the Company, the Trustee and each Agent may amend or supplement this Indenture (including, without limitation, Section 4.08 hereof) and the Notes, with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium or Additional Amounts, if any, or interest on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes, may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes).

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon delivery to the Trustee of evidence satisfactory to the Trustee of the consent of the holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02, 9.06 and 13.04 hereof, the Trustee and each Agent will join with the Company in the execution of such amended or supplemental indenture authorized or permitted by the terms of this Indenture unless such amended or supplemental indenture directly affects either the Trustee’s or any Agent’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee and each Agent (as the case may be) may in their discretion, but will not be obligated to, enter into such amended or supplemental indenture.

It is not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it is sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of Holders of 90% of the aggregate principal amount then outstanding of Notes (including the Additional Notes) affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes (including the Additional Notes) held by a non-consenting Holder):

(1)        reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2)         reduce the principal of, premium, if any, or change the fixed maturity of any Note or alter or waive any provisions with respect to the redemption of the Notes (except as provided above with respect to Section 4.08 hereof);

(3)        reduce the rate of or change the time for payment of interest, including default interest, on any Note;

 

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(4)         waive a Default or Event of Default in the payment of principal of, or interest, premium or Additional Amounts, if any, on, the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration);

(5)        make any Note payable in money other than that stated in the Notes;

(6)         make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest, premium or Additional Amounts, if any, on, the Notes;

(7)         waive a redemption payment with respect to any Note (other than a payment required by Section 4.08 hereof); or

(8)        make any change in the preceding amendment and waiver provisions.

Section 9.03    Supplemental Indenture.

Every amendment or supplement to this Indenture or the Notes will be set forth in an amended or supplemental indenture.

Section 9.04    Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by such Holder and every subsequent holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

Section 9.05    Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06    Trustee to Sign Amendments, etc.

The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee will (subject to Section 7.01 hereof and in addition to Section 7.02 hereof) be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture, that the supplemental indenture is legal, valid, binding and enforceable against the Company in accordance with its terms and such other matters as the Trustee may request. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

 

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ARTICLE 10

[INTENTIONALLY OMITTED]

ARTICLE 11

[INTENTIONALLY OMITTED]

ARTICLE 12

SATISFACTION AND DISCHARGE

Section 12.01    Satisfaction and Discharge.

This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when:

(1)        either:

(A)         all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or

(B)         all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one (1) year and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination of cash in U.S. dollars and non-callable U.S. Government Obligations, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Additional Amounts, if any, and accrued interest to but excluding the date of maturity or redemption;

(2)         no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound;

(3)        the Company has paid or caused to be paid all sums payable by it under this Indenture; and

(4)         the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be.

In addition, the Company must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

 

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Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section 12.01, the provisions of Sections 12.02 and 8.06 hereof will survive.

Section 12.02    Application of Trust Money.

Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Amounts, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any cash in U.S. dollars or non-callable U.S. Government Obligations in accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof; provided that if the Company has made any payment of principal of, premium or Additional Amounts, if any, or interest on, any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the cash in U.S. dollars or non-callable U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 13

MISCELLANEOUS

Section 13.01    [Intentionally Omitted].

Section 13.02    Notices.

Any notice or communication by the Company or the Trustee to the others is duly given if in writing, in the English language, and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others’ address:

If to the Company:

Melco Resorts Finance Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue, George Town

Grand Cayman KY1-9005

Cayman Islands

c/o Melco Resorts & Entertainment Limited

36th Floor, The Centrium

60 Wyndham Street

Central, Hong Kong

Facsimile No.: +852 2537-3618

Attention: Company Secretary

 

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Latham & Watkins LLP

18th Floor, One Exchange Square

8 Connaught Place

Central, Hong Kong

Facsimile No.: +852.2912.2600

Attention: Ji-Hyun Helena Kim

If to the Trustee, Paying Agent, Transfer Agent or Registrar:

Deutsche Bank Trust Company Americas

Trust and Agency Services

60 Wall Street, 24th Floor

Mail Stop: NYC60-2407

New York, New York 10005

USA

Attn: Corporates Team, Melco Resorts

Facsimile: (732) 578-4635

The Company, the Trustee and any Agent, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time.

Section 13.03    Communication by Holders of Notes with Other Holders of Notes.

Holders may communicate with other Holders with respect to their rights under this Indenture or the Notes.

Section 13.04    Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(1)        an Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

 

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(2)         an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

Section 13.05    Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture must include:

(1)         a statement that the Person making such certificate or opinion has read such covenant or condition;

(2)         a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3)         a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

(4)         a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.

Section 13.06    Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar, Transfer Agent or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 13.07    No Personal Liability of Directors, Officers, Employees and Stockholders.

No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, will have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Section 13.08    Governing Law.

THE LAWS OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES.

Section 13.09    No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

 

67

Section 13.10    Successors.

All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee and each Agent in this Indenture will bind their respective successors.

Section 13.11    Severability.

In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 13.12    Counterpart Originals.

The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement.

Section 13.13    Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof.

Section 13.14    Patriot Act

In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including, without limitation, those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA PATRIOT Act of the United States (“Applicable Law”), the Trustee and Agents are required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Trustee and Agents. Accordingly, each of the parties hereto agrees to provide to the Trustee and Agents, upon their request from time to time such identifying information and documentation as may be available for such party in order to enable the Trustee and Agents to comply with Applicable Law.

Section 13.15    Submission to Jurisdiction; Waiver of Jury Trial

THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES AND ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK AND IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT OR PROCEEDING IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. THE COMPANY IRREVOCABLY APPOINTS LAW DEBENTURE CORPORATE SERVICES INC., 801 2ND AVENUE, SUITE 403, NEW YORK, NY10017, AS ITS AUTHORIZED AGENT IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK UPON WHICH PROCESS MAY BE SERVED IN ANY SUCH SUIT OR PROCEEDING, AND AGREES THAT SERVICE OF PROCESS UPON SUCH AGENT, AND WRITTEN NOTICE OF SAID SERVICE TO THE COMPANY BY THE PERSON SERVING THE SAME TO THE ADDRESS PROVIDED IN SECTION 13.02, SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE COMPANY IN ANY SUCH SUIT OR PROCEEDING. THE COMPANY FURTHER AGREES TO TAKE ANY AND ALL ACTION AS MAY BE NECESSARY TO MAINTAIN SUCH DESIGNATION AND APPOINTMENT OF SUCH AGENT IN FULL FORCE AND EFFECT FOR A PERIOD OF TEN YEARS FROM THE DATE OF THIS INDENTURE.

 

68

EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION 13.15 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS INDENTURE. IN THE EVENT OF LITIGATION, THIS INDENTURE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.

[Signatures on following page]

 

69

SIGNATURES

Dated as of December 4, 2019

 

The Company

MELCO RESORTS FINANCE LIMITED

By:

  

/s/ Chung Yuk Man

 

Name: Chung Yuk Man

 

Title:   Director

[Signature page to Indenture]

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Trustee

By:

  

/s/ Bridgette Casasnovas

 

Name: Bridgette Casasnovas

 

Title:   Vice President

By:

  

/s/ Irina Golovashchuk

 

Name: Irina Golovashchuk

 

Title:   Vice President

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Paying Agent, Registrar and Transfer Agent

By:

  

/s/ Bridgette Casasnovas

 

Name: Bridgette Casasnovas

 

Title:   Vice President

By:

  

/s/ Irina Golovashchuk

 

Name: Irina Golovashchuk

 

Title:   Vice President

[Signature page to Indenture]

EXHIBIT A

[Face of Note]

 

 

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

CUSIP:

ISIN:

COMMON CODE:

5.375% Senior Notes due 2029

 

No.         

    US$                    

MELCO RESORTS FINANCE LIMITED

Promises to pay to Cede & Co. or its registered assigns, the principal sum of US$                     [NUMBER IN WORDS U.S. DOLLARS] on December 4, 2029.

Interest Payment Dates: June 4 and December 4

Record Dates: May 20 and November 19

Dated:                         , 20    

 

A-1

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by the duly authorized officer referred to below.

Dated:                         , 20    

 

MELCO RESORTS FINANCE LIMITED, as Company

By:

    
 

Name:

 

Title:

 

A-2

Certificate of Authentication

This is one of the Notes referred to in the within-mentioned Indenture.

Dated:                         , 20    

 

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee

By:

    
 

Name:

 

Title:

 

A-3

[Back of Note]

MELCO RESORTS FINANCE LIMITED

5.375% Senior Notes due 2029

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

(1)         INTEREST.     Melco Resorts Finance Limited, a Cayman Islands exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”), promises to pay or cause to be paid interest on the principal amount of this Note at 5.375% per annum from                 , 20     until maturity. The Company will pay interest and Additional Amounts, if any, semi-annually in arrears on June 4 and December 4 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be                 , 20    . The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Amounts (without regard to any applicable grace period) at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year comprising twelve 30-day months.

(2)         METHOD OF PAYMENT.     The Company will pay interest on the Notes (except defaulted interest) and Additional Amounts, if any, to the Persons who are registered Holders of Notes at the close of business on May 20 or November 19 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, and Additional Amounts, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Additional Amounts, if any, may be made by check mailed to the Holders at their address set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Amounts, if any, on, all Global Notes and all other Notes, the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent, and shall so notify the Trustee and each Paying Agent thereof. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

(3)         PAYING AGENT AND REGISTRAR.     Initially, Deutsche Bank Trust Company Americas will act as Paying Agent, Transfer Agent and Registrar. The Company may change the Paying Agent, Transfer Agent or Registrar without notice to any holders of the Notes. The Company or any of its Subsidiaries may act in any such capacity.

(4)         INDENTURE.     The Company issued the Notes under an Indenture dated as of December 4, 2019 (the “Indenture”) among the Company, the Trustee, the Paying Agent, the Registrar and the Transfer Agent. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder.

 

A-4

(5)        OPTIONAL REDEMPTION.

(a)        Except as set forth in subparagraphs (b) and (c) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to December 4, 2024. On or after December 4, 2024, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, and Additional Amounts if any, on the Notes redeemed, to but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on December 4 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

 

Year

    Percentage  

2024

      102.688 % 

2025

      101.792 % 

2026

      100.896 % 

2027 and thereafter

      100.000 % 

Any such redemption may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent. If such redemption is so subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Company’s discretion, the redemption date may be delayed until such time (provided, however, that any delayed redemption date shall not be more than 60 days after the date the relevant notice of redemption was sent) as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date or by the redemption date as so delayed. In addition, the Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person.

Unless the Company defaults in the payment of the redemption price or fails to satisfy the conditions precedent to the redemption and thereby terminates the redemption, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(b)        Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to December 4, 2024, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 105.375% of the principal amount thereof, plus accrued and unpaid interest and Additional Amounts, if any, to but excluding the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of the Notes originally issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and that such redemption occurs within 45 days of the date of the closing of such Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Equity Offering, and any such redemption or notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Equity Offering.

 

A-5

(c)         At any time prior to December 4, 2024, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the discretion of the Company, be subject to the satisfaction of one or more conditions precedent.

(d)         The Notes may also be redeemed in the circumstances described in Section 3.09 and 3.10 of the Indenture.

(6)         MANDATORY REDEMPTION.     The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

(7)         REPURCHASE AT THE OPTION OF HOLDER.     The Notes may be subject to a Change of Control Offer or a Special Put Option Offer, as further described in Sections 4.08 and 4.10 of the Indenture.

(8)         NOTICE OF REDEMPTION.     Subject to the second paragraph of Section 5(b) above, notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction or discharge of the Indenture. Notes in denominations larger than US$200,000 may be redeemed in part but only in integral multiples of US$1,000; provided that the unredeemed part has a minimum denomination of US$200,000, unless all of the Notes held by a Holder are to be redeemed.

(9)         DENOMINATIONS, TRANSFER, EXCHANGE.     The Notes are in registered form without coupons in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

(10)     PERSONS DEEMED OWNERS.     The registered Holder may be treated as its owner for all purposes.

(11)     AMENDMENT, SUPPLEMENT AND WAIVER.     The Indenture or the Notes, may be amended as set forth in the Indenture.

(12)    DEFAULTS AND REMEDIES.     The events listed in Section 6.01 of the Indenture shall constitute “Events of Default” for the purpose of this Note.

 

A-6

(13)         TRUSTEE DEALINGS WITH COMPANY.     The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

(14)         NO RECOURSE AGAINST OTHERS.     A director, officer, employee, incorporator or stockholder of the Company, as such, will not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

(15)         AUTHENTICATION.     This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

(16)         ABBREVIATIONS.     Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(17)         CUSIP NUMBERS.     Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

(18)         GOVERNING LAW.     THE LAWS OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THIS NOTE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

Melco Resorts Finance Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue, George Town

Grand Cayman KY1-9005

Cayman Islands

c/o Melco Resorts & Entertainment Limited

36th Floor, The Centrium

60 Wyndham Street

Central

Hong Kong

Attention: Company Secretary

 

A-7

ASSIGNMENT FORM

To assign this Note, fill in the form below:

 

(I) or (we) assign and transfer this Note to:

     
   (Insert assignee’s legal name)
 

 

(Insert assignee’s soc. sec. or tax I.D. no.)

 

 

 

 

 

 

 

 

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                                                                                                                                                                                                    

to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:                                 

 

Your Signature:

    
(Sign exactly as your name appears on the face of this Note)

Signature Guarantee*:                                                          

 

*

    Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

 

A-8

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Sections 4.08 or 4.10 of the Indenture, check the appropriate box below:

 

☐    Section 4.08   ☐    Section 4.10

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.08 or Section 4.10 of the Indenture, state the amount you elect to have purchased:

US$                             

Date:                             

 

Your Signature:

    
(Sign exactly as your name appears on the face of this Note)

 

Tax Identification No.:

    

Signature Guarantee*:                                                      

 

*

    Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

 

A-9

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

 

Date of Exchange   

Amount of

decrease in
Principal Amount
of

this Global Note

   

Amount of
increase in
Principal Amount
of

this Global Note

   

Principal Amount
of this Global Note
following such
decrease
(or increase)

    Signature of
authorized officer
of Trustee or
Custodian

 

A-10

EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

[Company address block]

[Registrar address block]

Re: 5.375% Senior Notes due 2029 of Melco Resorts Finance Limited

Reference is hereby made to the Indenture, dated as of December 4, 2019 (the “Indenture”), among Melco Resorts Finance Limited, as issuer (the “Company”) and Deutsche Bank Trust Company Americas, as trustee, paying agent, registrar and transfer agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                 , (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of US$                         in such Note[s] or interests (the “Transfer”), to                                               (the “Transferee”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. ☐     Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive Note pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

2. ☐     Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

 

B-1

3. ☐     Check and complete if Transferee will take delivery of a beneficial interest in a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

(a)         ☐ such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or

(b)         ☐ such Transfer is being effected to the Company or a subsidiary thereof;

or

(c)         ☐ such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.

4. ☐     Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

(a) ☐     Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(b) ☐     Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(c) ☐     Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

 

B-2

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

 

 

        [Insert Name of Transferor]

 

By:

    
 

Name:

 

Title:

Dated:                                         

 

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

 

  1.

The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

 

  (a)

☐     a beneficial interest in the:

 

  (i)

    ☐ 144A Global Note (CUSIP                         ), or

 

  (ii)

    ☐ Regulation S Global Note (CUSIP                         ); or

 

  (b)

☐     a Restricted Definitive Note.

 

  2.

After the Transfer the Transferee will hold:

[CHECK ONE]

 

  (a)

☐     a beneficial interest in the:

 

  (i)

    ☐ 144A Global Note (CUSIP                         ), or

 

  (ii)

    ☐ Regulation S Global Note (CUSIP                         ), or

 

  (iii)

    ☐ Unrestricted Global Note (CUSIP                         ); or

 

  (b)

☐     a Restricted Definitive Note; or

 

  (c)

☐     an Unrestricted Definitive Note,

in accordance with the terms of the Indenture.

 

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

[Company address block]

[Registrar address block]

Re: 5.375% Senior Notes due 2029 of Melco Resorts Finance Limited

(CUSIP                         )

Reference is hereby made to the Indenture, dated as of December 4, 2019 (the “Indenture”), among Melco Resorts Finance Limited, as issuer (the “Company”) and Deutsche Bank Trust Company Americas, as trustee, paying agent, registrar and transfer agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                                             , (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of US$                         in such Note[s] or interests (the “Exchange”). In connection with the Exchange, the Owner hereby certifies that:

1.         Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note

(a)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the “Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(b)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(c)   ☐ Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner’s Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

 

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(d)   ☐ Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2.         Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

(a)   ☐ Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

(b)   ☐ Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE] ☐ 144A Global Note, ☐ Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

 

 

[Insert Name of Transferor]

By:

    
 

Name:

 

Title:

  Dated:                                                                  

 

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EX-2.31

Exhibit 2.31

Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”)

American Depositary Shares (“ADSs”), each representing three ordinary shares of Melco Resorts & Entertainment Limited (“we,” “our,” “our company,” or “us”), are listed and traded on Nasdaq and, in connection therewith, the ordinary shares are registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This exhibit contains a description of the rights of (i) the holders of ordinary shares and (ii) the holders of the ADSs. Ordinary shares underlying the ADSs are held in Hong Kong by the custodian, Deutsche Bank AG, Hong Kong Branch, on behalf of Deutsche Bank Trust Company Americas as depositary, and holders of ADSs will not be treated as holders of ordinary shares.

Description of Ordinary Shares

The following is a summary of material provisions of our currently effective amended and restated memorandum and articles of association (the “Memorandum and Articles of Association”), as well as the Companies Law (as amended) of the Cayman Islands (the “Companies Law”), insofar as they relate to the material terms of the ordinary shares. Notwithstanding this, because it is a summary, it may not contain all the information that you may otherwise deem important. For more complete information, you should read the entire Memorandum and Articles of Association, which has been filed with the Securities and Exchange Commission (the “SEC”) as an exhibit to our annual report on Form 20-F for the fiscal year ended December 31, 2016 (File No. 001-33178) filed with the SEC on April 11, 2017.

Type and Class of Securities

Each ordinary share has US$0.01 par value. The number of ordinary shares that have been issued as of the last day of the financial year ended December 31, 2019 is provided on the cover of our annual report on Form 20-F filed on March 31, 2020 (the “2019 Form 20-F”).

Rights of Ordinary Shares

General

All of our outstanding ordinary shares are fully paid and non-assessable. Some of the ordinary shares are issued in registered form only with no share certificates. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their ordinary shares. Under article 3 of our Memorandum and Articles of Association, the objects for which we were established are unrestricted and we have full power and authority to carry out any object not prohibited by any law as provided by Section 7(4) of the Companies Law.

Dividends

The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law and our Memorandum and Articles of Association. Our Memorandum and Articles of Association do not provide a time limit after which a shareholder’s entitlement to an unclaimed dividend lapses.

Voting Rights

Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by our chairman or one or more shareholders present in person or by proxy entitled to vote and who together hold not less than 10 % of the paid up voting share capital of our company.

A quorum required for a meeting of shareholders consists of one or more shareholders who hold at least one-third of our ordinary shares at the meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings are held annually and may be convened by our board on its own initiative or upon a request to the directors by shareholders holding in aggregate at least ten percent of our ordinary shares. Advance notice of at least seven days is required for the convening of our annual general meeting and other shareholders meetings.

An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of not less than two-thirds of the votes cast attaching to the ordinary shares. A special resolution will be required for important matters such as changing our name or making changes to our Memorandum and Articles of Association.

Transfer of Ordinary Shares

Subject to the restrictions of our Memorandum and Articles of Association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.

Our board may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any ordinary share unless:

 

  •  

the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates, and such other evidence as our board may reasonably require to show the right of the transferor to make the transfer;

 

  •  

the instrument of transfer is in respect of only one class of ordinary shares;

 

  •  

the instrument of transfer is properly stamped, if required; or

 

  •  

in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four.

If our directors refuse to register a transfer they must, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board may from time to time determine, provided, however, that the registration of transfers may not be suspended nor the register closed for more than 30 days in any year.

Liquidation

On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for distribution among the holders of ordinary shares will be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.

Calls on Ordinary Shares and Forfeiture of Ordinary Shares

Our board may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on the specified time are subject to forfeiture. Shareholders are not liable for any capital calls by the company except to the extent there is an amount unpaid on their shares.

Redemption of Ordinary Shares

Subject to the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as the directors may determine.

Prohibitions on the Receipt of Dividends, the Exercise of Voting or Other Rights or the Receipt of Other Remuneration

Our Memorandum and Articles of Association prohibit anyone who is an unsuitable person or an affiliate of an unsuitable person from:

 

  •  

receiving dividends or interest with regard to our shares;

 

  •  

exercising voting or other rights conferred by our shares; and

 

  •  

receiving any remuneration in any form from us or an affiliated company for services rendered or otherwise.

Such unsuitable person or its affiliate must sell all of the shares, or allow us to redeem or repurchase the shares on such terms and manner as the directors may determine and agree with the shareholders, within such period of time as specified by a gaming authority.

These prohibitions commence on the date that a gaming authority serves notice of a determination of unsuitability or our board determines that a person or its affiliate is unsuitable and continue until the securities are owned or controlled by persons found suitable by a gaming authority or our board, as applicable, to own them. An “unsuitable person” is any person who is determined by a gaming authority to be unsuitable to own or control any of our shares or who causes us or any affiliated company to lose or to be threatened with the loss of any gaming license, or who, in the sole discretion of our board, is deemed likely to jeopardize our or any of our affiliates’ application for, receipt of approval for right to the use of, or entitlement to, any gaming license.

The terms “affiliated companies,” “gaming authority” and “person” have the meanings set forth in our Memorandum and Articles of Association.

Redemption of Securities Owned or Controlled by an Unsuitable Person or an Affiliate

Our Memorandum and Articles of Association provide that shares owned or controlled by an unsuitable person or an affiliate of an unsuitable person are redeemable by us, out of funds legally available for that redemption, by appropriate action of our board to the extent required by the gaming authorities making the determination of unsuitability or to the extent deemed necessary or advisable by our board having regard to relevant gaming laws. From and after the redemption date, the securities will not be considered outstanding and all rights of the unsuitable person or affiliate will cease, other than the right to receive the redemption price and the right to receive any dividends declared prior to any receipt of any written notice from a gaming authority declaring the suitable person to be an unsuitable person but not yet paid. The redemption price will be the price, if any, required to be paid by the gaming authority making the finding of unsuitability or, if the gaming authority does not require a price to be paid, the sum deemed to be the fair value of the securities by our board. The price for the shares will not exceed the closing price per share of the shares on the principal national securities exchange on which the shares are then listed on the trading date on the day before the redemption notice is given. If the shares are not then listed, the redemption price will not exceed the closing sales price of the shares as quoted on an automated quotation system, or if the closing price is not then reported, the mean between the bid and asked prices, as quoted by any other generally recognized reporting system. Our right of redemption is not exclusive of any other rights that we may have or later acquire under any agreement, its bylaws or otherwise. The redemption price may be paid in cash, by promissory note, or both, as required by the applicable gaming authority and, if not, as we elect.

Our Memorandum and Articles of Association require any unsuitable person and any affiliate of an unsuitable person to indemnify us and our affiliated companies for any and all losses, costs and expenses, including attorneys’ fees, incurred by us and our subsidiaries as a result of the unsuitable person’s or affiliate’s ownership or control of shares, the neglect, refusal or other failure to comply with the provisions of our Memorandum and Articles of Association relating to unsuitable persons, or failure to promptly divest itself of any shares in us.

Requirements to Change the Rights of Holders of Ordinary Shares

Variations of Rights of Shares. All or any of the rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied or abrogated either with the unanimous written consent of the holders of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Changes in Capital

We may from time to time by ordinary resolution:

 

  •  

increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution may prescribe;

 

  •  

consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;

 

  •  

convert all or any of our paid-up shares into stock and reconvert that stock into paid up shares of any denomination;

 

  •  

sub-divide our existing shares, or any of them, into shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share will be the same as it was in case of the share from which the reduced share is derived; or

 

  •  

cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled.

We may by special resolution reduce our share capital and any capital redemption reserve in any manner authorized by law.

Exempted Company

We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:

 

  •  

annual reporting requirements are minimal and consist mainly of a statement that the company has conducted its operations mainly outside of the Cayman Islands and has complied with the provisions of the Companies Law;

 

  •  

an exempted company’s register of members is not open to inspection;

 

  •  

an exempted company does not have to hold an annual general meeting;

 

  •  

an exempted company may issue shares with no par value;

  •  

an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);

 

  •  

an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

 

  •  

an exempted company may register as a limited duration company; and

 

  •  

an exempted company may register as a segregated portfolio company.

Differences in Corporate Law

The Companies Law is modeled after that of England and Wales but does not follow recent statutory enactments in England. In addition, the Companies Law differs from laws applicable to Delaware corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to Delaware corporations and their shareholders.

Mergers and Similar Arrangements. The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (i) a “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (ii) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (i) a special resolution of the shareholders of each constituent company, and (ii) such other authorization, if any, as may be specified in such constituent company’s articles of association

A merger between a parent company incorporated in the Cayman Islands and its subsidiary or subsidiaries incorporated in the Cayman Islands does not require authorization by a resolution of shareholders of the constituent companies provided a copy of the plan of merger is given to every shareholder of each subsidiary company to be merged unless that shareholder agrees otherwise. For this purpose, a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.

The plan of merger or consolidation must be filed with the Registrar of Companies in the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a declaration as to the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger and consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares if they follow the required procedures, subject to certain exceptions. The fair value of the shares will be determined by the Cayman Islands court if it cannot be agreed among the parties. Court approval is not required for a merger or consolidation effected in compliance with these statutory procedures.

In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands.

While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

 

  •  

the statutory provisions as to the required majority vote have been met;

  •  

the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;

 

  •  

the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and

 

  •  

the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

When a take-over offer is made and accepted by holders of not less than 90% of the shares within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholders’ Suits. Derivative actions have been brought in the Cayman Islands courts. In most cases, the company will be the proper plaintiff in any claim based on a breach of duty owed to it, and a claim against (for example) the company’s officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

 

  •  

a company is acting, or proposing to act, illegally or beyond the scope of its authority;

 

  •  

the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or

 

  •  

those who control the company are perpetrating a “fraud on the minority.”

A shareholder may have a direct right of action against the company where the individual rights of that shareholder have been infringed or are about to be infringed.

Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components, the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director must act in a manner he or she reasonably believes to be in the best interests of the corporation. A director must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interests of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company, and therefore it is considered that he or she owes the following duties to the company: a duty to act bona fide in the best interests of the company, a duty not to make a profit out of his or her position as director (unless the company permits him or her to do so), a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interests or his or her duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, there are indications that the courts are moving towards an objective standard with regard to the required skill and care.

Under our Memorandum and Articles of Association, directors who are in any way, whether directly or indirectly, interested in a contract or proposed contract with our company must declare the nature of their interest at a meeting of the board of directors. Following such declaration, a director may vote in respect of any contract or proposed contract notwithstanding his or her interest.

Shareholder Action by Written Resolution. Under the Delaware General Corporation Law, a corporation’s certificate of incorporation may eliminate the right of stockholders to act by written consent. Our Memorandum and Articles of Association allow shareholders to act by written resolutions.

Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled for a single director, which increases the shareholder’s voting interest with respect to electing such director. As permitted under Cayman Islands law, our Memorandum and Articles of Association do not provide for cumulative voting.

Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation may be removed with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our Memorandum and Articles of Association, directors can be removed by special resolution of the shareholders.

Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date on which such person becomes an interested shareholder. An interested shareholder generally is one which owns or owned 15% or more of the target’s outstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction that resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions entered into must be bona fide in the best interests of the company, for a proper corporate purpose and not with the effect of perpetrating a fraud on the minority shareholders.

Dissolution and Winding Up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting interest of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. The Delaware General Corporation Law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board of directors.

Under our Memorandum and Articles of Association, a resolution that our company be wound up by the court or be wound up voluntarily shall be a special resolution, except where the company is to be wound up voluntarily because it is unable to pay its debts as they may fall due in which event the resolution shall be an ordinary resolution.

Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our Memorandum and Articles of Association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the unanimous consent in writing of the holders of the issued shares of the relevant class or with the sanction of a resolution passed at a separate meeting of the holders of the shares of such class by a majority of two-thirds of the votes cast at such a meeting.

Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Our Memorandum and Articles of Association may be amended by a special resolution of shareholders.

Inspection of Books and Records. Under the Delaware General Corporation Law, any shareholder of a corporation may for any proper purpose inspect or make copies of the corporation’s stock ledger, list of shareholders and other books and records. Holders of our shares have no general right under Cayman Islands law, nor any right under our Memorandum and Articles of Association, to inspect or obtain copies of our register of members or our corporate records. However, we intend to provide our shareholders with annual reports containing audited financial statements.

Anti-Takeover Provisions in our Memorandum and Articles of Association. Some provisions of our Memorandum and Articles of Association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including a provision that authorizes our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders. Such shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue these preference shares, the price of our ordinary shares may fall and the voting and other rights of the holders of our ordinary shares may be materially and adversely affected. However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum and Articles of Association for a proper purpose and for what they believe in good faith to be in the best interests of our company.

Rights of Non-Resident or Foreign Shareholders. There are no limitations imposed by our Memorandum and Articles of Association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our Memorandum and Articles of Association governing the ownership threshold above which shareholder ownership must be disclosed.

Description of American Depositary Shares

For information regarding our ADSs, please refer to the Description of American Depositary Shares (incorporated by reference to our registration statement on Form F-3 (File No. 333-215100), as amended, initially filed with the SEC on December 14, 2016).

EX-4.27

Exhibit 4.27

Contract Register No.201904015

Net Doc ID 3452-5544-8845 v2.pdf

Execution Version

MELCO RESORTS FINANCE LIMITED

US$500,000,000 5.250% Senior Notes due 2026

PURCHASE AGREEMENT

WHITE & CASE

9/F, Central Tower

28 Queen’s Road Central

Hong Kong

April 17, 2019

Each of the institutions named in Schedule A hereto

(each, an “Initial Purchaser” and, collectively, the “Initial Purchasers”)

Ladies and Gentlemen:

Melco Resorts Finance Limited, an exempted company incorporated with limited liability in the Cayman Islands (the “Issuer”), confirms its agreement with the Initial Purchasers with respect to the issuance and sale by the Issuer and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts set forth in Schedule A hereto of US$500,000,000 aggregate principal amount of the Issuer’s 5.250% Senior Notes due 2026 (the “Notes”), subject to the terms and conditions set forth in this purchase agreement (this “Agreement”). The Notes are to be issued pursuant to an indenture (the “Indenture”), dated as of the Closing Date (as defined below), between the Issuer and Deutsche Bank Trust Company Americas, as trustee (the “Trustee”).

The Issuer intends to use the net proceeds from the offering of the Notes to repay, in part, the amount outstanding under the HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility under the amended and restated credit facilities entered into by Melco Resorts Macau (as defined below) on June 19, 2015 (the “2015 Credit Facilities”).

This Agreement, the Indenture and the Notes are referred to herein as the “Operative Documents.”

The offer of the Notes by the Initial Purchasers is herein called the “Offering.” All references to “U.S. dollars” or “US$” herein are to United States dollars. In connection with the Offering, the Issuer has made a listing application to, and approval-in-principle has been obtained from, the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing on the SGX-ST of the Notes.

The Issuer understands that the Initial Purchasers propose to make the Offering on the terms and in the manner set forth herein and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Notes to purchasers (“Subsequent Purchasers”) at any time after this Agreement has been executed and delivered. The Notes are to be offered and sold through the Initial Purchasers without being registered under the United States Securities Act of 1933, as amended (the “Securities Act”), in reliance upon exemptions therefrom. Pursuant to the terms of the Notes and the Indenture, investors that acquire Notes may only resell or otherwise transfer such Notes (A) (i) if such Notes are hereafter registered under the Securities Act or (ii) if an exemption from the registration requirements of the Securities Act is available for such resale or transfer (including, without limitation, the exemptions afforded by Rule 144A under the Securities Act (“Rule 144A”), or Regulation S under the Securities Act (“Regulation S”) and (B) in compliance with transfer restrictions set forth in the Offering Memorandum under the caption “Transfer Restrictions”.

 

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In connection with the sale of the Notes, the Issuer confirms that it has prepared and delivered to each of the Initial Purchasers copies of a preliminary offering memorandum dated April 16, 2019 (the “Preliminary Offering Memorandum”) and a pricing supplement, in the form attached hereto as Schedule C (the “Pricing Supplement”) and that it will prepare and deliver to each of the Initial Purchasers, dated the date hereof, a final offering memorandum (the “Final Offering Memorandum”), each for use by each of the Initial Purchasers in connection with its solicitation of purchases of, or offering of, the Notes. “Offering Memorandum” means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document) which has been prepared and delivered by the Issuer to each of the Initial Purchasers in connection with their solicitation of purchases of, or offering of the Notes.

For purposes of this Agreement:

“Gaming License” means a license for operating games of chance and other casino games in Macau, pursuant to a valid subconcession contract;

“Sanction Target” means any person who is (i) the subject or the target of any sanctions or trade embargos administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council (“UNSC”), the European Union (“EU”), Her Majesty’s Treasury (“HMT”) or the Monetary Authority of Singapore (“MAS”) or any other applicable sanctions regulation (collectively, “Sanctions”); (ii) 50% or more owned by or otherwise controlled by or acting on behalf of one or more persons referenced in clause (i) above, or (iii) located, organized or resident in a country or territory that is the subject or the target of Sanctions (including but not limited to, Cuba, Iran, North Korea, Sudan, the Crimea region in the Ukraine and Syria) (each, a “Sanctioned Country”); and

“Subconcession Contract” means the Subconcession Contract dated September 8, 2006 between Wynn Resorts (Macau), S.A. and Melco Resorts (Macau) Limited (formerly known as Melco Crown (Macau) Limited and before that as Melco Crown Gaming (Macau) Limited or Melco PBL Gaming (Macau) Limited and before that as PBL Entertainment (Macau) Limited) (“Melco Resorts Macau”).

SECTION 1.     Representations and Warranties by the Issuer.

The Issuer represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Date referred to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows:

(i)     Disclosure Package and Final Offering Memorandum.     As of the Applicable Time (as defined below), neither (x) the Preliminary Offering Memorandum as supplemented by the Pricing Supplement, all considered together (collectively, the “Disclosure Package”), nor (y) any individual Supplemental Offering Materials (as defined below), when considered together with the Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. “Applicable Time” means the time when sales of the Notes were first made.

 

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“Supplemental Offering Materials” means any “written communication” (within the meaning of the rules and regulations promulgated under the Securities Act by the U.S. Securities and Exchange Commission (the “Commission”)), prepared by or on behalf of the Issuer, or used or referred to by the Issuer, that constitutes an offer to sell or a solicitation of an offer to buy the Notes other than the Offering Memorandum or amendments or supplements thereto (including the Pricing Supplement), including, without limitation, any roadshow material relating to the Notes that constitutes such a written communication.

As of its date of issue and as of the Closing Date, the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the representations, warranties and agreements in this Section 1(i) shall not apply to statements in or omissions from the Disclosure Package or the Final Offering Memorandum or any amendments or supplements thereto made in reliance upon and in conformity with information furnished to the Issuer in writing by an Initial Purchaser expressly for use in the Disclosure Package or the Final Offering Memorandum or any amendments or supplements thereto, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the information described as such in Section 7(b) hereof.

(ii)     Existence.     The Issuer and each of its subsidiaries has been duly incorporated and is existing and (where such concept is applicable) in good standing under the laws of the jurisdiction of its incorporation or establishment, with power and authority (corporate and other) to own its properties and conduct its business as described in the Disclosure Package and the Final Offering Memorandum and to enter into, execute and perform its obligations under the Operative Documents to which it is a party, and is duly qualified to do business as a foreign corporation (where such concept is applicable) in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified in such jurisdiction, individually or in the aggregate, would not have a material adverse effect on the condition (financial or other), business, properties, business prospects or results of operations of the Issuer and its subsidiaries taken as a whole (“Material Adverse Effect”).

(iii)     Subsidiaries.     The Issuer does not have any subsidiaries other than the ones listed on Schedule B. All of the issued and outstanding authorized shares of each subsidiary of the Issuer have been duly authorized and validly issued and are fully paid and non-assessable; and except for authorized shares which have been pledged pursuant to prior financings as disclosed in the Disclosure Package and the Final Offering Memorandum, the authorized shares of each subsidiary owned by the Issuer, directly or through subsidiaries, are owned free from liens, encumbrances and defects.

(iv)     Capitalization.     The capitalization of the Issuer is as set forth in the Disclosure Package and the Final Offering Memorandum in the column entitled “Actual” under the caption “Capitalization”; all of the issued and outstanding shares of the Issuer have been duly authorized.

 

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(v)     Absence of Further Requirements.     No consent, approval, or order of, clearance by, or filing or registration with, any person (including any governmental agency or body or any court or any stock exchange) is required to be obtained or made by the Issuer or any of its subsidiaries for the consummation by the Issuer of the transactions contemplated by the Operative Documents, except such as may be required (A) under the blue sky or similar laws of any jurisdiction in connection with the purchase and distribution of the Notes by the Initial Purchasers in the manner contemplated in the Operative Documents, the Disclosure Package and the Final Offering Memorandum and (B) by the SGX-ST in connection with its granting approval-in-principle for the listing and quotation of the Notes when such approval is obtained. No governmental authorization is required to effect payments of principal, premium, if any, and interest on the Notes.

(vi)     Title to Property.     Except as disclosed in the Disclosure Package and the Final Offering Memorandum, the Issuer and its subsidiaries have good and marketable title to all real property and all other property and assets owned by them as are necessary to conduct their respective businesses in the manner described in the Disclosure Package and the Final Offering Memorandum, in each case free from liens, charges, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them, and the Issuer and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no terms or provisions that would materially interfere with the use made or to be made thereof by them and except for such liens, encumbrances, charges, defects, claims, options or restrictions which, individually or in the aggregate, would not have a Material Adverse Effect.

(vii)     Compliance.     Neither the Issuer nor any of its subsidiaries is (A) in violation of its respective constitutional documents, (B) in default of the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, license, lease or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which it may be bound, or to which any of the properties or assets of the Issuer or any of its subsidiaries may be subject (and no event has occurred which, with the giving of notices or lapse of time or both, would constitute such default), or (C) in violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Issuer or such subsidiary or any of its properties, as applicable, except, in the case of (B) and (C) only, any defaults or violations which, individually and in the aggregate, would not have a Material Adverse Effect.

 

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(viii)     Absence of Defaults and Conflicts Resulting from Transaction.     The execution, delivery and performance of each Operative Document and the consummation of the transactions contemplated herein and therein by the Issuer, the issuance and sale of the Notes and the application of the proceeds from the sale of the Notes by the Issuer, as described in the Disclosure Package and the Final Offering Memorandum under the caption “Use of Proceeds,” and compliance by the Issuer with its obligations hereunder and thereunder do not and will not result in (A) a violation of the respective constitutional documents of the Issuer or any of its subsidiaries, (B) a violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Issuer or any of its subsidiaries or any of their properties, or (C) a breach or violation of any of the terms and provisions of, or constitute a default or a Debt Repayment Triggering Event (as defined below) under, or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Issuer or any of its subsidiaries pursuant to, the constitutional documents of the Issuer or any of its subsidiaries, any statute, rule, regulation or order of any governmental agency or body or any court, arbitrator or other authority, domestic or foreign, having jurisdiction over the Issuer or any of its subsidiaries or any of their properties, or any agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries is bound or to which any of the properties of the Issuer or any of its subsidiaries is subject (including but not limited to the 2015 Credit Facilities and the 4.875% senior notes due 2025 of the Issuer), except in the case of (B) and (C) above, where any such breach, violation, contravention, default, Debt Repayment Triggering Event, lien, charge or encumbrance would not, individually or in the aggregate, have a Material Adverse Effect. A “Debt Repayment Triggering Event” means any event or condition that gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture, or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Issuer or any of its subsidiaries.

(ix)     Subconcession Contract.     The Subconcession Contract has been duly authorized, executed and delivered by Melco Resorts Macau, and assuming due authorization, execution and delivery by the other parties thereto, constitutes a legal, valid and binding agreement of such parties, enforceable against Melco Resorts Macau in accordance with its terms, in each case, except as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

(x)     Licenses.     The Issuer and its subsidiaries possess, and are in compliance with the terms of, all licenses, certificates, authorizations, and franchise permits (collectively, “Licenses”) issued by appropriate governmental agencies or bodies necessary to the conduct of the business now operated by them, except for such non-compliance that would not, individually or in the aggregate, have a Material Adverse Effect and have not received any notice of proceedings relating to the revocation or modification of any License that, if determined adversely to the Issuer or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. To the best knowledge of the Issuer, the Gaming License of Melco Resorts Macau remains in full force and effect and validly authorizes Melco Resorts Macau to carry on the gaming business as is and is proposed to be conducted and on the terms and conditions, in each case as described in the Disclosure Package and the Final Offering Memorandum, and to the knowledge of the Issuer, no notice of any proceeding or claim or action for the invalidation, revocation, cancellation or imposition of any further condition or requirement of or in connection with the Gaming License has occurred or is pending.

(xi)     Absence of Labor Dispute.     Except as would not have a Material Adverse Effect, no labor dispute with the employees of the Issuer or any of its subsidiaries exists or, to the knowledge of the Issuer or any of its subsidiaries, is imminent.

 

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(xii)     Possession of Intellectual Property.     Except as disclosed in the Disclosure Package and the Final Offering Memorandum, the Issuer and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, “intellectual property rights”) necessary to conduct the business now operated or employed by them, and if such business is described in the Disclosure Package and the Final Offering Memorandum, as described in the Disclosure Package and the Final Offering Memorandum. Neither the Issuer nor any of its subsidiaries has received any notice or communication of infringement of or conflict with asserted rights of others with respect to any intellectual property rights of others that, if determined adversely to the Issuer or any of its subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect.

(xiii)     Offering Memorandum.     The statements set forth in the Disclosure Package and the Final Offering Memorandum (i) under the sections headed “Summary,” “Description of Notes” and “Description of Other Material Indebtedness,” insofar as they purport to constitute a summary of the material terms of the Notes and the material indebtedness of the Issuer and its subsidiaries, respectively, and (ii) under the sections headed “Related Party Transactions,” “Plan of Distribution” and “Taxation,” insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and fair in all material respects. The Operative Documents will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum.

(xiv)     Environmental Laws.     Neither the Issuer nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances or relating to the safety of employees in the workplace (collectively, “environmental laws”), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any civil, criminal or administrative action, suit, claim, hearing, notice of violation, investigation or proceeding (“Proceeding”) relating to any environmental laws, which violation, contamination, liability or Proceeding would, individually or in the aggregate, have a Material Adverse Effect; and neither the Issuer nor any of its subsidiaries is aware of any pending hearing or investigation which would lead to such a claim.

(xv)     Insurance.     The Issuer and its subsidiaries maintain insurance in such amounts and covering such risks as the Issuer and each subsidiary reasonably considers adequate for the conduct of its business, all of which insurance is in full force and effect. There are no material claims by the Issuer or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. Neither the Issuer nor any of its subsidiaries has a reason to believe that it will not be able to renew its existing renewable insurance as and when such coverage expires or will not be able to obtain replacement insurance adequate for the conduct of the business and the value of its properties at a cost that would not have a Material Adverse Effect.

 

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(xvi)     Statistical and Market-Related Data.     Any third-party statistical and market-related data included in the Disclosure Package or the Final Offering Memorandum are based on or derived from sources that the Issuer believes to be reliable and accurate.

(xvii)     Absence of Accounting Issues.     A member of the Board of Directors of the Issuer has confirmed that the Board of Directors is not reviewing or investigating, and neither the Issuer’s independent auditors nor its internal auditors have recommended that the Board of Directors review or investigate adding to, deleting, changing the application of, or changing the Issuer’s disclosure with respect to, the Issuer’s material accounting policies, other than in connection with any proposed change in U.S. GAAP (as defined below).

(xviii)     Taxes.     No taxes, imposts or duties of any nature (including, without limitation, stamp or other issuance or transfer taxes or duties and capital gains, income, withholding or other taxes) are payable by or on behalf of the Initial Purchasers to the governments of the Cayman Islands or Macau or, in each case, any political subdivision or taxing authority thereof or therein in connection with (A) the execution and delivery of the Operative Documents, except Cayman Islands stamp duty will be payable if originals of the Operative Documents are executed or brought into the Cayman Islands, or (B) except as disclosed in the Disclosure Package and the Final Offering Memorandum under the heading “Taxation,” the resale and delivery of such Notes by the Initial Purchasers in the manner contemplated in the Disclosure Package and the Final Offering Memorandum.

(xix)     Filing of Tax Returns.     Each of the Issuer and its subsidiaries has filed on a timely basis all necessary tax returns, reports and filings (except in any case in which the failure to file on a timely basis would not have a Material Adverse Effect), and all such returns, reports or filings are true, correct and complete in all material aspects, and are not the subject of any disputes with revenue or other authorities and to the Issuer’s knowledge there are no circumstances giving rise to, or which could give rise to, such disputes. None of the Issuer or its subsidiaries is delinquent in the payment of any taxes due thereunder or has any knowledge of any tax deficiency which might be assessed against any of them, which, if so assessed, would have a Material Adverse Effect.

(xx)     Litigation.     Except as disclosed in the Disclosure Package and the Final Offering Memorandum, there are no pending actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) against or affecting the Issuer, any of its subsidiaries or any of their respective properties that, if determined adversely to the Issuer or any of its subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect, or would materially or adversely affect the ability of the Issuer to perform its obligations under the Operative Documents, or which are otherwise material in the context of the sale of the Notes by the Issuer; and to the Issuer’s and each of its subsidiaries’ best knowledge, no such actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) are threatened or contemplated.

 

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(xxi)     Auditor.     Ernst & Young (“E&Y”), who audited the financial statements of the Issuer for the years ended and as of December 31, 2017 and 2018 included in the Disclosure Package and the Final Offering Memorandum, is the current independent public accountant of the Issuer. E&Y also audited the adjustments related to the retrospective application of the authoritative guidance on the presentation and classification of restricted cash to the consolidated statement of cash flows for the year ended December 31, 2016, and Deloitte Touche Tohmatsu (“Deloitte”), who audited the financial statements (before retrospective adjustments to the consolidated financial statements) of the Issuer for the year ended and as of December 31, 2016, is the predecessor independent public accountant of the Issuer.

(xxii)     Financial Statements.     The consolidated financial statements of the Issuer and its consolidated subsidiaries, together with the applicable related notes, included in the Disclosure Package and the Final Offering Memorandum present fairly, in all material respects, the consolidated financial position of the Issuer and its consolidated subsidiaries at the dates indicated and their consolidated statement of operations, stockholders’ equity and cash flows for the periods specified. Such consolidated financial statements of the Issuer and its consolidated subsidiaries have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and, except as disclosed therein, applied on a consistent basis throughout the periods involved. The selected financial data and the summary financial information included in the Disclosure Package and the Final Offering Memorandum present fairly in all material respects the information shown therein. Such data have been, except as disclosed therein, compiled on a basis consistent with that of the audited financial statements included in the Disclosure Package and the Final Offering Memorandum and the other financial information included in the Disclosure Package and the Final Offering Memorandum has been derived from the accounting records of the Issuer and its subsidiaries and presents fairly the information shown thereby.

(xxiii)     No Material Adverse Change in Business.     Except as disclosed in the Disclosure Package and the Final Offering Memorandum, since December 31, 2018, neither the Issuer nor any of its subsidiaries has (i) incurred, assumed or acquired any material liability (including contingent liability) or other material obligation except for any obligation incurred in the ordinary course of its business including renovation, construction or development of properties owned or leased by the Issuer or its subsidiaries, (ii) received notice of any cancellation, termination or revocation of the Subconcession Contract or of any Debt Repayment Triggering Event, (iii) acquired or disposed of or agreed to acquire or dispose of any business or any other asset material to the Issuer and its subsidiaries taken as a whole, (iv) entered into a letter of intent or memorandum of understanding (or announced an intention to do so) relating to any matter identified in clauses (i) through (iii) above, or (v) sustained any material loss or interference with its business from strike, fire, explosion or other calamity, whether or not covered by insurance, or from any court or governmental action, order or decree, and since the respective dates as of which information is given in the Disclosure Package and the Final Offering Memorandum, except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, there has been no change, nor any development or event, that would have a Material Adverse Effect. Except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, since December 31, 2018, there has been no dividend or distribution of any kind declared, paid or made by the Issuer on any class of its authorized shares.

 

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(xxiv)     Management’s Discussion and Analysis of Financial Condition and Results of Operations.     The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the Disclosure Package and the Final Offering Memorandum accurately and fully describes, in all material respects, (A) accounting policies which the Issuer believes are the most important in the portrayal of the consolidated financial condition and results of operations of the Issuer and its consolidated subsidiaries and which require management’s most difficult, subjective or complex judgments (“critical accounting policies”); (B) judgments and uncertainties affecting the application of critical accounting policies; and (C) explanation of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

(xxv)     No Prohibition on Subsidiaries from Paying Dividends or Making Other Distributions.     Except as disclosed in the Disclosure Package and the Final Offering Memorandum, no subsidiary of the Issuer is currently prohibited, directly or indirectly, (i) from paying any dividends to the Issuer, (ii) from making any other distribution on such subsidiary’s authorized shares, (iii) from repaying to the Issuer any loans or advances to such subsidiary from the Issuer or (iv) from transferring any of such subsidiary’s property or assets to the Issuer or any other subsidiary of the Issuer; provided that in the case of clause (iv) only, it is acknowledged that the transfer of gaming assets by Melco Resorts Macau and of casinos and/or gaming areas will be subject to compliance with the Gaming License and related requirements under Macau law.

(xxvi)     Investment Company Act.     The Issuer is not required to register, and after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Disclosure Package and the Final Offering Memorandum, would not be required to register, as an investment company under the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”).

(xxvii)     No Undisclosed Relationships.     No relationship, direct or indirect, exists between or among the Issuer or any of its subsidiaries, on the one hand, and the directors, officers, shareholders, customers, suppliers or other affiliates of the Issuer or any of its subsidiaries, on the other hand, that is required to be described in the Disclosure Package and the Final Offering Memorandum that is not so described.

(xxviii)     Stabilization Activities.     None of the Issuer, its subsidiaries, their respective Affiliates (as defined below) or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation or warranty is made), has taken, directly or indirectly, any action for the purpose of stabilizing or manipulating the price of any security to facilitate the sale or resale of the Notes in violation of any applicable law.

(xxix)     Choice of Law.     The agreement of the Issuer to the choice of law provisions set forth in Section 21 hereof will be recognized by the courts of the Cayman Islands and Macau and are legal, valid and binding; the Issuer can sue and be sued in its own name under the laws of the Cayman Islands and Macau; the irrevocable submission by the Issuer to the jurisdiction of the federal and state courts in the Borough of Manhattan in The City of New York and the appointment of Law Debenture Corporate Services Inc., 801 2nd Avenue, Suite 403, New York, New York 10017, as its authorized agent for the purpose described in Section 21 hereof is legal, valid and binding; service of process effected in the manner set forth in Section 21 hereof will be effective to confer valid personal jurisdiction over the Issuer; and, except as disclosed in the Disclosure Package and the Final Offering Memorandum, a judgment obtained in the federal and state courts in the Borough of Manhattan in The City of New York arising out of or in relation to the obligations of the Issuer under this Agreement would be enforceable against the Issuer in the courts of the Cayman Islands and Macau, in each case, without further review of the merits.

 

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(xxx)     Compliance with Anti-bribery Laws.     None of the Issuer, any of its subsidiaries or any of their respective directors or officers, nor to the knowledge of the Issuer, any agent, employee or other person acting on behalf of and at the direction of the Issuer or any of its subsidiaries has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or made any direct or indirect unlawful payment to any government official or employee from corporate funds. None of the Issuer, its subsidiaries and any of their respective officers, directors, supervisors or managers, and to the knowledge of the Issuer, their respective affiliates, agents or employees, has violated any applicable anti-bribery law, rule or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the United States Foreign Corrupt Practices Act or any other applicable law, rule or regulation of similar purpose and scope, or any amendment thereto (collectively, the “Anti-Bribery Laws”). The Issuer and its subsidiaries have instituted and maintain policies and procedures designed to (a) ensure continued compliance with the Anti-Bribery Laws and (b) detect the violations of the Anti-Bribery Laws.

(xxxi)     Compliance with Money Laundering Laws.     Each of the Issuer, its subsidiaries and their respective officers, directors, supervisors, managers, and to the knowledge of the Issuer, each of their respective affiliates, agents or employees or other person acting on behalf, at the direction or in the interest of the Issuer or its subsidiaries, has not violated, and the Issuer and its subsidiaries operate and will continue to operate their businesses in compliance with, any applicable financial recordkeeping and reporting requirements and anti-money laundering laws of applicable jurisdictions, including but not limited to, applicable federal, state, international, foreign or other applicable laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 U.S. Code sections 1956 and 1957, the U.S. Patriot Act, the U.S. Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended and as applicable, and any executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any applicable orders or licenses issued thereunder (collectively, the “Anti-Money Laundering Laws”).

(xxxii)     Sanctions.     None of the Issuer, its subsidiaries and their respective officers, directors, supervisors, managers, nor to the knowledge of the Issuer, any affiliate, agent, or employee or other person acting on behalf or at the direction of the Issuer or its subsidiaries is a person that is a Sanction Target or domiciled or registered in or operating from a Sanctioned Country. Neither the Issuer nor any of its subsidiaries has or intends to have any business operations or other dealings (a) in any Sanctioned Country, including the Crimean region in Ukraine, Cuba, Iran, Sudan, North Korea and Syria, (b) with any Specially Designated National (“SDN”) on OFAC’s SDN list or, to its knowledge, any person that at the time of the business operations or other dealings is or was the subject of Sanctions, or (c) involving commodities or services of a Sanctioned Country origin or shipped to, through, or from a Sanctioned Country, or on Sanctioned Country owned or registered vessels or aircraft, or finance or subsidize any of the foregoing in an amount exceeding 5% of the total assets or revenues of the Issuer and its subsidiaries on a consolidated basis. The Issuer and its subsidiaries have instituted and maintain policies and procedures designed to prevent sanctions violations (by the Issuer and its subsidiaries and by persons associated with the Issuer and its subsidiaries). Neither the Issuer nor any of its subsidiaries knows or has reason to believe that any of them are or may become subject of sanctions-related investigations or juridical proceedings. The Issuer and each Initial Purchaser acknowledges, agrees and confirms that the representation, warranty and covenant contained in this Section 1(xxxii) is only sought, given or repeated, as appropriate, to the extent that to do so would be permissible pursuant to Council Regulation (EC) No. 2271/96 of 22 November 1996 or any applicable anti-boycott laws or regulations.

 

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(xxxiii)     Forward-Looking Statements.     Each “forward-looking statement” (within the meaning of Section 27A of the Act and Section 21E of the U.S. Securities Exchange Act of 1934 Act, as amended (the “Exchange Act”)) included in the Disclosure Package or the Final Offering Memorandum has been made or reaffirmed by the Issuer with a reasonable basis, in good faith and based on reasonable assumptions.

(xxxiv)     Authorization of this Agreement.     This Agreement has been duly and validly authorized, executed and delivered by the Issuer.

(xxxv)     Authorization of the Notes.     The Notes have been duly authorized and, at the Closing Date, will have been duly executed by the Issuer and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the Purchase Price (as defined below) as provided in this Agreement, will constitute legal, valid and binding obligations of the Issuer, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture.

(xxxvi)     Authorization of the Indenture.     The Indenture has been duly authorized by the Issuer and, when executed and delivered by the Issuer (assuming the due authorization, execution and delivery by the Trustee), will constitute a legal, valid and binding agreement of the Issuer, enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(xxxvii)     No Qualification under Trust Indenture Act.     No qualification of the Indenture under the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (the “TIA”) is required in connection with the offer and sale of the Notes by the Issuer to the Initial Purchasers hereunder or the resales thereof by the Initial Purchasers in the manner contemplated hereby.

(xxxviii)     Payments without Withholding.     Except as disclosed in the Disclosure Package and the Final Offering Memorandum, all payments on the Notes will be made by the Issuer without withholding or deduction for or on account of any and all taxes, duties or other charges or whatsoever nature (including, without limitation, income taxes) imposed by the Cayman Islands or Macau, or, in each case, any political subdivision or taxing authority thereof or therein.

 

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(xxxix)     Sovereign Immunity.     None of the Issuer or any of its subsidiaries or any of their respective properties has any sovereign immunity from jurisdiction or suit of any court or from set-off or from any legal process or remedy (whether through service, notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of Macau.

(xl)     Solvency.     Immediately after the Closing Time, the Issuer individually, and the Issuer and its subsidiaries on a consolidated basis (the “Group”), will be Solvent. As used herein, the term “Solvent” means, with respect to the Issuer and the Group, on a particular date, that on such date (1) the fair market value of the assets of the entity is greater than the total amount of liabilities (including contingent liabilities) of such entity, (2) the present fair saleable value of the assets of such entity is greater than the sum of its stated liabilities and identified contingent liabilities, (3) such entity is able to realize upon its assets and pay its debts and other liabilities, including contingent obligations, as they mature, and (4) such entity does not have unreasonably small capital. No proceedings have been commenced by the Issuer or its subsidiaries for, nor has the Issuer or any of its subsidiaries passed any resolutions or presented petitions for purposes of, and no judgment has been rendered for, the liquidation, bankruptcy, winding-up, administration or analogous event of the Issuer or any of its subsidiaries, except with respect to any subsidiary of the Issuer, for any such resolutions in respect of a voluntary reorganization.

(xli)     Undisclosed Liabilities.     There are (i) no liabilities of the Issuer or any of its subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and (ii) no existing situations or set of circumstances that would reasonably be expected to result in such a liability, other than (x) liabilities set forth in the Disclosure Package and the Final Offering Memorandum, or (y) other undisclosed liabilities which would not, individually or in the aggregate, have a Material Adverse Effect.

(xlii)     Accounting Controls.     The Issuer and its consolidated subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(xliii)     Similar Offerings.     None of the Issuer, its Affiliates, as such term is defined in Rule 501(b) under the Securities Act (each, an “Affiliate”), or any other person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any U.S. person (as defined in Regulation S), any security which is or would be integrated with the sale of the Notes in a manner that would require the Notes to be registered under the Securities Act.

 

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(xliv)     Rule 144A Eligibility.     The Notes are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated interdealer quotation system. Each of the Disclosure Package and the Final Offering Memorandum, as of its date, contain all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.

(xlv)     No General Solicitation.     None of the Issuer, its subsidiaries, their Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has engaged or will engage, in connection with the Offering, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

(xlvi)     Public Announcements Relating to Stabilization Actions.     The Issuer represents, warrants and agrees that in relation to any Notes for which Deutsche Bank AG, Singapore Branch is named as a Stabilizing Coordinator (the “Stabilizing Coordinator”), each of the Issuer and its subsidiaries will not issue, without the prior consent of the Stabilizing Coordinator, any press release or other public announcement referring to the proposed issue of Notes unless the announcement adequately discloses the fact that stabilizing action may take place in relation to the Notes and the Issuer authorizes the Initial Purchasers to make adequate public disclosure of the information required by Article 6 of the Commission Delegated Regulation 2016/1052 instead of the Issuer or such subsidiaries.

(xlvii)     No Registration Required.     Subject to compliance by the Initial Purchasers with the representations, warranties and procedures set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Notes under the Securities Act.

(xlviii)     No Directed Selling Efforts.     With respect to those Notes sold in reliance on Regulation S, (A) none of the Issuer, its subsidiaries, their respective Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (B) each of the Issuer, its subsidiaries and their respective Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has complied with and will comply with the offering restrictions requirements of Regulation S.

(xlix)     Foreign Private Issuer.     The Issuer is a “foreign private issuer” as defined in Rule 405 under the Securities Act.

SECTION 2.     Sale and Delivery to Initial Purchasers; Closing.

(a)                 Notes.     On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Issuer agrees to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Issuer, at the purchase price of 99.15% (consisting of the issue price for the Notes, being 100.00% of the principal amount thereof, net the commission thereon, being 0.85% of the principal amount of the Notes (the “Fees”)) of the principal amount thereof (the “Purchase Price”), the principal amounts of the Notes set forth in Schedule A opposite the name of such Initial Purchaser, plus any additional principal amount of the Notes which such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 10 hereof (any such additional principal amount purchased, a “Default Purchase”).

 

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The Fees shall be allocated among the Initial Purchasers as follow: subject to any adjustment to account for any Default Purchase, (i) Deutsche Bank AG, Singapore Branch and Australia and New Zealand Banking Group Limited shall be entitled to 70.0% and 20.0% of the aggregate amount of the Fees, respectively, (ii) and Bank of Communications Co., Ltd. Macau Branch, BOCI Asia Limited, Industrial and Commercial Bank of China (Macau) Limited and Mizuho Securities Asia Limited shall be entitled to 2.5%, 2.5%, 2.5% and 2.5% of the aggregate amount of the Fees, respectively.

(b)                 Payment of Purchase Price.     Payment of the Purchase Price for the Notes shall be made by the Initial Purchasers in U.S. dollars in immediately available funds by wire transfer to the account of the Issuer notified to Deutsche Bank AG, Singapore Branch, acting as settlement lead manager, at least three business days before 9:30 A.M. New York City time on April 26, 2019 (the “Closing Date”), or at least three business days before such other date, not later than seven calendar days after the foregoing date, as shall be agreed upon by the Representative (as defined below) and the Issuer (such time and date of payment being herein called the “Closing Time”).

Payment shall be made to the Issuer against delivery to the Initial Purchasers for the respective accounts of the Initial Purchasers or the accounts of the persons procured by the Initial Purchasers to purchase the Notes. Each Initial Purchaser shall accept delivery of, receipt for, and make payment of the Purchase Price for, the Notes which it has agreed to purchase, or procure the purchase of. Each of the Initial Purchasers may (but shall not be obligated to) make payment of the Purchase Price for the Notes to be purchased by any persons procured by such Initial Purchaser whose funds have not been received by the Closing Time.

(c)                 Delivery.     The Issuer will deliver to the Initial Purchasers, against payment of the Purchase Price thereof pursuant to Section 2(b) above, the Notes to be purchased by the Initial Purchasers hereunder and to be offered and sold by the Initial Purchasers in reliance on Regulation S in the form of one or more global notes (the “Regulation S Global Notes”) registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), and deposited with the Trustee as custodian for DTC for the respective accounts of the DTC participants for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”). The Issuer will deliver to the Initial Purchasers against payment of the Purchase Price thereof the Notes to be purchased by the Initial Purchasers hereunder and to be offered and sold by the Initial Purchasers in reliance on Rule 144A in the form of one or more global notes (the “Rule 144A Global Notes”) deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global Notes and the Rule 144A Global Notes shall be assigned separate CUSIP numbers. The Regulation S Global Notes and the Rule 144A Global Notes shall include the legend regarding restrictions on transfer set forth under “Transfer Restrictions” in the Offering Memorandum. Interests in the Regulation S Global Notes and the Rule 144A Global Notes will be held only in book-entry form through DTC except in the limited circumstances described in the Indenture when they may be exchanged for definitive certificated Notes.

 

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(d)                 Stabilization.     Deutsche Bank AG, Singapore Branch, as Stabilizing Coordinator (or any person duly appointed as acting for the Stabilizing Coordinator) may, to the extent permitted by applicable laws and regulations, over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail, but in doing so the Stabilizing Coordinator shall act as principal and not as agent of the Issuer.

SECTION 3.     Covenants of the Issuer.     The Issuer covenants with each Initial Purchaser as follows:

(a)                 Disclosure Package and Offering Memorandum.     During the period from the date hereof to that indicated in Section 3(b)(ii) below, the Issuer, as promptly as practicable, will furnish to each Initial Purchaser, without charge, such number of copies of the Disclosure Package and the Final Offering Memorandum and any amendments and supplements thereto as such Initial Purchaser may reasonably request.

(b)                 Notice and Effect of Material Events.     The Issuer will promptly notify each Initial Purchaser, and confirm such notice in writing, of (i) any filing made by the Issuer of information relating to the Offering with any securities exchange or any other regulatory body in any applicable jurisdiction, and (ii) at any time prior to the earlier of (A) two months after the Closing Date and (B) the completion of the resale of the Notes by the Initial Purchasers (which the Initial Purchasers shall provide prompt notice thereof to the Issuer), any material changes in or affecting the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Issuer and its subsidiaries considered as one enterprise which (x) make any statement in the Disclosure Package, any Offering Memorandum or any Supplemental Offering Material false or misleading or (y) are not disclosed in the Disclosure Package or Offering Memorandum. During such time as described in clause (ii) of the preceding sentence, if any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order that the Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances under which they were made and then existing, or if in the reasonable opinion of the Initial Purchasers or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Issuer will, upon receiving reasonable request from the Representative, amend or supplement the Offering Memorandum by promptly preparing and furnishing, at its own expense, to each Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchasers) so that, as so amended or supplemented, the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made and existing at the time it is furnished to the Initial Purchasers, not misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law.

 

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(c)                 Amendments and Supplements to the Offering Memorandum; Preparation of Pricing Supplement; Supplemental Offering Materials.     The Issuer will promptly submit for review and approval to each Initial Purchaser any proposed amendment or supplement to the Disclosure Package and Offering Memorandum, such approval not to be unreasonably withheld or delayed. Neither the approval of the Initial Purchasers, nor the Initial Purchasers’ delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof. The Issuer represents that it has not made, and agrees that unless it obtains the prior consent of the Representative it will not make, any offer relating to the Notes by means of any Supplemental Offering Materials other than the roadshow presentation dated April 16, 2019 relating to the Notes.

(d)                 Qualification of Notes for Offer and Sale.     The Issuer will use its commercially reasonable best efforts, in cooperation with the Initial Purchasers and counsel for the Initial Purchasers, to qualify the Notes for offering and sale under the applicable securities laws of such states and other jurisdictions as the Initial Purchasers may designate and will maintain such qualifications in effect as long as required for the sale of the Notes; provided, however, that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities or take any other action in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Issuer will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Notes for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Issuer shall use its commercially reasonable best efforts to obtain the withdrawal thereof as soon as practicable.

(e)                 DTC.     The Issuer will cooperate with the Initial Purchasers and use its best efforts to permit the Notes to be eligible for clearance and settlement through the facilities of DTC and will assist the Initial Purchasers in obtaining the approval of DTC for “book-entry” transfer of the Notes in global form.

(f)                Euroclear and Clearstream.     The Issuer will cooperate with the Initial Purchasers and use its best efforts to permit the Notes to be eligible for clearance and settlement through the facilities of Euroclear and Clearstream and will assist the Initial Purchasers in obtaining the approval of Euroclear and Clearstream for “book-entry” transfer of the Notes in global form.

(g)                 Use of Proceeds.     The Issuer will apply the net proceeds received by it from the sale of the Notes in the manner specified in the Disclosure Package and the Final Offering Memorandum under “Use of Proceeds” and will not directly or indirectly use, lend, contribute or otherwise make available to any subsidiary, joint venture partner or other person or entity, such net proceeds (i) to fund or facilitate any activities of or business with persons that, at the time of such funding or facilitation, is a Sanction Target, (ii) to fund or facilitate any activities of or business in any Sanctioned Country, or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as initial purchaser, advisor, investor or otherwise) of any Sanctions, Anti-Money Laundering Laws or any applicable anti-terrorism financing laws of applicable jurisdictions, including without limitation, applicable rules, regulations or guidelines, issued, administered or enforced by governmental authorities or regulatory agencies having jurisdictions over the Issuer and its subsidiaries (collectively, the “Anti-Terrorism Financing Laws”). The proceeds from the sale of the Notes will not be used, directly or indirectly, for any purpose in violation of the Anti-Bribery Laws.

 

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(h)                 Restriction on Sale of Securities.     For a period of 90 days from the date of this Agreement, the Issuer agrees not to, directly or indirectly, sell, offer to sell, contract to sell, grant any option to purchase, issue any instrument convertible into or exchangeable for, or otherwise transfer or dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition in the future of), any debt securities of the Issuer with terms substantially similar (including having equal rank) to the Notes (other than the Notes), except with the prior consent of the Representative.

(i)                 Listing on Securities Exchange.     The Issuer will use commercially reasonable efforts to have the Notes listed or admitted to trading on the SGX-ST.

(j)                 Stabilization and Manipulation.     In connection with the issuance and sale of the Notes, until the Initial Purchasers have notified the Issuer of the completion of the placement and resales of the Notes by the Initial Purchasers (which notice the Initial Purchasers shall provide promptly after such completion), neither the Issuer nor any of its Affiliates will take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Notes to facilitate the sale or resale of the Notes.

SECTION 4.     Payment of Expenses.

The Issuer agrees to reimburse the Initial Purchasers upon request for all fees, stamp duty (if any), expenses and other costs reasonably and properly incurred in connection with the Offering, including, without limitation, telecommunications, postage, document production and other pre-agreed out-of-pocket expenses; provided that except as otherwise provided for in Section 13 hereof, the fees and expenses of the Initial Purchasers’ legal advisors shall not be reimbursed by the Issuer.

The Issuer must pay for its own fees, expenses and other costs incurred in connection with the Offering (or reimburse any Initial Purchaser to the extent that such Initial Purchaser incurs such costs on the Issuer’s behalf) including, without limitation, (i) its own legal, accounting and auditors’ fees and expenses, (ii) the fees and expenses (including legal fees) of the Trustee, rating agencies, the paying agent(s), the listing agent and all other agents involved in the Offering, (iii) all listing fees and other listing costs payable to the relevant stock exchange and/or any other relevant competent authority in connection with the listing, (iv) the cost of roadshows and any other presentations to investors prepared in connection with the Offering, printing and distribution of the Offering Memorandum and any other marketing materials for the Notes other than the Initial Purchasers’ travel expenses (and each Initial Purchaser shall be responsible for its own travel expenses), (v) the cost of printing, authenticating and distributing any Notes in definitive form, and (vi) the cost of publishing any notices.

 

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Unless set out otherwise in this Agreement, all payments under this Agreement must be made: (i) on the due date in accordance with the payment instructions of the Initial Purchasers or within 30 days of the invoice (as the case may be), (ii) together with any applicable VAT, sales and any similar taxes which will be invoiced to or otherwise payable by the Issuer, and (iii) in full without set-off, condition, restriction, counterclaim, deduction or withholding, unless required by law. If any deduction or withholding is required by any applicable law in connection with any such payment, the Issuer will increase the amount paid so that the full amount of such payment is received by the Initial Purchasers as if no such deduction or withholding had been made.

SECTION 5.     Conditions of Initial Purchasers’ Obligations.

The obligations of the several Initial Purchasers to purchase and pay for, or procure the purchase of and payment for, the Notes hereunder are subject to the accuracy of the representations and warranties of the Issuer contained in Section 1 hereof, as of the date hereof and as of the Closing Date, or in certificates of any officer or director of the Issuer, delivered pursuant to the provisions hereof, to the performance by the Issuer of its covenants and other obligations hereunder, and to the following further conditions (any of which may be waived by the Representative):

(a)                 Opinion of U.S. Counsel for the Issuer.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received (x) the opinion, (y) the tax opinion and (z) the 10b-5 disclosure letter, dated as of the Closing Date, of Latham & Watkins, U.S. counsel for the Issuer, in each case substantially in the form as attached hereto as Exhibits A-1, A-2 and A-3, respectively.

(b)                 Opinion of Cayman Islands Counsel for the Issuer.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Harney Westwood & Riegels, special Cayman Islands counsel for the Issuer incorporated under the laws of the Cayman Islands, substantially in the form as attached hereto as Exhibit B.

(c)                 Opinion of Macau Counsel for the Issuer.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Manuela António Lawyer and Notaries, special Macau counsel for the Issuer incorporated under the laws of Macau, substantially in the form as attached hereto as Exhibit C.

(d)                 Opinion of U.S. Counsel for the Initial Purchasers.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received (x) the opinion and (y) the 10b-5 disclosure letter, dated as of the Closing Date, of White & Case, U.S. counsel for the Initial Purchasers, in the form and substance satisfactory to the Representative.

(e)                 Opinion of Cayman Islands Counsel for the Initial Purchasers.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Maples and Calder (Hong Kong) LLP, special Cayman Islands counsel for the Initial Purchasers, in form and substance satisfactory to the Representative.

 

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(f)                Opinion of Macau Counsel for the Initial Purchasers.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Henrique Saldanha, Advogados e Notàrios, special Macau counsel for the Initial Purchasers, in form and substance satisfactory to the Representative.

(g)                 Compliance Certificate of the Issuer.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received a certificate signed by an executive officer or director of the Issuer, dated as of the Closing Date, to the effect that (i) since the respective dates as of which information is given in the Disclosure Package and the Final Offering Memorandum, except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, there shall have been no event or development, and no information shall have become known, that, individually or in the aggregate, has a Material Adverse Effect, (ii) the representations and warranties of the Issuer in Section 1 hereof are true and correct in all material respects with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Issuer has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Time.

(h)                 Comfort Letter of the Accountants.     At the time of the execution of this Agreement, the Representative, on behalf of the Initial Purchasers, shall have received from each of E&Y and Deloitte a letter dated the date hereof, in form and substance satisfactory to the Representative, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to the Initial Purchasers, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletins), with respect to the financial statements and certain financial information contained in the Disclosure Package.

(i)                 Bring-down Comfort Letter.     At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received from E&Y a letter, dated as of the Closing Date, to the effect that E&Y reaffirms the statements made in its letter furnished pursuant to subsection (h) of this Section 5, except that (i) it shall cover the financial statements and certain financial information contained in the Final Offering Memorandum and (ii) the specified date referred to shall be a date not more than three business days prior to the Closing Time.

(j)                 Approval of Listing.     At the Closing Time, the Notes shall have been approved in principle for listing on the SGX-ST, subject only to official notice of issuance.

(k)                 No Material Adverse Change or Ratings Agency Change.     For the period from and after the date of this Agreement and prior to the Closing Date:

(i)     in the judgment of the Initial Purchasers, there shall not have occurred any event or development, and no information shall have become known, that, individually or in the aggregate, would have a Material Adverse Effect (“Material Adverse Change”); and

(ii)     there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Issuer or any of its subsidiaries by any “nationally recognized statistical rating organization” as such term is defined in Section 3(a)(62) of the Exchange Act.

 

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(l)                 DTC.     At the Closing Time, the Notes shall be eligible for clearance and settlement through DTC.

(m)                 Indenture.     Executed copies of the Indenture in form and substance reasonably satisfactory to the Representative shall have been delivered to the Representative, on behalf of the Initial Purchasers.

(n)                 Additional Documents.     On or before the Closing Time, the Representative, on behalf of the Initial Purchasers, or counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Notes as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained.

(o)                 Termination of Agreement.     If any condition specified in this Section 5 shall not have been fulfilled in all material respects when and as required to be fulfilled, this Agreement may be terminated by the Representative on behalf of the Initial Purchasers, by notice to the Issuer at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 hereof and except that Sections 7 and 8 hereof shall survive any such termination and remain in full force and effect.

The documents required to be delivered by this Section 5 will be delivered at the offices of White & Case, counsel for the Initial Purchasers, at 9th Floor, Central Tower, 28 Queen’s Road, Central, Hong Kong.

SECTION 6.     Offers and Sales of the Notes.

(a)                 Offer and Sale Procedures.     Each of the Initial Purchasers hereby, severally and not jointly, establishes and agrees to observe the following procedures in connection with the offer and sale of the Notes:

(i)     Offers and Sales only to Qualified Institutional Buyers in the United States or to Non-U.S. Persons.     Initial offers and sales of the Notes shall only be made (A) by the U.S. registered broker-dealer affiliates of such Initial Purchaser to persons whom such Initial Purchaser reasonably believes to be qualified institutional buyers, as defined in Rule 144A (“QIBs”) in accordance with Rule 144A or (B) to non-U.S. persons (as defined in Regulation S) outside the United States in reliance upon Regulation S.

(ii)     Each of the Initial Purchasers hereby, severally and not jointly, represents and agrees that:

 

  (1)

it, or the U.S. registered broker-dealer affiliates of such Initial Purchaser making sales pursuant to Rule 144A, is a QIB; and

 

  (2)

if it is not a QIB, then it represents and agrees with the Issuer and the other Initial Purchasers that it shall offer and sell the Notes only outside the United States in offshore transactions to persons who are not U.S. persons (as defined in Rule 902 under the Securities Act).

 

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(iii)     No Directed Selling Efforts.     Neither such Initial Purchaser nor its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Regulation S and such Initial Purchaser, its Affiliates and any person acting on its or their behalf has complied and will comply with the offering restrictions of Regulation S.

(iv)     No General Solicitation.     No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) has been or will be used in connection with the offering or sale of the Notes.

(v)     Purchases by Non-Bank Fiduciaries.     In the case of a non-bank Subsequent Purchaser of a Note acting as a fiduciary for one or more third parties, each third party shall, in the judgment of the Initial Purchaser, be a QIB or a non-U.S. person outside the United States.

(vi)     Restrictions on Transfer.     The selling and transfer restrictions and the other provisions set forth in the Offering Memorandum under the heading “Transfer Restrictions” including, without limitation, the legend required thereby, shall apply to the Notes except as otherwise agreed by the Issuer and the Initial Purchasers.

(b)                 Restriction on Repurchases.     The Issuer covenants with each Initial Purchaser that, until the expiration of one year after the later of the date of the original issuance of the Notes and the last date on which the Issuer or any of its Affiliates were the owner of Notes, neither the Issuer nor any of its subsidiaries will, and will cause persons acting on its or their behalf (other than the Initial Purchasers, as to whom no covenant is made), not to, resell any such Notes which are “restricted securities” (as such term is defined under Rule 144(a)(3) under the Securities Act), whether as beneficial owner or otherwise (except an agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker’s transactions).

(c)                 Resale Pursuant to Rule 903 of Regulation S or Rule 144A.     Each Initial Purchaser understands that the Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each of the Initial Purchasers, severally and not jointly, represents and agrees, that, except as permitted by Section 6(a) above, it has not offered and sold Notes and will not offer and sell Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date upon which the Offering commences and the Closing Time, except in accordance with Rule 903 of Regulation S, Rule 144A or another applicable exemption from the registration requirements of the Securities Act. Accordingly, none of such Initial Purchaser, its Affiliates or any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to Notes sold hereunder pursuant to Regulation S, and such Initial Purchaser, its Affiliates and any person acting on its or their behalf have complied and will comply with the offering restrictions of Regulation S. Each of the Initial Purchasers, severally and not jointly, agrees that, at or prior to confirmation of a sale of Notes pursuant to Regulation S, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it or through it during the restricted period a confirmation or notice to substantially the following effect:

 

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“This Note has not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or with any securities regulatory authority of any jurisdiction and may not be reoffered, resold, pledged or otherwise transferred within the United States or to a U.S. person (as defined in Regulation S under the Securities Act) except pursuant to applicable exemption from registration under the Securities Act. The Issuer of this Note has agreed that this legend shall be deemed to have been removed on the 41st day following the later of the commencement of the offering of the Notes and the final delivery date with respect thereof.”

SECTION 7.     Indemnification.

(a)                 Indemnification of Initial Purchasers.     The Issuer will indemnify and hold harmless each Initial Purchaser, its partners, members, directors, officers, employees, agents, affiliates and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “Indemnified Party”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Securities Act, the Exchange Act, other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Package as of any time, the Final Offering Memorandum (or any amendment or supplement thereto) or any Supplemental Offering Materials, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating, defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Indemnified Party is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Issuer shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Issuer by any Initial Purchaser specifically for use therein, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the information described as such in subsection (b) below.

 

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(b)                 Indemnification of Issuer.     Each Initial Purchaser will, severally and not jointly, indemnify and hold harmless the Issuer and each person, if any, who controls the Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “Initial Purchaser Indemnified Party”), against any losses, claims, damages or liabilities to which such Initial Purchaser Indemnified Party may become subject, under the Securities Act, the Exchange Act, other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of the Disclosure Package as of any time, the Final Offering Memorandum (or any amendment or supplement thereto) or in any Supplemental Offering Materials or arise out of or are based upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuer by such Initial Purchaser specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by such Initial Purchaser Indemnified Party in connection with investigating or defending against any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Initial Purchaser Indemnified Party is a party thereto), whether threatened or commenced, based upon any such untrue statement or omission, or any such alleged untrue statement or omission as such expenses are incurred, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the following information in the Offering Memorandum furnished on behalf of each Initial Purchaser: its name as set forth in the first sentence of the first paragraph under the section “Plan of Distribution—Price Stabilization and Short Positions” in the Disclosure Package and the Final Offering Memorandum.

(c)                 Actions against Parties; Notification.     Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above hereafter, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7, as the case may be, for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.

 

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(d)                 Control Persons.     The obligations of the Issuer under this Section 7 shall be in addition to any liability which the Issuer may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Initial Purchaser, within the meaning of the Securities Act; and the obligations of the Initial Purchasers under this Section 7 shall be in addition to any liability which the respective Initial Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each director of the Issuer and to each person, if any, who controls the Issuer within the meaning of the Securities Act.

SECTION 8.     Contribution.

If the indemnification provided for in Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7 (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in Section 7 (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other from the Offering or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuer on the one hand and the Initial Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Issuer bear to the total underwriting discounts and commissions received by the Initial Purchasers. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer or the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section 8. Notwithstanding the provisions of this Section 8, no Initial Purchaser shall be required to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by such Initial Purchaser under this Agreement, less the aggregate amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers’ obligations in this Section 8 to contribute are several in proportion to their respective underwriting obligations and not joint. The Issuer and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8.

SECTION 9.     Agreement among Initial Purchasers.

 

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The execution of this Agreement on behalf of all parties hereto will constitute the acceptance by each Initial Purchaser of the International Capital Market Association Standard Form Agreement Among Managers Version 1 (“AAM”). The Initial Purchasers further agree that references in the AAM to the “Lead Manager”, the “Joint Bookrunners” and the “Managers” shall mean the Initial Purchasers, references in the AAM and this Agreement to the “Settlement Lead Manager” shall mean Deutsche Bank AG, Singapore Branch (or persons acting on its behalf) and references in the AAM to the “Stabilisation Coordinator” shall mean Deutsche Bank AG, Singapore Branch (or persons acting on its behalf). The Initial Purchasers agree as between themselves to amend the AAM as follows:

 

  (a)

Clause 5(2), and the two paragraphs immediately following Clause 5(3), shall be deemed to be deleted in their entirety;

 

  (b)

Clause 6 shall be deemed to be deleted in its entirety and replaced by the following:

 

  “6.

STABILIZATION

 

  (1)

Each Initial Purchaser agrees that the Stabilization Coordinator may, after consultation with and agreement by the Initial Purchasers, either directly or together with the Stabilization Managers appointed by it, effect Stabilization Transactions. All such Stabilization Transactions shall be made in accordance with applicable laws and any profits and losses incurred in effecting Stabilization Transactions shall be aggregated and:

 

  (a)

in the case of a net profit, credited to the account of each Initial Purchaser in proportion to its respective Commitment; and

 

  (b)

in the case of a net loss, apportioned among the Initial Purchasers as follows:

 

  (i)

first, among the Initial Purchasers pro rata to their respective Commitments in an amount up to and including the amount of the fees payable to that Initial Purchasers in connection with the issue of the Notes; and

  (ii)

secondly, among the Initial Purchasers that are responsible for actively running the order book for the transaction, pro rata to their respective Commitments.

 

  (2)

Upon the aforementioned consultation by the Stabilization Coordinator with the Initial Purchasers, any Stabilization Transactions may be effected on or after the date on which adequate public disclosure of the terms of the offer of Notes is made and, if begun, may be ended at any time, but in no case later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes.

 

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  (3)

For the avoidance of doubt, the Initial Purchasers may agree to overallot in arranging subscriptions, sales and purchases of the Notes and to reallocate such positions among themselves in proportion to each Initial Purchaser’s Purchase Percentage, and the Initial Purchasers may subsequently make purchases and sales of the Notes, in addition to their respective Purchase Percentage, in the open market or otherwise, on such terms as each Initial Purchaser may deem advisable. All such purchases, sales and overallotments shall be made in accordance with applicable laws and regulations. Each Initial Purchaser shall be responsible for managing its individual long or short position arising from such aforementioned reallocation (the “Individual Position”) and may cover any short position, sell any long position and/or engage in hedging activity in respect of its Individual Position. Each Initial Purchaser shall be liable for any loss, or entitled to any profit, arising from the management of its own Individual Position and, for the avoidance of doubt, no Initial Purchaser shall be liable for any loss, or entitled to any profit, arising from the management of the Individual Position of any other Initial Purchaser. “Purchase Percentage” with respect to each series of Notes means the principal amount of such series of Notes subscribed by the relevant Initial Purchaser as a percentage of the aggregate principal amount of such series of Notes issued.

 

  (c)

Clause 7(2) shall be deemed to be deleted in its entirety and replaced with the following:

 

  “(2)

The Initial Purchasers agree that all fees and expenses that are the joint responsibility of the Initial Purchasers and payable by the Initial Purchasers, and any out-of-pocket expenses that are the joint responsibility of the Initial Purchasers and reimbursable but not reimbursed by the Issuer, shall be aggregated and allocated among the Initial Purchasers pro rata to their respective Commitments and each Initial Purchaser authorizes the Settlement Lead Manager to charge or credit each Initial Purchaser’s account for its proportional share of such fees and expenses.; ”

 

  (d)

Clause 8 shall be deemed to be deleted in its entirety;

 

  (e)

The definition of “Commitments” shall be deleted in its entirety and replaced with the following:

““Commitments” means, for the purposes of Clauses 3, 6, 7 and 10, the fee allocation proportion paid to each of the Initial Purchasers under this Agreement and any related fee letters, and for the purposes of all other clauses of this Agreement, the amounts severally underwritten by the Initial Purchasers as set out in the Purchase Agreement.”; and

 

  (f)

Deutsche Bank AG, Singapore Branch shall act as Representative of each of them for administrative purposes (in such capacity, the “Representative”).

Where there are any inconsistencies between this Agreement and the AAM, the terms of this Agreement shall prevail.

 

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SECTION 10.     Default of Initial Purchasers.

If any Initial Purchaser or Initial Purchasers default in their obligations to purchase Notes hereunder at the Closing Time and the principal amount of Notes that such defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase does not exceed 10% of the aggregate principal amount of Notes that the Initial Purchasers are obligated to purchase at such Closing Time, the Representative may make arrangements satisfactory to the Issuer for the purchase of such Notes by other persons, including any of the Initial Purchasers, but if no such arrangements are made by such Closing Time, the non-defaulting Initial Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Notes that such defaulting Initial Purchasers agreed but failed to purchase at such Closing Time. If any Initial Purchaser or Initial Purchasers so default and the principal amount of Notes with respect to which such default or defaults occur exceeds 10% of the aggregate principal amount of Notes that the Initial Purchasers are obligated to purchase at such Closing Time and arrangements satisfactory to the Representative and the Issuer for the purchase of such Notes by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Initial Purchaser or the Issuer, except as provided in Section 12 hereof. As used in this Agreement, the term “Initial Purchaser” includes any person substituted for an Initial Purchaser under this Section 10. Nothing herein will relieve a defaulting Initial Purchaser from liability for its default.

SECTION 11.     Representations, Warranties and Agreements to Survive Delivery.

All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Issuer submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or controlling person, or by or on behalf of the Issuer, and shall survive delivery of the Notes to the Initial Purchasers.

SECTION 12.     Termination of Agreement.

(a)                 Termination; General.     Prior to the Closing Time, this Agreement may be terminated by the Initial Purchasers by notice given to the Issuer if at any time: (i) trading in securities generally on the New York Stock Exchange, NASDAQ, the Hong Kong Stock Exchange, the London Stock Exchange or the SGX-ST shall have been suspended or materially limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the SGX-ST, or maximum ranges for prices shall have been required by any of said exchanges or by such system or by order of the Commission or any other governmental authority in the United States or otherwise or a material disruption has occurred in commercial banking or securities, settlement or clearance services with respect to DTC in the United States or with respect to Euroclear and Clearstream in Europe; (ii) a general banking moratorium shall have been declared by any of federal, New York, Cayman Islands, Macau, Hong Kong, Singapore or European authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States’ or international political, financial or economic conditions or currency exchange rates or exchange controls, in each case the effect of which is such as to make it, in the judgment of the Initial Purchasers, impracticable or inadvisable to market the Notes in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of the Notes; (iv) in the judgment of the Initial Purchasers there shall have occurred any Material Adverse Change; or (v) the Issuer and its subsidiaries shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Initial Purchasers may interfere materially with the conduct of the business and operations of the Issuer and its subsidiaries taken as a whole regardless of whether or not such loss shall have been insured; provided that in the case of (iv) or (v), any such change or loss shall have occurred from and after the date of this Agreement and prior to the Closing Time.

 

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(b)                 Liabilities.     If this Agreement is terminated pursuant to this Section 12, such termination shall be without liability of any party to any other party; provided that Sections 7 and 8 hereof shall survive such termination and remain in full force and effect.

SECTION 13.     Reimbursement of Initial Purchasers’ Expenses.

If the sale to the Initial Purchasers of the Notes on the Closing Date pursuant to this Agreement is not consummated because of any refusal, inability or failure on the part of the Issuer to perform any agreement herein or to comply with any provision hereof (provided that the occurrence of any event under Section 12 or failure to satisfy any condition under Section 5 shall not be deemed as any refusal, inability or failure on the part of the Issuer), the Issuer agrees to reimburse the Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all reasonable expenses as set forth in Section 4 hereof and the legal fees and expenses incurred by the Initial Purchasers.

SECTION 14.     Notices.

All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given upon receipt if mailed, delivered or transmitted by telefax at the address set forth below:

 

  (a)

if to the Initial Purchasers:

c/o Deutsche Bank AG, Singapore Branch

One Raffles Quay

#17-00 South Tower

Singapore 048583

Telephone: +65 6423 5342

Attention: Global Risk Syndicate

Facsimile: +65 6883 1769

 

  (b)

if to the Issuer:

Melco Resorts Finance Limited

INTERTRUST CORPORATE SERVICES (CAYMAN) LIMITED, 190 Elgin

Avenue, George Town

Grand Cayman KY1-9005, Cayman Islands

 

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with a copy to:

Melco Resorts & Entertainment Limited

36/F, The Centrium

60 Wyndham Street

Central, Hong Kong

Telephone: 852 2598 3600

Attention: Company Secretary

Facsimile: 852 2537 3618

SECTION 15.     Parties.

This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Issuer and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers, the Issuer and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 hereof and their heirs and legal Representative, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers, the Issuer and their respective successors, and said controlling persons and officers and directors and their heirs and legal Representative, and for the benefit of no other person, firm or corporation. No purchaser of Notes from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase.

SECTION 16.     Counterparts.

This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

SECTION 17.     Absence of Fiduciary Relationship.     The Issuer acknowledges and agrees that:

(a)                 No Other Relationship.     The Initial Purchasers have been retained solely to act as the initial purchasers of the Notes and that no fiduciary, advisory or agency relationship between the Issuer and the Initial Purchasers has been created in respect of any of the transactions contemplated by this Agreement, the Disclosure Package or the Final Offering Memorandum, irrespective of whether the Initial Purchasers have advised or are advising the Issuer on other matters;

(b)                 Arms’ Length Negotiations.     The price of the Notes set forth in this Agreement was established by the Issuer following discussions and arms-length negotiations with the Initial Purchasers and each of the Issuer is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;

 

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(c)                 Absence of Obligation to Disclose.     The Issuer has been advised that the Initial Purchasers and their respective affiliates are engaged in a broad range of transactions which may involve interests that differ from or conflict with those of the Issuer and that the Initial Purchasers have no obligation to disclose such interests and transactions to the Issuer by virtue of any fiduciary, advisory or agency relationship; and

(d)                 Waiver.     The Issuer waives, to the fullest extent permitted by law, any claims it may have against the Initial Purchasers for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Initial Purchasers shall have no liability (whether direct or indirect) to the Issuer in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Issuer, including shareholders, employees or creditors of the Issuer.

SECTION 18.     MiFID Product Governance.

Solely for the purposes of the requirements of Article 9(8) of the MIFID Product Governance rules under EU Delegated Directive 2017/593 (the “Product Governance Rules”) regarding the mutual responsibilities of manufacturers under the Product Governance Rules, Deutsche Bank AG, Singapore Branch (the “Manufacturer”) acknowledges that it understands the responsibilities conferred upon it under the Product Governance Rules relating to each of the product approval process, the target market and the proposed distribution channels as applying to the Notes and the related information set out in the Offering Memorandum and any announcements in connection with the Notes. The parties to this Agreement note the application of the Product Governance Rules to the Manufacturer and acknowledge the target market and distribution channels identified as applying to the Notes by the Manufacturer and the related information set out in the Offering Memorandum and any announcements in connection with the Notes.

SECTION 19.     Recognition of the U.S. Special Resolution Regimes.

(a)                 In the event that any Initial Purchaser that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Initial Purchaser of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

(b)                 In the event that any Initial Purchaser that is a Covered Entity or a BHC Act affiliate of such Initial Purchaser becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Initial Purchaser are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

For the purpose of this Section 19:

 

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“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).

“Covered Entity” means any of the following:

 

  (i)

    a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

 

  (ii)

    a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

 

  (iii)

    a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

SECTION 20.     Waiver of Immunity.

To the extent that the Issuer has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment in aid or otherwise) with respect to itself or any of its property, the Issuer hereby irrevocably waives and agrees not to plead or claim such immunity in respect of its obligations under this Agreement.

SECTION 21.     Applicable Law.

This Agreement shall be governed by and construed in accordance with the laws of the state of New York.

The Issuer hereby submits to the non-exclusive jurisdiction of the federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Issuer irrevocably and unconditionally waives any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in federal and state courts in the Borough of Manhattan in The City of New York and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum. The Issuer irrevocably appoints Law Debenture Corporate Services Inc., 801 2nd Avenue, Suite 403, New York, New York 10017, as its authorized agent in the Borough of Manhattan in The City of New York upon which process may be served in any such suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Issuer by the person serving the same to the address provided in Section 14, shall be deemed in every respect effective service of process upon the Issuer in any such suit or proceeding. The Issuer further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of five years from the date of this Agreement.

 

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The obligations of the Issuer pursuant to this Agreement in respect of any sum due to any Initial Purchaser shall, notwithstanding any judgment in a currency other than U.S. dollars, not be discharged until the first business day, following receipt by such Initial Purchaser of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such Initial Purchaser may in accordance with normal banking procedures purchase U.S. dollars with such other currency; if the U.S. dollars so purchased are less than the sum originally due to such Initial Purchaser hereunder, the Issuer agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Initial Purchaser against such loss. If the U.S. dollars so purchased are greater than the sum originally due to such Initial Purchaser hereunder, such Initial Purchaser agrees to pay to the Issuer an amount equal to the excess of the dollars so purchased over the sum originally due to such Initial Purchaser hereunder.

SECTION 22.     Waiver of Jury Trial.     Each party hereto hereby waives its rights to a jury trial of any claim or cause of action based upon or arising out of this Agreement or the subject matter hereof. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. This Section 22 has been fully discussed by each of the parties hereto and these provisions shall not be subject to any exceptions. Each party hereto hereby further warrants and represents that such party has reviewed this waiver with its legal counsel, and that such party knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, supplements or modifications to (or assignments of) this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial (without a jury) by the court.

SECTION 23.     Effect of Headings.

The section headings herein are for convenience only and shall not affect the construction hereof.

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between each of the Initial Purchasers and the Issuer in accordance with its terms.

 

Very truly yours,

[Signature Pages to Follow]

 

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Issuer

MELCO RESORTS FINANCE LIMITED

By:

   /s/ Chung Yuk Man
 

Name: Chung Yuk Man

 

Title:   Director

[Signature page to Purchase Agreement]

The foregoing Agreement is hereby confirmed and accepted as of the date first above written:

DEUTSCHE BANK AG, SINGAPORE BRANCH

 

By:    

  

/s/ Haitham Ghattas

 

Name: Haitham Ghattas

 

Title:   Managing Director

 

By:    

  

/s/ Ed Tsui

 

Name: Ed Tsui

 

Title:   Managing Director

[Signature page to Purchase Agreement]

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

 

By:    

  

/s/ Louis Lim

 

Name: Louis Lim

 

Title:   Director, DCM Execution

[Signature page to Purchase Agreement]

BANK OF COMMUNICATIONS CO., LTD. MACAU BRANCH

 

By:    

  

/s/ Leng San

 

Name: Leng San

 

Title:   Vice President

[Signature page to Purchase Agreement]

BOCI ASIA LIMITED

 

By:    

  

/s/ Samson K.M. Lee

 

Name: Samson K.M. Lee

 

Title:   Managing Director,

Head of Financial Products Division

[Signature page to Purchase Agreement]

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (MACAU) LIMITED

 

By:    

  

/s/ 黃獻軍

 

Name: 黃獻軍

 

Title:   A0032

 

By:    

  

/s/ 余景豪

 

Name: 余景豪

 

Title:   B0089

[Signature page to Purchase Agreement]

MIZUHO SECURITIES ASIA LIMITED

 

By:    

  

/s/ Andrew Loong

 

Name: Andrew Loong

 

Title:   Executive Director

[Signature page to Purchase Agreement]

SCHEDULE A

 

Name of Initial Purchaser

    Principal Amount of Notes
(US$)		  

Deutsche Bank AG, Singapore Branch

      350,000,000  

Australia and New Zealand Banking Group Limited

      100,000,000  

Bank of Communications Co., Ltd. Macau Branch

      12,500,000  

BOCI Asia Limited

      12,500,000  

Industrial and Commercial Bank of China (Macau) Limited

      12,500,000  

Mizuho Securities Asia Limited

      12,500,000  
  

 

 

  

Total

      500,000,000  
  

 

 

  

SCHEDULE B

SUBSIDIARIES OF THE ISSUER

MCO International Limited

MCO Nominee One Limited

MCO Investments Limited

Melco Resorts (Macau) Limited

MCO (Macau) Hotel Limited

MCO (Macau) Consulting Limited

Golden Future (Management Services) Limited

Melco Resorts (Cafe) Limited

COD Resorts Limited

Altira Resorts Limited

Jumbo Watertours Limited

MCO Nominee Two Limited

Melco International Investments (Henan) Limited

SCHEDULE C

PRICING SUPPLEMENT

 

PRICING SUPPLEMENT

    STRICTLY CONFIDENTIAL

US$500,000,000 5.250% Senior Notes due 2026

Melco Resorts Finance Limited

April 17, 2019

 

 

Pricing Supplement dated April 17, 2019 to the

Preliminary Offering Memorandum dated April 16, 2019

This Pricing Supplement is qualified in its entirety by reference to the Preliminary Offering Memorandum. Capitalized terms used but not defined in this Pricing Supplement have the meanings ascribed to them in the Preliminary Offering Memorandum. The information in this Pricing Supplement supplements the Preliminary Offering Memorandum and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with the information in the Preliminary Offering Memorandum.

The US$500,000,000 5.250% Senior Notes due 2026 (the “Notes”) have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and are being offered only (1) to “qualified institutional buyers” as defined in Rule 144A under the Securities Act and (2) outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.

Distribution of this Pricing Supplement to any persons other than the person receiving this electronic transmission, its agents and any persons retained to advise the person receiving this electronic transmission, is unauthorized. Any photocopying, disclosure or alteration of the contents of this Pricing Supplement or any portion thereof by electronic mail or any other means to any person other than the person receiving this electronic transmission is prohibited. By accepting delivery of this Pricing Supplement, the recipient agrees to the foregoing.

 

Issuer:   

Melco Resorts Finance Limited (the “Company”)

Security Description:   

5.250% Senior Notes due 2026

Distribution:   

144A and Regulation S

Notes:   

Aggregate Principal Amount:

   

US$500,000,000

Currency:

   

U.S. Dollars

Maturity Date:

   

April 26, 2026

Interest Payment Dates:

   

April 26 and October 26, beginning on October 26, 2019

Trade Date:

   

April 17, 2019

Issue Date:

   

April 26, 2019 (T+6)

  

Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of pricing or the next four succeeding business days will be required, by virtue of the fact that the Notes initially will settle in T+6, to specify alternative settlement arrangements to prevent a failed settlement

Coupon:

   

5.250%

Issue Price:

   

100.000%

Yield to Maturity:

   

5.250%

Optional Redemption Provisions:   

Optional Redemption:

   

Optional Redemption Prices:

   

On or after April 26, 2022: 102.625%

  

On or after April 26, 2023: 101.313%

  

April 26, 2024 and thereafter: 100.000%

Make-Whole Call:

   

Prior to April 26, 2022

Redemption with proceeds from certain equity offerings:

   

Prior to April 26, 2022, up to 35% may be redeemed at 105.250%

Gaming Redemption:

   

The Notes may be redeemed if the gaming authority of any relevant jurisdictions requires that holders or beneficial owners of the Notes be licensed, qualified or found suitable under applicable gaming laws and such holders or beneficial owners, as the case may be, fail to apply or become licensed or qualified within the required time period or are found unsuitable

Offer to Repurchase Provisions:   

Change of Control Triggering Event

   

101%

Special Put Option Triggering Event

   

Upon the occurrence of (1) any event after which none of the Company or any Subsidiary of the Company has such licenses, concessions, subconcessions or other permits or authorizations as are necessary for the Company and its Subsidiaries to own or manage casino or gaming areas or operate casino games of fortune and chance in Macau in substantially the same manner and scope as the Company and its Subsidiaries are entitled to at the Issue Date, for a period of ten consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole; or (2) the termination, rescission, revocation or modification of any Gaming License which has had a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole, each holder of the Notes will have the right to require the Company to repurchase all or any part of such holder’s Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase

Security Codes:      

Rule 144A Notes

   

Regulation S Notes

  

CUSIP No.:

   

58547D AB5

   

G5975L AC0

  

ISIN:

   

US58547DAB55

   

USG5975LAC03

Denominations:   

US$200,000 minimum; US$1,000 increments

Issue Ratings:   

BB / Ba2 (S&P / Moody’s)

Sole Global Coordinator and Left Lead Bookrunner:   

Deutsche Bank AG, Singapore Branch

Initial Purchasers and Principal Amount of Notes Purchased:   

Initial Purchaser

    Principal Amount of Notes Purchased
   Deutsche Bank AG, Singapore Branch    US$350,000,000
   Australia and New Zealand Banking Group Limited    US$100,000,000
   Bank of Communications Co., Ltd. Macau Branch    US$12,500,000
   BOCI Asia Limited    US$12,500,000
   Industrial and Commercial Bank of China (Macau) Limited    US$12,500,000
  

Mizuho Securities Asia

Limited

    US$12,500,000

Listing:

   

Approval-in-principle has been obtained from the Singapore Exchange Securities Trading Limited (“SGX-ST”) for the listing and quotation of the Notes on the Official List of the SGX-ST

Trustee, Paying Agent, Registrar and Transfer Agent:   

Deutsche Bank Trust Company Americas

In addition to reflecting the information set forth above, the Preliminary Offering Memorandum is hereby supplemented, amended and modified as follows (page references are to page numbers in the Preliminary Offering Memorandum), which reflect certain recent developments and other updated information. Any conforming amendments or modifications within the Preliminary Offering Memorandum as a result of the following amendments or modifications have not been repeated in this Pricing Supplement (unless otherwise specified, additions are shown in double-underline and deletions are shown in strikethrough):

The section “Use of Proceeds” on page 43 of the Preliminary Offering Memorandum is amended by this Pricing Supplement as follows:

We estimate that the net proceeds from this Offering will be approximately US$493.2 million after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this Offering to make a partial repayment of the principal amount outstanding under the 2015 Revolving Credit Facility.

The section “Capitalization” on page 45 of the Preliminary Offering Memorandum is amended by the Pricing Supplement by being replaced in its entirety with the following:

The following table sets out the cash and cash equivalents, indebtedness and capitalization of Melco Resorts Finance and its subsidiaries as of December 31, 2018 on an actual basis and as adjusted to give effect to the following:

 

  •  

the issuance of US$500 million aggregate principal amount of the Notes offered hereby; and

 

  •  

application of the net proceeds of the Notes to make a partial repayment of the principal amount outstanding under the 2015 Revolving Credit Facility.

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds” and our consolidated financial statements prepared in accordance with U.S. GAAP, the related notes and other financial information contained elsewhere in this offering memorandum.

     As of December 31, 2018  
     Actual     As Adjusted  
     (in thousands of US$)  

Cash and cash equivalents

      882,989       882,989  
  

 

 

    

 

 

  

Indebtedness:

     

2015 Credit Facilities, net(1)

      1,471,466       978,266  

2017 Notes, net

      977,096       977,096  

The Notes offered hereby(2)

      —       500,000  

Capital lease obligations

      47       47  

Advance from an affiliated company

      1,953       1,953  
  

 

 

    

 

 

  

Total indebtedness

      2,450,562       2,457,362  
  

 

 

    

 

 

  

Shareholder’s Equity:

     

Ordinary shares at US$0.01 par value per share

      —       —  

Additional paid-in capital

      1,849,785       1,849,785  

Accumulated other comprehensive losses

      (15,162 )      (15,162 ) 

Retained earnings(3)

      387,064       380,264  
  

 

 

    

 

 

  

Total shareholder’s equity

      2,221,687       2,214,887  
  

 

 

    

 

 

  

Total capitalization

      4,672,249       4,672,249  
  

 

 

    

 

 

  

 

(1)

As of December 31, 2018, the outstanding principal amounts under 2015 Credit Facilities and 2017 Notes were US$1,475.9 million and US$1,000 million, respectively. The amounts presented in the above table were net of unamortized deferring financing costs and original issue premiums.

(2)

Reflects the principal amount of the Notes issue in this Offering.

(3)

Assumes the estimated fees and expenses related to this Offering, which may be capitalized as deferred financing costs under U.S. GAAP, are instead recognized as expenses in the consolidated statements of operations.

The Company has prepared the Preliminary Offering Memorandum to which this communication relates. Before you invest, you should read the Preliminary Offering Memorandum and the contents of this pricing supplement for more complete information about the Issuer and this offering. You should already have a copy of the Preliminary Offering Memorandum, but the Initial Purchasers will arrange to send you another copy, if you request it.

THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY NOTES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. THE NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, OR ANY OTHER JURISDICTION IN THE UNITED STATES.

Singapore Securities and Futures Act Product Classification: Solely for the purposes of its obligations pursuant to sections 309B(1)(a) and 309B(1)(c) of the Securities and Futures Act (Chapter 289 of Singapore) (the “SFA”), the Issuer has determined, and hereby notifies all relevant persons (as defined in Regulation 3(b) of the Securities and Futures (Capital Markets Products) Regulations 2018 (the “SF (CMP) Regulations”) that the Notes are “prescribed capital markets products” (as defined in the SF (CMP) Regulations) and “Excluded Investment Products” (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

EX-4.28

Exhibit 4.28

 

  CLAYTON UTZ

 

Share sale agreement

CPH Crown Holdings Pty Limited ACN 603 296 804

Seller

Melco Resorts & Entertainment Limited

Buyer

Clayton Utz

Level 15 1 Bligh Street

Sydney NSW 2000

GPO Box 9806

Sydney NSW 2001

 

Tel

    +61 2 9353 4000

Fax

    +61 2 8220 6700

www.claytonutz.com

  CLAYTON UTZ

 

Contents

 

1.

    Definitions and interpretation      2  
   1.1    Definitions      2  
   1.2    General rules of interpretation      4  
   1.3    Relationship between the parties      5  

2.

    Sale and purchase of Shares      5  
   2.1    Sale and Purchase of First Tranche Shares      5  
   2.2    Sale and Purchase of Second Tranche Shares      5  

3.

    Period before completion      5  

4.

    Completion      5  
   4.1    First Tranche Completion      5  
   4.2    Second Tranche Completion      7  
   4.3    Buyer liable for its obligations and obligations of Nominee(s)      9  

5.

    Dividend entitlements      9  

6.

    Warranties      9  
   6.1    Seller Warranties      9  
   6.2    Reliance      9  
   6.3    Adjustment      10  
   6.4    Buyer Warranties      10  

7.

    Confidentiality      10  
   7.1    No announcement or other disclosure of transaction      10  
   7.2    Permitted disclosure      10  
   7.3    ASX and other disclosure      10  

8.

    GST      11  
   8.1    Interpretation      11  
   8.2    Reimbursements and similar payments      11  
   8.3    GST payable      11  
   8.4    Variation to GST payable      11  

9.

    Notices      11  
   9.1    How notice to be given      11  
   9.2    When notice taken to be received      12  
   9.3    Notices sent by more than one method of communication      13  

10.

    Entire agreement      14  

11.

    General      14  
   11.1    Amendments      14  
   11.2    Assignment      14  
   11.3    Consents      14  
   11.4    Counterparts      14  
   11.5    Costs      14  
   11.6    Further acts and documents      14  
   11.7    Stamp duties      14  
   11.8    Operation of indemnities      15  
   11.9    Waivers      15  

12.

    Governing law and jurisdiction      15  
   12.1    Governing law and jurisdiction      15  

Schedule 1 Seller Warranties

      17  

Schedule 2 — Buyer Warranties

      19  

ANNEXURE A — Nominee Deed Poll

      24  

 

 

 

  CLAYTON UTZ

 

Share sale agreement

 

 

 

Date

30 May 2019

 

Parties

CPH Crown Holdings Pty Limited ACN 603 296 804 of ‘Liberty Place’, Level 39, 161 Castlereagh Street Sydney NSW 2000 (Seller)

 

  

Melco Resorts & Entertainment Limited of c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands (Buyer)

Background

 

A.

The Seller owns the Shares, being 135,350,000 ordinary shares in the capital of the Company.

 

B.

The Seller wishes to sell the Shares and the Buyer (or its Nominee) wishes to buy the Shares on the terms and conditions of this agreement.

Operative provisions

 

 

 

1.

Definitions and interpretation

 

1.1

Definitions

In this agreement:

Affiliate means, in relation to a person:

 

  (a)

an Associate of that person;

 

  (b)

an entity (such as a natural person, body corporate, partnership or the trustee of a trust) that person Controls;

 

  (c)

an entity (such as a natural person, body corporate, partnership or the trustee of a trust) that Controls that person; and

 

  (d)

an entity (such as a natural person, body corporate, partnership or the trustee of a trust) that is controlled by an entity that Controls that person.

ASIC means the Australian Securities and Investments Commission.

Associate has the meaning given in the Corporations Act.

ASX means the Australian Securities Exchange or ASX Limited ACN 008 624 691, as the context requires.

Business Day means a day that is not a Saturday, Sunday or public holiday and on which banks are open for business generally in each of New South Wales, Australia, the People’s Republic of China and the Hong Kong and Macau Special Administrative Regions of the People’s Republic of China.

Buyer Warranties means the warranties set out in Schedule 2.

 

 

Share sale agreement

  CLAYTON UTZ

 

Company means Crown Resorts Limited ACN 125 709 953.

Control has the meaning given in section 50AA of the Corporations Act.

Corporations Act means the Corporations Act 2001 (Cth).

Encumbrance means a mortgage, charge, pledge, lien, encumbrance, security interest, title retention, preferential right, trust arrangement, contractual right of set-off, or any other security agreement or arrangement in favour of any person, whether registered or unregistered, including any Security Interest.

Excluded Share has the meaning given in clause 1.3(a).

First Tranche Completion means the completion of the sale and purchase of the First Tranche Shares in accordance with clause 4.1.

First Tranche Completion Date has the meaning given in clause 4.1(a).

First Tranche Defaulting Party has the meaning given in clause 4.1(f).

First Tranche Nominee has the meaning given in clause 4.1(b).

First Tranche Purchase Price means $879,775,000.

First Tranche Shares means 67,675,000 Shares.

GST has the meaning given in the GST Act.

GST Act means the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

Indemnified Losses means, in relation to any fact, matter or circumstance, all losses, costs, charges, damages, expenses, penalties and other liabilities arising out of or in connection with that fact, matter or circumstance including all legal and other professional expenses on a solicitor-client basis incurred in connection with investigating, disputing, defending or settling any claim, action, demand or proceeding relating to that fact, matter or circumstance (including any claim, action, demand or proceeding based on the terms of this agreement).

Nominee means any one or more Related Bodies Corporate of the Buyer, who is nominated by the Buyer as the First Tranche Nominee or the Second Tranche Nominee.

Nominee Deed Poll means the deed poll to be entered into by a Nominee nominated by the Buyer under this agreement in the form set out in Annexure A.

Non First Tranche Defaulting Party has the meaning given in clause 4.1(f).

Non Second Tranche Defaulting Party has the meaning given in clause 4.2(f).

PPSA means the Personal Property Securities Act 2009 (Cth).

Recipient has the meaning given in clause 8.3.

Regulatory Authority means:

 

  (a)

any government or local authority and any department, minister or agency of any government; and

 

  (b)

any other authority, agency, commission or similar entity having powers or jurisdiction under any law or regulation or the listing rules of any recognised stock or securities exchange.

 

 

Share sale agreement

  CLAYTON UTZ

 

Related Body Corporate has the meaning given to it in the Corporation Act.

Security Interest has the meaning given in section 12 of the PPSA.

Second Tranche Completion means the completion of the sale and purchase of the Second Tranche Shares in accordance with clause 4.2.

Second Tranche Completion Date has the meaning given in clause 4.2(a).

Second Tranche Defaulting Party has the meaning given in clause 4.2(f).

Second Tranche Nominee has the meaning given in clause 4.2(b).

Second Tranche Purchase Price means $879,775,000.

Second Tranche Shares means 67,675,000 Shares.

Seller Warranties means the warranties set out in Schedule 1.

Shares means the 135,350,000 ordinary shares in the capital of the Company (each of which is a Share).

Supplier has the meaning given in clause 8.3.

Warranties means the Seller Warranties and the Buyer Warranties.

 

1.2

General rules of interpretation

In this agreement headings are for convenience only and do not affect interpretation and, unless the contrary intention appears:

 

  (a)

a word importing the singular includes the plural and vice versa, and a word of any gender includes the corresponding words of any other gender;

 

  (b)

the word including or any other form of that word is not a word of limitation;

 

  (c)

if a word or phrase is given a defined meaning, any other part of speech or grammatical form of that word or phrase has a corresponding meaning;

 

  (d)

a reference to a person includes an individual, the estate of an individual, a corporation, a Regulatory Authority, an incorporated or unincorporated association or parties in a joint venture, a partnership and a trust;

 

  (e)

a reference to a party includes that party’s executors, administrators, successors and permitted assigns, including persons taking by way of novation and, in the case of a trustee, includes any substituted or additional trustee;

 

  (f)

a reference to a document or a provision of a document is to that document or provision as varied, novated, ratified or replaced from time to time;

 

  (g)

a reference to this agreement is to this agreement as varied, novated, ratified or replaced from time to time;

 

  (h)

a reference to an agency or body; if that agency or body ceases to exist or is reconstituted, renamed or replaced or has its powers or function removed (obsolete body), means the agency or body which performs most closely the functions of the obsolete body;

 

  (i)

a reference to a party, clause, schedule, exhibit, attachment or annexure is a reference to a party, clause, schedule, exhibit, attachment or annexure to or of this agreement, and a reference to this agreement includes all schedules, exhibits, attachments and annexures to it;

 

 

Share sale agreement

  CLAYTON UTZ

 

  (j)

a reference to a statute includes any regulations or other instruments made under it (delegated legislation) and a reference to a statute or delegated legislation or a provision of either includes consolidations, amendments, re-enactments and replacements;

 

  (k)

a reference to $ or dollar is to Australian currency; and

 

  (l)

this agreement must not be construed adversely to a party just because that party prepared it or caused it to be prepared.

 

1.3

Relationship between the parties

 

  (a)

For the avoidance of doubt, there is no agreement, arrangement or understanding between the parties in relation to any share in the capital of the Company held by the Seller or any of its Affiliates that is not a Share (Excluded Share) (whether with respect to the voting or disposal of any Excluded Share, or otherwise).

 

  (b)

Without limiting clause 1.3(a), nothing in this agreement:

 

  (i)

gives the Buyer or its Nominee any right or interest of whatsoever nature in any Excluded Share;

 

  (ii)

in any way, or to any extent, restricts the ability of the Seller or any of its Affiliates to deal in, dispose of or exercise rights attaching to any Excluded Share.

 

 

 

2.

Sale and purchase of Shares

 

2.1

Sale and Purchase of First Tranche Shares

The Seller must sell, and the Buyer must buy (or procure that its Nominee buy), the First Tranche Shares for the First Tranche Purchase Price free from all Encumbrances and together with all rights attaching or accruing to the First Tranche Shares after the date of this agreement on the terms and conditions of this agreement. Completion of the sale and purchase of the First Tranche Shares will take place on the First Tranche Completion Date.

 

2.2

Sale and Purchase of Second Tranche Shares

The Seller must sell, and the Buyer must buy (or procure that its Nominee buy), the Second Tranche Shares for the Second Tranche Purchase Price free from all Encumbrances and together with all rights attaching or accruing to the Second Tranche Shares after the date of this agreement on the terms and conditions of this agreement. Completion of the sale and purchase of the Second Tranche Shares will take place on the Second Tranche Completion Date.

 

 

 

3.

Period before completion

From the date of this agreement until such time as Second Tranche Completion has occurred, the Seller must not dispose of or create any Encumbrance over any of the Shares (or any interest in any of them).

 

 

 

4.

Completion

 

4.1

First Tranche Completion

 

 

Share sale agreement

  CLAYTON UTZ

 

  (a)

First Tranche Completion must take place on the date that is 5 Business Days after the date of this agreement (which is currently expected to be 6 June 2019) (First Tranche Completion Date) at the time and place agreed by the parties in writing or at any other place, date or time as the Seller and the Buyer agree in writing.

 

  (b)

If the First Tranche Shares are to be purchased by a Nominee of the Buyer (First Tranche Nominee), the Buyer must, at least 2 Business Days before First Tranche Completion:

 

  (i)

give the Seller written notice specifying the name and the address of that Nominee; and

 

  (ii)

give, or procure that the First Tranche Nominee give, the Seller the Nominee Deed Poll duly executed by the First Tranche Nominee under which the First Tranche Nominee agrees to be bound by each of the Buyer’s obligations in relation to the First Tranche Shares under this agreement.

 

  (c)

At First Tranche Completion the Seller must deliver to the Buyer or the First Tranche Nominee (as the case may be):

 

  (i)

completed transfers of the First Tranche Shares in favour of the Buyer or the First Tranche Nominee as transferee duly executed by the registered holder as transferor including the Seller’s securityholder reference number(s) in respect of all of the First Tranche Shares, in a form acceptable to the Company’s share registry; and

 

  (ii)

all other documents as may be reasonably required to register the Buyer or the First Tranche Nominee as the registered holder of the First Tranche Shares.

 

  (d)

At First Tranche Completion the Buyer must pay, or procure that the First Tranche Nominee pays, the First Tranche Purchase Price to the Seller by:

 

  (i)

electronic funds transfer to an account with an Australian bank specified by written notice given from the Seller to the Buyer on the date of this agreement; or

 

  (ii)

otherwise, unendorsed bank cheque drawn on an Australian bank.

 

  (e)

The obligations of the parties under clause 4.1(c) and clause 4.1(d) are interdependent and must be performed, as nearly as possible, simultaneously. If any obligation specified in clause 4.1(c) and clause 4.1(d) is not performed on First Tranche Completion then, without prejudice to any other rights of the parties, First Tranche Completion is taken not to have occurred and any document delivered, or payment made, under this clause 4.1 must be returned to the party that delivered it or paid it.

 

  (f)

If First Tranche Completion does not occur in accordance with this clause 4.1 because of the failure of any party (First Tranche Defaulting Party) to satisfy any of its obligations under this clause 4.1 then:

 

  (i)

the Buyer or the First Tranche Nominee (where the First Tranche Defaulting Party is the Seller); or

 

  (ii)

the Seller (where the First Tranche Defaulting Party is the Buyer or the First Tranche Nominee),

(in either case the Non First Tranche Defaulting Party) may give the First Tranche Defaulting Party a notice requiring the First Tranche Defaulting Party to satisfy those obligations within a period of 5 Business Days after the date of the notice and specifying that time is of the essence in relation to that notice.

 

 

Share sale agreement

  CLAYTON UTZ

 

  (g)

If the First Tranche Defaulting Party fails to comply with a notice given under clause 4.1(f), the Non First Tranche Defaulting Party may without limiting its other rights or remedies available under this agreement or at law:

 

  (i)

immediately terminate this agreement, in which case the Non First Tranche Defaulting Party may seek damages for breach of this agreement; or

 

  (ii)

seek specific performance of this agreement, in which case:

 

  A.

if specific performance is obtained, the Non First Tranche Defaulting Party may also seek damages for breach of this agreement; and

 

  B.

if specific performance is not obtained, the Non First Tranche Defaulting Party may then terminate this agreement and may seek damages for breach of this agreement.

 

  (h)

Beneficial ownership of and risk in the First Tranche Shares will pass from the Seller to the Buyer or the First Tranche Nominee (as applicable) on First Tranche Completion.

 

4.2

Second Tranche Completion

 

  (a)

Second Tranche Completion must take place at:

 

  (i)

the earlier of:

 

  A.

30 September 2019, at the time and place agreed by the parties in writing; and

 

  B.

an earlier date than 30 September 2019 specified by the Buyer, and at a time and place on that date agreed by the parties in writing, provided the Buyer has given the Seller at least 2 Business Days’ notice of that earlier date; or

 

  (ii)

at any other place, date or time as the Seller and the Buyer agree in writing,

(Second Tranche Completion Date).

 

  (b)

If the Second Tranche Shares are to be purchased by a Nominee of the Buyer (Second Tranche Nominee), the Buyer must, at least 2 Business Days before Second Tranche Completion:

 

  (i)

give the Seller written notice specifying the name and the address of that Nominee; and

 

  (ii)

give, or procure that the Second Tranche Nominee give, the Seller the Nominee Deed Poll duly executed by the Second Tranche Nominee under which the Second Tranche Nominee agrees to be bound by each of the Buyer’s obligations in relation to the Second Tranche Shares under this agreement.

 

  (c)

At Second Tranche Completion the Seller must deliver to the Buyer or the Second Tranche Nominee (as the case may be):

 

 

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  (i)

completed transfers of the Second Tranche Shares in favour of the Buyer or the Second Tranche Nominee as transferee duly executed by the registered holder as transferor including the Seller’s securityholder reference number(s) in respect of all of the Second Tranche Shares, in a form acceptable to the Company’s share registry; and

 

  (ii)

all other documents as may be reasonably required to register the Buyer or the Second Tranche Nominee as the registered holder of the Second Tranche Shares.

 

  (d)

At Second Tranche Completion the Buyer must pay, or procure that the Second Tranche Nominee pays, the Second Tranche Purchase Price to the Seller by:

 

  (i)

electronic funds transfer to an account with an Australian bank specified by written notice given from the Seller to the Buyer at least 2 Business Days before Second Tranche Completion; or

 

  (ii)

otherwise, unendorsed bank cheque drawn on an Australian bank.

 

  (e)

The obligations of the parties under clause 4.2(c) and clause 4.2(d) are interdependent and must be performed, as nearly as possible, simultaneously. If any obligation specified in clause 4.2(c) and clause 4.2(d) is not performed on Second Tranche Completion then, without prejudice to any other rights of the parties, Second Tranche Completion is taken not to have occurred and any document delivered, or payment made, under this clause 4.2 must be returned to the party that delivered it or paid it.

 

  (f)

If Second Tranche Completion does not occur in accordance with this clause 4.2 because of the failure of any party (Second Tranche Defaulting Party) to satisfy any of its obligations under this clause 4.2 then:

 

  (i)

the Buyer or the Second Tranche Nominee (where the Second Tranche Defaulting Party is the Seller); or

 

  (ii)

the Seller (where the Second Tranche Defaulting Party is the Buyer or the Second Tranche Nominee),

(in either case the Non Second Tranche Defaulting Party) may give the Second Tranche Defaulting Party a notice requiring the Second Tranche Defaulting Party to satisfy those obligations within a period of 5 Business Days after the date of the notice and specifying that time is of the essence in relation to that notice.

 

  (g)

If the Second Tranche Defaulting Party fails to comply with a notice given under clause 4.2(f), the Non Second Tranche Defaulting Party may without limiting its other rights or remedies available under this agreement or at law:

 

  (i)

immediately terminate this agreement, in which case the Non Second Tranche Defaulting Party may seek damages for breach of this agreement; or

 

  (ii)

seek specific performance of this agreement, in which case:

 

  A.

if specific performance is obtained, the Non Second Tranche Defaulting Party may also seek damages for breach of this agreement; and

 

  B.

if specific performance is not obtained, the Non Second Tranche Defaulting Party may then terminate this agreement and may seek damages for breach of this agreement.

 

 

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  (h)

Beneficial ownership of and risk in the Second Tranche Shares will pass from the Seller to the Buyer or the Second Tranche Nominee (as applicable) on Second Tranche Completion.

 

4.3

Buyer liable for its obligations and obligations of Nominee(s)

Notwithstanding any other provision of this agreement, the Buyer:

 

  (a)

is unconditionally and irrevocably liable for its obligations under this agreement; and

 

  (b)

guarantees, and is unconditionally and irrevocably liable for, the obligations of any Nominee appointed under this clause 4 and under any agreement entered into with the Seller pursuant to clauses 4.1(b)(ii) and 4.2(b)(ii).

If any Nominee appointed by the Buyer under this agreement breaches an obligation under any agreement entered into with the Seller under clauses 4.1(b)(ii) and 4.2(b)(ii), that breach will be deemed to also be a breach by the Buyer of this agreement (and the Seller will be entitled to all rights and remedies available to it under this agreement against the Buyer as if the breach by the Nominee had been a breach by the Buyer in addition to the rights it has against the Nominee).

 

 

 

5.

Dividend entitlements

Notwithstanding any other provision of this agreement, the parties agree that:

 

  (a)

the Buyer or its Nominee (as the case may be) is entitled to any dividend, distribution, return of capital, paid or credited amount, transferred property or similar, announced and/or paid in respect of the Second Tranche Shares at any time after the date of this agreement (each an Entitlement).

 

  (b)

to the extent the Buyer or its Nominee (as the case may be) is entitled to an Entitlement under paragraph (a) above and that Entitlement is received by the Seller, the Second Tranche Purchase Price will be reduced by an amount equal to the amount of the Entitlement. For the avoidance of doubt, the amount or value of any franking credit that is attached to a dividend or other distribution does not form part of, and is excluded from, the Entitlement of the Buyer or its Nominee (as the case may be) for all purposes including for the purposes of reducing the Second Tranche Purchase Price under this paragraph (b).

 

 

 

6.

Warranties

 

6.1

Seller Warranties

 

  (a)

The Seller warrants to the Buyer that each Warranty is correct and not misleading as at the date of execution of this agreement, as at the time immediately prior to First Tranche Completion and as at the time immediately prior to Second Tranche Completion, except where it is stated as being given on a particular date, in which case, the Seller warrants to the Buyer that it is correct and not misleading as at that date.

 

  (b)

The Buyer acknowledges that it has made, and relies on, its own independent searches, investigations and enquiries in relation to the Company, and has received independent professional advice in relation to the acquisition of the Shares and the terms of this agreement.

 

6.2

Reliance

 

  (a)

Each party acknowledges that each other party has entered into this agreement in reliance on the Warranties given to that party.

 

 

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  (b)

Each party acknowledges that, except for the Warranties, no party nor their respective Affiliates nor any of their respective officers, employees or advisers makes or has made any warranty or representation (whether express, implied, written, oral or otherwise) to any person. To the fullest extent permitted by law, every warranty or representation (whether express, implied, written, oral or otherwise) other than the Warranties is excluded.

 

6.3

Adjustment

Any payment made to the Buyer for a breach of a Warranty will be treated as an adjustment in the purchase price of the Shares.

 

6.4

Buyer Warranties

The Buyer warrants to the Seller that each Buyer Warranty is correct and not misleading as at the date of execution of this agreement, as at the time immediately prior to First Tranche Completion and as at the time immediately prior to Second Tranche Completion.

 

 

 

7.

Confidentiality

 

7.1

No announcement or other disclosure of transaction

Except as permitted by clause 7.2 or 7.3, each party must keep confidential the existence of and the terms of this agreement and all negotiations between the parties in relation to the subject matter of this agreement.

 

7.2

Permitted disclosure

Nothing in this agreement prevents a person from disclosing matters referred to in clause 7.1:

 

  (a)

if disclosure is required to be made by law or the rules of a recognised stock or securities exchange and the party whose obligation it is to keep matters confidential or procure that those matters are kept confidential has before disclosure is made notified each other party of the requirement to disclose and, where the relevant law or rules permit and where practicable to do so, given each other party a reasonable opportunity to comment on the requirement for and proposed contents of the proposed disclosure;

 

  (b)

to any professional adviser of a party who has been retained to advise in relation to the transactions contemplated by this agreement or any auditor of a party who reasonably requires to know;

 

  (c)

with the prior written approval of the party other than the party whose obligation it is to keep those matters confidential or procure that those matters are kept confidential; or

 

  (d)

where the matter has come into the public domain otherwise than as a result of a breach by any party of this agreement.

 

7.3

ASX and other disclosure

 

  (a)

The parties acknowledge and agree that a copy of this agreement will be attached to:

 

  (i)

a substantial holder notice (ASIC Form 603) to be lodged with the Company and ASX by or on behalf of the Buyer and certain of its Affiliates within 2 Business Days following the date of this agreement; and

 

 

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  (ii)

a substantial holder notice (ASIC Form 604) will be lodged with the Company and ASX by or on behalf of the Seller and certain of its Affiliates within 2 Business Days following the First Completion Date and the Second Completion Date.

 

  (b)

Each party must, to the extent practicable, give each other party a reasonable opportunity to review and comment on any announcement, communication, media release or similar document in connection with this agreement, the subject matter of this agreement or any negotiations or discussions between the parties in relation to this agreement or the subject matter of this agreement.

 

 

 

8.

GST

 

8.1

Interpretation

The parties agree that:

 

  (a)

except where the context suggests otherwise, terms used in this clause 8 have the meanings given to those terms by the GST Act (as amended from time to time);

 

  (b)

any part of a supply that is treated as a separate supply for GST purposes (including attributing GST payable to tax periods) will be treated as a separate supply for the purposes of this clause 8; and

 

  (c)

any consideration that is specified to be inclusive of GST must not be taken into account in calculating the GST payable in relation to a supply for the purpose of this clause.

 

8.2

Reimbursements and similar payments

Any payment or reimbursement required to be made under this agreement that is calculated by reference to a cost, expense, or other amount paid or incurred will be limited to the total cost, expense or amount less the amount of any input tax credit to which an entity is entitled for the acquisition to which the cost, expense or amount relates.

 

8.3

GST payable

If GST is payable in relation to a supply made under or in connection with this agreement then any party (Recipient) that is required to provide consideration to another party (Supplier) for that supply must pay an additional amount to the Supplier equal to the amount of that GST at the same time as other consideration is to be provided for that supply or, if later, within 5 Business Days of the Supplier providing a valid tax invoice to the Recipient.

 

8.4

Variation to GST payable

If the GST payable in relation to a supply made under or in connection with this agreement varies from the additional amount paid by the Recipient under clause 8.3 then the Supplier will provide a corresponding refund or credit to, or will be entitled to receive the amount of that variation from, the Recipient. Any ruling, advice, document or other information received by the Recipient from the Australian Taxation Office in relation to any supply made under this agreement will be conclusive as to the GST payable in relation to that supply. Any payment, credit or refund under this paragraph is deemed to be a payment, credit or refund of the additional amount payable under clause 8.3.

 

 

 

9.

Notices

 

9.1

How notice to be given

 

 

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Each communication (including each notice, consent, approval, request and demand) under or in connection with this agreement:

 

  (a)

must be given to a party:

 

  (i)

using one of the following methods (and no other method) namely, hand delivery, courier service, prepaid express post, fax or email; and

 

  (ii)

using the address or other details for the party set out below (or as otherwise notified by that party to each other party from time to time under this clause 9):

 

A.

   

if to the Seller:

  

Address:

    ‘Liberty Place’, Level 39, 161 Castlereagh Street, Sydney NSW 2000
  

Fax:

    (02) 9126 3769
  

Email:

    kandrews@cph.com.au
  

Attention:

    Company Secretary

B.

   

if to the Buyer:

  

Address:

    c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1- 9005, Cayman Islands)
      with copy to:
     

Legal Department

37/F, The Centrium, 60 Wyndham Street, Central, Hong Kong

  

Fax:

    +853 8867 0632
  

Email:

    MCO-COMSEC@melco-resorts.com
  

Attention:

    Company Secretary

 

  (b)

must be in legible writing and in English;

 

  (c)

(in the case of communications other than email) must be signed by the sending party or by a person duly authorised by the sending party;

 

  (d)

(in the case of email) must:

 

  (i)

state the name of the sending party or a person duly authorised by the sending party and state that the email is a communication under or in connection with this agreement; and

 

  (ii)

if the email contains attachments, ensure the attachments are in PDF or other non-modifiable format the receiving party can open, view and download at no additional cost,

and communications sent by email are taken to be signed by the named sender.

 

9.2

When notice taken to be received

 

 

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Without limiting the ability of a party to prove that a notice has been given and received at an earlier time, each communication (including each notice, consent, approval, request and demand) under or in connection with this agreement is taken to be given by the sender and received by the recipient:

 

  (e)

(in the case of delivery by hand or courier service) on delivery;

 

  (f)

(in the case of prepaid express post sent to an address in the same country) on the second Business Day after the date of posting;

 

  (g)

(in the case of prepaid express post sent to an address in another country) on the fourth Business Day after the date of posting;

 

  (h)

(in the case of fax) at the time shown on the transmission confirmation report produced by the fax machine from which it was sent showing that the whole fax was sent to the recipient’s fax number,

 

  (i)

(in the case of email, whether or not containing attachments) the earlier of:

 

  (i)

the time sent (as recorded on the device from which the sender sent the email) unless, within 4 hours of sending the email, the party sending the email receives an automated message that the email has not been delivered;

 

  (ii)

receipt by the sender of an automated message confirming delivery; and

 

  (iii)

the time of receipt as acknowledged by the recipient (either orally or in writing),

provided that:

 

  (j)

the communication will be taken to be so given by the sender and received by the recipient regardless of whether:

 

  (i)

the recipient is absent from the place at which the communication is delivered or sent;

 

  (ii)

the communication is returned unclaimed; and

 

  (iii)

(in the case of email) the email or any of its attachments is opened by the recipient;

 

  (k)

if the communication specifies a later time as the time of delivery then that later time will be taken to be the time of delivery of the communication; and

 

  (l)

if the communication would otherwise be taken to be received on a day that is not a working day or:

 

  (i)

in the case of the Seller, after 5.00 pm (Sydney time), it is taken to be received at 9.00 am (Sydney time) on the next working day; and

 

  (ii)

in the case of the Buyer, after 5,00pm (Hong Kong time), it is taken to be received at 9.00am (Hong Kong time) on the next working day,

(where “working day” meaning a day that is not a Saturday, Sunday or public holiday and on which banks are open for business generally, in the place to which the communication is delivered or sent).

 

9.3

Notices sent by more than one method of communication

 

 

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If a communication delivered or sent under this clause 9 is delivered or sent by more than one method, the communication is taken to be given by the sender and received by the recipient whenever it is taken to be first received in accordance with clause 9.3.

 

 

 

10.

Entire agreement

This agreement constitutes the entire agreement between the parties in relation to its subject matter including the sale and purchase of the Shares and supersedes all previous agreements and understandings between the parties in relation to its subject matter.

 

 

 

11.

General

 

11.1

Amendments

This agreement may only be varied by a document signed by or on behalf of each party.

 

11.2

Assignment

A party cannot assign or otherwise transfer any of its rights under this agreement without the prior consent of each other party.

 

11.3

Consents

Unless this agreement expressly provides otherwise, a consent under this agreement may be given or withheld in the absolute discretion of the party entitled to give the consent and to be effective must be given in writing.

 

11.4

Counterparts

This agreement may be executed in any number of counterparts and by the parties on separate counterparts. Each counterpart constitutes an original of this agreement, and all together constitute one agreement.

 

11.5

Costs

Except as otherwise provided in this agreement, each party must pay its own costs and expenses in connection with negotiating, preparing, executing and performing this agreement.

 

11.6

Further acts and documents

Each party must promptly do, and procure that its employees and agents promptly do, all further acts and execute and deliver all further documents (in form and content reasonably satisfactory to that party) required by law or reasonably requested by another party to give effect to this agreement.

 

11.7

Stamp duties

The Buyer:

 

  (a)

must pay, or procure that its Nominee pays, all stamp duties, other duties and similar taxes, together with any related fees, penalties, fines, interest or statutory charges, in respect of this agreement, the performance of this agreement and each transaction effected or contemplated by or made under this agreement; and

 

  (b)

indemnifies the Seller and each of its Affiliates (other than those referred to in paragraph (a) of the definition of Affiliates) (Relevant Affiliates) against, or must procure that its Nominee indemnifies the Seller and each of its Relevant Affiliates against, and must pay, or procure that its Nominee pays, to the Seller on demand the amount of, any Indemnified Loss suffered or incurred by the Seller or any of its Relevant Affiliates arising out of or in connection with any delay or failure to comply with clause 11.7(a).

 

 

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11.8

Operation of indemnities

Without limiting any other provision of this agreement, the parties agree that:

 

  (a)

each indemnity in this agreement is a continuing obligation, separate and independent from the other obligations of the parties, and survives termination, completion or expiration of this agreement; and

 

  (b)

it is not necessary for a party to incur expense or to make any payment before enforcing a right of indemnity conferred by this agreement.

 

11.9

Waivers

Without prejudice to any other provision of this agreement, the parties agree that:

 

  (a)

failure to exercise or enforce, or a delay in exercising or enforcing, or the partial exercise or enforcement of, a right, power or remedy provided by law or under this agreement by a party does not preclude, or operate as a waiver of, the exercise or enforcement, or further exercise or enforcement, of that or any other right, power or remedy provided by law or under this agreement;

 

  (b)

a waiver given by a party under this agreement is only effective and binding on that party if it is given or confirmed in writing by that party; and

 

  (c)

no waiver of a breach of a term of this agreement operates as a waiver of another breach of that term or of a breach of any other term of this agreement.

 

 

 

12.

Governing law and jurisdiction

 

12.1

Governing law and jurisdiction

 

  (a)

This agreement is governed by the law applying in New South Wales, Australia.

 

  (b)

Each party irrevocably submits to the non exclusive jurisdiction of the courts having jurisdiction in that state and the courts competent to determine appeals from those courts, with respect to any proceedings that may be brought at any time relating to this agreement and waives any objection it may have now or in the future to the venue of any proceedings, and any claim it may have now or in the future that any proceedings have been brought in an inconvenient forum, if that venue falls within this clause 12.1.

 

  (c)

The Buyer appoints:

 

  (i)

any Partner in the Sydney office of Clayton Utz of 1 Bligh Street, Sydney NSW 2000; or

 

  (ii)

any other Australian person who is nominated by the Buyer from time-to- time, provided the Buyer gives the Seller at least 5 Business Days prior written notice specifying the name and the Australian address of that person,

 

 

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as its agent to receive service of process for any proceedings arising out of or in connection with this document. The Buyer undertakes to maintain this appointment until termination of this document under clauses 4.1(g) and 4.2(g) and agrees that any such process served on that person is taken to be served on it.

 

 

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Schedule 1 Seller Warranties

 

 

 

1.

Seller

 

1.1

Capacity and authorisation

The Seller:

 

  (a)

is a company properly incorporated and validly existing under the laws of the country or jurisdiction of its incorporation; and

 

  (b)

has the legal right and full corporate power and capacity to:

 

  (i)

execute and deliver this agreement; and

 

  (ii)

perform its obligations under this agreement and each transaction effected by or made under this agreement.

 

1.2

Valid obligations

This agreement constitutes (or will when executed constitute) valid legal and binding obligations of the Seller and is enforceable against the Seller in accordance with its terms.

 

1.3

Breach or default

The execution, delivery and performance of this agreement by the Seller does not and will not result in a breach by the Seller of or constitute a default by the Seller under:

 

  (a)

any agreement to which the Seller is party;

 

  (b)

any provision of the constitution of the Seller; or

 

  (c)

any:

 

  (i)

order, judgment or determination of any court or Regulatory Authority; or

 

  (ii)

to the Seller’s knowledge as at the date of this agreement, any law or regulation,

by which the Seller is bound as at the date of this agreement.

 

1.4

Solvency

None of the following events has occurred in relation to the Seller:

 

  (a)

a receiver, receiver and manager, liquidator, provisional liquidator, administrator or trustee is appointed in respect of the Seller or any of its assets or anyone else is appointed who (whether or not an agent for the Seller) is in possession, or has control, of any of the Seller’s assets for the purpose of enforcing an Encumbrance;

 

  (b)

an event occurs that gives any person the right to seek an appointment referred to in paragraph (a);

 

  (c)

an application is made to court or a resolution is passed or an order is made for the winding up or dissolution of the Seller or an event occurs that would give any person the right to make an application of this type;

 

 

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  (d)

the Seller proposes or takes any steps to implement a scheme of arrangement or other compromise or arrangement with its creditors or any class of them;

 

  (e)

the Seller is declared or taken under any applicable law to be insolvent or the Seller’s board of directors resolves that the Seller is, or is likely to become at some future time, insolvent; or

 

  (f)

any person in whose favour the Seller has granted any Encumbrance becomes entitled to enforce any security under that Encumbrance or any floating charge under that Encumbrance crystallises.

 

 

 

2.

Shares

 

2.1

Ownership

 

  (a)

The Seller is the sole legal and beneficial owner of the Shares and has complete and unrestricted power and authority to sell the Shares to the Buyer free of any Encumbrance.

 

  (b)

The Shares are validly issued and fully paid up.

 

  (c)

As at the date of this agreement, the Shares represent 19.99% (rounded up to the nearest two decimal places) of the issued ordinary shares of the Company.

 

2.2

Third party rights

There is no Encumbrance, option, right of pre-emption, right of first or last refusal or other third party right over any of the Shares.

 

 

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Schedule 2 - Buyer Warranties

 

 

 

1.

The Buyer

 

1.1

Capacity and authorisation

The Buyer:

 

  (a)

is a company properly incorporated and validly existing under the laws of the country or jurisdiction of its incorporation; and

 

  (b)

has the legal right and full corporate power and capacity to:

 

  (i)

execute and deliver this agreement; and

 

  (ii)

perform its obligations under this agreement and each transaction effected by or made under this agreement.

 

1.2

Valid obligations

This agreement constitutes (or will when executed constitute) valid legal and binding obligations of the Buyer and is enforceable against the Buyer in accordance with its terms.

 

1.3

Breach or default

The execution, delivery and performance of this agreement by the Buyer does not and will not result in a breach by the Buyer of or constitute a default by the Buyer under:

 

  (a)

any agreement to which the Buyer is party;

 

  (b)

any provision of the constitution of the Buyer; or

 

  (c)

any:

 

  (i)

order, judgment or determination of any court or Regulatory Authority; or

 

  (ii)

to the Buyer’s knowledge as at the date of this agreement, any law or regulation,

by which the Buyer is bound as at the date of this agreement.

 

1.4

Solvency

None of the following events has occurred in relation to the Buyer:

 

  (a)

a receiver, receiver and manager, liquidator, provisional liquidator, administrator or trustee is appointed in respect of the Buyer or any of its assets or anyone else is appointed who (whether or not an agent for the Buyer) is in possession, or has control, of any of the Buyer’s assets for the purpose of enforcing an Encumbrance;

 

  (b)

an event occurs that gives any person the right to seek an appointment referred to in paragraph (a);

 

  (c)

an application is made to court or a resolution is passed or an order is made for the winding up or dissolution of the Buyer or an event occurs that would give any person the right to make an application of this type;

 

 

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  (d)

the Buyer proposes or takes any steps to implement a scheme of arrangement or other compromise or arrangement with its creditors or any class of them;

 

  (e)

the Buyer is declared or taken under any applicable law to be insolvent or the Buyer’s board of directors resolves that the Buyer is, or is likely to become at some future time, insolvent; or

 

  (f)

any person in whose favour the Buyer has granted any Encumbrance becomes entitled to enforce any security under that Encumbrance or any floating charge under that Encumbrance crystallises.

 

 

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Signed as an agreement.

 

Executed by CPH Crown Holdings Pty Limited

ACN 603 296 804 in accordance with section 127

of the Corporations Act 2001 (Cth):

     

 

/s/ Michael Johnston

     

 

/s/ Catherine Davies

Signature of director

   

Signature of company secretary/director

 

Michael Johnston

Director

   

 

Catherine Davies

Company Secretary

Full name of director

     

Full name of company secretary/director

 

 

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Signed for and on behalf of Melco Resorts &

Entertainment Limited by its authorised

signatory in the presence of:

         

 

/s/ Christy Law

     

 

/s/ Evan Winkler

Signature of witness

     

Signature of authorised signatory

 

Christy Law

     

 

Evan Winkler

Full name of witness

     

Full name of authorised signatory

 

 

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ANNEXURE A — Nominee Deed Poll

 

 

Share sale agreement

Nominee Deed Poll

 

Date

 

By

[Nominee] of [insert address] (Nominee)

 

In favour of

CPH Crown Holdings Pty Limited ACN 603 296 804 of ‘Liberty Place’, Level 39, 161 Castlereagh Street Sydney NSW 2000 (Seller)

Background

 

A

The Seller and Melco Resorts & Entertainment Limited (Buyer) have entered into a Share Sale Agreement dated 30 May 2019 (Share Sale Agreement) in relation to the sale and purchase of the Shares (as defined in the Share Sale Agreement).

 

B

Pursuant to clause [4.1 / 4.2] of the Share Sale Agreement, the Buyer nominates the Nominee to purchase the [First Tranche Shares / Second Tranche Shares] from the Seller.

 

C

The Nominee agrees to perform and be bound by each of the Buyer’s obligations in relation to the [First Tranche Shares / Second Tranche Shares] under the Share Sale Agreement on the terms and conditions of this Deed Poll.

Operative provisions

 

 

 

1.

Definitions and interpretation

 

1.1

Definitions

The following definitions apply in this document. Unless a contrary intention appears, capitalised terms used in this document (other than the terms defined in this clause 1.1) have the meaning given in the Share Sale Agreement.

Nominee Warranties means the warranties set out in Schedule 1.

 

1.2

General rules of interpretation

Clauses 1.2 and 1.3 of the Share Sale Agreement apply to this document as if set out in full in this document, mutatis mutandis.

 

 

 

2.

Undertaking

On and from the date of this document, the Nominee agrees to perform and be bound by each of the Buyer’s obligations in relation to the [First Tranche Shares / Second Tranche Shares] under the Share Sale Agreement (including, for the avoidance of doubt, the Buyer’s obligations in respect of [First Tranche Completion / Second Tranche Completion] in clause [4.1 / 4.2] of the Share Sale Agreement) as if it was the Buyer under the Share Sale Agreement.

 

 

 

3.

Acknowledgements

The Nominee acknowledges and agrees that:

 

  (a)

without limiting the Nominee’s obligations under this document, the Buyer continues to be unconditionally and irrevocably liable for its obligations under the Share Sale Agreement; and

 

 

  (b)

breach by the Nominee of any obligation under this document will be deemed to also be a breach by the Buyer of its corresponding obligations under the Share Sale Agreement and, in addition to the Seller’s rights against the Nominee under this document, the Seller will be entitled to all rights and remedies available to it against the Buyer under the Share Sale Agreement.

 

 

 

4.

Warranties

 

4.1

Nominee Warranties

The Nominee warrants to the Seller that each Nominee Warranty is correct and not misleading as at the date of execution of this agreement and as at the time immediately prior to [First Tranche Completion / Second Tranche Completion].

 

 

 

5.

Confidentiality

Clause 7 of the Share Sale Agreement applies to this document as if set out in full in this document, mutatis mutandis.

 

 

 

6.

Notices

 

6.1

How notice to be given

Each communication (including each notice, consent, approval, request and demand) under or in connection with this document:

 

  (a)

must be given to the Nominee:

 

  (i)

using one of the following methods (and no other method) namely, hand delivery, courier service, prepaid express post, fax or email; and

 

  (ii)

using the address or other details set out below (or as otherwise notified by the Nominee to the Seller from time to time under this clause 6):

 

Address:

    [insert]

Fax:

    [insert]

Email:

    [insert]

Attention:

    [insert]

 

  (b)

must be in legible writing and in English;

 

  (c)

(in the case of communications other than email) must be signed by the sending party or by a person duly authorised by the sending party;

 

  (d)

(in the case of email) must:

 

  (i)

state the name of the sending party or a person duly authorised by the sending party and state that the email is a communication under or in connection with this agreement; and

 

  (ii)

if the email contains attachments, ensure the attachments are in PDF or other non-modifiable format the receiving party can open, view and download at no additional cost,

 

 

and communications sent by email are taken to be signed by the named sender.

Clauses 9.2 and 9.3 of the Share Sale Agreement apply to this document as if set out in full in this document, mutatis mutandis.

 

 

 

7.

General

 

7.1

Deed Poll

This document operates as a deed poll in favour of the Seller and may be enforced by the Seller against the Nominee.

 

7.2

Amendments

This document may only be varied with the prior written consent of the Seller.

 

7.3

Assignment

The Nominee cannot assign or otherwise transfer any of its rights under this document without the prior consent of the Seller.

 

7.4

Consents

Unless this document expressly provides otherwise, a consent given in relation to this document may be given or withheld in the absolute discretion of the party entitled to give the consent and to be effective must be given in writing.

 

7.5

Further acts and documents

The Nominee must promptly do, and procure that its employees and agents promptly do, all further acts and execute and deliver all further documents (in form and content reasonably satisfactory to that party) required by law or reasonably requested by the Seller to give effect to this document.

 

 

 

8.

Governing law and jurisdiction

 

8.1

Governing law and jurisdiction

 

  (a)

This document is governed by the law applying in New South Wales, Australia.

 

  (b)

The Nominee irrevocably submits to the non exclusive jurisdiction of the courts having jurisdiction in that state and the courts competent to determine appeals from those courts, with respect to any proceedings that may be brought at any time relating to this agreement and waives any objection it may have now or in the future to the venue of any proceedings, and any claim it may have now or in the future that any proceedings have been brought in an inconvenient forum, if that venue falls within this clause 8.1.

 

  (c)

The Nominee appoints:

 

  (i)

any Partner in the Sydney office of Clayton Utz of 1 Bligh Street, Sydney NSW 2000; or

 

  (i)

any other Australian person who is nominated by the Buyer from time-to-time, provided the Buyer gives the Seller at least 5 Business Days prior written notice specifying the name and the Australian address of that person,

 

 

as its agent to receive service of process for any proceedings arising out of or in connection with this document. The Nominee undertakes to maintain this appointment until termination of the Share Sale Agreement under clauses 4.1(g) and 4.2(g) of the Share Sale Agreement and agrees that any such process served on that person is taken to be served on it.

 

 

EXECUTED as a DEED POLL

 

Signed for and on behalf of [Nominee] by its

authorised signatory in the presence of:

     

 

     

 

Signature of witness

     

Signature of authorised signatory

 

     

 

Full name of witness

     

Full name of authorised signatory

 

 

Schedule 1 — Nominee Warranties

 

 

 

1.

The Nominee

 

1.1

Capacity and authorisation

The Nominee:

 

  (a)

is a company properly incorporated and validly existing under the laws of the country or jurisdiction of its incorporation; and

 

  (b)

has the legal right and full corporate power and capacity to:

 

  (i)

execute and deliver this document; and

 

  (ii)

perform its obligations under this document and each transaction effected by or made under this document.

 

1.2

Valid obligations

This document constitutes (or will when executed constitute) valid legal and binding obligations of the Nominee and is enforceable against the Nominee in accordance with its terms.

 

1.3

Breach or default

The execution, delivery and performance of this document by the Nominee does not and will not result in a breach by the Nominee of or constitute a default by the Nominee under:

 

  (a)

any agreement to which the Nominee is party;

 

  (b)

any provision of the constitution of the Nominee; or

 

  (c)

any:

 

  (i)

order, judgment or determination of any court or Regulatory Authority; or

 

  (ii)

to the Nominee’s knowledge as at the date of this agreement, any law or regulation,

by which the Nominee is bound as at the date of this agreement.

 

1.4

Solvency

None of the following events has occurred in relation to the Nominee:

 

  (a)

a receiver, receiver and manager, liquidator, provisional liquidator, administrator or trustee is appointed in respect of the Nominee or any of its assets or anyone else is appointed who (whether or not an agent for the Nominee) is in possession, or has control, of any of the Nominee’s assets for the purpose of enforcing an Encumbrance;

 

  (b)

an event occurs that gives any person the right to seek an appointment referred to in paragraph (a);

 

  (c)

an application is made to court or a resolution is passed or an order is made for the winding up or dissolution of the Nominee or an event occurs that would give any person the right to make an application of this type;

 

 

  (d)

the Nominee proposes or takes any steps to implement a scheme of arrangement or other compromise or arrangement with its creditors or any class of them;

 

  (e)

the Nominee is declared or taken under any applicable law to be insolvent or the Nominee’s board of directors resolves that the Nominee is, or is likely to become at some future time, insolvent; or

 

  (f)

any person in whose favour the Nominee has granted any Encumbrance becomes entitled to enforce any security under that Encumbrance or any floating charge under that Encumbrance crystallises.

 

 

EX-4.29

Exhibit 4.29

Contract Register No. 201906025    

NetDoc ID 3448-4102-2989 v.2      

EXECUTION VERSION

24 June 2019

MELCO INTERNATIONAL DEVELOPMENT LIMITED

(as Vendor)

and

MELCO RESORTS & ENTERTAINMENT LIMITED

(as Purchaser)

 

 

SHARE PURCHASE AGREEMENT

 

 

TABLE OF CONTENTS

 

Clause         Pages  
1.    DEFINITIONS AND INTERPRETATIONS      1  
2.    SALE OF SHARES      4  
3.    CONSIDERATION      4  
4.    CONDITIONS      5  
5.    PRE-COMPLETION OBLIGATIONS      6  
6.    COMPLETION      6  
7.    POST-COMPLETION OBLIGATIONS      7  
8.    VENDOR WARRANTIES      7  
9.    PURCHASER WARRANTIES      8  
10.    INDEMNITIES      8  
11.    TAX COVENANTS      8  
12.    TERMINATION      8  
13.    FURTHER ASSURANCE      9  
14.    ENTIRE AGREEMENT AND REMEDIES      9  
15.    POST-COMPLETION EFFECT OF AGREEMENT      10  
16.    WAIVERS AND VARIATIONS      10  
17.    INVALIDITY      10  
18.    ASSIGNMENT      10  
19.    NOTICES      11  
20.    COSTS      11  
21.    RIGHTS OF THIRD PARTIES      12  
22.    COUNTERPARTS      12  
23.    GOVERNING LAW AND JURISDICTION      12  

SCHEDULE 1

      13  
             PARTICULARS OF THE COMPANY   

SCHEDULE 2

      14  
 

           PRE-COMPLETION OBLIGATIONS

   

SCHEDULE 3

      16  
 

           COMPLETION OBLIGATIONS

   

SCHEDULE 4

      18  
 

           WARRANTIES

   

SCHEDULE 5

      31  
 

           LIMITATIONS ON VENDOR LIABILITY

   

SCHEDULE 6

      33  
 

           TAX COVENANTS

   

THIS AGREEMENT is made on 24 June 2019

BETWEEN

 

(1)

MELCO INTERNATIONAL DEVELOPMENT LIMITED, a company incorporated in Hong Kong and having its registered office at Penthouse 38/F, The Centrium, 60 Wyndham Street, Central, Hong Kong (the “Vendor”); and

 

(2)

MELCO RESORTS & ENTERTAINMENT LIMITED, a company incorporated in Cayman Islands and having its registered office at 190 Elgin Avenue, George Town, Grand Cayman KY1 - 9005, Cayman Islands (the “Purchaser”).

WHEREAS

The Vendor is the legal and beneficial owner of 750,000 of the issued ordinary shares of the Company (as defined below), representing 75% of the total issued share capital of the Company (the “Shares”) all of which have been issued and are fully paid.

The Vendor wishes to sell and the Purchaser wishes to acquire all of the Shares on the terms and subject to the conditions set forth in this Agreement.

IT IS AGREED THAT

 

1.

DEFINITIONS AND INTERPRETATIONS

 

1.1

In this Agreement, unless the context otherwise requires:

“Accounts” means:

 

  (a)

the consolidated balance sheet of the Group made up as at the Balance Sheet Date;

 

  (b)

the consolidated profit and loss account of the Group in respect of the financial year ended on the Balance Sheet Date; and

 

  (c)

the consolidated cash flow statement of the Group in respect of the financial year ended on the Balance Sheet Date,

as set out in the copies provided to the Purchaser, and includes all notes and related reports thereto;

“Affiliate” means, in relation to a body corporate, any subsidiary or holding company of such body corporate, and any subsidiary of any such holding company, in each case from time to time;

“Agreed Form” means the form of any agreement or document agreed and initialled by each of the Vendor and the Purchaser;

“Antitrust Authority” means any Authority that enforces any Antitrust Law;

“Antitrust Laws” means all applicable legislation, statutes, directives, regulations, judgments, decisions, decrees, orders, instruments, by-laws, and other legislative measures or decisions having the force of law, treaties, conventions and other agreements between states, or between states and the European Union or other supranational bodies, rules of common law, customary law and equity and all civil or other codes and all other laws of, or having effect in, any jurisdiction from time to time governing the conduct of any person in relation to restrictive or other anti-competitive agreements or practices (including, but not limited to, cartels, pricing, resale pricing, market sharing, bid rigging, terms of trading, purchase or supply and joint ventures), abuse of dominant or monopoly market positions (whether held individually or collectively) and the control of acquisitions or mergers;

 

1

“Authority” means any competent governmental, administrative, supervisory, regulatory, judicial, determinative, disciplinary, enforcement or tax raising body, authority, agency, board, department, court or tribunal of any jurisdiction and whether supranational, national, regional or local;

“Balance Sheet Date” means 31 December 2018;

“Business Day” means a day (other than a Saturday or Sunday) on which banks in Cyprus, Hong Kong and Macau are open for ordinary banking business;

“Claim” means any claim by the Purchaser for breach of any of the Warranties;

“Company” means ICR CYPRUS HOLDINGS LIMITED, a company incorporated in Cyprus and having its registered office at 30 Karpenisiou Street, 1077, Nicosia, Cyprus, further particulars of which are set out in Schedule 1.

“Completion” means completion of the sale and purchase of the Shares in accordance with Clause 6;

“Completion Date” means the date on which Completion takes place;

“Conditions” means the conditions set out in Clause 4.1;

“Disclosed” means fairly disclosed (with sufficient details to identify the nature and scope of the matter disclosed) in or under the Disclosure Letter;

“Disclosure Letter” means the disclosure letter dated the date hereof, written and delivered by or on behalf of the Vendor to the Purchaser immediately before the signing of this Agreement;

“Encumbrance” means any interest or equity of any person (including any right to acquire, option or right of pre-emption), any mortgage, charge, pledge, lien, assignment, hypothecation, security interest (including any created by Law), title retention or other security agreement or arrangement having similar effect;

“Final Consideration” has the meaning given in Clause 3.1;

“Group” means the Company and each of its Subsidiaries;

“Group Company” means any member of the Group;

“Laws” means all applicable legislation, statutes, directives, regulations, judgments, decisions, decrees, orders, instruments, by-laws, and other legislative measures or decisions having the force of law, treaties, conventions and other agreements between states, or between states and the European Union or other supranational bodies, rules of common law, customary law and equity and all civil or other codes and all other laws of, or having effect in, any jurisdiction from time to time;

“Leased Properties” means the land and premises particulars of which are set out in Part 2 of Schedule 4 of the Disclosure Letter under the heading Leasehold Properties;

“Losses” means all costs, losses, liabilities, damages, claims, demands, proceedings, expenses, and all interest, penalties and legal and other professional fees;

 

2

“Management Accounts” means the unaudited monthly management accounts of the Group, including the consolidated balance sheet and the consolidated profit and loss account, for the period from the Balance Sheet Date to 31 May 2019, copies of which have been provided to the Purchaser;

“Material Adverse Effect” means an event which has or is likely to have a material and adverse effect on the assets, liabilities, regulatory position, business or operations of the Group as a whole;

“Material Contract” has the meaning given in Schedule 4;

“MLCO Shares” means 55,500,738 ordinary shares of the Purchaser;

“New Shareholders Agreement” means the shareholders agreement to be entered into by the Purchaser, the Purchaser Designee, The Cyprus Phassouri (Zakaki) Limited and the Company substantially in the Agreed Form;

“Owned Properties” means the land and premises particulars of which are set out in Part 1 of Schedule 4 of the Disclosure Letter under the heading Freehold Properties;

“Properties” means the land and premises particulars of which are set out in Schedule 4 of the Disclosure Letter;

“Purchaser Designee” means MCO Europe Holdings (NL) B.V.;

“Purchaser Group” means the Purchaser and each of its Affiliates including, for the avoidance of doubt, the Group Companies from Completion, but excluding the Vendor Group Companies;

“Purchaser Group Company” means any member of the Purchaser Group;

“Purchaser’s Warranties” means the Purchaser’s representations and warranties set out in Clause 9.

“Representatives” means, in relation to a party, its Affiliates and their respective directors, officers, employees, agents, consultants and advisers;

“Subsidiary” means the companies whose details are set out in Schedule 2 of the Disclosure Letter;

“Tax” means:

 

  (a)

all forms of tax, levy, impost, contribution, duty, liability and charge in the nature of taxation and all related withholdings or deductions of any nature; and

 

  (b)

all related fines, penalties, charges and interest,

imposed or collected by a Tax Authority whether directly or primarily chargeable against, recoverable from or attributable to any of the Group Companies (and “Taxes” and “Taxation” shall be construed accordingly);

“Tax Authority” means a taxing or other governmental (local or central), state or municipal authority (whether within or outside Cyprus) competent to impose a liability for or to collect Tax;

“Tax Covenant” means the covenant relating to Taxation set out at Schedule 6;

 

3

“Transaction” means the transactions contemplated by this Agreement and/or the other Transaction Documents or any part thereof;

“Transaction Documents” means this Agreement, the Disclosure Letter, the New Shareholders Agreement and the Termination Agreement;

“Termination Agreement” means the agreement to terminate the shareholders’ agreement dated 18 December 2017 by and among The Cyprus Phassouri (Zakaki) Limited, the Vendor and the Company, substantially in the Agreed Form;

“Vendor Group” means the Vendor and each of its Affiliates excluding, for the avoidance of doubt, the Group Companies and Purchaser Group Companies;

“Vendor Group Company” means any member of the Vendor Group; and

“Warranties” means the Vendor’s representations and warranties set out in Clause 8 and Schedule 4.

 

1.2

In this Agreement, unless the context otherwise requires:

 

  (a)

every reference to a particular Law shall be construed also as a reference to all other Laws made under the Law referred to and to all such Laws as amended, re-enacted, consolidated or replaced or as their application or interpretation is affected by other Laws from time to time and whether before or after Completion provided that, as between the parties, no such amendment or modification shall apply for the purposes of this Agreement to the extent that it would impose any new or extended obligation, liability or restriction on, or otherwise adversely affect the rights of, any party;

 

  (b)

Warranties qualified by the expression “so far as the Vendor is aware” (or any similar expression) are deemed to be given to the best of the knowledge, information and belief of the Vendor after it has made due and careful enquiries and shall include the knowledge of each member of the Vendor Group;

 

  (c)

references to the singular shall include the plural and vice versa and references to one gender include any other gender; and

 

  (d)

references to times of the day are to Hong Kong time unless otherwise stated.

 

1.3

The headings and sub-headings in this Agreement are inserted for convenience only and shall not affect the construction of this Agreement.

 

1.4

Each of the schedules to this Agreement shall form part of this Agreement.

 

1.5

References to this Agreement include this Agreement as amended or varied in accordance with its terms.

 

2.

SALE OF SHARES

On the terms set out in this Agreement the Vendor shall sell and the Purchaser shall purchase the Shares with effect from Completion, free from all Encumbrances, together with all rights attaching to the Shares as at Completion (including all dividends and distributions declared, paid or made in respect of the Shares after the Completion Date).

 

3.

CONSIDERATION

 

3.1

The purchase price for the sale of the Shares shall be USD375,000,000 which is payable solely in MLCO Shares (the “Final Consideration”).

 

4

3.2

The Final Consideration shall be satisfied by the issuance at Completion by the Purchaser to the Vendor of the Final Consideration.

 

4.

CONDITIONS

 

4.1

Completion shall be subject to the following conditions being satisfied (or waived in accordance with Clause 4.7) by the date and time provided in Clause 4.2:

 

  (a)

the Purchaser receiving the written consents of each of the Cyprus National Gaming and Casino Supervision Commission and the Council of Ministers of the Republic of Cyprus, each approving the Transaction and confirming that no objections have been raised by either the Cyprus National Gaming and Casino Supervision Commission or the Council of Ministers of the Republic of Cyprus; and

 

  (b)

the Vendor having delivered, or caused to have been delivered, to the Purchaser the documents listed in paragraph 1 of Schedule 3.

 

4.2

The Vendor and the Purchaser shall use all reasonable endeavours (so far as lies within their respective powers), at their own cost, to procure that the Conditions are satisfied as soon as practicable and in any event no later than:

 

  (a)

6.00 pm on 20 September 2019; or

 

  (b)

such later time and date as may be agreed in writing by the Vendor and the Purchaser.

 

4.3

The Vendor shall, and shall procure that its Representatives shall, co-operate fully in all actions necessary to procure the satisfaction of the Conditions including:

 

  (a)

making all filings and notifications and obtaining all consents, approvals, clearances, waivers or actions of any Authorities in order to satisfy the Condition set out in Clause 4.1(a) as soon as possible after the date of this Agreement and in accordance with any relevant time limit;

 

  (b)

promptly notifying the Purchaser of any communication (whether written or oral) from any such Authority, keeping the Purchaser regularly and reasonably informed of the progress of any notification or filing and providing such assistance as may reasonably be required in relation thereto;

 

  (c)

responding to any request for information from any such Authority promptly and in any event in accordance with any relevant time limit;

 

  (d)

consulting with, and taking into account the views of the Purchaser as to the mode, content and timing of all material communications (whether made orally or in writing) with any such Authority, giving the Purchaser a reasonable opportunity to comment on drafts of such communications and to participate in telephone calls and meetings with any such Authority (save to the extent that such Authority expressly requests that the Purchaser should not participate in such meetings or telephone calls); and

 

  (e)

providing the Purchaser with copies of all such communications, without delay, to the extent only that to do so is reasonably practicable and would not entail the disclosure of commercially sensitive information.

The Purchaser shall cooperate fully with the Vendor in all actions necessary to procure the satisfaction of the Conditions including (but not limited to) the provision by the Purchaser of all information reasonably necessary to make any notification or filing that the Vendor (acting reasonably) deems to be necessary or as required by any Authorities.

 

5

4.4

If at any time the Vendor or the Purchaser becomes aware of any event, circumstance or condition that would be reasonably likely to prevent a Condition being satisfied it shall forthwith inform the other party.

 

4.5

Each party shall notify the other promptly upon it becoming aware that any of the Conditions have been satisfied.

 

4.6

If any of the Conditions are not satisfied (or waived in accordance with Clause 4.7) by the date and time referred to in Clause 4.2, this Agreement shall cease to have effect immediately except for the provisions of Clauses 1, 4.6, 14 and 16 to 23.1 and any rights or liabilities that have accrued prior to that time.

 

4.7

Other than the Condition set out in Clause 4.1(a), the Purchaser may, to such extent as it thinks fit and is legally entitled to do so, waive the Conditions, in whole or in part, by written notice to the Vendor.

 

5.

PRE-COMPLETION OBLIGATIONS

 

5.1

During the period from the date of this Agreement to Completion the Vendor shall perform its obligations as set out in Schedule 2.

 

5.2

For the purposes of this Clause 5 and the Vendor’s obligations set out in Schedule 2, the Purchaser acknowledges that members of the Purchaser’s Group are engaged in the project management of the casino resort being developed by the Group and have been granted certain powers and authorities in connection with such project management engagement. During the period from the date of this Agreement to Completion, the Purchaser undertakes not to take any action in relation to any Group Company that requires a consent under paragraph 1.2 of Schedule 2, and to ensure that no other member of the Purchaser’s Group takes any such action, in each case, without the prior written consent of the Vendor.

 

6.

COMPLETION

 

6.1

Completion shall take place on:

 

  (a)

the fifth Business Day following the satisfaction of the Conditions in accordance with Clause 4.2 or waived in accordance with Clause 4 through electronic means of communication and to the extent a physical meeting is required, it shall take place at the offices of the Purchaser at 36/F, The Centrium, 60 Wyndham Street, Central, Hong Kong;

 

  (b)

any other date agreed in writing by the Vendor and the Purchaser.

 

6.2

At Completion:

 

  (a)

the Vendor shall do or procure the carrying out of all those things listed in paragraph 1 of Schedule 3; and

 

  (b)

the Purchaser shall do or procure the carrying out of all those things listed in paragraph 2 of Schedule 3.

All documents and items delivered and payments made in connection with Completion shall be held by the recipient to the order of the person delivering them until such time as Completion takes place.

 

6.3

Without prejudice to any other rights and remedies the Purchaser may have, the Purchaser shall not be obliged to complete the sale and purchase of any of the Shares unless the sale and purchase of all of the Shares is completed simultaneously.

 

6

7.

POST-COMPLETION OBLIGATIONS

 

7.1

From Completion, the Vendor shall cooperate with the Purchaser to ensure that all insurance policies which are in force at Completion continue in force on the same terms where they provide cover in relation to the carrying on of the Group’s business before Completion or any matter occurring in relation to any of the Group Companies before Completion and under their respective terms, claims can still be made or pursued after Completion.

 

7.2

The Vendor shall ensure that each member of the Vendor Group shall take such steps as the Purchaser reasonably requires to pursue any claims notified by the Group Companies or the Purchaser to the relevant insurers on or before the first anniversary of Completion, including giving notice of the claim to the insurer at the request of the relevant Group Company or the Purchaser (as the case may be), or to assist any member of the Group or the Purchaser Group in making the claim, and shall promptly pay to the beneficiary of the relevant insurance policy any proceeds actually received.

 

7.3

The Vendor shall promptly account to the relevant Group Company for any rebate of premium which any member of the Vendor Group receives to the extent that it results from any of the Group Companies ceasing to have the benefit of any insurance policy from Completion where the relevant premium or portion of it was previously funded by a Group Company payor.

 

7.4

The Vendor and the Purchaser shall use their respective best endeavors (so far as lies within their respective powers) to procure:

 

  (a)

within ten (10) Business Days from Completion, the registration of the transfer of the Shares in the statutory form to the office of the Cyprus Registrar of Companies and immediately upon the making of the filing, the delivery by the secretary of the Company to the Purchaser of a copy of the receipt received from the Registrar of Companies in respect of the filing of the relevant statutory form and payment of the registration fee; and

 

  (b)

within ten (10) Business Days from the date of filing of the relevant statutory form specified in sub-clause (a) above, the delivery to the Purchaser of a copy of the updated register of members of the Company, along with the relevant certificate of shareholders evidencing the entry made into such register of members in respect of the particulars of the relevant transfer of the Shares and the respective share certificate.

 

8.

VENDOR WARRANTIES

 

8.1

The Vendor represents and warrants to the Purchaser as at the date of this Agreement in the terms set out in Schedule 4.

 

8.2

The Warranties are deemed to be repeated immediately before Completion by reference to the facts and circumstances then existing and any reference made to the date of this Agreement (whether express or implied) in relation to any Warranty shall be construed, in relation to such repetition, as a reference to the Completion Date.

 

8.3

The Vendor acknowledges that the Purchaser is entering into this Agreement on the basis of and in express reliance on the Warranties and each Warranty being true, accurate and not misleading immediately before Completion.

 

8.4

Each of the Warranties is separate and independent and, unless otherwise specifically provided, shall not be restricted or limited by reference to any other representation, warranty or term of this Agreement.

 

7

8.5

The Warranties are given subject to matters Disclosed and to make a reasonably informed assessment of its impact on the relevant Group Company and/or its business.

 

8.6

Any Claim shall be subject to the provisions of this Clause 8 and Schedule 5.

 

9.

PURCHASER WARRANTIES

 

9.1

The Purchaser represents and warrants to the Vendor as at the date of this Agreement as set out in this Clause 9.

 

9.2

The MLCO Shares will be validly issued, fully paid and non-assessable and free and clear of any Encumbrance, except for restrictions arising under the Securities Act (as defined in Schedule 4) or created by virtue of the transactions under this Agreement. Upon entry of the Vendor into the register of members of the Company as the legal owner of the MLCO Shares, the Purchaser will transfer to the Vendor good and valid title to the MLCO Shares, free and clear of any Encumbrances, except for restrictions arising under the Securities Act or created by virtue of the transactions under this Agreement.

 

9.3

Assuming the accuracy of the representations and warranties set forth in Schedule 4 of this Agreement, it is not necessary in connection with the issuance the MLCO Shares to register the MLCO Shares under the Securities Act or to qualify or register the MLCO Shares under applicable U.S. state securities laws. No directed selling efforts (as defined in Rule 902 of Regulation S under the Securities Act) have been made by any of the Purchaser, any of its Affiliates or any person acting on its behalf with respect to any MLCO Shares and none of such Persons has taken any actions that would result in the sale of the MLCO Shares to the Vendor under this Agreement requiring registration under the Securities Act. The Purchaser is a “foreign issuer” (as defined in Regulation S under the Securities Act).

 

9.4

The Purchaser has not dealt with any broker, finder, commission agent, placement agent or arranger in connection with the issuance of the MLCO Shares, and the Purchaser is not under any obligation to pay any broker’s fee or commission in connection with the issuance of the MLCO Shares.

 

9.5

The Purchaser’s Warranties are deemed to be repeated immediately before Completion by reference to the facts and circumstances then existing and any reference made to the date of this Agreement (whether express or implied) in relation to any Purchaser Warranty shall be construed, in relation to such repetition, as a reference to the Completion Date.

 

10.

INDEMNITIES

The Vendor undertakes to indemnify, and to keep indemnified, the Purchaser on demand against all Losses which may be suffered or incurred by the Purchaser as a result of:

 

  (a)

any breach of or inaccuracy in any of the representations or warranties of the Vendor set out in Schedule 4; and

 

  (b)

any breach of a covenant of the Vendor contained in this Agreement, but excluding the obligations set forth in Schedule 3, paragraphs 1.1(a)(viii) and (x).

 

11.

TAX COVENANTS

The provisions of Schedule 6 shall apply in relation to Taxation.

 

12.

TERMINATION

 

12.1

Where:

 

8

  (a)

the Vendor is in breach of any of its obligations under Clause 5 and such breach or breaches taken together are material to the Group as a whole provided that, if any such breach or breaches are capable of being cured, the Vendor has first been afforded the opportunity to try to remedy such breach or breaches prior to Completion to the Purchaser’s reasonable satisfaction and the breach or breaches remain uncured;

 

  (b)

the Vendor is in breach of any of the Warranties as given at the date of this Agreement and such breach or breaches taken together are material to the Group as a whole;

 

  (c)

the Vendor is in breach of any of its obligations under Clause 6.2(a) or Schedule 3; or

 

  (d)

there would be, if Completion were to occur, a breach of one or more of the Warranties as repeated immediately before Completion under Clause 8.2 and such breach would give rise to a Material Adverse Effect.

the Purchaser may at any time at or prior to Completion (in addition to and without prejudice to any other rights and remedies it may have) serve written notice on the Vendor terminating this Agreement without liability on its part, in which case this Agreement shall cease to have effect immediately except for the provisions of Clauses 1, 12, 14 and 16 to 23.1 and any rights or liabilities that have accrued prior to termination under this Agreement.

 

12.2

Where this Agreement is terminated in accordance with Clause 12.1 (other than for the Vendor’s breach of its obligations under paragraphs 1.1(a)(viii) and/or (x) of Schedule 3), the Vendor shall indemnify the Purchaser against all costs and expenses incurred by the Purchaser or any member of the Purchaser Group in investigating the affairs of the Group and in the negotiation, preparation and performance of this Agreement.

 

13.

FURTHER ASSURANCE

The Vendor shall and shall procure that each member of the Vendor Group shall, at its own cost, promptly execute and deliver all such documents and do all such things and provide all such information and assistance, as the Purchaser may from time to time reasonably require for the purpose of giving full effect to the provisions of this Agreement and to secure for the Purchaser the full benefit of the rights, powers and remedies conferred upon it under this Agreement.

 

14.

ENTIRE AGREEMENT AND REMEDIES

 

14.1

This Agreement and the other Transaction Documents together set out the entire agreement between the parties relating to the sale and purchase of the Shares and, save to the extent expressly set out in this Agreement or any other Transaction Document, supersede and extinguish any prior drafts, agreements, undertakings, representations, warranties, promises, assurances and arrangements of any nature whatsoever, whether or not in writing, relating thereto.

 

14.2

The Purchaser acknowledges and agrees that neither it nor any of its Representatives has any rights against, and shall not make any claim or bring any action against, any Representative of the Vendor in relation to the Transaction.

 

14.3

If there is any conflict between the terms of this Agreement and any other agreement, this Agreement shall prevail (as between the parties to this Agreement and as between any members of the Vendor Group and any members of the Purchaser Group) unless:

 

  (a)

such other agreement expressly states that it overrides this Agreement in the relevant respect; and

 

9

  (b)

the Vendor and the Purchaser are either also parties to that other agreement or otherwise expressly agree in writing that such other agreement shall override this Agreement in that respect.

 

14.4

The rights, powers, privileges and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers, privileges or remedies provided by Law.

 

15.

POST-COMPLETION EFFECT OF AGREEMENT

Notwithstanding Completion:

 

  (a)

each provision of this Agreement and any other Transaction Document not performed at or before Completion but which remains capable of performance;

 

  (b)

the Warranties and the Purchaser’s Warranties; and

 

  (c)

all covenants, indemnities and other undertakings and assurances contained in or entered into pursuant to this Agreement or any other Transaction Document,

will remain in full force and effect and, except as otherwise expressly provided, without limit in time.

 

16.

WAIVERS AND VARIATIONS

 

16.1

A failure or delay by a party to exercise any right or remedy provided under this Agreement or by Law, whether by conduct or otherwise, shall not constitute a waiver of that or any other right or remedy, nor shall it preclude or restrict any further exercise of that or any other right or remedy. No single or partial exercise of any right or remedy provided under this Agreement or by Law, whether by conduct or otherwise, shall preclude or restrict the further exercise of that or any other right or remedy.

 

16.2

A waiver of any right or remedy under this Agreement shall only be effective if given in writing and shall not be deemed a waiver of any subsequent breach or default.

 

16.3

No variation or amendment of this Agreement shall be valid unless it is in writing and duly executed by or on behalf of all of the parties to this Agreement. Unless expressly agreed, no variation or amendment shall constitute a general waiver of any provision of this Agreement, nor shall it affect any rights or obligations under or pursuant to this Agreement which have already accrued up to the date of variation or amendment and the rights and obligations under or pursuant to this Agreement shall remain in full force and effect except and only to the extent that they are varied or amended.

 

17.

INVALIDITY

Where any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the Laws of any jurisdiction then such provision shall be deemed to be severed from this Agreement and, if possible, replaced with a lawful provision which, as closely as possible, gives effect to the intention of the parties under this Agreement and, where permissible, that shall not affect or impair the legality, validity or enforceability in that, or any other, jurisdiction of any other provision of this Agreement.

 

18.

ASSIGNMENT

 

18.1

Except as provided in this Clause 18 or as the parties specifically agree in writing, no person shall assign, transfer, charge or otherwise deal with all or any of its rights under this Agreement nor grant, declare, create or dispose of any right or interest in it.

 

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18.2

Subject to Clause 18.3 and to obtaining any necessary regulatory approvals, the Purchaser may assign the benefit of this Agreement and/or of any other Transaction Document to which it is a party, in whole or in part, to, and it may be enforced by any other member of the Purchaser Group.

Any such person to whom an assignment is made under this Clause 18.2 may itself make an assignment as if it were the Purchaser under this Clause 18.2, but only to another member of the Purchaser Group. If an assignee will cease to be a member of the Purchaser Group, the assignee must first re-assign the benefit of this Agreement and/or any other Transaction Documents (as applicable) to the Purchaser or a member of the Purchaser Group.

 

18.3

Any assignment made pursuant to this Clause 18 shall be on the basis that:

 

  (a)

the Vendor may discharge its obligations under this Agreement to the assignor until it receives notice of the assignment;

 

  (b)

the liability of the Vendor to any assignee shall not be greater than its liability to the Purchaser; and

 

  (c)

the Purchaser will remain liable for any obligations under this Agreement.

 

19.

NOTICES

 

19.1

Any notice or other communication given under this Agreement or in connection with the matters contemplated herein shall, except where otherwise specifically provided, be in writing in the English language and addressed as provided in Clause 19.2.

 

19.2

Notices under this Agreement shall be sent for the attention of the person and to the address or e-mail address as set out below:

For the Vendor:

Melco International Development Limited

37/F The Centrium

60 Wyndham Street, Central

Hong Kong

e-mail address: vincentleung@melco-group.com

attention: Company Secretary

For the Purchaser:

Melco Resorts & Entertainment Limited

36/F, The Centrium

60 Wyndham Street, Central

Hong Kong

e-mail address: mco-comsec@melco-resorts.com

attention: Company Secretary

 

19.3

Any party to this Agreement may notify the other party of any change to its address or other details specified in Clause 19.2 provided that such notification shall only be effective on the date specified in such notice or five Business Days after the notice is given, whichever is later.

 

20.

COSTS

 

20.1

Except as otherwise provided in this Agreement, each party shall bear its own costs arising out of or in connection with the preparation, negotiation and implementation of this Agreement and all other Transaction Documents. The Vendor shall pay the registration fee referred to in Clause 7.4(a).

 

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20.2

This Agreement shall be executed outside Cyprus and the original of this Agreement shall not be brought into Cyprus unless the party wishing to do so pays, in accordance with applicable Law, the Cyprus stamp duty and any penalties (if any) in connection therewith which would be incurred as a result of doing so.

 

21.

RIGHTS OF THIRD PARTIES

 

21.1

A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Ordinance (Chapter 623) to enforce any of its terms.

 

21.2

Each party represents to the other that their respective rights to terminate, rescind or agree any amendment, variation, waiver or settlement under this Agreement are not subject to the consent of any person that is not a party to this Agreement.

 

22.

COUNTERPARTS

This Agreement may be executed in any number of counterparts. Each counterpart shall constitute an original of this Agreement but all the counterparts together shall constitute but one and the same instrument.

 

23.

GOVERNING LAW AND JURISDICTION

 

23.1

This Agreement and any non-contractual rights or obligations arising out of or in connection with it shall be governed in all respects by the laws of Hong Kong, without giving effect to any principles of conflict of laws.

 

23.2

The parties irrevocably agree that the courts of Hong Kong shall have exclusive jurisdiction to settle any Disputes, and waive any objection to proceedings before such courts on the grounds of venue or on the grounds that such proceedings have been brought in an inappropriate forum.

 

23.3

For the purposes of this Clause, “Dispute” means any dispute, controversy, claim or difference of whatever nature arising out of, relating to, or having any connection with this Agreement, including a dispute regarding the existence, formation, validity, interpretation, performance or termination of this Agreement or the consequences of its nullity and also including any dispute relating to any non-contractual rights or obligations arising out of, relating to, or having any connection with this Agreement.

 

12

SCHEDULE 1

PARTICULARS OF THE COMPANY

 

Company Name:

                        ICR Cyprus Holdings Limited

 

Registered Number:

                        HE 375858

 

Registered Office:

                        30 Karpenisiou Street, 1077, Nicosia, Cyprus

 

Date and Place of Incorporation:

                        7 November 2017, Cyprus

 

Directors:

                        Evan Andrew Winkler

 

                          Andy Choy

 

                          Menelaos Shiacolas

 

                          Stephanie Cheung

 

                          Akiko Takahashi

 

                          Geoffrey Stuart Davis

 

Secretary:

                        Petros Liasis

 

                          Romanos Secretarial Limited (Assistant Secretary)

 

Authorised Share Capital:

                        1,000,000

 

Issued Share Capital:

                        1,000,000

 

Shareholders and Shares Held:

                        Melco International Development Limited 75%

                         (750,000 shares)

 

                          The Cyprus Phassouri (Zakaki) Limited 25%

                         (250,000 shares)

 

Tax Residence:

                        Cyprus

 

Tax Identification Number:

                        10375858 E

 

13

SCHEDULE 2

PRE-COMPLETION OBLIGATIONS

 

1.

VENDOR’S OBLIGATIONS

 

1.1

Except as otherwise expressly permitted under this Agreement or with the prior written consent of the Purchaser, the Vendor shall from the date of this Agreement until Completion:

 

  (a)

procure that each Group Company carries on its business only in the ordinary course and takes all reasonable steps to preserve and protect its assets and goodwill, including its existing relationships with customers and suppliers;

 

  (b)

not create any Encumbrance over, or sell or dispose of, the Shares or any interest in any share or loan capital or other security of any of the Group Companies; and

 

  (c)

procure that none of the Group Companies:

 

  (i)

creates, allots, issues, redeems or repurchases any share, loan capital or other security or grants any options over, or any other right in respect of, any share, loan capital or other security;

 

  (ii)

enters into any transaction with any member of the Vendor Group, except as expressly contemplated by this Agreement;

 

  (iii)

makes any payments other than routine payments in the ordinary course of business;

 

  (iv)

assumes or incurs any liability, obligation or expense (actual or contingent) except in the ordinary and usual course of business on normal arm’s length terms;

 

  (v)

declares, makes or pays a dividend or other distribution (whether in cash, stock or in kind) or makes any reduction of its paid-up share capital;

 

  (vi)

creates, grants, issues or varies any Encumbrance over its shares, assets or undertaking;

 

  (vii)

makes any alteration to its constitutional documents;

 

  (viii)

incurs any capital expenditure in excess of EUR5.0 million other than as disclosed to the Purchaser;

 

  (ix)

borrows any money (other than by bank overdraft or similar facility in the ordinary course of business and within limits subsisting at the date of this Agreement) or enters into any foreign exchange contracts, interest rate swaps or other derivative instruments (other than in the ordinary course of business);

 

  (x)

acquires (whether by one transaction of by a series of transactions) the whole, or a substantial or material part of the business, undertaking or assets of any other person;

 

  (xi)

disposes of (whether by one transaction or by a series of transactions) the whole or any substantial or material part of its business, undertaking or any other of its assets;

 

14

  (xii)

grants or modifies the terms of any loans or other financial facilities or any guarantees or indemnities for the benefit of any person;

 

  (xiii)

enters into any lease, lease hire or hire purchase agreement or agreement for payment on deferred terms;

 

  (xiv)

enters into, makes a bid, tender, proposal or offer likely to lead to, modifies or terminates any Material Contract;

 

  (xv)

institutes, engages in or settles any legal proceedings (except in respect of debt collection in the ordinary course of business);

 

  (xvi)

takes any action or makes any omission which is inconsistent with the provisions of this Agreement or the implementation of the Transaction, or which is or is reasonably likely to constitute or cause or give rise to a breach of any of the Warranties as repeated immediately before Completion under Clause 8.2; or

 

  (xvii)

enters into any agreement or arrangement (whether in writing or otherwise) to do any of the foregoing or allow or permit any of the foregoing.

 

1.2

If at any time prior to or at Completion the Vendor, any member of the Vendor Group or any of the Group Companies becomes aware that any of the matters set out in Clause 12.1(a)-(d) has occurred, or there is a reasonable expectation that any of the matters set out in Clause 12.1(a)-(d) might occur, the Vendor shall immediately:

 

  (a)

notify the Purchaser in sufficient detail to enable the Purchaser to make an accurate assessment of the situation (and, for the avoidance of doubt, the delivery of such notice shall not limit or otherwise affect the remedies available to the Purchaser); and

 

  (b)

if requested by the Purchaser, use its best endeavours to procure that the notified occurrence is prevented or remedied.

 

15

SCHEDULE 3

COMPLETION OBLIGATIONS

 

1.

VENDOR’S OBLIGATIONS

 

1.1

At Completion the Vendor shall:

 

  (a)

deliver to the Purchaser or procure the delivery to the Purchaser of (or, in the case of paragraphs (vi) and (vii) below, make available for collection by or on behalf of the Purchaser at the corporate headquarters of the Group in Cyprus):

 

  (i)

all documents, including an instrument of transfer, duly executed and/or endorsed where required, required to enable title to all of the Shares to pass into the name of the Purchaser Designee;

 

  (ii)

share certificates, or relevant documents in lieu of the share certificates, in respect of all of the Shares;

 

  (iii)

such waivers or consents as the Purchaser may require to enable the Purchaser Designee to be registered as holder of the Shares;

 

  (iv)

an irrevocable power of attorney in agreed form given by the Vendor in favour of the Purchaser Designee in respect of rights attaching to the Shares;

 

  (v)

the original of any power of attorney in agreed form under which any document to be delivered to the Purchaser under this paragraph 1 has been executed;

 

  (vi)

as applicable, the share certificates, or equivalent documents in Cyprus, in respect of all issued shares in the capital of each of the Subsidiaries, and all necessary documents, duly executed and/or endorsed where required, to enable title to all shares in any Subsidiary not registered in the name of a Group Company to pass into the name of such persons as the Purchaser shall direct;

 

  (vii)

all the statutory and other books and corporate registers (duly written up to date) of each Group Company and all certificates of incorporation, certificates of incorporation on change of name and common seals or such equivalent items in the relevant jurisdiction as are kept by such Group Company or required to be kept by Law;

 

  (viii)

the relevant counterparts of the New Shareholders Agreement duly executed by each of The Cyprus Phassouri (Zakaki) Limited and the Company; and the duly executed Termination Agreement;

 

  (ix)

an opinion of counsel reasonably satisfactory to the Purchaser confirming that The Cyprus Phassouri (Zakaki) Limited has the capacity to enter into the New Shareholders Agreement and the Termination Agreement;

 

  (x)

a certified true copy of the board resolutions of The Cyprus Phassouri (Zakaki) Limited approving the entry into and performance of the New Shareholders Agreement and the Termination Agreement;

 

  (xi)

a certified true copy of a board resolution of the Vendor approving the Transaction and the execution by the Vendor of the Transaction Documents and any other documents referred to in this Agreement; and

 

16

  (xii)

a copy of the resolutions as are referred to in paragraph (b), duly certified as correct by the company secretary of the relevant Group Company.

 

  (b)

procure that a board resolution and resolution of the shareholders, where required, of the Company is/are passed approving the transfer of the Shares.

 

  (c)

for itself and as agent for the relevant members of the Vendor Group, pay to the Company on behalf of the relevant Group Companies the aggregate of all amounts owed as at Completion by any member of the Vendor Group to any Group Company, together with all accrued interest, if any, which shall be treated as discharged to the extent of that payment.

 

1.2

Melco Services Limited (a wholly-owned subsidiary of the Vendor) is the service provider under the Melco Management Services Agreement dated 7 August 2018 with ICR Cyprus Resort Development Co. Limited, a Group Company (the “Management Services Agreement”). A copy of the Management Services Agreement has been provided to the Purchaser by the Vendor. The Vendor shall procure that the Management Services Agreement is terminated with effect from Completion by mutual agreement between Melco Services Limited and ICR Cyprus Resort Development Co. Limited, without further liability to either party thereafter, and shall deliver a certified copy of the duly executed termination document in the agreed form to the Purchaser on Completion.

 

2.

PURCHASER’S OBLIGATIONS

 

2.1

At Completion the Purchaser shall:

 

  (a)

provide the Final Consideration to the Vendor as provided in Clause 3.2.

 

  (b)

deliver to the Vendor:

 

  (i)

a counterpart of the New Shareholders Agreement duly executed by the Purchaser and the Purchaser Designee;

 

  (ii)

a certified true copy of the board resolution of the Purchaser approving the Transaction and the execution by the Purchaser of the New Shareholders Agreement and any other document to be executed by the Purchaser pursuant to this Agreement; and

 

  (iii)

instrument of transfer in respect of the Shares, duly executed by the Purchaser Designee in its capacity as transferee; and

 

  (c)

procure that the Company, on behalf of the Group Companies, pays to the Vendor as agent for the relevant members of the Vendor Group, the aggregate of all amounts owed as at Completion by any Group Company to any member of the Vendor Group, together with all accrued interest, if any, which shall be treated as discharged to the extent of that payment.

 

2.2

The Purchaser shall cooperate with and assist (to the extent of its powers) the Vendor to obtain the counterparts of the New Shareholders Agreement and the Termination Agreement executed by The Cyprus Phassouri (Zakaki) Limited, referred to in paragraph 1.1(a)(viii) above, and the other documents referred to in paragraphs 1.1(a)(ix) and (x) above.

 

17

SCHEDULE 4

WARRANTIES

 

1.

DEFINITIONS AND INTERPRETATION

 

1.1

In this Schedule, where the context admits:

“Anticorruption Laws” means any laws, regulations, or orders relating to anti-bribery, anti-corruption (governmental or commercial), including laws that prohibit the corrupt payment, offer, promise, or authorisation of the payment or transfer of anything of value (including gifts or entertainment), directly or indirectly, to any foreign government official, foreign government employee, person or commercial entity, to obtain a business advantage, or the offer, promise, or gift of, or the request for, agreement to receive or receipt of a financial or other advantage to induce or reward the improper performance of a relevant function or activity; such as, without limitation, the U.S. Foreign Corrupt Practices Act of 1977, as amended from time to time, the UK Bribery Act of 2010 and all national and international laws enacted to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions;

“Business Intellectual Property” has the meaning given in paragraph 17.1;

“EHS Consents” means any permits, licences, consents, certificates, registrations, approvals, notifications waivers, exemptions, allowances, credits or other authorisations relating to EHS Matters and required by or under any EHS Laws for the operation of the Group’s business or the use of, or any activities or operations carried out at, any of the Properties;

“EHS Laws” means all applicable laws (including, for the avoidance of doubt, common law), statutes, regulations, statutory guidance notes, by-laws, codes (including codes of practice), regulations, decrees, orders and any final and binding court, tribunal or other official decision of any relevant authority in any jurisdiction, insofar as they relate or apply to EHS Matters from time to time;

“EHS Matters” means matters relating to human health, safety and welfare, the environment, the use or exploitation of any environmental or natural resources and/or any Hazardous Substances, the condition, protection, maintenance, remediation, reinstatement, restoration or replacement of the environment or any part of it;

“Government Entity” means (i) any national, federal, state, county, municipal, local, or foreign government or any entity exercising executive, legislative, judicial, regulatory, taxing, or administrative functions of or pertaining to government, (ii) any public international organization, (iii) any agency, division, bureau, department, or other political subdivision of any government, entity, or organization described in the foregoing clauses (i) or (ii) of this definition, (iv) any company, business, enterprise, or other entity owned, in whole or in part, or controlled by any government, entity, organization, or other Person described in the foregoing clauses (i), (ii), or (iii) of this definition, or (v) any political party;

“Government Official” means (i) any official, officer, employee, or representative of, or any Person acting in an official capacity for or on behalf of, any Governmental Entity and/or authority, (ii) any political party or party official or candidate for political office (iii) a Politically Exposed Person (PEP) as defined by the Financial Action Task Force (FATF), Groupe d’action Financière sur le Blanchiment de Capitaux (GAFI) or the EU Directive of the Prevention of Money Laundering and Terrorist Financing (EU AML Directive); (iv) any company, business, enterprise, or other entity owned, in whole or in part, or controlled by any Person described in the foregoing clause (i) (ii) or (iii) of this definition, or (iv) an individual who (a) holds a legislative, administrative or judicial position of any kind, whether appointed or elected, of a country or territory (or any subdivision of such a country or territory), (b) exercises a public function for or on behalf of a country or territory (or any subdivision of such a country or territory) or for any public agency or public enterprise of that country or territory (or subdivision), or (c) is an official or agent of a public international organisation;

 

18

“Hazardous Substances” means any wastes, pollutants, contaminants and any other natural or artificial substance (whether in the form of a solid, liquid, gas or otherwise and whether alone or in combination with any other material or substance) which is capable of causing harm or damage to the environment or a nuisance to any person, including (but not limited to) radioactive substances;

“Intellectual Property” means all rights in patents, utility models, trade marks, service marks, logos, getup, trade names, internet domain names, copyright (including rights in computer software), design rights, moral rights, database rights, topography rights, plant variety rights, confidential information and knowledge (including know how, inventions, secret formulae and processes, market information, and lists of customers and suppliers), and rights protecting goodwill and reputation, in all cases whether registered or unregistered; all other forms of protection having a similar nature or effect anywhere in the world to any of the foregoing and applications for or registrations of any of the foregoing rights;

“Material Contract” means any agreement or arrangement to which any of the Group Companies is a party or is bound and which:

 

  (a)

is of material importance to the business, assets, liabilities, income or expenditure of the Group;

 

  (b)

is not on arm’s length terms;

 

  (c)

restricts the freedom of a Group Company to carry on the whole or any part of its business in any part of the world in such manner as it thinks fit;

 

  (d)

cannot be readily fulfilled or performed by the relevant Group Company on time and without undue or unusual expenditure of money and effort; or

 

  (e)

requires a Group Company to pay any commission, finders’ fee, royalty or a similar payment.

“Pension Benefits” means any pension, superannuation, retirement (including on early retirement) incapacity, sickness, disability, accident, healthcare or death benefits (including in the form of a lump sum);

“Relevant Scheme” means any scheme or arrangement for the provision of Pension Benefits; and

“Securities Act” means the U.S. Securities Act of 1933, as amended.

 

2.

CAPACITY AND AUTHORITY

 

2.1

The Vendor is validly incorporated, in existence and duly registered under the laws of its country of incorporation.

 

2.2

The Vendor and each Group Company which is a party to this Agreement or any of the other Transaction Documents has taken all necessary action and has all requisite power and authority to enter into and perform this Agreement and the other Transaction Documents to which it is a party in accordance with their terms.

 

19

2.3

This Agreement and the other Transaction Documents constitute (or shall constitute when executed) valid, legal and binding obligations on the Vendor and each Group Company which is a party in the terms of the Agreement and such other Transaction Documents.

 

2.4

The execution and delivery of this Agreement and the other Transaction Documents by the Vendor and each Group Company which is a party thereto and the performance of and compliance with its terms and provisions will not conflict with or result in a breach of, or constitute a default under, the constitutional documents of the Vendor, any member of the Vendor Group or any Group Company, any agreement or instrument to which any such person is a party or by which it is bound, or any Law, order or judgment that applies to or binds any such person or any of its property.

 

2.5

No consent, action, approval or authorisation of, and no registration, declaration, notification or filing with or to, any Authority is required to be obtained, or made, by the Vendor or any other member of the Vendor Group or any Group Company to authorise the execution or performance of this Agreement by such persons.

 

3.

SHARES IN THE COMPANY AND THE SUBSIDIARIES

 

3.1

The Shares constitute 75% of the allotted and issued share capital of the Company and are fully paid and free from all Encumbrances.

 

3.2

All of the Vendor’s obligations under the Subscription Agreement dated 18 December 2017 by and among the Vendor, The Cyprus Phassouri (Zakaki) Limited and the Company have been fully satisfied and discharged.

 

3.3

The Vendor is the sole legal and beneficial owner of the Shares and is entitled to transfer the full ownership of the Shares on the terms set out in this Agreement.

 

3.4

Schedule 2 of the Disclosure Letter lists all the subsidiaries of the Company and sets out particulars of their allotted and issued share capital.

 

3.5

Schedule 3 of the Disclosure Letter fully and accurately sets out the organizational and ownership structure of the Company and each Subsidiary.

 

3.6

The Company or a Subsidiary is the sole legal and beneficial owner of the whole allotted and issued share capital of each of the Subsidiaries and all such shares are fully paid up and free from all Encumbrances.

 

3.7

Each Group Company is validly incorporated, in existence and duly registered under the laws of its country of incorporation.

 

3.8

No right has been granted to any person to require any of the Group Companies to allot, issue, sell, transfer or convert any share capital and no Encumbrance has been created in favour of any person affecting any unissued shares or debentures or other unissued securities of any of the Group Companies.

 

3.9

No commitment has been given to create an Encumbrance affecting the Shares or the issued shares of the Subsidiaries (or any unissued shares or debentures or other unissued securities of any of the Group Companies) or for any of them to issue any share capital and no person has claimed any rights in connection with any of those things.

 

3.10

None of the Group Companies:

 

  (a)

holds or beneficially owns, or has agreed to acquire, any interest of any nature in any shares, debentures or other securities of any company other than the Subsidiaries;

 

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  (b)

is or has agreed to become a member of any partnership or other unincorporated association, joint venture or consortium (other than recognised trade associations);

 

  (c)

has any branch or permanent establishment outside its country of incorporation; or

 

  (d)

has allotted or issued any securities that are convertible into shares.

 

3.11

None of the Group Companies has at any time:

 

  (a)

purchased, redeemed or repaid any of its own share capital; or

 

  (b)

given any financial assistance in connection with any acquisition of its share capital or the share capital of its holding company in contravention of any Law.

 

4.

CONSTITUTIONAL AND CORPORATE DOCUMENTS

 

4.1

The copies of the articles of association or other constitutional and corporate documents of each Group Company copies of which have been provided to the Purchaser are true, accurate and complete in all respects and copies of all the resolutions and agreements required to be annexed to or incorporated in those documents by Law are annexed or incorporated.

 

4.2

All returns, particulars, resolutions and other documents which each Group Company is required by Law to file with or deliver to any Authority in any jurisdiction have been correctly made up and filed or delivered.

 

4.3

All statutory books and registers of the Group Companies have been properly kept and no notice or allegation that any of them is incorrect or should be rectified has been received.

 

5.

ACCOUNTS

 

5.1

The Accounts:

 

  (a)

have been prepared in accordance with applicable Law and all applicable accounting standards and the policies, principles and practices generally accepted and consistent therewith;

 

  (b)

show that the commitments and financial position and affairs of the Group as a whole as at the Balance Sheet Date and the profit and loss of the Group as a whole for the financial year ended on that date are true and fair, in all material respects; and

 

  (c)

contain either provision adequate to cover, or full particulars in notes of, all Taxation (including deferred Taxation) of the Group as at the Balance Sheet Date.

 

5.2

The Management Accounts:

 

  (a)

have been properly prepared in all material respects on a basis consistent with that employed in preparing the Accounts and on a basis consistent with that employed in preparing the management accounts of the Group for the twelve months ended on the Balance Sheet Date; and

 

  (b)

having regard to the purpose for which they were prepared, are not misleading in any material respect and do not materially overstate the assets and profits or materially understate the liabilities and losses of the Group for the periods to which they relate.

 

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6.

CHANGES SINCE THE BALANCE SHEET DATE

 

6.1

Since the Balance Sheet Date:

 

  (a)

the Group has conducted its business in the normal course and as a going concern;

 

  (b)

there has been no material adverse change in the turnover or financial position of the Group as a whole;

 

  (c)

no Group Company has issued or agreed to issue any share or loan capital;

 

  (d)

no dividend or other distribution of profits or assets has been, or has agreed to be, declared, made or paid by any Group Company to any person other than another Group Company;

 

  (e)

no Group Company has entered into any Material Contract;

 

  (f)

other than as disclosed to the Purchaser, no Group Company has borrowed or raised any money or taken any form of financial security, and no capital expenditure has been incurred in excess of EUR5.0 million and no Group Company has acquired, invested or disposed of (or agreed to acquire, invest or dispose of) any individual item in excess of EUR2.5 million; and

 

  (g)

no shareholder resolutions of any Group Company have been passed other than as routine business at the annual general meeting.

 

7.

INFORMATION

 

7.1

The particulars relating to each Group Company in this Agreement are complete, accurate and not misleading.

 

7.2

The details of the Subsidiaries set out in Schedule 2 to the Disclosure Letter and the details of the Properties set out in Schedule 4 to the Disclosure Letter are, in all material respects, complete, accurate and not misleading.

 

8.

COMPLIANCE WITH LAWS AND DISPUTES

 

8.1

The Group has at all times conducted its business in all material respects in accordance with all applicable Laws.

 

8.2

All necessary licences, registrations and authorisations (public and private) which are material to enable the Group to carry on its businesses, in the jurisdictions and in the manner in which such businesses are currently carried on, have been obtained and all such licences, registrations and authorisations are valid and subsisting.

 

8.3

Save for reports which have been Disclosed, or of which any member of the Purchaser Group otherwise has actual knowledge as at the date of this Agreement, no adverse reports have been issued by any Authority within the last three years (or, in the case of a Group Company which has been established for less than three years, since the date of establishment of the relevant Group Company), specifically in respect of the Group Companies’ operations and affairs.

 

8.4

No Group Company, or any of its respective directors, officers or employees, or, so far as the Vendor is aware, any Group Company’s agents, representatives or any persons for whom it is vicariously liable or any persons who perform services for or on behalf of the relevant Group Company:

 

22

  (a)

is or has been engaged in any litigation, administrative, mediation or arbitration proceedings or other proceedings or hearings before any Authority (except for debt collection in the normal course of business) in connection with the business or operations of any Group Company; or

 

  (b)

is or has been the subject of any investigation, inquiry or enforcement proceedings by any Authority (including pursuant to any Anticorruption Law) in connection with the business or operations of any Group Company,

and, so far as the Vendor is aware, no such proceedings, investigations or inquiries have been threatened or are pending and there are no circumstances likely to give rise to any such proceedings, investigations or inquiries.

 

8.5

No Group Company is affected by any existing or pending judgments or rulings and no Group Company has given any undertakings arising from legal proceedings to an Authority or other third party.

 

8.6

No Group Company is or has at any time engaged in any conduct, activity or practice which would constitute an offence under or relating to any noncompliance with or offence under any Anticorruption Law.

 

8.7

No Group Company or any of its respective directors, officers or employees, or so far as the Vendor is aware, any Group Company’s agents, representatives or any person who performs services for or on behalf of any Group Company has received any notice, request, or citation, or has been subject to investigation or prosecution by any authority for any actual or potential noncompliance with or offence under any Anticorruption Laws.

 

8.8

No Group Company or any of its respective directors, officers or employees, or so far as the Vendor is aware, any Group Company’s agents, representatives or any person who performs services for or on behalf of any Group Company has violated or committed an offence under any Anticorruption Laws.

 

8.9

No Group Company or any of its respective directors, officers or employees, or so far as the Vendor is aware, any Group Company’s agents, representatives or any person who performs services for or on behalf of any Group Company has, directly or indirectly, offered, paid, promised to pay, or authorised the payment of any money, or offered, given, promised to give, or authorised the giving of a financial or other advantage or anything of value, to any Government Official, or to any person:

 

  (a)

for the purpose of: (1) influencing any act or decision of a Government Official in their official capacity in connection with the Group’s business; (2) inducing a Government Official to do or omit to do any act in violation of their lawful duties in connection with the Group’s business; (3) securing any improper advantage in connection with the Group’s business; (4) inducing a Government Official to influence or affect any act or decision of any Government Entity in connection with the Group’s business; or (5) assisting any Group Company or any of their directors, officers or employees, or so far as the Vendor is aware, any Group Company’s agents, representatives, or any person who performs services for or on behalf of any Group Company or any of their agents or representatives in obtaining or retaining business for or with, or directing business to, any Group Company; or

 

  (b)

to induce or reward another person to perform a function or activity improperly in order to obtain or retain business or an advantage in the conduct of business for any Group Company.

 

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8.10

The Group has maintained complete and accurate, in all material respects, books and records, including records of payments to any agents, consultants, representatives, third parties, and Government Officials in accordance with generally accepted accounting principles.

 

9.

ANTI-TRUST

 

9.1

Each Group Company has at all times conducted its business in all material respects in accordance with all applicable Antitrust Laws.

 

9.2

No Group Company is or has been in the last three years (or, in the case of a Group Company which has been established for less than three years, since the date of establishment of the relevant Group Company) engaged in any agreement, arrangement, activity, practice or conduct which constitutes an infringement or breach of any applicable Antitrust Laws.

 

9.3

No adverse reports have been issued by any Antitrust Authority within the last three years, specifically in respect of the Group Companies’ operations and affairs.

 

9.4

No Group Company or any of its respective directors or any person for whom it is vicariously liable (including any person who is or has been employed by the Group) is or has been in the last three years prior to the Completion Date (or, in the case of a Group Company which has been established for less than three years, from the date of establishment of the relevant Group Company to the Completion Date):

 

  (a)

engaged in any litigation, administrative, mediation or arbitration proceedings or such other proceedings or hearings before any Antitrust Authority in relation to an infringement of any applicable Antitrust Laws; or

 

  (b)

the subject of any investigation, inquiry or enforcement proceedings by any Antitrust Authority in relation to an infringement of any applicable Antitrust Laws,

and, so far as the Vendor is aware, no such proceedings, investigations or inquiries have been threatened or pending and there are no circumstances likely to give rise to any such proceedings, investigations or inquiries.

 

9.5

No Group Company is affected by any existing or pending judgements or rulings and no Group Company has given any undertakings arising from legal proceedings to any Antitrust Authority in connection with an infringement or breach of any applicable Antitrust Laws.

 

9.6

No Group Company or any of its directors, officers or employees is or has agreed to become a member of any trade association or entered into any kind of collective agreement, understanding or arrangement with any trade association or member(s) of any such trade association which has or may have implications under the applicable Antitrust Laws.

 

10.

CONTRACTS

 

10.1

True and complete copies of all of the Material Contracts have been made available to the Purchaser Group or its advisors.

 

10.2

So far as the Vendor is aware, each of the Material Contracts is in full force and effect and binding on the parties to it. No notice of termination of any Material Contract has been received or served by a Group Company and, so far as the Vendor is aware, there are no grounds for determination, rescission, avoidance, repudiation or a material change in the terms of any such Material Contract.

 

10.3

No Group Company is in material default under any agreement or arrangement to which it is a party and, so far as the Vendor is aware, no other party to such an agreement or arrangement is in material default thereunder. So far as the Vendor is aware, there are no circumstances likely to give rise to any such default.

 

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11.

FINANCE AND GUARANTEES

 

11.1

As at the date of this Agreement, there is no indebtedness of the Group.

 

11.2

No guarantee or Encumbrance has been given by or entered into by any Group Company or any third party in respect of the indebtedness or other obligations of any Group Company.

 

11.3

No indebtedness of any Group Company is due and payable and no security over any of the assets of any Group Company is now enforceable, whether by virtue of the stated maturity date of the indebtedness having been reached or otherwise.

 

11.4

No Group Company is responsible for the indebtedness, or for the default in the performance of any obligation, of any other person.

 

11.5

The Transaction will not result in:

 

  (a)

termination of or a material effect on any financial agreement or arrangement to which any Group Company, is a party or subject; or

 

  (b)

any indebtedness of any Group Company becoming due, or capable of being declared due and payable, prior to its stated maturity.

 

11.6

No Group Company has given or entered into any guarantee, mortgage, charge, pledge, lien, assignment or other security agreement or arrangement or is responsible for the indebtedness, or for the default in the performance of any obligation, of any other person.

 

11.7

There have been no payments out of the bank accounts of each Group Company other than routine payments in the ordinary course of business since such time.

 

12.

INSOLVENCY

 

12.1

No Group Company:

 

  (a)

is insolvent or unable to pay its debts within the meaning of the Companies Law, Cap. 113 of the laws of Cyprus or any other insolvency legislation applicable to the company concerned; or

 

  (b)

has stopped paying its debts as they fall due.

 

12.2

No process has been initiated which could lead to the Vendor or any Group Company being dissolved and its assets being distributed among the relevant company’s creditors, shareholders or other contributors.

 

13.

INSURANCE

 

13.1

All of the policies of insurance maintained by or covering each of the Group Companies are currently in full force and effect. All sums falling due in respect of premiums on such policies of insurance have been paid. There is no outstanding claim by any Group Company under any such policies.

 

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14.

TRANSACTIONS WITH THE VENDOR

 

14.1

There is no outstanding indebtedness or other liability (actual or contingent) and no outstanding contract, commitment or arrangement between a Group Company and the Vendor or any other Vendor Group Company.

 

15.

EFFECT OF SALE ON SHARES

 

15.1

Neither the sale of the Shares by the Vendor nor compliance by the Vendor with the terms of this Agreement will:

 

  (a)

cause any Group Company to lose the benefit of any right or privilege it presently enjoys;

 

  (b)

relieve any person of any obligation to any Group Company (whether contractual or otherwise), or enable any person to determine any such obligation or any right or benefit enjoyed by the Group Company, or to exercise any right in respect of the Group Company;

 

  (c)

give rise to, or cause to become exercisable, any right of pre-emption over the Shares;

 

  (d)

result in a breach of contract, order, judgment, injunction, undertaking, decree or other like imposition;

 

  (e)

result in the creation, imposition, crystallisation or enforcement of any Encumbrance on any of the assets of any Group Company;

 

  (f)

result in the loss or impairment of or any default under any licence, authorisation or consent required by any of the Group Companies for the purposes of its business;

 

  (g)

entitle any person to acquire or affect the entitlement of any person to acquire shares in the Company.

 

16.

ASSETS

 

16.1

All of the assets included in the Accounts are legally and beneficially owned by Group Companies, except for those disposed of since the Balance Sheet Date in the ordinary course of business and any assets acquired since the Balance Sheet Date.

 

16.2

None of the assets, undertakings or goodwill of any Group Company is subject to any Encumbrance, or to any agreement or commitment to create an Encumbrance, and no person has claimed to be entitled to create such an Encumbrance.

 

16.3

Group Companies are in possession and control of all the assets included in the Accounts or acquired since the Balance Sheet Date, except for those disposed of in the ordinary course of business.

 

16.4

The assets of the Group Companies comprise all the assets necessary for the continuation of the Group’s business in the same manner as it is currently carried on.

 

16.5

The plant, machinery, equipment used by the Group Companies are in good working order in all material respects, have been regularly and properly maintained and are capable of doing the work for which they were designed.

 

26

17.

INTELLECTUAL PROPERTY

 

17.1

The Group Companies either own, or have valid licences to use, all the Intellectual Property required to carry on the Group’s business in the same manner as it is currently carried on (the “Business Intellectual Property”) and the Business Intellectual Property will not be lost or liable to termination as a result of the Transaction or the execution or performance of any of the Transaction Documents. None of the Business Intellectual Property is owned by any member of the Vendor Group.

 

17.2

So far as the Vendor is aware:

 

  (a)

the activities of the Group Companies have not infringed or misappropriated the Intellectual Property of any third party during the last three years (or, in the case of a Group Company which has been established for less than three years, since the date of establishment of the relevant Group Company); and

 

  (b)

no Business Intellectual Property has been infringed or misappropriated by a third party during the last three years.

 

17.3

In the last three years (or, in the case of a Group Company which has been established for less than three years, since the date of establishment of the relevant Group Company):

 

  (a)

no notice or allegation has been received by the Group Companies or the Vendor Group that the Group Companies or the Vendor Group are, or may be, infringing or misappropriating any third party Intellectual Property or has otherwise challenged the validity or ownership of any of the Business Intellectual Property; and

 

  (b)

no Group Company and no member of the Vendor Group has notified any third party or otherwise alleged that the third party is, or may be, infringing or misappropriating any Business Intellectual Property.

 

17.4

Other than the domain names listed at paragraph 2.1(a) of the Disclosure Letter, none of the Group Companies owns any domain names.

 

17.5

None of the Group Companies operates a website or email account from a domain name owned by a third party.

 

18.

PENSIONS

 

18.1

Save for those Relevant Schemes and/or Pension Benefits which have been Disclosed, or of which any member of the Purchaser Group otherwise has actual knowledge as at the date of this Agreement, no Group Company is or has at any time been a party to or had any liability in respect of any Relevant Scheme or been obliged to provide, participate in or contribute towards any Pension Benefits to any person, excluding any contributions to Social Security contributions.

 

19.

REAL ESTATE

 

19.1

The Properties are the only land and buildings owned, controlled, used or occupied by any Group Company in connection with its existing business or in relation to which any Group Company has any right, interest or liability and the particulars of the Properties set out in the Disclosure Letter are true, complete and accurate in all respects.

 

19.2

A Group Company is the legal and beneficial owner in possession of each of the Owned Properties, is in exclusive occupation of each of the Properties and has a good and marketable title to each of the Owned Properties.

 

27

19.3

All fixtures and fittings at the Owned Properties are the absolute property of a Group Company and are free from all Encumbrances.

 

19.4

None of the Properties is subject (or likely to become subject) to any matter which might adversely affect a Group Company’s ability to carry on its existing business from the Property in the same manner and at the same cost as at present.

 

19.5

None of the Properties is affected by a subsisting contract for sale or other disposition of any interest in it.

 

19.6

A Group Company has a permanent legal right free from onerous and unusual conditions to use all roads and conducting media serving each of the Owned Properties in the manner in which they are presently used.

 

19.7

Each of the Owned Properties is free from Encumbrances.

 

19.8

There is no covenant, restriction, burden, stipulation or outgoing affecting any Owned Properties which is of an onerous or unusual nature or which conflicts with its current use or materially affects its value.

 

19.9

No material breach of any covenant affecting the titles to the Properties is outstanding and all principal and additional rent has been paid up to date in relation to each of the Properties.

 

19.10

The current use of each of the Properties is the lawful use under the applicable Laws.

 

19.11

Building regulation and by-law consents and approvals have been obtained in respect of the development of the Properties and any alteration, extension or other improvement thereof.

 

19.12

The Properties are insured in their respective full reinstatement value against the usual comprehensive risks and against third party and public liability claims to an adequate extent and (where tenanted) for not less than three years’ loss of rent.

 

19.13

A Group Company has paid the rent and observed and performed the covenants on the part of the lessee and the conditions contained in any leases (which expression includes underleases) under which the Properties are held and the last demands for rent (or receipts if issued) were unqualified and all such leases are valid and in full force.

 

19.14

All licences, consents and approvals required from the lessors and any superior lessors under the leases of the Properties and from their respective mortgagees (if any) have been obtained and the covenants on the part of the lessee contained in such licences, consents and approvals have been duly performed and observed and, subject thereto, there are no collateral agreements, undertakings, waivers or concessions which are binding upon either the landlords or the Group Company.

 

19.15

All buildings or other erections on each of the Properties are in such condition and state of repair as to be substantially fit for the purpose for which they are at present used.

 

19.16

The Properties are held subject to and with the benefit of those tenancies (which expression includes sub-tenancies), details of which are set out in the Disclosure Schedule and there are no other such tenancies.

 

20.

ENVIRONMENT, HEALTH & SAFETY

 

20.1

Each Group Company is and has for the previous three years (or, in the case of a Group Company which has been established for less than three years, since the date of establishment of the relevant Group Company) been in compliance in all material respects with all EHS Laws and, so far as the Vendor is aware, there are no facts, matters or circumstances which may lead to any breach of or liability under any EHS Laws.

 

28

20.2

Each Group Company has obtained and has for the previous three years (or, in the case of a Group Company which has been established for less than three years, since the date of establishment of the relevant Group Company) been in compliance in all material respects with all EHS Consents, all material EHS Consents are in full force and effect and, so far as the Vendor is aware, there are no facts, matters or circumstances (including the transaction contemplated under this Agreement) that may lead to the revocation, suspension, variation or non-renewal of any EHS Consents.

 

20.3

No material expenditure is required to meet existing or anticipated conditions of any EHS Consents or to comply with EHS Laws or to address any EHS Matters arising out of the operation of the Group’s business or associated with the Properties.

 

20.4

There are no claims, proceedings or other form of dispute pending or threatened against any Group Company in either case relating to any breach of or any liability under EHS Laws and, so far as the Vendor is aware, there are no facts, matters or circumstances likely to give rise to any such claims, proceedings or other form of dispute.

 

20.5

No complaints, notices or other communication have been received by any Group Company alleging or specifying any breach of or liability under any EHS Laws and, so far as the Vendor is aware, there are no facts, matters or circumstances likely to give rise to any such complaints, notices or other communication.

 

20.6

In respect of the period during which the Properties have been owned, occupied or leased by the Group (and not in respect of any prior period), no EHS Matters exist or have arisen out of the business of any member or former member of the Group or have arisen at, in, on, under or from the Properties which have resulted in or, so far as the Vendor is aware, which are likely to give rise to any such member of the Group having any actual or potential liability under EHS Laws.

 

20.7

In respect of the period during which the Properties have been owned, occupied or leased by the Group (and not in respect of any prior period), there are: (a) no Hazardous Substances at, on, in or under the Properties, nor have any Hazardous Substances been emitted, escaped or migrated either from any of the Properties and (b) no claims, investigations, prosecutions or other proceedings against or threatened against the Vendor, any member of the Group or any of their respective directors, officers or employees in respect of the use of the Properties or for any breach and, so far as the Vendor is aware, there are no facts or circumstances that may lead to any such claims, investigations, prosecutions or other proceedings.

 

21.

TAX

 

21.1.

All notices, returns, reports, accounts, statements, assessments, claims and registrations and any other necessary information which have, or should have, been submitted by all Group Companies to any Tax Authority for the purposes of Tax have been made on a proper basis, were submitted within applicable time limits and were accurate and complete in all material respects. So far as the Vendor is aware, none of the above is, or is likely to be, the subject of any material dispute with any Tax Authority.

 

21.2.

All Taxes for which the Group Companies have been liable have been duly paid and no penalties, fines, surcharges or interest have been incurred.

 

21.3.

Each Group Company maintains complete and accurate records, invoices and other information in relation to Tax that meet the applicable legal requirements and enable the tax liabilities of the Company and any Subsidiary to be calculated accurately in all material respects.

 

21.4.

As far as the Vendor is aware, neither the Company nor any Subsidiary is, or will become, liable to make to any person any payment in respect of any Tax which is primarily or directly chargeable against, or attributable to, any other person (other than the Company or any Subsidiary).

 

29

22.

MLCO SHARES AS CONSIDERATION

 

21.5.

The Vendor has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in MLCO Shares. The Vendor is capable of bearing the economic risks of such investment, including a complete loss of its investment.

 

21.6.

The Vendor is acquiring the MLCO Shares that it will receive pursuant to this Agreement for investment for its own account for investment purposes only and not with the view to, or with any intention of, resale, distribution or other disposition thereof in a manner that would violate the registration requirements of the Securities Act.

 

21.7.

The Vendor acknowledges that the MLCO Shares are “restricted securities” that have not been registered under the Securities Act or any applicable state securities law. The Vendor further acknowledges that, absent an effective registration under the Securities Act, the MLCO Shares may only be offered, sold or otherwise transferred (x) to the Purchaser, (y) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act or (z) pursuant to an exemption from registration under the Securities Act.

 

21.8.

The Vendor is not a “U.S. person” as defined in Rule 902 of Regulation S under the Securities Act.

 

21.9.

The Vendor is acquiring the MLCO Shares in an offshore transaction executed in reliance upon the exemption from registration provided by Regulation S under the Securities Act.

 

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SCHEDULE 5

LIMITATIONS ON VENDOR LIABILITY

 

1.

FINANCIAL LIMITS ON CLAIMS

 

1.1

The aggregate liability of the Vendor in respect of all Claims shall not exceed USD170,000,000.

 

1.2

The Vendor shall not be liable in respect of any single Claim unless the amount of the liability pursuant to that Claim would (but for this paragraph 1.2) exceed USD500,000 (and, for these purposes, Claims arising out of the same or similar subject matter, facts, events or circumstances shall be aggregated to form a single Claim).

 

1.3

The Vendor shall not be liable in respect of any single Claim unless the aggregate amount of the liability of the Vendor for all Claims (other than Claims excluded by paragraph 1.2) and all claims under paragraph 1.1 of Schedule 6 (Tax Covenant) exceeds USD2,750,000, in which case the Vendor shall be liable for the entire amount of such Claim and not merely the excess.

 

2.

TIME LIMITS ON CLAIMS

 

2.1

The Vendor shall not be liable in respect of any Claim unless the Purchaser has given notice in writing of such Claim to the Vendor:

 

  (a)

in the case of a claim made under paragraph 21 (Tax) of Schedule 4, within the period of seven years beginning with the Completion Date; and

 

  (b)

in any other case, within the period of two years beginning with the Completion Date.

 

2.2

The notice referred to in paragraph 2.1 shall include a summary of the nature of the Claim as far as it is known to the Purchaser and the amount claimed.

 

2.3

For the avoidance of doubt, the Purchaser may give notice of any single Claim in accordance with paragraph 2, whether or not the amount set out in paragraph 1.3 has been exceeded at the time the notice is given.

 

3.

LIMITATIONS IN RELATION TO SPECIFIC WARRANTIES

The provisions of paragraphs 1 and 2 above shall not apply in respect of any Claim for breach of the Warranties set out in paragraphs 3.1 and 3.3 to 3.11 (inclusive) (Shares in the Company and the Subsidiaries) of Schedule 4.

 

4.

CONTINGENT LIABILITIES

The Vendor shall not be liable in respect of any contingent liability in relation to any Claim unless and until such contingent liability becomes an actual liability and is due and payable. This is without prejudice to the right of the Purchaser to give notice of the relevant Claim to the Vendor notwithstanding the fact that the liability may not have become an actual liability. The fact that the liability may not have become an actual liability within the time limits provided in paragraph 2 shall not exonerate the Vendor in respect of any Claim properly notified within such time limits.

 

5.

NO DUPLICATION OF RECOVERY

The Purchaser shall not be entitled to recover damages or obtain payment, reimbursement, restitution or indemnity more than once in respect of the same Loss, regardless of whether more than one Claim arises in respect of it.

 

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6.

INFORMATION DISCLOSED

 

6.1

The vendor shall not be liable for a Claim to the extent that the Claim relates to any matter:

 

  (a)

Disclosed;

 

  (b)

disclosed in this Agreement or any other Transaction Document;

 

  (c)

specifically provided for in the Accounts or the Management Accounts; or

 

  (d)

of which the Purchaser, any other member of the Purchaser’s Group, any professional adviser of any member of the Purchaser’s Group or any director, officer or employee of any member of the Purchaser’s Group has actual knowledge prior to the date of this Agreement, including (without limiting the generality of the foregoing) by reason of the involvement by the Purchaser’s Group in the project management of the casino resort being developed by the Group as referred to in Clause 5.2.

 

7.

MISCELLANEOUS

 

7.1

The Vendor shall not be liable for any Claim to the extent it arises or is increased as a result of any change of law or regulation coming into force after Completion.

 

7.2

The Vendor shall not be liable for any Claim to the extent it would not have arisen but for a change after Completion in the accounting basis on which any Group Company values its assets.

 

7.3

The Vendor shall not be liable for any Claim if it would not have arisen but for a voluntary act, transaction or omission made after Completion by any Group Company or the Purchaser or any other member of the Purchaser’s Group outside the ordinary course of business and which the Purchaser was aware or ought reasonably to have been aware would give rise to a breach of Warranty.

 

7.4

The Purchaser shall provide, and shall procure that the Company or relevant other Group Company provides, to the Vendor and the Vendor’s professional advisors reasonable access to premises and personnel and any relevant assets, documents and records within their power, possession or control for the purpose of enabling the Vendor to investigate and verify a Claim.

 

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SCHEDULE 6

TAX COVENANTS

 

1.1

The Vendor covenants to pay to the Purchaser an amount equal to 75% of any:

 

  (a)

liability for Tax resulting from, or by reference to, any event occurring on or before Completion or in respect of any gross receipts, income, profits or gains earned, accrued or received by any Group Company on or before Completion;

 

  (b)

liability for Tax that arises due to any event that occurs after Completion under a legally binding obligation (whether or not conditional) entered into by any of the Group Companies on or before Completion other than in the ordinary course of business; and

 

  (c)

costs and expenses (including legal costs on a full indemnity basis), properly incurred by the Purchaser, the Company or any Subsidiary in connection with any liability for Tax or other liability in respect of which the Vendor is liable under this Schedule or defending any action under this Schedule 6.

 

1.2

The provisions of paragraph 1.1 shall not cover any liability for Tax if and to the extent that:

 

  (a)

provision or reserve for the liability is made or reflected in the Accounts or the Management Accounts or the liability is noted in the notes to the Accounts or the Management Accounts; or

 

  (b)

the liability for Tax was paid on or before Completion; or

 

  (c)

it arises as a result of a transaction in the ordinary course of business of the Company or any Subsidiary between the Accounts Date and Completion; or

 

  (d)

it arises or is increased as a result of any change in the law or rates of Tax (other than a change targeted specifically at countering a tax avoidance scheme) announced and coming into force after Completion, or the withdrawal of any published extra statutory concession previously made by a Tax Authority (whether or not the change is retrospective in whole or in part); or

 

  (e)

it would not have arisen but for a change in accounting policies (including a change in accounting reference date) or the accounting bases on which the Company or any Subsidiary values its assets (other than a change made to comply with mandatory accounting standards) after Completion; or

 

  (f)

the Purchaser is compensated for the liability for Tax under any other provision of this Agreement; or

 

  (g)

any loss, relief, allowance, credit, exemption or set off for Tax, or any deduction in computing income, profits or gains for the purposes of Tax, or any right to a repayment of Tax or to a payment in respect of Tax (other than any of the foregoing which is shown as an asset in the Accounts) is available to the Company or any Subsidiary; or

 

  (h)

it would not have arisen but for a voluntary act, transaction or omission of the Company or any Subsidiary or the Purchaser or any other member of the Purchaser’s Group outside the ordinary course of business after Completion and which the Purchaser was aware, or ought reasonably to have been aware, would give rise to the liability for Tax or other liability in question. For the purpose of this paragraph (h), an act will not be regarded as voluntary if undertaken under a legally binding obligation entered into by the Company or any Subsidiary on or before Completion or imposed on the Company or any Subsidiary by any legislation whether coming into force before, on or after Completion, or to avoid or mitigate a penalty imposable by any legislation, or if carried out at the written request of the Vendor.

 

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1.3

The liability of the Vendor under paragraph 1.1 will terminate on the seventh anniversary of Completion, except for any claim under paragraph 1.1 of which written notice is given to the Vendor before that date containing, if and to the extent reasonably practicable, a description of that claim and the estimated total amount of the claim.

 

1.4

The aggregate liability of the Vendor under paragraph 1.1 and for all Claims, when taken together, shall not exceed the amount of the Final Consideration.

 

1.5

The Vendor shall not be liable for any single claim under paragraph 1.1 unless the amount of the liability pursuant to that claim exceeds USD250,000.

 

1.6

The Vendor shall not be liable for any claim under paragraph 1.1 unless the amount of all claims under paragraph 1.1 (other than those excluded under paragraph 1.5) when aggregated with any other Claims (other than those excluded under paragraph 1.2 of Schedule 5) exceeds USD1,500,000.

 

1.7

If the Purchaser, the Company or any Subsidiary becomes aware of an assessment, notice, demand, letter or other document issued or action taken by or on behalf of any Tax Authority, or any self-assessment or other occurrence, from which it appears that the Company or any Subsidiary or the Purchaser is or may be subject to a liability for Tax for which the Seller is or may be liable under paragraph 1.1 (a “Tax Authority Claim”), the Purchaser shall give or procure that notice in writing is given to the Vendor as soon as reasonably practicable, provided that giving that notice shall not be a condition precedent to the Vendor’s liability under paragraph 1.1.

 

1.8

If the Vendor indemnifies the Purchaser, the Company and the relevant Subsidiary to the Purchaser’s reasonable satisfaction against all liabilities, costs, damages or expenses that may be incurred (including any additional liability for Tax), the Purchaser shall take, and shall procure that the Company or the relevant Subsidiary shall take, any action that the Vendor may reasonably request by notice in writing given to the Purchaser to avoid, dispute, defend, resist, appeal or compromise any Tax Authority Claim.

 

1.9

The Purchaser, the Company or any Subsidiary shall not be obliged to appeal or procure an appeal against any assessment to Tax if the Purchaser, having given the Vendor written notice of that assessment, does not receive written instructions to do so from the Vendor within 10 Business Days.

 

1.10

The Purchaser shall not be obliged to take, or procure the taking of, any action under paragraph 1.8 in respect of any Tax Authority Claim:

 

  (a)

if the Vendor does not request the Purchaser to take any action under paragraph 1.8 or fails to indemnify the Purchaser, the Company or the relevant Subsidiary to the Purchaser’s reasonable satisfaction in a reasonable period of time (starting with the date of the notice given to the Vendor) considering the nature of the Tax Authority Claim and the existence of any time limit for avoiding, disputing, defending, resisting, appealing or compromising that Tax Authority Claim, and that period shall not, in any event, exceed 10 Business Days;

 

  (b)

where the Vendor (or the Company or any Subsidiary before Completion) has been engaged in fraudulent conduct or deliberate default relating to the liability for Tax that is the subject matter of the dispute; or

 

34

  (c)

if the dispute involves an appeal against a determination by the Tax Authority, unless the Vendor has obtained the opinion of Tax counsel of at least five years standing that the appeal has a reasonable prospect of success.

 

1.11

If paragraph 1.8 does not apply by virtue of any provision in paragraph 1.10, the Purchaser, the Company or the relevant Subsidiary shall have the absolute conduct of the Tax Authority Claim (without prejudice to its rights under paragraph 1.1) and shall be free to pay or settle the Tax Authority Claim in any terms that the Purchaser, the Company or the relevant Subsidiary in its absolute discretion thinks fit.

 

1.12

The Purchaser shall provide, and shall procure that the Company or the relevant Subsidiary provides, to the Vendor and the Vendor’s professional advisors reasonable access to premises and personnel, and to any relevant assets, documents and records in their power, possession or control to investigate any Tax Authority Claim.

 

35

IN WITNESS WHEREOF the undersigned has hereto executed and delivered this Agreement as of the day and year first above written.

 

Signed by

  

Chung Yuk Man

for and on behalf of MELCO INTERNATIONAL

DEVELOPMENT LIMITED

  

                                                                      

  

        /s/ Chung Yuk Man        

 

Signed by Francesca Galante, Director

for and on behalf of MELCO RESORTS &                 

ENTERTAINMENT LIMITED

  

                                                                 

 

        /s/ Francesca Galante        

Signature Page to Share Purchase Agreement

EX-4.30

Exhibit 4.30

EXECUTION VERSION

MELCO RESORTS FINANCE LIMITED

US$600,000,000 5.625% Senior Notes due 2027

PURCHASE AGREEMENT

WHITE & CASE

9/F, Central Tower

28 Queen’s Road Central

Hong Kong

July 10, 2019

Each of the institutions named in Schedule A hereto

(each, an “Initial Purchaser” and, collectively, the “Initial Purchasers”)

Ladies and Gentlemen:

Melco Resorts Finance Limited, an exempted company incorporated with limited liability in the Cayman Islands (the “Issuer”), confirms its agreement with the Initial Purchasers with respect to the issuance and sale by the Issuer and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts set forth in Schedule A hereto of US$600,000,000 aggregate principal amount of the Issuer’s 5.625% Senior Notes due 2027 (the “Notes”), subject to the terms and conditions set forth in this purchase agreement (this “Agreement”). The Notes are to be issued pursuant to an indenture (the “Indenture”), dated as of the Closing Date (as defined below), between the Issuer and Deutsche Bank Trust Company Americas, as trustee (the “Trustee”).

The Issuer intends to use the net proceeds from the offering of the Notes to repay, in part, the amount outstanding under the HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility under the amended and restated credit facilities entered into by Melco Resorts Macau (as defined below) on June 19, 2015 (the “2015 Credit Facilities”).

This Agreement, the Indenture and the Notes are referred to herein as the “Operative Documents.”

The offer of the Notes by the Initial Purchasers is herein called the “Offering.” All references to “U.S. dollars” or “US$” herein are to United States dollars. In connection with the Offering, the Issuer has made a listing application to, and approval-in-principle has been obtained from, the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing on the SGX-ST of the Notes.

The Issuer understands that the Initial Purchasers propose to make the Offering on the terms and in the manner set forth herein and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Notes to purchasers (“Subsequent Purchasers”) at any time after this Agreement has been executed and delivered. The Notes are to be offered and sold through the Initial Purchasers without being registered under the United States Securities Act of 1933, as amended (the “Securities Act”), in reliance upon exemptions therefrom. Pursuant to the terms of the Notes and the Indenture, investors that acquire Notes may only resell or otherwise transfer such Notes (A) (i) if such Notes are hereafter registered under the Securities Act or (ii) if an exemption from the registration requirements of the Securities Act is available for such resale or transfer (including, without limitation, the exemptions afforded by Rule 144A under the Securities Act (“Rule 144A”), or Regulation S under the Securities Act (“Regulation S”) and (B) in compliance with transfer restrictions set forth in the Offering Memorandum under the caption “Transfer Restrictions”.

 

1

In connection with the sale of the Notes, the Issuer confirms that it has prepared and delivered to each of the Initial Purchasers copies of a preliminary offering memorandum dated July 9, 2019 (the “Preliminary Offering Memorandum”) and a pricing supplement, in the form attached hereto as Schedule C (the “Pricing Supplement”), and that it will prepare and deliver to each of the Initial Purchasers, dated the date hereof, a final offering memorandum (the “Final Offering Memorandum”), each for use by each of the Initial Purchasers in connection with its solicitation of purchases of, or offering of, the Notes. “Offering Memorandum” means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document) which has been prepared and delivered by the Issuer to each of the Initial Purchasers in connection with their solicitation of purchases of, or offering of the Notes.

For purposes of this Agreement:

“Gaming License” means a license for operating games of chance and other casino games in Macau, pursuant to a valid subconcession contract;

“Sanction Target” means any person who is (i) the subject or the target of any sanctions or trade embargos administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council (“UNSC”), the European Union (“EU”), Her Majesty’s Treasury (“HMT”) or the Monetary Authority of Singapore (“MAS”) or any other applicable sanctions regulation (collectively, “Sanctions”); (ii) 50% or more owned by or otherwise controlled by or acting on behalf of one or more persons referenced in clause (i) above, or (iii) located, organized or resident in a country or territory that is the subject or the target of Sanctions (including but not limited to, Cuba, Iran, North Korea, Sudan, the Crimea region in the Ukraine and Syria) (each, a “Sanctioned Country”); and

“Subconcession Contract” means the Subconcession Contract dated September 8, 2006 between Wynn Resorts (Macau), S.A. and Melco Resorts (Macau) Limited (formerly known as Melco Crown (Macau) Limited and before that as Melco Crown Gaming (Macau) Limited or Melco PBL Gaming (Macau) Limited and before that as PBL Entertainment (Macau) Limited) (“Melco Resorts Macau”).

SECTION 1. Representations and Warranties by the Issuer.

The Issuer represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Date referred to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows:

(i)     Disclosure Package and Final Offering Memorandum. As of the Applicable Time (as defined below), neither (x) the Preliminary Offering Memorandum as supplemented by the Pricing Supplement, all considered together (collectively, the “Disclosure Package”), nor (y) any individual Supplemental Offering Materials (as defined below), when considered together with the Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. “Applicable Time” means the time when sales of the Notes were first made.

 

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“Supplemental Offering Materials” means any “written communication” (within the meaning of the rules and regulations promulgated under the Securities Act by the U.S. Securities and Exchange Commission (the “Commission”)), prepared by or on behalf of the Issuer, or used or referred to by the Issuer, that constitutes an offer to sell or a solicitation of an offer to buy the Notes other than the Offering Memorandum or amendments or supplements thereto (including the Pricing Supplement), including, without limitation, any roadshow material relating to the Notes that constitutes such a written communication.

As of its date of issue and as of the Closing Date, the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the representations, warranties and agreements in this Section 1(i) shall not apply to statements in or omissions from the Disclosure Package or the Final Offering Memorandum or any amendments or supplements thereto made in reliance upon and in conformity with information furnished to the Issuer in writing by an Initial Purchaser expressly for use in the Disclosure Package or the Final Offering Memorandum or any amendments or supplements thereto, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the information described as such in Section 7(b) hereof.

(ii)     Existence. The Issuer and each of its subsidiaries has been duly incorporated and is existing and (where such concept is applicable) in good standing under the laws of the jurisdiction of its incorporation or establishment, with power and authority (corporate and other) to own its properties and conduct its business as described in the Disclosure Package and the Final Offering Memorandum and to enter into, execute and perform its obligations under the Operative Documents to which it is a party, and is duly qualified to do business as a foreign corporation (where such concept is applicable) in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified in such jurisdiction, individually or in the aggregate, would not have a material adverse effect on the condition (financial or other), business, properties, business prospects or results of operations of the Issuer and its subsidiaries taken as a whole (“Material Adverse Effect”).

(iii)     Subsidiaries. The Issuer does not have any subsidiaries other than the ones listed on Schedule B. All of the issued and outstanding authorized shares of each subsidiary of the Issuer have been duly authorized and validly issued and are fully paid and non-assessable; and except for authorized shares which have been pledged pursuant to prior financings as disclosed in the Disclosure Package and the Final Offering Memorandum, the authorized shares of each subsidiary owned by the Issuer, directly or through subsidiaries, are owned free from liens, encumbrances and defects.

(iv)     Capitalization. The capitalization of the Issuer is as set forth in the Disclosure Package and the Final Offering Memorandum in the column entitled “Actual” under the caption “Capitalization”; all of the issued and outstanding shares of the Issuer have been duly authorized.

 

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(v)     Absence of Further Requirements. No consent, approval, or order of, clearance by, or filing or registration with, any person (including any governmental agency or body or any court or any stock exchange) is required to be obtained or made by the Issuer or any of its subsidiaries for the consummation by the Issuer of the transactions contemplated by the Operative Documents, except such as may be required (A) under the blue sky or similar laws of any jurisdiction in connection with the purchase and distribution of the Notes by the Initial Purchasers in the manner contemplated in the Operative Documents, the Disclosure Package and the Final Offering Memorandum and (B) by the SGX-ST in connection with its granting approval-in-principle for the listing and quotation of the Notes when such approval is obtained. No governmental authorization is required to effect payments of principal, premium, if any, and interest on the Notes.

(vi)     Title to Property. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, the Issuer and its subsidiaries have good and marketable title to all real property and all other property and assets owned by them as are necessary to conduct their respective businesses in the manner described in the Disclosure Package and the Final Offering Memorandum, in each case free from liens, charges, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them, and the Issuer and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no terms or provisions that would materially interfere with the use made or to be made thereof by them and except for such liens, encumbrances, charges, defects, claims, options or restrictions which, individually or in the aggregate, would not have a Material Adverse Effect.

(vii)     Compliance. Neither the Issuer nor any of its subsidiaries is (A) in violation of its respective constitutional documents, (B) in default of the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, license, lease or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which it may be bound, or to which any of the properties or assets of the Issuer or any of its subsidiaries may be subject (and no event has occurred which, with the giving of notices or lapse of time or both, would constitute such default), or (C) in violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Issuer or such subsidiary or any of its properties, as applicable, except, in the case of (B) and (C) only, any defaults or violations which, individually and in the aggregate, would not have a Material Adverse Effect.

 

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(viii)     Absence of Defaults and Conflicts Resulting from Transaction. The execution, delivery and performance of each Operative Document and the consummation of the transactions contemplated herein and therein by the Issuer, the issuance and sale of the Notes and the application of the proceeds from the sale of the Notes by the Issuer, as described in the Disclosure Package and the Final Offering Memorandum under the caption “Use of Proceeds,” and compliance by the Issuer with its obligations hereunder and thereunder do not and will not result in (A) a violation of the respective constitutional documents of the Issuer or any of its subsidiaries, (B) a violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Issuer or any of its subsidiaries or any of their properties, or (C) a breach or violation of any of the terms and provisions of, or constitute a default or a Debt Repayment Triggering Event (as defined below) under, or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Issuer or any of its subsidiaries pursuant to, the constitutional documents of the Issuer or any of its subsidiaries, any statute, rule, regulation or order of any governmental agency or body or any court, arbitrator or other authority, domestic or foreign, having jurisdiction over the Issuer or any of its subsidiaries or any of their properties, or any agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries is bound or to which any of the properties of the Issuer or any of its subsidiaries is subject (including but not limited to the 2015 Credit Facilities, the 4.875% senior notes due 2025 of the Issuer, and the 5.250% senior notes due 2026 of the Issuer), except in the case of (B) and (C) above, where any such breach, violation, contravention, default, Debt Repayment Triggering Event, lien, charge or encumbrance would not, individually or in the aggregate, have a Material Adverse Effect. A “Debt Repayment Triggering Event” means any event or condition that gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture, or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Issuer or any of its subsidiaries.

(ix)     Subconcession Contract. The Subconcession Contract has been duly authorized, executed and delivered by Melco Resorts Macau, and assuming due authorization, execution and delivery by the other parties thereto, constitutes a legal, valid and binding agreement of such parties, enforceable against Melco Resorts Macau in accordance with its terms, in each case, except as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

(x)     Licenses. The Issuer and its subsidiaries possess, and are in compliance with the terms of, all licenses, certificates, authorizations, and franchise permits (collectively, “Licenses”) issued by appropriate governmental agencies or bodies necessary to the conduct of the business now operated by them, except for such non-compliance that would not, individually or in the aggregate, have a Material Adverse Effect and have not received any notice of proceedings relating to the revocation or modification of any License that, if determined adversely to the Issuer or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. To the best knowledge of the Issuer, the Gaming License of Melco Resorts Macau remains in full force and effect and validly authorizes Melco Resorts Macau to carry on the gaming business as is and is proposed to be conducted and on the terms and conditions, in each case as described in the Disclosure Package and the Final Offering Memorandum, and to the knowledge of the Issuer, no notice of any proceeding or claim or action for the invalidation, revocation, cancellation or imposition of any further condition or requirement of or in connection with the Gaming License has occurred or is pending.

(xi)     Absence of Labor Dispute. Except as would not have a Material Adverse Effect, no labor dispute with the employees of the Issuer or any of its subsidiaries exists or, to the knowledge of the Issuer or any of its subsidiaries, is imminent.

 

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(xii)     Possession of Intellectual Property. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, the Issuer and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, “intellectual property rights”) necessary to conduct the business now operated or employed by them, and if such business is described in the Disclosure Package and the Final Offering Memorandum, as described in the Disclosure Package and the Final Offering Memorandum. Neither the Issuer nor any of its subsidiaries has received any notice or communication of infringement of or conflict with asserted rights of others with respect to any intellectual property rights of others that, if determined adversely to the Issuer or any of its subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect.

(xiii)     Offering Memorandum. The statements set forth in the Disclosure Package and the Final Offering Memorandum (i) under the sections headed “Summary,” “Description of Notes” and “Description of Other Material Indebtedness,” insofar as they purport to constitute a summary of the material terms of the Notes and the material indebtedness of the Issuer and its subsidiaries, respectively, and (ii) under the sections headed “Related Party Transactions,” “Plan of Distribution” and “Taxation,” insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and fair in all material respects. The Operative Documents will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum.

(xiv)     Environmental Laws. Neither the Issuer nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances or relating to the safety of employees in the workplace (collectively, “environmental laws”), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any civil, criminal or administrative action, suit, claim, hearing, notice of violation, investigation or proceeding (“Proceeding”) relating to any environmental laws, which violation, contamination, liability or Proceeding would, individually or in the aggregate, have a Material Adverse Effect; and neither the Issuer nor any of its subsidiaries is aware of any pending hearing or investigation which would lead to such a claim.

(xv)     Insurance. The Issuer and its subsidiaries maintain insurance in such amounts and covering such risks as the Issuer and each subsidiary reasonably considers adequate for the conduct of its business, all of which insurance is in full force and effect. There are no material claims by the Issuer or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. Neither the Issuer nor any of its subsidiaries has a reason to believe that it will not be able to renew its existing renewable insurance as and when such coverage expires or will not be able to obtain replacement insurance adequate for the conduct of the business and the value of its properties at a cost that would not have a Material Adverse Effect.

(xvi)     Statistical and Market-Related Data. Any third-party statistical and market-related data included in the Disclosure Package or the Final Offering Memorandum are based on or derived from sources that the Issuer believes to be reliable and accurate.

 

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(xvii)     Absence of Accounting Issues. A member of the Board of Directors of the Issuer has confirmed that the Board of Directors is not reviewing or investigating, and neither the Issuer’s independent auditors nor its internal auditors have recommended that the Board of Directors review or investigate adding to, deleting, changing the application of, or changing the Issuer’s disclosure with respect to, the Issuer’s material accounting policies, other than in connection with any proposed change in U.S. GAAP (as defined below).

(xviii)     Taxes. No taxes, imposts or duties of any nature (including, without limitation, stamp or other issuance or transfer taxes or duties and capital gains, income, withholding or other taxes) are payable by or on behalf of the Initial Purchasers to the governments of the Cayman Islands or Macau or, in each case, any political subdivision or taxing authority thereof or therein in connection with (A) the execution and delivery of the Operative Documents, except Cayman Islands stamp duty will be payable if originals of the Operative Documents are executed or brought into the Cayman Islands, or (B) except as disclosed in the Disclosure Package and the Final Offering Memorandum under the heading “Taxation,” the resale and delivery of such Notes by the Initial Purchasers in the manner contemplated in the Disclosure Package and the Final Offering Memorandum.

(xix)     Filing of Tax Returns. Each of the Issuer and its subsidiaries has filed on a timely basis all necessary tax returns, reports and filings (except in any case in which the failure to file on a timely basis would not have a Material Adverse Effect), and all such returns, reports or filings are true, correct and complete in all material aspects, and are not the subject of any disputes with revenue or other authorities and to the Issuer’s knowledge there are no circumstances giving rise to, or which could give rise to, such disputes. None of the Issuer or its subsidiaries is delinquent in the payment of any taxes due thereunder or has any knowledge of any tax deficiency which might be assessed against any of them, which, if so assessed, would have a Material Adverse Effect.

(xx)     Litigation. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, there are no pending actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) against or affecting the Issuer, any of its subsidiaries or any of their respective properties that, if determined adversely to the Issuer or any of its subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect, or would materially or adversely affect the ability of the Issuer to perform its obligations under the Operative Documents, or which are otherwise material in the context of the sale of the Notes by the Issuer; and to the Issuer’s and each of its subsidiaries’ best knowledge, no such actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) are threatened or contemplated.

(xxi)    Auditors. Ernst & Young (“EY”), who audited the consolidated financial statements of the Issuer as of and for the years ended December 31, 2017 and 2018 and reviewed the condensed consolidated financial statements of the Issuer as of March 31, 2019 and for the three months ended March 31, 2018 and 2019 included in the Disclosure Package and the Final Offering Memorandum, is the current independent public accountant of the Issuer. EY also audited the adjustments related to the retrospective application of the authoritative guidance on the presentation and classification of restricted cash to the consolidated statement of cash flows for the year ended December 31, 2016, and Deloitte Touche Tohmatsu (“Deloitte”), who audited the consolidated financial statements (before retrospective adjustments to the consolidated financial statements) of the Issuer as of and for the year ended December 31, 2016, is the predecessor independent public accountant of the Issuer.

 

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(xxii)     Financial Statements. The consolidated financial statements of the Issuer and its consolidated subsidiaries, together with the applicable related notes, included in the Disclosure Package and the Final Offering Memorandum present fairly, in all material respects, the consolidated financial position of the Issuer and its consolidated subsidiaries at the dates indicated and their consolidated statement of operations, stockholders’ equity and cash flows for the periods specified. Such consolidated financial statements of the Issuer and its consolidated subsidiaries have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and, except as disclosed therein, applied on a consistent basis throughout the periods involved. The selected financial data and the summary financial information included in the Disclosure Package and the Final Offering Memorandum present fairly in all material respects the information shown therein. Such data have been, except as disclosed therein, compiled on a basis consistent with that of the audited financial statements included in the Disclosure Package and the Final Offering Memorandum and the other financial information included in the Disclosure Package and the Final Offering Memorandum has been derived from the accounting records of the Issuer and its subsidiaries and presents fairly the information shown thereby.

(xxiii)     No Material Adverse Change in Business. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, since March 31, 2019, neither the Issuer nor any of its subsidiaries has (i) incurred, assumed or acquired any material liability (including contingent liability) or other material obligation except for any obligation incurred in the ordinary course of its business including renovation, construction or development of properties owned or leased by the Issuer or its subsidiaries, (ii) received notice of any cancellation, termination or revocation of the Subconcession Contract or of any Debt Repayment Triggering Event, (iii) acquired or disposed of or agreed to acquire or dispose of any business or any other asset material to the Issuer and its subsidiaries taken as a whole, (iv) entered into a letter of intent or memorandum of understanding (or announced an intention to do so) relating to any matter identified in clauses (i) through (iii) above, or (v) sustained any material loss or interference with its business from strike, fire, explosion or other calamity, whether or not covered by insurance, or from any court or governmental action, order or decree, and since the respective dates as of which information is given in the Disclosure Package and the Final Offering Memorandum, except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, there has been no change, nor any development or event, that would have a Material Adverse Effect. Except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, since March 31, 2019, there has been no dividend or distribution of any kind declared, paid or made by the Issuer on any class of its authorized shares.

(xxiv)     Management’s Discussion and Analysis of Financial Condition and Results of Operations. The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the Disclosure Package and the Final Offering Memorandum accurately and fully describes, in all material respects, (A) accounting policies which the Issuer believes are the most important in the portrayal of the consolidated financial condition and results of operations of the Issuer and its consolidated subsidiaries and which require management’s most difficult, subjective or complex judgments (“critical accounting policies”); (B) judgments and uncertainties affecting the application of critical accounting policies; and (C) explanation of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

 

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(xxv)     No Prohibition on Subsidiaries from Paying Dividends or Making Other Distributions. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, no subsidiary of the Issuer is currently prohibited, directly or indirectly, (i) from paying any dividends to the Issuer, (ii) from making any other distribution on such subsidiary’s authorized shares, (iii) from repaying to the Issuer any loans or advances to such subsidiary from the Issuer or (iv) from transferring any of such subsidiary’s property or assets to the Issuer or any other subsidiary of the Issuer; provided that in the case of clause (iv) only, it is acknowledged that the transfer of gaming assets by Melco Resorts Macau and of casinos and/or gaming areas will be subject to compliance with the Gaming License and related requirements under Macau law.

(xxvi)    Investment Company Act. The Issuer is not required to register, and after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Disclosure Package and the Final Offering Memorandum, would not be required to register, as an investment company under the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”).

(xxvii)     No Undisclosed Relationships. No relationship, direct or indirect, exists between or among the Issuer or any of its subsidiaries, on the one hand, and the directors, officers, shareholders, customers, suppliers or other affiliates of the Issuer or any of its subsidiaries, on the other hand, that is required to be described in the Disclosure Package and the Final Offering Memorandum that is not so described.

(xxviii)     Stabilization Activities. None of the Issuer, its subsidiaries, their respective Affiliates (as defined below) or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation or warranty is made), has taken, directly or indirectly, any action for the purpose of stabilizing or manipulating the price of any security to facilitate the sale or resale of the Notes in violation of any applicable law.

(xxix)     Choice of Law. The agreement of the Issuer to the choice of law provisions set forth in Section 21 hereof will be recognized by the courts of the Cayman Islands and Macau and are legal, valid and binding; the Issuer can sue and be sued in its own name under the laws of the Cayman Islands and Macau; the irrevocable submission by the Issuer to the jurisdiction of the federal and state courts in the Borough of Manhattan in The City of New York and the appointment of Law Debenture Corporate Services Inc., 801 2nd Avenue, Suite 403, New York, NY10017, as its authorized agent for the purpose described in Section 21 hereof is legal, valid and binding; service of process effected in the manner set forth in Section 21 hereof will be effective to confer valid personal jurisdiction over the Issuer; and, except as disclosed in the Disclosure Package and the Final Offering Memorandum, a judgment obtained in the federal and state courts in the Borough of Manhattan in The City of New York arising out of or in relation to the obligations of the Issuer under this Agreement would be enforceable against the Issuer in the courts of the Cayman Islands and Macau, in each case, without further review of the merits.

 

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(xxx)     Compliance with Anti-bribery Laws. None of the Issuer, any of its subsidiaries or any of their respective directors or officers, nor to the knowledge of the Issuer, any agent, employee or other person acting on behalf of and at the direction of the Issuer or any of its subsidiaries has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or made any direct or indirect unlawful payment to any government official or employee from corporate funds. None of the Issuer, its subsidiaries and any of their respective officers, directors, supervisors or managers, and to the knowledge of the Issuer, their respective affiliates, agents or employees, has violated any applicable anti-bribery law, rule or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the United States Foreign Corrupt Practices Act or any other applicable law, rule or regulation of similar purpose and scope, or any amendment thereto (collectively, the “Anti-Bribery Laws”). The Issuer and its subsidiaries have instituted and maintain policies and procedures designed to (a) ensure continued compliance with the Anti-Bribery Laws and (b) detect the violations of the Anti-Bribery Laws.

(xxxi)     Compliance with Money Laundering Laws. Each of the Issuer, its subsidiaries and their respective officers, directors, supervisors, managers, and to the knowledge of the Issuer, each of their respective affiliates, agents or employees or other person acting on behalf, at the direction or in the interest of the Issuer or its subsidiaries, has not violated, and the Issuer and its subsidiaries operate and will continue to operate their businesses in compliance with, any applicable financial recordkeeping and reporting requirements and anti-money laundering laws of applicable jurisdictions, including but not limited to, applicable federal, state, international, foreign or other applicable laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 U.S. Code sections 1956 and 1957, the U.S. Patriot Act, the U.S. Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended and as applicable, and any executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any applicable orders or licenses issued thereunder (collectively, the “Anti-Money Laundering Laws”).

(xxxii)     Sanctions. None of the Issuer, its subsidiaries and their respective officers, directors, supervisors, managers, nor to the knowledge of the Issuer, any affiliate, agent, or employee or other person acting on behalf or at the direction of the Issuer or its subsidiaries is a person that is a Sanction Target or domiciled or registered in or operating from a Sanctioned Country. Neither the Issuer nor any of its subsidiaries has or intends to have any business operations or other dealings (a) in any Sanctioned Country, including the Crimean region in Ukraine, Cuba, Iran, Sudan, North Korea and Syria, (b) with any Specially Designated National (“SDN”) on OFAC’s SDN list or, to its knowledge, any person that at the time of the business operations or other dealings is or was the subject of Sanctions, or (c) involving commodities or services of a Sanctioned Country origin or shipped to, through, or from a Sanctioned Country, or on Sanctioned Country owned or registered vessels or aircraft, or finance or subsidize any of the foregoing in an amount exceeding 5% of the total assets or revenues of the Issuer and its subsidiaries on a consolidated basis. The Issuer and its subsidiaries have instituted and maintain policies and procedures designed to prevent sanctions violations (by the Issuer and its subsidiaries and by persons associated with the Issuer and its subsidiaries). Neither the Issuer nor any of its subsidiaries knows or has reason to believe that any of them are or may become subject of sanctions-related investigations or juridical proceedings. The Issuer and each Initial Purchaser (other than Morgan Stanley & Co. LLC) acknowledges, agrees and confirms that the representation, warranty and covenant contained in this Section 1(xxxii) is only sought, given or repeated, as appropriate, to the extent that to do so would be permissible pursuant to Council Regulation (EC) No. 2271/96 of 22 November 1996 or any applicable anti-boycott laws or regulations.

 

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(xxxiii)     Forward-Looking Statements. Each “forward-looking statement” (within the meaning of Section 27A of the Act and Section 21E of the U.S. Securities Exchange Act of 1934 Act, as amended (the “Exchange Act”)) included in the Disclosure Package or the Final Offering Memorandum has been made or reaffirmed by the Issuer with a reasonable basis, in good faith and based on reasonable assumptions.

(xxxiv)     Authorization of this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Issuer.

(xxxv)     Authorization of the Notes. The Notes have been duly authorized and, at the Closing Date, will have been duly executed by the Issuer and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the Purchase Price (as defined below) as provided in this Agreement, will constitute legal, valid and binding obligations of the Issuer, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture.

(xxxvi)     Authorization of the Indenture. The Indenture has been duly authorized by the Issuer and, when executed and delivered by the Issuer (assuming the due authorization, execution and delivery by the Trustee), will constitute a legal, valid and binding agreement of the Issuer, enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(xxxvii)     No Qualification under Trust Indenture Act. No qualification of the Indenture under the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (the “TIA”) is required in connection with the offer and sale of the Notes by the Issuer to the Initial Purchasers hereunder or the resales thereof by the Initial Purchasers in the manner contemplated hereby.

(xxxviii)     Payments without Withholding. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, all payments on the Notes will be made by the Issuer without withholding or deduction for or on account of any and all taxes, duties or other charges or whatsoever nature (including, without limitation, income taxes) imposed by the Cayman Islands or Macau, or, in each case, any political subdivision or taxing authority thereof or therein.

(xxxix)     Sovereign Immunity. None of the Issuer or any of its subsidiaries or any of their respective properties has any sovereign immunity from jurisdiction or suit of any court or from set-off or from any legal process or remedy (whether through service, notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of Macau.

 

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(xl)     Solvency. Immediately after the Closing Time, the Issuer individually, and the Issuer and its subsidiaries on a consolidated basis (the “Group”), will be Solvent. As used herein, the term “Solvent” means, with respect to the Issuer and the Group, on a particular date, that on such date (1) the fair market value of the assets of the entity is greater than the total amount of liabilities (including contingent liabilities) of such entity, (2) the present fair saleable value of the assets of such entity is greater than the sum of its stated liabilities and identified contingent liabilities, (3) such entity is able to realize upon its assets and pay its debts and other liabilities, including contingent obligations, as they mature, and (4) such entity does not have unreasonably small capital. No proceedings have been commenced by the Issuer or its subsidiaries for, nor has the Issuer or any of its subsidiaries passed any resolutions or presented petitions for purposes of, and no judgment has been rendered for, the liquidation, bankruptcy, winding-up, administration or analogous event of the Issuer or any of its subsidiaries, except with respect to any subsidiary of the Issuer, for any such resolutions in respect of a voluntary reorganization.

(xli)     Undisclosed Liabilities. There are (i) no liabilities of the Issuer or any of its subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and (ii) no existing situations or set of circumstances that would reasonably be expected to result in such a liability, other than (x) liabilities set forth in the Disclosure Package and the Final Offering Memorandum, or (y) other undisclosed liabilities which would not, individually or in the aggregate, have a Material Adverse Effect.

(xlii)     Accounting Controls. The Issuer and its consolidated subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(xliii)     Similar Offerings. None of the Issuer, its Affiliates, as such term is defined in Rule 501(b) under the Securities Act (each, an “Affiliate”), or any other person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any U.S. person (as defined in Regulation S), any security which is or would be integrated with the sale of the Notes in a manner that would require the Notes to be registered under the Securities Act.

(xliv)     Rule 144A Eligibility. The Notes are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated interdealer quotation system. Each of the Disclosure Package and the Final Offering Memorandum, as of its date, contain all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.

 

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(xlv)     No General Solicitation. None of the Issuer, its subsidiaries, their Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has engaged or will engage, in connection with the Offering, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

(xlvi)     Public Announcements Relating to Stabilization Actions. The Issuer represents, warrants and agrees that in relation to any Notes for which Deutsche Bank AG, Singapore Branch is named as a Stabilizing Coordinator (the “Stabilizing Coordinator”), each of the Issuer and its subsidiaries will not issue, without the prior consent of the Stabilizing Coordinator, any press release or other public announcement referring to the proposed issue of Notes unless the announcement adequately discloses the fact that stabilizing action may take place in relation to the Notes and the Issuer authorizes the Initial Purchasers to make adequate public disclosure of the information required by Article 6 of the Commission Delegated Regulation 2016/1052 instead of the Issuer or such subsidiaries.

(xlvii)     No Registration Required.     Subject to compliance by the Initial Purchasers with the representations, warranties and procedures set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Notes under the Securities Act.

(xlviii)     No Directed Selling Efforts. With respect to those Notes sold in reliance on Regulation S, (A) none of the Issuer, its subsidiaries, their respective Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (B) each of the Issuer, its subsidiaries and their respective Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has complied with and will comply with the offering restrictions requirements of Regulation S.

(xlix)     Foreign Private Issuer. The Issuer is a “foreign private issuer” as defined in Rule 405 under the Securities Act.

SECTION 2.     Sale and Delivery to Initial Purchasers; Closing.

(a)                 Notes. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Issuer agrees to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Issuer, at the purchase price of 99.15% (consisting of the issue price for the Notes, being 100.00% of the principal amount thereof, net the commission thereon, being 0.85% of the principal amount of the Notes (the “Fees”)) of the principal amount thereof (the “Purchase Price”), the principal amounts of the Notes set forth in Schedule A opposite the name of such Initial Purchaser, plus any additional principal amount of the Notes which such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 10 hereof (any such additional principal amount purchased, a “Default Purchase”).

 

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The Fees shall be allocated among the Initial Purchasers as follow: subject to any adjustment to account for any Default Purchase, (i) Deutsche Bank AG, Singapore Branch and Australia and New Zealand Banking Group Limited shall be entitled to 68.0% and 19.5% of the aggregate amount of the Fees, respectively, (ii) and Bank of Communications Co., Ltd. Macau Branch, BOCI Asia Limited, Industrial and Commercial Bank of China (Macau) Limited, Mizuho Securities Asia Limited and Morgan Stanley & Co. LLC shall be entitled to 2.5%, 2.5%, 2.5%, 2.5% and 2.5% of the aggregate amount of the Fees, respectively.

(b)                 Payment of Purchase Price. Payment of the Purchase Price for the Notes shall be made by the Initial Purchasers in U.S. dollars in immediately available funds by wire transfer to the account of the Issuer notified to Deutsche Bank AG, Singapore Branch, acting as settlement lead manager, at least three business days before 9:30A.M. New York City time on July 17, 2019 (the “Closing Date”), or at least three business days before such other date, not later than seven calendar days after the foregoing date, as shall be agreed upon by the Representative (as defined below) and the Issuer (such time and date of payment being herein called the “Closing Time”).

Payment shall be made to the Issuer against delivery to the Initial Purchasers for the respective accounts of the Initial Purchasers or the accounts of the persons procured by the Initial Purchasers to purchase the Notes. Each Initial Purchaser shall accept delivery of, receipt for, and make payment of the Purchase Price for, the Notes which it has agreed to purchase, or procure the purchase of. Each of the Initial Purchasers may (but shall not be obligated to) make payment of the Purchase Price for the Notes to be purchased by any persons procured by such Initial Purchaser whose funds have not been received by the Closing Time.

(c)                 Delivery. The Issuer will deliver to the Initial Purchasers, against payment of the Purchase Price thereof pursuant to Section 2(b) above, the Notes to be purchased by the Initial Purchasers hereunder and to be offered and sold by the Initial Purchasers in reliance on Regulation S in the form of one or more global notes (the “Regulation S Global Notes”) registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), and deposited with the Trustee as custodian for DTC for the respective accounts of the DTC participants for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”). The Issuer will deliver to the Initial Purchasers against payment of the Purchase Price thereof the Notes to be purchased by the Initial Purchasers hereunder and to be offered and sold by the Initial Purchasers in reliance on Rule 144A in the form of one or more global notes (the “Rule 144A Global Notes”) deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global Notes and the Rule 144A Global Notes shall be assigned separate CUSIP numbers. The Regulation S Global Notes and the Rule 144A Global Notes shall include the legend regarding restrictions on transfer set forth under “Transfer Restrictions” in the Offering Memorandum. Interests in the Regulation S Global Notes and the Rule 144A Global Notes will be held only in book-entry form through DTC except in the limited circumstances described in the Indenture when they may be exchanged for definitive certificated Notes.

(d)                 Stabilization. Deutsche Bank AG, Singapore Branch, as Stabilizing Coordinator (or any person duly appointed as acting for the Stabilizing Coordinator) may, to the extent permitted by applicable laws and regulations, over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail, but in doing so the Stabilizing Coordinator shall act as principal and not as agent of the Issuer.

 

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SECTION 3.     Covenants of the Issuer. The Issuer covenants with each Initial Purchaser as follows:

(a)                 Disclosure Package and Offering Memorandum. During the period from the date hereof to that indicated in Section 3(b)(ii) below, the Issuer, as promptly as practicable, will furnish to each Initial Purchaser, without charge, such number of copies of the Disclosure Package and the Final Offering Memorandum and any amendments and supplements thereto as such Initial Purchaser may reasonably request.

(b)                 Notice and Effect of Material Events. The Issuer will promptly notify each Initial Purchaser, and confirm such notice in writing, of (i) any filing made by the Issuer of information relating to the Offering with any securities exchange or any other regulatory body in any applicable jurisdiction, and (ii) at any time prior to the earlier of (A) two months after the Closing Date and (B) the completion of the resale of the Notes by the Initial Purchasers (which the Initial Purchasers shall provide prompt notice thereof to the Issuer), any material changes in or affecting the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Issuer and its subsidiaries considered as one enterprise which (x) make any statement in the Disclosure Package, any Offering Memorandum or any Supplemental Offering Material false or misleading or (y) are not disclosed in the Disclosure Package or Offering Memorandum. During such time as described in clause (ii) of the preceding sentence, if any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order that the Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances under which they were made and then existing, or if in the reasonable opinion of the Initial Purchasers or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Issuer will, upon receiving reasonable request from the Representative, amend or supplement the Offering Memorandum by promptly preparing and furnishing, at its own expense, to each Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchasers) so that, as so amended or supplemented, the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made and existing at the time it is furnished to the Initial Purchasers, not misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law.

(c)                 Amendments and Supplements to the Offering Memorandum; Preparation of Pricing Supplement; Supplemental Offering Materials. The Issuer will promptly submit for review and approval to each Initial Purchaser any proposed amendment or supplement to the Disclosure Package and Offering Memorandum, such approval not to be unreasonably withheld or delayed. Neither the approval of the Initial Purchasers, nor the Initial Purchasers’ delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof. The Issuer represents that it has not made, and agrees that unless it obtains the prior consent of the Representative it will not make, any offer relating to the Notes by means of any Supplemental Offering Materials other than the roadshow presentation dated July 9, 2019 relating to the Notes.

 

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(d)                 Qualification of Notes for Offer and Sale. The Issuer will use its commercially reasonable best efforts, in cooperation with the Initial Purchasers and counsel for the Initial Purchasers, to qualify the Notes for offering and sale under the applicable securities laws of such states and other jurisdictions as the Initial Purchasers may designate and will maintain such qualifications in effect as long as required for the sale of the Notes; provided, however, that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities or take any other action in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Issuer will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Notes for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Issuer shall use its commercially reasonable best efforts to obtain the withdrawal thereof as soon as practicable.

(e)                 DTC. The Issuer will cooperate with the Initial Purchasers and use its best efforts to permit the Notes to be eligible for clearance and settlement through the facilities of DTC and will assist the Initial Purchasers in obtaining the approval of DTC for “book-entry” transfer of the Notes in global form.

(f)                 Euroclear and Clearstream. The Issuer will cooperate with the Initial Purchasers and use its best efforts to permit the Notes to be eligible for clearance and settlement through the facilities of Euroclear and Clearstream and will assist the Initial Purchasers in obtaining the approval of Euroclear and Clearstream for “book-entry” transfer of the Notes in global form.

(g)                 Use of Proceeds. The Issuer will apply the net proceeds received by it from the sale of the Notes in the manner specified in the Disclosure Package and the Final Offering Memorandum under “Use of Proceeds” and will not directly or indirectly use, lend, contribute or otherwise make available to any subsidiary, joint venture partner or other person or entity, such net proceeds (i) to fund or facilitate any activities of or business with persons that, at the time of such funding or facilitation, is a Sanction Target, (ii) to fund or facilitate any activities of or business in any Sanctioned Country, or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as initial purchaser, advisor, investor or otherwise) of any Sanctions, Anti-Money Laundering Laws or any applicable anti-terrorism financing laws of applicable jurisdictions, including without limitation, applicable rules, regulations or guidelines, issued, administered or enforced by governmental authorities or regulatory agencies having jurisdictions over the Issuer and its subsidiaries (collectively, the “Anti-Terrorism Financing Laws”). The proceeds from the sale of the Notes will not be used, directly or indirectly, for any purpose in violation of the Anti-Bribery Laws.

(h)                 Restriction on Sale of Securities. For a period of 90 days from the date of this Agreement, the Issuer agrees not to, directly or indirectly, sell, offer to sell, contract to sell, grant any option to purchase, issue any instrument convertible into or exchangeable for, or otherwise transfer or dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition in the future of), any debt securities of the Issuer with terms substantially similar (including having equal rank) to the Notes (other than the Notes), except with the prior consent of the Representative.

 

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(i)                 Listing on Securities Exchange. The Issuer will use commercially reasonable efforts to have the Notes listed or admitted to trading on the SGX-ST.

(j)                 Stabilization and Manipulation. In connection with the issuance and sale of the Notes, until the Initial Purchasers have notified the Issuer of the completion of the placement and resales of the Notes by the Initial Purchasers (which notice the Initial Purchasers shall provide promptly after such completion), neither the Issuer nor any of its Affiliates will take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Notes to facilitate the sale or resale of the Notes.

SECTION 4.     Payment of Expenses.

The Issuer agrees to reimburse the Initial Purchasers upon request for all fees, stamp duty (if any), expenses and other costs reasonably and properly incurred in connection with the Offering, including, without limitation, telecommunications, postage, document production and other pre-agreed out-of-pocket expenses; provided that except as otherwise provided for in Section 13 hereof, the fees and expenses of the Initial Purchasers’ legal advisors shall not be reimbursed by the Issuer.

The Issuer must pay for its own fees, expenses and other costs incurred in connection with the Offering (or reimburse any Initial Purchaser to the extent that such Initial Purchaser incurs such costs on the Issuer’s behalf) including, without limitation, (i) its own legal, accounting and auditors’ fees and expenses, (ii) the fees and expenses (including legal fees) of the Trustee, rating agencies, the paying agent(s), the listing agent and all other agents involved in the Offering, (iii) all listing fees and other listing costs payable to the relevant stock exchange and/or any other relevant competent authority in connection with the listing, (iv) the cost of roadshows and any other presentations to investors prepared in connection with the Offering, printing and distribution of the Offering Memorandum and any other marketing materials for the Notes other than the Initial Purchasers’ travel expenses (and each Initial Purchaser shall be responsible for its own travel expenses), (v) the cost of printing, authenticating and distributing any Notes in definitive form, and (vi) the cost of publishing any notices.

Unless set out otherwise in this Agreement, all payments under this Agreement must be made: (i) on the due date in accordance with the payment instructions of the Initial Purchasers or within 30 days of the invoice (as the case may be), (ii) together with any applicable VAT, sales and any similar taxes which will be invoiced to or otherwise payable by the Issuer, and (iii) in full without set-off, condition, restriction, counterclaim, deduction or withholding, unless required by law. If any deduction or withholding is required by any applicable law in connection with any such payment, the Issuer will increase the amount paid so that the full amount of such payment is received by the Initial Purchasers as if no such deduction or withholding had been made.

SECTION 5.     Conditions of Initial Purchasers’ Obligations.

The obligations of the several Initial Purchasers to purchase and pay for, or procure the purchase of and payment for, the Notes hereunder are subject to the accuracy of the representations and warranties of the Issuer contained in Section 1 hereof, as of the date hereof and as of the Closing Date, or in certificates of any officer or director of the Issuer, delivered pursuant to the provisions hereof, to the performance by the Issuer of its covenants and other obligations hereunder, and to the following further conditions (any of which may be waived by the Representative):

 

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(a)                 Opinion of U.S. Counsel for the Issuer. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received (x) the opinion, (y) the tax opinion and (z) the 10b-5 disclosure letter, dated as of the Closing Date, of Latham & Watkins, U.S. counsel for the Issuer, in each case substantially in the form as attached hereto as Exhibits A-1, A-2 and A-3, respectively.

(b)                 Opinion of Cayman Islands Counsel for the Issuer. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Harney Westwood & Riegels, special Cayman Islands counsel for the Issuer incorporated under the laws of the Cayman Islands, substantially in the form as attached hereto as Exhibit B.

(c)                 Opinion of Macau Counsel for the Issuer. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Manuela António Lawyer and Notaries, special Macau counsel for the Issuer incorporated under the laws of Macau, substantially in the form as attached hereto as Exhibit C.

(d)                 Opinion of U.S. Counsel for the Initial Purchasers. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received (x) the opinion and (y) the 10b-5 disclosure letter, dated as of the Closing Date, of White & Case, U.S. counsel for the Initial Purchasers, in the form and substance satisfactory to the Representative.

(e)                 Opinion of Cayman Islands Counsel for the Initial Purchasers. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Maples and Calder (Hong Kong) LLP, special Cayman Islands counsel for the Initial Purchasers, in form and substance satisfactory to the Representative.

(f)                 Opinion of Macau Counsel for the Initial Purchasers. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Henrique Saldanha, Advogados e Notàrios, special Macau counsel for the Initial Purchasers, in form and substance satisfactory to the Representative.

(g)                 Compliance Certificate of the Issuer. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received a certificate signed by an executive officer or director of the Issuer, dated as of the Closing Date, to the effect that (i) since the respective dates as of which information is given in the Disclosure Package and the Final Offering Memorandum, except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, there shall have been no event or development, and no information shall have become known, that, individually or in the aggregate, has a Material Adverse Effect, (ii) the representations and warranties of the Issuer in Section 1 hereof are true and correct in all material respects with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Issuer has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Time.

 

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(h)                 Comfort Letter of the Accountants. At the time of the execution of this Agreement, the Representative, on behalf of the Initial Purchasers, shall have received from each of EY and Deloitte a letter dated the date hereof, in form and substance satisfactory to the Representative, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to the Initial Purchasers, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletins), with respect to the financial statements and certain financial information contained in the Disclosure Package.

(i)                 Bring-down Comfort Letter. At the Closing Time, the Representative, on behalf of the Initial Purchasers, shall have received from EY a letter, dated as of the Closing Date, to the effect that EY reaffirms the statements made in its letter furnished pursuant to subsection (h) of this Section 5, except that (i) it shall cover the financial statements and certain financial information contained in the Final Offering Memorandum and (ii) the specified date referred to shall be a date not more than three business days prior to the Closing Time.

(j)                 Approval of Listing. At the Closing Time, the Notes shall have been approved in principle for listing on the SGX-ST, subject only to official notice of issuance.

(k)                 No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and prior to the Closing Date:

(i) in the judgment of the Initial Purchasers, there shall not have occurred any event or development, and no information shall have become known, that, individually or in the aggregate, would have a Material Adverse Effect (“Material Adverse Change”); and

(ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Issuer or any of its subsidiaries by any “nationally recognized statistical rating organization” as such term is defined in Section 3(a)(62) of the Exchange Act.

(l)                 DTC. At the Closing Time, the Notes shall be eligible for clearance and settlement through DTC.

(m)                Indenture. Executed copies of the Indenture in form and substance reasonably satisfactory to the Representative shall have been delivered to the Representative, on behalf of the Initial Purchasers.

(n)                 Additional Documents. On or before the Closing Time, the Representative, on behalf of the Initial Purchasers, or counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Notes as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained.

(o)                 Termination of Agreement. If any condition specified in this Section 5 shall not have been fulfilled in all material respects when and as required to be fulfilled, this Agreement may be terminated by the Representative on behalf of the Initial Purchasers, by notice to the Issuer at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 hereof and except that Sections 7 and 8 hereof shall survive any such termination and remain in full force and effect.

 

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The documents required to be delivered by this Section 5 will be delivered at the offices of White & Case, counsel for the Initial Purchasers, at 9th Floor, Central Tower, 28 Queen’s Road, Central, Hong Kong.

SECTION 6.     Offers and Sales of the Notes.

(a)                 Offer and Sale Procedures. Each of the Initial Purchasers hereby, severally and not jointly, establishes and agrees to observe the following procedures in connection with the offer and sale of the Notes:

(i)     Offers and Sales only to Qualified Institutional Buyers in the United States or to Non-U.S. Persons. Initial offers and sales of the Notes shall only be made (A) by the U.S. registered broker-dealer affiliates of such Initial Purchaser to persons whom such Initial Purchaser reasonably believes to be qualified institutional buyers, as defined in Rule 144A (“QIBs”) in accordance with Rule 144A or (B) to non-U.S. persons (as defined in Regulation S) outside the United States in reliance upon Regulation S.

(ii)     Each of the Initial Purchasers hereby, severally and not jointly, represents and agrees that:

 

  (1)

it, or the U.S. registered broker-dealer affiliates of such Initial Purchaser making sales pursuant to Rule 144A, is a QIB; and

 

  (2)

if it is not a QIB, then it represents and agrees with the Issuer and the other Initial Purchasers that it shall offer and sell the Notes only outside the United States in offshore transactions to persons who are not U.S. persons (as defined in Rule 902 under the Securities Act).

(iii)     No Directed Selling Efforts. Neither such Initial Purchaser nor its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Regulation S and such Initial Purchaser, its Affiliates and any person acting on its or their behalf has complied and will comply with the offering restrictions of Regulation S.

(iv)     No General Solicitation. No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) has been or will be used in connection with the offering or sale of the Notes.

(v)     Purchases by Non-Bank Fiduciaries. In the case of a non-bank Subsequent Purchaser of a Note acting as a fiduciary for one or more third parties, each third party shall, in the judgment of the Initial Purchaser, be a QIB or a non-U.S. person outside the United States.

(vi)     Restrictions on Transfer. The selling and transfer restrictions and the other provisions set forth in the Offering Memorandum under the heading “Transfer Restrictions” including, without limitation, the legend required thereby, shall apply to the Notes except as otherwise agreed by the Issuer and the Initial Purchasers.

 

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(b)                 Restriction on Repurchases. The Issuer covenants with each Initial Purchaser that, until the expiration of one year after the later of the date of the original issuance of the Notes and the last date on which the Issuer or any of its Affiliates were the owner of Notes, neither the Issuer nor any of its subsidiaries will, and will cause persons acting on its or their behalf (other than the Initial Purchasers, as to whom no covenant is made), not to, resell any such Notes which are “restricted securities” (as such term is defined under Rule 144(a)(3) under the Securities Act), whether as beneficial owner or otherwise (except an agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker’s transactions).

(c)                 Resale Pursuant to Rule 903 of Regulation S or Rule 144A. Each Initial Purchaser understands that the Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each of the Initial Purchasers, severally and not jointly, represents and agrees, that, except as permitted by Section 6(a) above, it has not offered and sold Notes and will not offer and sell Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date upon which the Offering commences and the Closing Time, except in accordance with Rule 903 of Regulation S, Rule 144A or another applicable exemption from the registration requirements of the Securities Act. Accordingly, none of such Initial Purchaser, its Affiliates or any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to Notes sold hereunder pursuant to Regulation S, and such Initial Purchaser, its Affiliates and any person acting on its or their behalf have complied and will comply with the offering restrictions of Regulation S. Each of the Initial Purchasers, severally and not jointly, agrees that, at or prior to confirmation of a sale of Notes pursuant to Regulation S, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it or through it during the restricted period a confirmation or notice to substantially the following effect:

“This Note has not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or with any securities regulatory authority of any jurisdiction and may not be reoffered, resold, pledged or otherwise transferred within the United States or to a U.S. person (as defined in Regulation S under the Securities Act) except pursuant to applicable exemption from registration under the Securities Act. The Issuer of this Note has agreed that this legend shall be deemed to have been removed on the 41st day following the later of the commencement of the offering of the Notes and the final delivery date with respect thereof.”

 

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SECTION 7.     Indemnification.

(a)                 Indemnification of Initial Purchasers. The Issuer will indemnify and hold harmless each Initial Purchaser, its partners, members, directors, officers, employees, agents, affiliates and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “Indemnified Party”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Securities Act, the Exchange Act, other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Package as of any time, the Final Offering Memorandum (or any amendment or supplement thereto) or any Supplemental Offering Materials, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating, defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Indemnified Party is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Issuer shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Issuer by any Initial Purchaser specifically for use therein, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the information described as such in subsection (b) below.

(b)                 Indemnification of Issuer. Each Initial Purchaser will, severally and not jointly, indemnify and hold harmless the Issuer and each person, if any, who controls the Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “Initial Purchaser Indemnified Party”), against any losses, claims, damages or liabilities to which such Initial Purchaser Indemnified Party may become subject, under the Securities Act, the Exchange Act, other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of the Disclosure Package as of any time, the Final Offering Memorandum (or any amendment or supplement thereto) or in any Supplemental Offering Materials or arise out of or are based upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuer by such Initial Purchaser specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by such Initial Purchaser Indemnified Party in connection with investigating or defending against any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Initial Purchaser Indemnified Party is a party thereto), whether threatened or commenced, based upon any such untrue statement or omission, or any such alleged untrue statement or omission as such expenses are incurred, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the following information in the Offering Memorandum furnished on behalf of each Initial Purchaser: its name as set forth in the first sentence of the first paragraph under the section “Plan of Distribution—Price Stabilization and Short Positions” in the Disclosure Package and the Final Offering Memorandum.

 

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(c)                 Actions against Parties; Notification. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above hereafter, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7, as the case may be, for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.

(d)                 Control Persons. The obligations of the Issuer under this Section 7 shall be in addition to any liability which the Issuer may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Initial Purchaser, within the meaning of the Securities Act; and the obligations of the Initial Purchasers under this Section 7 shall be in addition to any liability which the respective Initial Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each director of the Issuer and to each person, if any, who controls the Issuer within the meaning of the Securities Act.

SECTION 8.     Contribution.

If the indemnification provided for in Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7 (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in Section 7 (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other from the Offering or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuer on the one hand and the Initial Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Issuer bear to the total underwriting discounts and commissions received by the Initial Purchasers. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer or the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section 8. Notwithstanding the provisions of this Section 8, no Initial Purchaser shall be required to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by such Initial Purchaser under this Agreement, less the aggregate amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers’ obligations in this Section 8 to contribute are several in proportion to their respective underwriting obligations and not joint. The Issuer and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8.

 

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SECTION 9.     Agreement among Initial Purchasers.

The execution of this Agreement on behalf of all parties hereto will constitute the acceptance by each Initial Purchaser of the International Capital Market Association Standard Form Agreement Among Managers Version 1 (“AAM”). The Initial Purchasers further agree that references in the AAM to the “Lead Manager”, the “Joint Bookrunners” and the “Managers” shall mean the Initial Purchasers, references in the AAM and this Agreement to the “Settlement Lead Manager” shall mean Deutsche Bank AG, Singapore Branch (or persons acting on its behalf) and references in the AAM to the “Stabilisation Coordinator” shall mean Deutsche Bank AG, Singapore Branch (or persons acting on its behalf). The Initial Purchasers agree as between themselves to amend the AAM as follows:

 

  (a)

Clause 5(2), and the two paragraphs immediately following Clause 5(3), shall be deemed to be deleted in their entirety;

 

  (b)

Clause 6 shall be deemed to be deleted in its entirety and replaced by the following:

 

  “6.

STABILIZATION

 

  (1)

Each Initial Purchaser agrees that the Stabilization Coordinator may, after consultation with and agreement by the Initial Purchasers, either directly or together with the Stabilization Managers appointed by it, effect Stabilization Transactions. All such Stabilization Transactions shall be made in accordance with applicable laws and any profits and losses incurred in effecting Stabilization Transactions shall be aggregated and:

 

  (a)

in the case of a net profit, credited to the account of each Initial Purchaser in proportion to its respective Commitment; and

 

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  (b)

in the case of a net loss, apportioned among the Initial Purchasers as follows:

 

  (i)

first, among the Initial Purchasers pro rata to their respective Commitments in an amount up to and including the amount of the fees payable to that Initial Purchasers in connection with the issue of the Notes; and

 

  (ii)

secondly, among the Initial Purchasers that are responsible for actively running the order book for the transaction, pro rata to their respective Commitments.

 

  (2)

Upon the aforementioned consultation by the Stabilization Coordinator with the Initial Purchasers, any Stabilization Transactions may be effected on or after the date on which adequate public disclosure of the terms of the offer of Notes is made and, if begun, may be ended at any time, but in no case later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes.

 

  (3)

For the avoidance of doubt, the Initial Purchasers may agree to overallot in arranging subscriptions, sales and purchases of the Notes and to reallocate such positions among themselves in proportion to each Initial Purchaser’s Purchase Percentage, and the Initial Purchasers may subsequently make purchases and sales of the Notes, in addition to their respective Purchase Percentage, in the open market or otherwise, on such terms as each Initial Purchaser may deem advisable. All such purchases, sales and overallotments shall be made in accordance with applicable laws and regulations. Each Initial Purchaser shall be responsible for managing its individual long or short position arising from such aforementioned reallocation (the “Individual Position”) and may cover any short position, sell any long position and/or engage in hedging activity in respect of its Individual Position. Each Initial Purchaser shall be liable for any loss, or entitled to any profit, arising from the management of its own Individual Position and, for the avoidance of doubt, no Initial Purchaser shall be liable for any loss, or entitled to any profit, arising from the management of the Individual Position of any other Initial Purchaser. “Purchase Percentage” with respect to each series of Notes means the principal amount of such series of Notes subscribed by the relevant Initial Purchaser as a percentage of the aggregate principal amount of such series of Notes issued.

 

  (c)

Clause 7(2) shall be deemed to be deleted in its entirety and replaced with the following:

 

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  “(2)

The Initial Purchasers agree that all fees and expenses that are the joint responsibility of the Initial Purchasers and payable by the Initial Purchasers, and any out-of-pocket expenses that are the joint responsibility of the Initial Purchasers and reimbursable but not reimbursed by the Issuer, shall be aggregated and allocated among the Initial Purchasers pro rata to their respective Commitments and each Initial Purchaser authorizes the Settlement Lead Manager to charge or credit each Initial Purchaser’s account for its proportional share of such fees and expenses.; ”

 

  (d)

Clause 8 shall be deemed to be deleted in its entirety;

 

  (e)

The definition of “Commitments” shall be deleted in its entirety and replaced with the following:

““Commitments” means, for the purposes of Clauses 3, 6, 7 and 10, the fee allocation proportion paid to each of the Initial Purchasers under this Agreement and any related fee letters, and for the purposes of all other clauses of this Agreement, the amounts severally underwritten by the Initial Purchasers as set out in the Purchase Agreement.”; and

 

  (f)

Deutsche Bank AG, Singapore Branch shall act as Representative of each of them for administrative purposes (in such capacity, the “Representative”).

Where there are any inconsistencies between this Agreement and the AAM, the terms of this Agreement shall prevail.

SECTION 10.     Default of Initial Purchasers.

If any Initial Purchaser or Initial Purchasers default in their obligations to purchase Notes hereunder at the Closing Time and the principal amount of Notes that such defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase does not exceed 10% of the aggregate principal amount of Notes that the Initial Purchasers are obligated to purchase at such Closing Time, the Representative may make arrangements satisfactory to the Issuer for the purchase of such Notes by other persons, including any of the Initial Purchasers, but if no such arrangements are made by such Closing Time, the non-defaulting Initial Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Notes that such defaulting Initial Purchasers agreed but failed to purchase at such Closing Time. If any Initial Purchaser or Initial Purchasers so default and the principal amount of Notes with respect to which such default or defaults occur exceeds 10% of the aggregate principal amount of Notes that the Initial Purchasers are obligated to purchase at such Closing Time and arrangements satisfactory to the Representative and the Issuer for the purchase of such Notes by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Initial Purchaser or the Issuer, except as provided in Section 12 hereof. As used in this Agreement, the term “Initial Purchaser” includes any person substituted for an Initial Purchaser under this Section 10. Nothing herein will relieve a defaulting Initial Purchaser from liability for its default.

SECTION 11.     Representations, Warranties and Agreements to Survive Delivery.

 

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All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Issuer submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or controlling person, or by or on behalf of the Issuer, and shall survive delivery of the Notes to the Initial Purchasers.

SECTION 12.     Termination of Agreement.

(a)                 Termination; General. Prior to the Closing Time, this Agreement may be terminated by the Initial Purchasers by notice given to the Issuer if at any time: (i) trading in securities generally on the New York Stock Exchange, NASDAQ, the Hong Kong Stock Exchange, the London Stock Exchange or the SGX-ST shall have been suspended or materially limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the SGX-ST, or maximum ranges for prices shall have been required by any of said exchanges or by such system or by order of the Commission or any other governmental authority in the United States or otherwise or a material disruption has occurred in commercial banking or securities, settlement or clearance services with respect to DTC in the United States or with respect to Euroclear and Clearstream in Europe; (ii) a general banking moratorium shall have been declared by any of federal, New York, Cayman Islands, Macau, Hong Kong, Singapore or European authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States’ or international political, financial or economic conditions or currency exchange rates or exchange controls, in each case the effect of which is such as to make it, in the judgment of the Initial Purchasers, impracticable or inadvisable to market the Notes in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of the Notes; (iv) in the judgment of the Initial Purchasers there shall have occurred any Material Adverse Change; or (v) the Issuer and its subsidiaries shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Initial Purchasers may interfere materially with the conduct of the business and operations of the Issuer and its subsidiaries taken as a whole regardless of whether or not such loss shall have been insured; provided that in the case of (iv) or (v), any such change or loss shall have occurred from and after the date of this Agreement and prior to the Closing Time.

(b)                 Liabilities. If this Agreement is terminated pursuant to this Section 12, such termination shall be without liability of any party to any other party; provided that Sections 7 and 8 hereof shall survive such termination and remain in full force and effect.

SECTION 13.     Reimbursement of Initial Purchasers’ Expenses.

If the sale to the Initial Purchasers of the Notes on the Closing Date pursuant to this Agreement is not consummated because of any refusal, inability or failure on the part of the Issuer to perform any agreement herein or to comply with any provision hereof (provided that the occurrence of any event under Section 12 or failure to satisfy any condition under Section 5 shall not be deemed as any refusal, inability or failure on the part of the Issuer), the Issuer agrees to reimburse the Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all reasonable expenses as set forth in Section 4 hereof and the legal fees and expenses incurred by the Initial Purchasers.

 

-27-

SECTION 14.     Notices.

All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given upon receipt if mailed, delivered or transmitted by telefax at the address set forth below:

 

  (a)

if to the Initial Purchasers:

c/o Deutsche Bank AG, Singapore Branch

One Raffles Quay

#17-00 South Tower

Singapore 048583

Telephone: +65 6423 5342

Attention: Global Risk Syndicate

Facsimile: +65 6883 1769

 

  (b)

if to the Issuer:

Melco Resorts Finance Limited

INTERTRUST CORPORATE SERVICES (CAYMAN) LIMITED, 190 Elgin

Avenue, George Town

Grand Cayman KY1-9005, Cayman Islands

with a copy to:

Melco Resorts & Entertainment Limited

36/F, The Centrium

60 Wyndham Street

Central, Hong Kong

Telephone: 852 2598 3600

Attention: Company Secretary

Facsimile: 852 2537 3618

SECTION 15.     Parties.

This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Issuer and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers, the Issuer and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 hereof and their heirs and legal representative, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers, the Issuer and their respective successors, and said controlling persons and officers and directors and their heirs and legal representative, and for the benefit of no other person, firm or corporation. No purchaser of Notes from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase.

 

-28-

SECTION 16.     Counterparts.

This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

SECTION 17.     Absence of Fiduciary Relationship. The Issuer acknowledges and agrees that:

(a)                 No Other Relationship. The Initial Purchasers have been retained solely to act as the initial purchasers of the Notes and that no fiduciary, advisory or agency relationship between the Issuer and the Initial Purchasers has been created in respect of any of the transactions contemplated by this Agreement, the Disclosure Package or the Final Offering Memorandum, irrespective of whether the Initial Purchasers have advised or are advising the Issuer on other matters;

(b)                 Arms’ Length Negotiations. The price of the Notes set forth in this Agreement was established by the Issuer following discussions and arms-length negotiations with the Initial Purchasers and each of the Issuer is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;

(c)                 Absence of Obligation to Disclose. The Issuer has been advised that the Initial Purchasers and their respective affiliates are engaged in a broad range of transactions which may involve interests that differ from or conflict with those of the Issuer and that the Initial Purchasers have no obligation to disclose such interests and transactions to the Issuer by virtue of any fiduciary, advisory or agency relationship; and

(d)                 Waiver. The Issuer waives, to the fullest extent permitted by law, any claims it may have against the Initial Purchasers for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Initial Purchasers shall have no liability (whether direct or indirect) to the Issuer in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Issuer, including shareholders, employees or creditors of the Issuer.

SECTION 18.     MiFID Product Governance.

Solely for the purposes of the requirements of Article 9(8) of the MIFID Product Governance rules under EU Delegated Directive 2017/593 (the “Product Governance Rules”) regarding the mutual responsibilities of manufacturers under the Product Governance Rules, Deutsche Bank AG, Singapore Branch (the “Manufacturer”) acknowledges that it understands the responsibilities conferred upon it under the Product Governance Rules relating to each of the product approval process, the target market and the proposed distribution channels as applying to the Notes and the related information set out in the Offering Memorandum and any announcements in connection with the Notes. The parties to this Agreement note the application of the Product Governance Rules to the Manufacturer and acknowledge the target market and distribution channels identified as applying to the Notes by the Manufacturer and the related information set out in the Offering Memorandum and any announcements in connection with the Notes.

 

-29-

SECTION 19.     Recognition of the U.S. Special Resolution Regimes.

(a)                 In the event that any Initial Purchaser that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Initial Purchaser of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

(b)                 In the event that any Initial Purchaser that is a Covered Entity or a BHC Act affiliate of such Initial Purchaser becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Initial Purchaser are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

For the purpose of this Section 19:

“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).

“Covered Entity” means any of the following:

(i)      a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

(ii)     a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

(iii)    a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

SECTION 20.     Waiver of Immunity.

To the extent that the Issuer has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment in aid or otherwise) with respect to itself or any of its property, the Issuer hereby irrevocably waives and agrees not to plead or claim such immunity in respect of its obligations under this Agreement.

 

-30-

SECTION 21.     Applicable Law.

This Agreement shall be governed by and construed in accordance with the laws of the state of New York.

The Issuer hereby submits to the non-exclusive jurisdiction of the federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Issuer irrevocably and unconditionally waives any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in federal and state courts in the Borough of Manhattan in The City of New York and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum. The Issuer irrevocably appoints Law Debenture Corporate Services Inc., 801 2nd Avenue, Suite 403, New York, NY10017, as its authorized agent in the Borough of Manhattan in The City of New York upon which process may be served in any such suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Issuer by the person serving the same to the address provided in Section 14, shall be deemed in every respect effective service of process upon the Issuer in any such suit or proceeding. The Issuer further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of five years from the date of this Agreement.

The obligations of the Issuer pursuant to this Agreement in respect of any sum due to any Initial Purchaser shall, notwithstanding any judgment in a currency other than U.S. dollars, not be discharged until the first business day, following receipt by such Initial Purchaser of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such Initial Purchaser may in accordance with normal banking procedures purchase U.S. dollars with such other currency; if the U.S. dollars so purchased are less than the sum originally due to such Initial Purchaser hereunder, the Issuer agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Initial Purchaser against such loss. If the U.S. dollars so purchased are greater than the sum originally due to such Initial Purchaser hereunder, such Initial Purchaser agrees to pay to the Issuer an amount equal to the excess of the dollars so purchased over the sum originally due to such Initial Purchaser hereunder.

SECTION 22.     Waiver of Jury Trial. Each party hereto hereby waives its rights to a jury trial of any claim or cause of action based upon or arising out of this Agreement or the subject matter hereof. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. This Section 22 has been fully discussed by each of the parties hereto and these provisions shall not be subject to any exceptions. Each party hereto hereby further warrants and represents that such party has reviewed this waiver with its legal counsel, and that such party knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, supplements or modifications to (or assignments of) this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial (without a jury) by the court.

 

-31-

SECTION 23.     Effect of Headings.

The section headings herein are for convenience only and shall not affect the construction hereof.

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between each of the Initial Purchasers and the Issuer in accordance with its terms.

 

Very truly yours,

[Signature Pages to Follow]

 

-32-

Issuer

MELCO RESORTS FINANCE LIMITED

By:    

  

/s/ Chung Yuk Man

 

Name: Chung Yuk Man

 

Title:   Director

[Signature page to Purchase Agreement]

The foregoing Agreement is hereby confirmed and accepted as of the date first above written:

DEUTSCHE BANK AG, SINGAPORE BRANCH

 

By:    

  

/s/ Sreenivasan Iyer

 

Name: Sreenivasan Iyer

 

Title:   Managing Director

 

By:    

  

/s/ Saurav Sen

 

Name: Saurav Sen

 

Title:   Director

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

 

By:    

  

/s/ Louis Lim

 

Name: Louis Lim

 

Title:   Director, DCM Execution

BANK OF COMMUNICATIONS CO., LTD. MACAU BRANCH

 

By:    

  

/s/ Leng San

 

Name: Leng San

 

Title:   Vice President

BOCI ASIA LIMITED

 

By:    

  

/s/ Michael Mak

 

Name: Michael Mak

 

Title:   Managing Director,

Co-Head of Debt Capital Markets

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (MACAU) LIMITED

 

By:    

  

/s/ 黃獻軍

 

Name: 黃獻軍

 

Title:   A0032

 

By:    

  

/s/ 余景豪

 

Name: 余景豪

 

Title:   B0089

MIZUHO SECURITIES ASIA LIMITED

 

By:    

  

/s/ Andrew Loong

 

Name: Andrew Loong

 

Title:   Executive Director

MORGAN STANLEY & CO. LLC

 

By:    

  

/s/ Ian Drewe

 

Name: IAN DREWE

 

Title:   ED

[Signature page to Purchase Agreement]

SCHEDULE A

 

Name of Initial Purchaser

    Principal Amount of Notes
(US$)		  

Deutsche Bank AG, Singapore Branch

      408,000,000  

Australia and New Zealand Banking Group Limited

      117,000,000  

Bank of Communications Co., Ltd. Macau Branch

      15,000,000  

BOCI Asia Limited

      15,000,000  

Industrial and Commercial Bank of China (Macau) Limited

      15,000,000  

Mizuho Securities Asia Limited

      15,000,000  

Morgan Stanley & Co. LLC

      15,000,000  
  

 

 

  

Total

      600,000,000  
  

 

 

  

SCHEDULE B

SUBSIDIARIES OF THE ISSUER

MCO International Limited

MCO Nominee One Limited

MCO Investments Limited

Melco Resorts (Macau) Limited

MCO (Macau) Hotel Limited

MCO (Macau) Consulting Limited

Golden Future (Management Services) Limited

Melco Resorts (Cafe) Limited

COD Resorts Limited

Altira Resorts Limited

Jumbo Watertours Limited

MCO Nominee Two Limited

Melco International Investments (Henan) Limited

SCHEDULE C

PRICING SUPPLEMENT

STRICTLY CONFIDENTIAL

US$600,000,000 5.625% Senior Notes due 2027

Melco Resorts Finance Limited

July 10, 2019

 

 

Pricing Supplement dated July 10, 2019 to the

Preliminary Offering Memorandum dated July 9, 2019

This Pricing Supplement is qualified in its entirety by reference to the Preliminary Offering Memorandum. Capitalized terms used but not defined in this Pricing Supplement have the meanings ascribed to them in the Preliminary Offering Memorandum. The information in this Pricing Supplement supplements the Preliminary Offering Memorandum and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with the information in the Preliminary Offering Memorandum.

The US$600,000,000 5.625% Senior Notes due 2027 (the “Notes”) have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and are being offered only (1) to “qualified institutional buyers” as defined in Rule 144A under the Securities Act and (2) outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.

Distribution of this Pricing Supplement to any persons other than the person receiving this electronic transmission, its agents and any persons retained to advise the person receiving this electronic transmission, is unauthorized. Any photocopying, disclosure or alteration of the contents of this Pricing Supplement or any portion thereof by electronic mail or any other means to any person other than the person receiving this electronic transmission is prohibited. By accepting delivery of this Pricing Supplement, the recipient agrees to the foregoing.

 

Issuer:

   

Melco Resorts Finance Limited (the “Company”)

Security Description:

   

5.625% Senior Notes due 2027

Distribution:

   

144A and Regulation S

Notes:

   

Aggregate Principal Amount:

   

US$600,000,000

Currency:

   

U.S. Dollars

Maturity Date:

   

July 17, 2027

Interest Payment Dates:

   

January 17 and July 17, beginning on January 17, 2020

Trade Date:

   

July 10, 2019

Issue Date:

   

July 17 (T+5)

  

Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of pricing or the next three succeeding business days will be required, by virtue of the fact that the Notes initially will settle in T+5, to specify alternative settlement arrangements to prevent a failed settlement

Coupon:

   

5.625%

Issue Price:

   

100.000%

Yield to Maturity:

   

5.625%

Optional Redemption Provisions:

   

Optional Redemption:

   

Optional Redemption Prices:

   

On or after July 17, 2022: 102.813%

On or after July 17, 2023: 101.406%

July 17, 2024 and thereafter: 100.000%

Make-Whole Call:

   

Prior to July 17, 2022

Redemption with proceeds from certain equity offerings:

   

Prior to July 17, 2022, up to 35% may be redeemed at 105.625%

Gaming Redemption:

   

The Notes may be redeemed if the gaming authority of any relevant jurisdictions requires that holders or beneficial owners of the Notes be licensed, qualified or found suitable under applicable gaming laws and such holders or beneficial owners, as the case may be, fail to apply or become licensed or qualified within the required time period or are found unsuitable

Offer to Repurchase Provisions:

   

Change of Control Triggering Event

   

101%

Special Put Option Triggering Event

   

Upon the occurrence of (1) any event after which none of the Company or any Subsidiary of the Company has such licenses, concessions, subconcessions or other permits or authorizations as are necessary for the Company and its Subsidiaries to own or manage casino or gaming areas or operate casino games of fortune and chance in Macau in substantially the same manner and scope as the Company and its Subsidiaries are entitled to at the Issue Date, for a period of ten consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole; or (2) the termination, rescission, revocation or modification of any Gaming License which has had a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole, each holder of the Notes will have the right to require the Company to repurchase all or any part of such holder’s Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase

Security Codes:

      

Rule 144A Notes

   

Regulation S Notes

  

CUSIP No.:

   

58547D AC3

   

G5975L AD8

  

ISIN:

   

US58547DAC39

   

USG5975LAD85

Denominations:

   

US$200,000 minimum; US$1,000 increments

Issue Ratings:

   

BB / Ba2 (S&P / Moody’s)

Sole Global Coordinator and Left Lead Bookrunner:   

Deutsche Bank AG, Singapore Branch

Joint Bookrunner:

   

Australia and New Zealand Banking Group Limited

Initial Purchasers and Principal Amount of Notes Purchased:    Initial Purchaser    Principal Amount of Notes Purchased
  

Deutsche Bank AG, Singapore Branch

    US$408,000,000
  

Australia and New Zealand Banking Group Limited

    US$117,000,000
  

Bank of Communications Co., Ltd. Macau Branch

    US$15,000,000
  

BOCI Asia Limited

    US$15,000,000
  

Industrial and Commercial Bank of China (Macau) Limited

    US$15,000,000
  

Mizuho Securities Asia Limited

    US$15,000,000
  

Morgan Stanley & Co. LLC

    US$15,000,000

Listing:

   

Approval-in-principle has been obtained from the Singapore Exchange Securities Trading Limited (“SGX-ST”) for the listing and quotation of the Notes on the Official List of the SGX-ST

Trustee, Paying Agent, Registrar and Transfer Agent:   

Deutsche Bank Trust Company Americas

In addition to reflecting the information set forth above, the Preliminary Offering Memorandum is hereby supplemented, amended and modified as follows (page references are to page numbers in the Preliminary Offering Memorandum), which reflect certain recent developments and other updated information. Any conforming amendments or modifications within the Preliminary Offering Memorandum as a result of the following amendments or modifications have not been repeated in this Pricing Supplement (unless otherwise specified, additions are shown in double-underline):

The second sentence in the first paragraph under the section “Risks Relating to Our Indebtedness and the Notes—We will have substantial amount of indebtedness, which could have important consequences for holders of the Notes and significant effects on our business and future operations” on page 38 of the Preliminary Offering Memorandum is amended by this Pricing Supplement as follows:

Assuming we had completed this offering of Notes and applied the net proceeds to repay the 2015 Revolving Credit Facility in part as intended, and after giving effect to the issuance of the 2019 Notes and the application of the net proceeds therefrom to the partial repayment of the amount outstanding under the 2015 Revolving Credit Facility and the partial drawdown of the 2015 Revolving Credit Facility by us in June 2019 to make advances to our affiliate to fund the closing of the first tranche of the Crown Acquisition by the Parent, as of March 31, 2019, we would have had total indebtedness of US$2.94 billion, comprising primarily the 2015 Credit Facilities, the 2017 Notes, the 2019 Notes and the Notes, which would require significant interest and principal payments.

The section “Use of Proceeds” on page 46 of the Preliminary Offering Memorandum is amended by this Pricing Supplement as follows:

We estimate that the net proceeds from this Offering will be approximately US$592.0 million after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this Offering to make a partial repayment of the principal amount outstanding under the 2015 Revolving Credit Facility.

The section “Capitalization” on page 45 of the Preliminary Offering Memorandum is amended by the Pricing Supplement by being replaced in its entirety with the following:

The following table sets out the cash and cash equivalents, indebtedness and capitalization of Melco Resorts Finance and its subsidiaries as of March 31, 2019 on an actual basis and as adjusted to give effect to the following:

 

  •  

the issuance of the 2019 Notes and the application of the net proceeds of the 2019 Notes and cash on hand to make a partial repayment of the principal amount outstanding under the 2015 Revolving Credit Facility in an amount of HK$3.98 billion (equivalent to US$507.8 million). See “Summary—Recent Developments”;

 

  •  

the declaration of a dividend of US$126,455.91 per share totaling US$152 million to the Parent. See “Summary—Recent Developments”;

 

  •  

the advance of AUD879.8 million (equivalent to US$608.2 million) to the Crown Acquisition Affiliate in June 2019, funded by a drawdown under the 2015 Revolving Credit Facility in the amount of HK$3.93 billion (equivalent to US$500.1 million) and cash on hand. See “Summary—Recent Developments”;

 

  •  

the issuance of US$600 million aggregate principal amount of the Notes offered hereby; and

 

  •  

the application of the net proceeds of the Notes to make a partial repayment of the principal amount outstanding under the 2015 Revolving Credit Facility.

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds,” “Summary—Recent Developments” and our consolidated financial statements prepared in accordance with U.S. GAAP, the related notes and other financial information contained elsewhere in this offering memorandum.

     As of March 31, 2019  
     Actual     As Adjusted  
     (in thousands of U.S. dollars)  

Cash and cash equivalents

      739,233       464,546  
  

 

 

    

 

 

  

Indebtedness:

     

2015 Credit Facilities, net(1)

      1,457,327       857,677  

2017 Notes, net(1)

      977,851       977,851  

2019 Notes(2)

      -       500,000  

The Notes offered hereby(3)

      -       600,000  

Advance from an affiliated company

      1,917       1,917  
  

 

 

    

 

 

  

Total indebtedness

      2,437,095       2,937,445  
  

 

 

    

 

 

  

Shareholder’s Equity:

     

Ordinary shares at US$0.01 par value per share

      -       -  

Additional paid-in capital

      1,849,785       1,849,785  

Accumulated other comprehensive losses

      (22,671 )      (22,671 ) 

Retained earnings(4)

      506,072       339,272  
  

 

 

    

 

 

  

Total shareholder’s equity

      2,333,186       2,166,386  
  

 

 

    

 

 

  

Total capitalization

      4,770,281       5,103,831  
  

 

 

    

 

 

  

 

(1)

As of March 31, 2019, the outstanding principal amounts under 2015 Credit Facilities and 2017 Notes were US$1,461.2 million and US$1,000 million, respectively. The amounts presented in the above table were net of unamortized deferring financing costs and original issue premiums.

(2)

Reflects the principal amount of the 2019 Notes.

(3)

Reflects the principal amount of the Notes.

(4)

Assumes the estimated fees and expenses related to issuance of 2019 Notes and this Offering, which may be capitalized as deferred financing costs under U.S. GAAP, are instead recognized as expenses in the consolidated statements of operations.

The Company has prepared the Preliminary Offering Memorandum to which this communication relates. Before you invest, you should read the Preliminary Offering Memorandum and the contents of this pricing supplement for more complete information about the Issuer and this offering. You should already have a copy of the Preliminary Offering Memorandum, but the Initial Purchasers will arrange to send you another copy, if you request it.

THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY NOTES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. THE NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, OR ANY OTHER JURISDICTION IN THE UNITED STATES.

Singapore Securities and Futures Act Product Classification: Solely for the purposes of its obligations pursuant to sections 309B(1)(a) and 309B(1)(c) of the Securities and Futures Act (Chapter 289 of Singapore) (the “SFA”), the Issuer has determined, and hereby notifies all relevant persons (as defined in Regulation 3(b) of the Securities and Futures (Capital Markets Products) Regulations 2018 (the “SF (CMP) Regulations”) that the Notes are “prescribed capital markets products” (as defined in the SF (CMP) Regulations) and “Excluded Investment Products” (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

EX-4.31

Exhibit 4.31

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS EXHIBIT, MARKED BY [***], HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

EXECUTION VERSION

Dated 31 July 2019

 

THE CYPRUS PHASSOURI (ZAKAKI) LIMITED

MCO EUROPE HOLDINGS (NL) B.V.

ICR CYPRUS HOLDINGS LIMITED

and

MELCO RESORTS & ENTERTAINMENT LIMITED

SHAREHOLDERS’ AGREEMENT

relating to ICR CYPRUS HOLDINGS LIMITED

Table of Contents

 

         

Page

1.

   

Interpretation

    1

2.

   

Purpose of joint venture

    11

3.

   

Expansion of joint venture

    12

4.

   

Conduct and development of the Business

    12

5.

   

Budgets and financial information

    14

6.

   

Powers and duties of the Board of Directors

    15

7.

   

Appointment of Directors

    16

8.

   

Removal of Directors

    17

9.

   

Chairman

    18

10.

   

Board meetings

    18

11.

   

Committees of Directors

    20

12.

   

Group Company boards

    20

13.

   

Management team

    20

14.

   

Meetings of Shareholders

    21

15.

   

Shareholder Reserved Matters

    21

16.

   

Distributions

    22

17.

   

Additional finance for the Company

    23

18.

   

Transfers

    23

19.

   

Default or Change of Control

    29

20.

   

Deadlock

    30

21.

   

Terms and consequences of transfers of Shares

    31

22.

   

Determination of Fair Market Value

    35

23.

   

IPO

    36

24.

   

Duration, termination and survival

    37

25.

   

Confidentiality

    37

26.

   

Goods and Services MFN

    40

27.

   

Related Agreements

    40

 

i

28.

   

General

    41

Schedule 1    Deed of Adherence (Clause 21.10)

    48

Schedule 2    Shareholder Reserved Matters (Clause 15)

    50

Schedule 3    Approved Valuers

    52

Schedule 4    Melco Competitors and Unacceptable Business Partners

    53

Schedule 5    Commercial Agreements

    54

Schedule 6    Company Funding

    56

 

ii

Shareholders’ Agreement

This Agreement is made on 31 July 2019 between:

 

(1)

The Cyprus Phassouri (Zakaki) Limited, a company incorporated in Cyprus whose registered office is at Fasouri 3601, Limassol, Cyprus (the “Original CPZ Shareholder”);

 

(2)

MCO Europe Holdings (NL) B.V., a company incorporated in the Netherlands whose registered office is at Prins Bernhardplein 200, 1097JB Amsterdam (“MCO”);

 

(3)

ICR Cyprus Holdings Limited, a company incorporated in Cyprus whose registered office is at Karpenisiou, 30, 1077, Nicosia, Cyprus (the “Company”); and

 

(4)

MELCO RESORTS & ENTERTAINMENT LIMITED, a company incorporated in Cayman Islands whose registered office is at 190 Elgin Avenue, George Town, Grand Cayman KY1 - 9005, Cayman Islands (“Melco Resorts”).

 

(each

a “Party” and together the “Parties”).

 

Recitals:

The Original CPZ Shareholder and MCO have agreed to hold their Shares and to regulate their respective rights in the Company on the terms and conditions of this Agreement.

Melco Resorts, the parent company that wholly owns MCO, is entering into this Agreement as the purchaser that purchased and designated MCO as the holder of its Shares.

It is agreed as follows:

PART A - INTERPRETATION

 

1.

Interpretation

In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:

 

1.1

Definitions

“Acceptance Notice” has the meaning set out in Clause 18.6.3(i);

“Acceptance Period” means the period of 30 days from the later of:

 

  (i)

the date of the Transfer Notice; and

 

  (ii)

the calculation of the Fair Market Value of the Transfer Shares in accordance with Clause 22,

in each case subject to extension for any Additional Investigation Period;

“Additional Investigation Period” has the meaning set out in Clause 18.6.3(i)(b);

“Agreed Terms” means, in relation to a document, such document in the terms agreed between the parties and signed for identification by the parties with such alterations as may be agreed in writing between the parties from time to time;

“Agreement” means this agreement as modified, amended or replaced from time to time;

 

1

“Annual Budget” means the annual budget for the Group Companies approved or amended from time to time by the Board, which shall include the following:

 

  (i)

an estimate of the working capital requirements of the Company incorporated within a cash flow statement;

 

  (ii)

a projected profit and loss account and forecast balance sheet;

 

  (iii)

a capital expenditure programme; and

 

  (iv)

a review of the projected business and a summary of annual objectives;

“Anti-Corruption Law” means:

 

  (i)

the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 1997 (the “OECD Convention”);

 

  (ii)

the US Foreign Corrupt Practices Act of 1977, as amended by the Foreign Corrupt Practices Act Amendments of 1988 and 1998, and as may be further amended and supplemented from time to time (the “FCPA”);

 

  (iii)

the UK Bribery Act 2010; and

 

  (iv)

any other applicable law (including any: (a) statute, ordinance, rule or regulation; (b) order of any court, tribunal or any other judicial body; and (c) rule, regulation, guideline or order of any public body, or any other administrative requirement) which:

 

  (a)

prohibits the conferring of any gift, payment or other benefit on any person or any officer, employee, agent or adviser of such person; and/or

 

  (b)

is broadly equivalent to the FCPA and/or the UK Bribery Act 2010 or was intended to enact the provisions of the OECD Convention or which has as its objective the prevention of corruption;

“Articles” means the articles of association of the Company in the Agreed Terms as amended from time to time;

“Associated Company” means, in relation to a person, any holding company, subsidiary or any other subsidiaries of any such holding company, in each case of such person, provided that the Company shall not be an Associated Company of any Shareholder or its Associated Companies (and, for the avoidance of doubt, Melco International and each of its subsidiaries shall be Associated Companies of Melco Resorts);

“Associated Person” means, in relation to a company, a person (including any employee, agent or subsidiary) who performs (or has performed) services for or on behalf of that company;

“Auditors” means Ernst & Young LLP or such other firm which is appointed as auditor of the Company from time to time;

“Board” means the board of directors of the Company or an authorised committee of the Board;

“Business” has the meaning set out in Clause 2;

“Business Day” means a day which is not a Saturday, a Sunday or a public holiday in Cyprus or Hong Kong;

 

2

“Business Policies” means the business policies of the Group Companies approved by the Board from time to time (including, but not limited to, employment policies and health and safety policies);

“Buyer” has the meaning set out in Clause 21.1;

“Chairman” means the Chairman of the Board from time to time;

“Change of Control” means where a person who did not previously exercise Control over another person acquires or agrees to acquire or otherwise becomes able to exercise such Control or where a person who was previously able to exercise Control over that person ceases to be in a position to do so;

“Closing Date” has the meaning set out in Clause 18.6.3(i);

“CoCo” means Integrated Casino Resorts Cyprus Limited, a company organised under the laws of Cyprus and a subsidiary of the Company;

“Commercial Agreements” means those agreements listed in Schedule 5 (including those to be entered into following the date of this Agreement by the parties specified in Schedule 5;

“Completion” has the meaning given in the Share Subscription Agreement;

“Confidential Information” has the meaning set out in Clause 25.2;

“Control” means, in relation to a person, where a person (or Persons Acting In Concert) has direct or indirect control: (1) over more than 50% of the total voting rights conferred by all the issued shares in the capital of that person which are ordinarily exercisable in general meeting; or (2) of a majority of the board of directors of that person (in each case whether pursuant to relevant constitutional documents, contract or otherwise) and “Controlled” shall be construed accordingly;

“CPZ Board Appointment Right” has the meaning set out in Clause 7.1.1(i);

“CPZ Consent Right” has the meaning set out in Clause 15.1;

“CPZ Shareholder” means for so long as such person holds any CPZ Shares:

 

  (i)

the Original CPZ Shareholder; and

 

  (ii)

any CPZ Transferee;

“CPZ Shares” means the Shares held by the Original CPZ Shareholder as at the date of this Agreement and all new Shares issued to a CPZ Shareholder under and in accordance with the terms of this Agreement;

“CPZ Transferee” means any person to whom CPZ Shares are transferred under and in accordance with this Agreement;

“Cyprus” means the Republic of Cyprus;

“Deadlock Matter” has the meaning set out in Clause 20.1.2;

“Debt” means any loans, borrowings or indebtedness (including any Loan Notes) (together with any accrued interest);

“Deed of Adherence” means a deed substantially in the form set out in Schedule 1;

 

3

“Default Notice” has the meaning set out in Clause 19.3;

“Defaulting Shareholder” has the meaning set out in Clause 19.2;

“Development Budget” means the overall budget for the construction and development of the Project, which shall be approved and updated in accordance with Clause 5.3;

“Director” means any director of the Company appointed by a Shareholder in accordance with the terms of this Agreement and the Articles;

“Dispute” has the meaning set out in Clause 28.1.1;

“Drag-along Assets” has the meaning set out in Clause 18.6.4(i);

“Drag-along Debt” has the meaning set out in Clause 18.6.4(i);

“Drag-along Notice” has the meaning set out in Clause 18.6.4(i);

“Drag-along Shares” has the meaning set out in Clause 18.6.4(i);

“Effective Date” means the date on which Completion occurred;

“Encumbrance” means any claim, charge, mortgage, lien, option, equitable right, power of sale, pledge, hypothecation, retention of title, right of pre-emption, right of first refusal or other third party right(s) or security interest of any kind or an agreement, arrangement or obligation to create any of the foregoing;

“Entitlement Fees” means any fees payable to the Original Melco Shareholder or any of its Associated Companies under the Commercial Agreements;

“Event of Default” has the meaning set out in Clause 19.1;

“Fair Market Value” has the meaning set out in Clause 22.2.1;

“Financial Year” means a financial year of the Company commencing (other than in the case of its initial financial period) on 1 January and ending on 31 December or on such other dates as the Company may resolve in accordance with the Articles, provided that the first financial year of the Company shall be deemed to have commenced on 7 November 2017 and ended on 31 December 2017;

“Gaming Regulator” means any department, authority, commission or other body of any government in any jurisdiction with the power to regulate businesses engaged in the gaming or gambling industries;

“Group Companies” means the Company and its subsidiaries and “Group Company” means any one of them;

“Group President” shall mean, if one is appointed by the Board, the top executive officer of the Group Companies;

“ICR” means the integrated casino resort, including a retail, hotel, gaming, entertainment and food and beverage complex in Cyprus to be developed, operated and maintained pursuant to the ICR Licence;

“ICR Licence” means the licence agreement between the Cyprus Gaming and Casino Supervision Commission and CoCo dated 26 June 2017 in relation to the development, operation and maintenance of the ICR;

 

4

“IDB Maximum Amount” has the meaning set out in Clause 5.3.1;

“IDB Melco Transaction Amount” has the meaning set out in Clause 5.3.1;

“Initial Development Budget” has the meaning set out in Clause 5.3.1;

“Insolvency Event”, in relation to a person, means:

 

  (i)

the person entering into any arrangement, composition or compromise with or assignment for the benefit of its creditors or any class of them in any relevant jurisdiction except as part of a solvent reorganisation or to the extent implemented to remedy an Insolvency Event set out in paragraph (ii) below (including by way of rescheduling the applicable indebtedness);

 

  (ii)

the person being unable to pay its debts when they are due or being deemed under any statutory provision of any relevant jurisdiction to be insolvent;

 

  (iii)

a liquidator or provisional liquidator being appointed to the person or a receiver, receiver and manager, examiner, trustee or similar official being appointed over any of the assets or undertakings of the person or an event analogous with any such event occurring in any relevant jurisdiction; or

 

  (iv)

an order being made or a resolution being passed for the winding up of the person (except for the purposes of a bona fide reconstruction or amalgamation);

“Interest” includes an interest of any kind in or in relation to any Share or any right to control the voting or other rights attributable to any Share, disregarding any conditions or restrictions to which the exercise of any right attributed to such interest may be subject;

“IPO” means the admission of all or any part of the ordinary share capital or depository receipts (or equivalent) representing Shares to the NASDAQ, New York Stock Exchange, London Stock Exchange, The Stock Exchange of Hong Kong Limited or the Singapore Exchange;

“Know-how” means confidential and proprietary industrial and commercial information and techniques in any form, including, without limitation, drawings, formulae, test results, reports, project reports and testing procedures, instruction and training manuals, tables or operating conditions, market forecasts, lists and particulars of customers and suppliers;

“Laws” means the laws and regulations of Cyprus and any other laws and regulations for the time being in force applicable to any Group Company or any Shareholder or their Associated Companies (as appropriate), including, where applicable, the rules of any stock exchange on which the securities of a Shareholder or its Associated Companies are listed or other governmental or regulatory body to which a Shareholder or its Associated Companies are subject;

“Licence Ineligibility Event” means, in a relation to a Shareholder:

 

  (i)

such Shareholder, its shareholders, Associated Companies or Ultimate Parent Company ceasing to be eligible to be a Shareholder, a shareholder of a Shareholder, an Associated Company of a Shareholder or an Ultimate Parent Company of a Shareholder under the terms of the ICR Licence; or

 

  (ii)

such Shareholder, its shareholders, Associated Companies or Ultimate Parent Company (excluding the Original Melco Shareholder, its Associated Companies or its Ultimate Parent Company) engaging or not engaging in any activity or transaction, or entering into or continuing any relationship, that results or could result in:

 

5

  (a)

the Original Melco Shareholder, its Associated Companies or its Ultimate Parent Company ceasing to be eligible to be licensed under any of its casino licences or concessions or sub-concessions; or

 

  (b)        (A)

any governmental authority or Gaming Regulator notifying the Original Melco Shareholder, its Associated Companies or its Ultimate Parent Company that the continuation of any relationship with such Shareholder, its shareholders, its Associated Companies or its Ultimate Parent Company could; or

 

              (B)

the Original Melco Shareholder, its Associated Companies or its Ultimate Parent Company forming the reasonable opinion that the continuation of any relationship with such Shareholder, its shareholders, its Associated Companies or its Ultimate Parent Company may,

adversely affect any licenses held, required or being sought by the Original Melco Shareholder, its Associated Companies or its Ultimate Parent Company;

“Loan Notes” means the loan notes that may be issued by the Company or any Group Company subject to the provisions of this Agreement, the Articles or the articles of association of the relevant Group Company (as the case may be);

“Losses” means all losses, liabilities, costs (including legal costs and experts’ and consultants’ fees), charges, expenses, actions, proceedings, claims and demands;

“Melco Competitor” means each of the persons listed or described in Schedule 4;

“Melco International” means Melco International Development Limited;

“Melco Shareholder” means for so long as such person holds any Melco Shares:

 

  (i)

the Original Melco Shareholder; and

 

  (ii)

any Melco Transferee;

“Melco Shares” means the Shares held by MCO as at the date of this Agreement and all new Shares issued to Melco Resorts or a Melco Shareholder under and in accordance with the terms of this Agreement;

“Melco Transferee” means any person to whom Melco Shares are transferred under and in accordance with this Agreement;

“Modified Shareholder Reserved Matters” has the meaning set out in Clause 15.215.2(i);

“New Opportunity” has the meaning set out in Clause 3.2.1;

“Non-defaulting Shareholder” has the meaning set out in Clause 19.2;

“Notice” has the meaning set out in Clause 28.3.1;

“Offer” has the meaning set out in Clause 18.6.2;

“Offeror” has the meaning set out in Clause 18.6.1;

“Opening Date” means the opening date of the ICR as determined by the Board;

 

6

“Original CPZ Shareholder” has the meaning given in the parties list;

“Original Melco Shareholder” means MCO or where MCO has transferred all of its Shares pursuant to a Permitted Melco Transfer, then the Original Melco Shareholder shall be deemed to be Melco Resorts or any Associated Company of Melco Resorts to which Shares were transferred pursuant to the Permitted Melco Transfer;

“Permitted Melco Transfer” means a Transfer by the Original Melco Shareholder of its Shares or any Interest in Shares to Melco Resorts or any Associated Company of Melco Resorts on giving prior written notice to the other Shareholders, copied to the Company, such notice to specifically indicate that such Transfer is a “Permitted Melco Transfer” made in accordance with Clause 18.5.2 of this Agreement;

“Permitted Regulatory Condition” means a bona fide material consent, clearance, approval or permission necessary to enable a Transferring Shareholder and/or Buyer to be able to complete a Transfer of Shares under: (1) the ICR Licence or Cyprus Law; (2) the rules or regulations of any stock exchange on which it or any of its Associated Companies is quoted; or (3) the rules or regulations of any governmental, statutory or regulatory body in those jurisdictions where the Transferring Shareholder, Buyer, the Company or any of their Associated Companies carries on business (including any required reviews on whether any person or entity is an Unsuitable Person or Unsuitable Director);

“Persons Acting In Concert”, in relation to a Shareholder, are persons which actively co-operate pursuant to an agreement or understanding (whether formal or informal), with a view to obtaining or consolidating Control of that Shareholder;

“Project” means the design, construction, development, ownership, operation, management and maintenance of the ICR, a temporary casino prior to the Opening Date, each in Limassol, Cyprus, and up to four satellite casinos in Cyprus;

“Property President” means the property president, or equivalent top operating officer of the Company, from time to time;

“Qualifying IPO” means an IPO in which (i) the total aggregate value of the Shares publicly sold or listed is not less than US$50 million or (ii) the total number of Shares publicly sold represents not less than 15% of the total Shares in the Company (post-IPO);

“Related Agreements” means the Share Subscription Agreement and the Commercial Agreements;

“Relevant Notice” has the meaning set out in each of Clause 21.1 and Clause 22.1;

“Relevant Proportion” has the meaning set out in Clause 18.6.1(vii);

“Relevant Securities” has the meaning set out in Clause 21.1;

“Relevant Time” has the meaning set out in Clause 21.1;

“Remaining Shareholder” has the meaning set out in Clause 18.6.2;

“Requisite Minimum CPZ Shareholding” means, with respect to a CPZ Shareholder, that CPZ Shareholder holding (directly and in aggregate with all Associated Companies of such CPZ Shareholder) CPZ Shares representing not less than 10% of the total outstanding Shares;

“Restricted Transferee” means, in respect of a potential third party Offeror: (i) a person whose personal or business reputation is such as would make it unacceptable as a business partner to any of the Remaining Shareholders acting reasonably; (ii) a person who a reasonable person would consider to be of insufficient financial substance or standing to be able to adhere to the terms of this Agreement; or (iii) any Melco Competitor or a person Controlled by a Melco Competitor;

 

7

“Right” means any right, power or remedy in connection with this Agreement;

“RoCo” means ICR Cyprus Resort Development Co Limited, a company organised under the laws of Cyprus and a subsidiary of the Company;

“Sale Assets” has the meaning set out in Clause 19.3;

“Sale Shares” has the meaning set out in Clause 19.3;

“Selling Shareholder” has the meaning set out in Clause 21.1;

“Senior Management” has the meaning set out in Clause 13.3.1;

“Share Subscription Agreement” means an agreement among the Original CPZ Shareholder, Melco International and the Company dated 18 December 2017, as amended, detailing the terms of the subscription of the initial Shares by the Shareholders;

“Shareholder” means any holder of Shares from time to time having the benefit of this Agreement, including under the terms of a Deed of Adherence;

“Shareholder Reserved Matters” has the meaning set out in Clause 15;

“Shareholder’s Group” means a Shareholder and any Associated Companies of that Shareholder from time to time;

“Shares” means ordinary shares in the issued share capital of the Company from time to time;

“Surviving Provisions” means Clauses 1, 25, 28.1, 28.2, 28.3, 28.4, 28.5, 28.8, 28.10, 28.11, 28.12, 28.13, 28.15, 28.17, 28.18, 28.19 and 28.20, and any other provisions of this Agreement to the extent relevant to the interpretation or enforcement of such provisions;

“Tag-along” has the meaning set out in Clause 18.6.1(vii);

“Tag-along Assets” has the meaning set out in Clause 18.6.3(ii)(a);

“Tag-along Debt” has the meaning set out in Clause 18.6.3(ii)(a);

“Tag-along Notice” has the meaning set out in Clause 18.6.3(ii)(a);

“Tag-along Shares” has the meaning set out in Clause 18.6.3(ii)(a);

“Taxation” or “Tax” means all forms of taxation (other than deferred tax) and statutory, governmental, state, provincial, local governmental or municipal impositions, duties, contributions and levies, in each case in the nature of tax, whether levied by reference to income, profits, gains, net wealth, asset values, turnover, added value or otherwise and shall further include payments to a Tax Authority on account of Tax, in each case wherever imposed and whether chargeable or primarily against or attributable directly or primarily to a Group Company or any other person and all penalties and interest relating thereto;

“Tax Authority” means any taxing or other authority competent to impose any liability in respect of Taxation or responsible for the administration and/or collection of Taxation or enforcement of any law in relation to Taxation;

 

8

“Term Sheet” means the term sheet dated 15 November 2017 entered into by the Original CPZ Shareholder and Melco International relating to the Project;

“Third Party Finance” has the meaning set out in Clause 17.1.2;

“Third Party Offer” has the meaning set out in Clause 18.6.1;

“Third Party Offer Price” has the meaning set out in Clause 18.6.1(v);

“Transfer”, in the context of Shares or any Interest in Shares, means any of the following: (a) sell, assign, transfer or otherwise dispose of, or grant any option over, any Shares or any Interest in Shares; (b) create or permit to subsist any Encumbrance over Shares or any Interest in Shares; (c) enter into any agreement in respect of the votes or any other rights attached to any Shares or any Interest in Shares (including under this Agreement); or (d) renounce or assign any right to receive any Shares or any Interest in Shares;

“Transfer Assets” has the meaning set out in Clause 18.6.1;

“Transfer Date” has the meaning set out in Clause 21.2.4;

“Transfer Debt” has the meaning set out in Clause 18.6.1;

“Transferee” has the meaning set out in Clause 18.5.1;

“Transfer Notice” has the meaning set out in Clause 18.6.2;

“Transferor” has the meaning set out in Clause 18.5.1;

“Transferring Shareholder” has the meaning set out in Clause 18.6.1;

“Transfer Shares” has the meaning set out in Clause 18.6.1;

“Ultimate Parent Company” means:

 

  (i)

in relation to the Original CPZ Shareholder, C.N.SHIACOLAS (ENGINEERS) LTD, a company incorporated in Cyprus with registration number HE66018 and its registered address at Ag. Nicolaou, 41-49, NIMELI COURT, BLOCK A, 3rd Floor, Engomi, 2408, Nicosia, Cyprus; and

 

  (ii)

in relation to the Original Melco Shareholder, Melco International;

“Unsuitable Director” means a Director who either: (i) has been determined by a court of competent jurisdiction to have acted in material breach of the Laws or to have committed any serious criminal offence, or material breach of any fiduciary or other duty in relation to the Company; (ii) is prevented by Law from acting as a Director; or (iii) is an Unsuitable Person;

“Unsuitable Person” means a person: (i) whose direct or indirect association or relationship with the Group Companies (or Shareholders) or ownership of securities could be reasonably expected to adversely impact the suitability or entitlement of any Shareholder, Associated Company of a Shareholder or Group Company to maintain any gaming concession, sub-concession, licensing or regulatory authorisation to conduct gaming business in any jurisdiction; or (ii) with whom the Original Melco Shareholder or any of its Associated Companies may be required to disassociate, formally or informally, by any gaming authority;

“Updated Shareholding Amount” means, with respect to each Shareholder, the amount of Shares held by that Shareholder immediately following Completion; and

 

9

“Valuer” has the meaning set out in Clause 22.2.1.

 

1.1

Singular, plural, gender

References to one gender include all genders and references to the singular include the plural and vice versa.

 

1.2

References to persons and companies

References to:

 

  1.2.1

a person includes any company, corporation, firm, joint venture, partnership or unincorporated association (whether or not having separate legal personality); and

 

  1.2.2

a company include any company, corporation or any body corporate, wherever incorporated.

 

1.3

References to subsidiaries and holding companies

A company is a “subsidiary” of another company (its “holding company”) if that other company, directly or indirectly, through one or more subsidiaries:

 

  1.3.1

holds a majority of the voting rights in it;

 
  1.3.2

is a member or shareholder of it and has the right to appoint or remove a majority of its board of directors or equivalent managing body;

 
  1.3.3

is a member or shareholder of it and controls alone, or pursuant to an agreement with other shareholders or members, a majority of the voting rights in it; or

 
  1.3.4

has the right to exercise a dominant influence over it, for example by having the right to give directions with respect to its operating and financial policies, with which directions its directors are obliged to comply.

 

1.4

Schedules etc.

References to this Agreement shall include any Recitals and Schedules to it and references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement. References to paragraphs and Parts are to paragraphs and Parts of the Schedules.

 

1.5

Information

References to books, records or other information mean books, records or other information in any form, including paper, electronically stored data, magnetic media, film and microfilm.

 

1.6

Legal terms

References to any English legal term shall, in respect of any jurisdiction other than England and Wales, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction.

 

1.7

Headings

Headings shall be ignored in interpreting this Agreement.

 

10

1.8

Non-limiting effect of words

The words “including”, “include”, “in particular” and words of similar effect shall not be deemed to limit the general effect of the words which precede them.

 

1.9

Winding up

References to the winding up of a person include any equivalent or analogous procedure under the law of any jurisdiction in which that person is incorporated, domiciled or resident or carries on business or has assets.

 

1.10

Modification etc. of statutes

References to a statute or statutory provision include that statute or provision as from time to time modified or re-enacted or consolidated, whether before or after the date of this Agreement, so far as such modification or re-enactment or consolidation applies or is capable of applying to this Agreement, provided that nothing in this Clause 1.10 shall operate to increase the liability of any party beyond that which would have existed had this Clause been omitted.

 

1.11

Documents

References to any document (including this Agreement) or to a provision in a document, shall be construed as a reference to such document or provision as amended, supplemented, modified, restated or novated from time to time.

 

1.12

Reasonable endeavours

Where the words “reasonable endeavours” are used in this Agreement in relation to the performance of any act by a Party, such Party shall be required to take only those steps in performing such act as are commercially reasonable having regard to such party’s circumstances at the time, but shall not be required to ensure such act’s performance whether by assuming material expenditure or otherwise.

PART B - SCOPE OF THE JOINT VENTURE

 

2.

Purpose of joint venture

 

2.1

The business of the Group Companies (the “Business”) shall be:

 

  2.1.1

to undertake the Project; and

 

  2.1.2

to carry out any activity which is necessary for, ancillary to, related to, incidental to, arising out of, supportive of or connected to the Project, including the provision of credit to gaming patrons, provision of all operational and support functions commonly required for casino and integrated resort businesses, food and beverage, spa, entertainment, entertainment production, convention, exhibition, advertising, marketing, retail, foreign exchange, transportation, travel, nightclubs, bars, restaurants, malls, amusements, attractions, recreations, pool, health, exercise or gym facilities, entertainment facilities or venues, retail shops, malls or venues or similar or related establishments or facilities and outsourcing of in-house facilities.

 

2.2

The head office of the Company shall initially be situated in Limassol, Cyprus and changes to its location shall be subject to the discretion of the Board.

 

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3.

Expansion of joint venture

 

3.1

Scope and development of the Business

 

  3.1.1

The Shareholders and the Company agree that the business of the Group Companies shall be confined to the Business, except as may be otherwise agreed by the Shareholders in accordance with this Agreement.

 

  3.1.2

The Shareholders shall procure that any expansion, development or evolution of the Business (whether to be conducted as part of, or in connection with, the Group Companies’ main business or ancillary to it) shall only be effected through the Company or a Group Company.

 

3.2

New Opportunities

 

  3.2.1

If any Shareholder or any of its Associated Companies identifies or becomes aware of any opportunity relevant to the Business or the greater casino business in Cyprus, then such Shareholder shall, as soon as reasonably practicable (and before any material negotiations commence with any third party), notify the Board in writing with reasonable details as to the nature of the opportunity (the “New Opportunity”).

 

  3.2.2

If the Board approves the New Opportunity, then the Parties shall procure that the Group Companies shall use reasonable endeavours to implement the New Opportunity.

 

  3.2.3

If the Board does not approve or fails to act on the New Opportunity within one month of receiving notice of it pursuant to Clause 3.2.1, the Shareholder that notified the Board of such New Opportunity shall be free to proceed on its own with such New Opportunity at its sole cost, risk and expense.

PART C - CONDUCT AND OPERATIONS OF THE COMPANY

 

4.

Conduct and development of the Business

 

4.1

General

 

  4.1.1

The Shareholders agree that their respective rights and obligations in relation to the Group Companies and the Business shall be regulated by this Agreement and the Articles. The Shareholders agree to comply with the provisions of this Agreement and all provisions of the Articles which relate to them and that such provisions of the Agreement and Articles shall be enforceable by the Shareholders between themselves in whatever capacity.

 

  4.1.2

The Company agrees to comply with all of its obligations under this Agreement and the Articles and under the Related Agreements and procure that its Group Companies do the same.

 

4.2

Conduct and promotion of the Business

The Shareholders shall vote their Shares and otherwise act within their power (so far as they lawfully can) to ensure the following:

 

  4.2.1

Business practice

that the Business shall be conducted in accordance with:

 

  (i)

the Development Budget and Annual Budget;

 

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  (ii)

applicable Laws and internal policies of the Original Melco Shareholder, including the Original Melco Shareholder’s corporate “Ethical Business Practices Programme” as updated from time to time;

 

  (iii)

business ethics and principles which are generally adopted by international reputable companies operating in the integrated resort industry; and

 

  (iv)

such other standards as are agreed among the Shareholders from time to time.

 

  4.2.2

Compliance

that the Company shall not, and shall procure (insofar as it lawfully can) that any Group Company shall not, act:

 

  (i)

otherwise than in accordance with applicable Laws;

 

  (ii)

in any way which might reasonably be likely to expose any officer, director or executive manager of the Company or any Group Company or the Shareholders to civil or criminal liability or sanction under the Laws; or

 

  (iii)

in any way contrary to the Business Policies.

 

  4.3

Anti-Corruption Laws

 

  4.3.1

Each of the Shareholders shall not, and shall procure (insofar as it lawfully can) that no Group Company and no Associated Person of any Shareholder or any Group Company engages in any activity or conduct that has or will result in a violation of:

 

  (i)

any Anti-Corruption Laws; and

 

  (ii)

any applicable laws relating to economic or trade sanctions, including:

 

  (a)

the laws or regulations implemented by the Office of Foreign Assets Controls of the United States Department of the Treasury or any other United States government authority or department;

 

  (b)

United Nations sanctions imposed pursuant to any United Nations Security Council Resolution;

 

  (c)

EU and EU member state restrictive measures implemented pursuant to any EU Council or European Commission regulation or decision adopted pursuant to a Common Position in furtherance of the EU’s and any EU member state’s Common Foreign and Security Policy; and

 

  (d)

any similar laws or regulations to the foregoing in any other applicable jurisdiction.

 

  4.3.2

Each of the Shareholders has and shall maintain in place, and the Company shall and shall procure that each of the Group Companies has and shall maintain in place, adequate procedures to prevent bribery within the meaning of the Anti-Corruption Laws.

 

13

5.

Budgets and financial information

 

5.1

Accounting principles

The Shareholders agree that the Company shall prepare its and the Group Companies’ consolidated financial statements for reporting purposes in accordance with IFRS or such other accounting methodologies to the extent required by applicable Law, provided that the Board may approve the use of any other accounting methodology for any other purpose as determined by the Board from time to time.

 

5.2

Information

 

  5.2.1

The Company shall prepare, or procure the preparation of, and, once approved by the Board, shall submit to the Shareholders:

 

  (i)

draft annual financial statements of the Group Companies within 120 days following the end of the relevant Financial Year of the Company (with the exception of the first Financial Year, in respect of which financial statements shall only be required to be produced in accordance with and in the time periods required by applicable Law);

 

  (ii)

audited financial statements of the Group Companies promptly following the signature of the audit certificate from the Auditors relating to such financial statements;

 

  (iii)

monthly management reports in respect of the Group Companies, in a form to be determined by the Board (but containing at a minimum a profit and loss account and a balance sheet) within 30 days following the end of the relevant month; and

 

  (iv)

such other information or documentation as any Shareholder may reasonably request from time to time relating to the Business or financial condition of the Company or of any Group Company within a reasonable period.

 

  5.2.2

Subject to Clause 25, a Shareholder may, at its own expense, at all reasonable times inspect and make copies of all books, records, accounts and documents relating to the business and the affairs of the Group Companies.

 

5.3

Development Budget

 

  5.3.1

As soon as reasonably practicable after the date of this Agreement, the Original Melco Shareholder shall propose for approval of the Board the initial Development Budget (“Initial Development Budget”) which shall:

 

  (i)

not exceed a maximum aggregate amount of €650,000,000 in total, including any pre-funded interest on high yield financing (the “IDB Maximum Amount”);

 

  (ii)

be consistent with the terms of the ICR Licence; and

 

  (iii)

shall not include transactions between any Group Companies, on the one hand, and the Original Melco Shareholder or its Associated Companies on the other hand (excluding any financing provided by the Original Melco Shareholder or its Associated Companies and any financing costs or related transaction fees), which in aggregate exceed [***] (the “IDB Melco Transaction Amount”), which for the avoidance of doubt shall be a sub-limit of the IDB Maximum Amount and not in addition to it.

 

14

  5.3.2

Provided the Initial Development Budget proposed by the Original Melco Shareholder under Clause 5.3.1 complies with the requirements of Clause 5.3.1, then it shall promptly be approved by the Board.

 

  5.3.3

The Development Budget may be updated from time to time in accordance with a decision of the Board, provided that the prior written consent of the Original CPZ Shareholder (not to be unreasonably withheld, conditioned or delayed) shall be required for:

 

  (i)

any increase in the total aggregate amount of the Development Budget above the IDB Maximum Amount; or

 

  (ii)

the inclusion of any transaction between any Group Companies, on the one hand, and the Original Melco Shareholder or its Associated Companies, on the other hand (excluding any financing provided by the Original Melco Shareholder or its Associated Companies and any financing costs or related transaction fees), which would result in the aggregate of all such transactions exceeding the IDB Melco Transaction Amount.

 

5.4

Approval of Annual Budgets

 

  5.4.1

The Board shall procure that the Company prepares an Annual Budget.

 

  5.4.2

The Board shall ensure that prior to the Opening Date, to the extent the Annual Budget relates to matters included in the Development Budget, the Annual Budget is not inconsistent with the Development Budget.

 

  5.4.3

Each draft Annual Budget shall be submitted to the Shareholders for comment not less than 30 days prior to the start of the relevant financial year but shall be approved by the Board.

 

  5.4.4

Once an Annual Budget is approved, any further variations to an Annual Budget shall require approval by the Board.

PART D - MANAGEMENT AND CONTROL

 

6.

Powers and duties of the Board of Directors

 

6.1

The Shareholders shall exercise their powers under this Agreement so far as they lawfully can to procure that:

 

  6.1.1

the Board shall be responsible for the overall management of the Group Companies, provided that the Board shall not implement any decision in relation to any of the Shareholder Reserved Matters without the requisite prior approval in accordance with Clause 15;

 

  6.1.2

the Board shall be responsible for deciding matters in relation to the Business which do not constitute Shareholder Reserved Matters;

 

  6.1.3

subject to Clause 6.1.4, the Board may delegate authority to operate the day-to-day affairs of the Company to any designees of the Shareholders, the Chairman of the Board, the Group President (if any), the Property President or any other members of the management of the Group Companies, provided that any delegation of authority to implement or address any issue which is a Shareholder Reserved Matter shall only be effective if approved in accordance with Clause 15; and

 

15

  6.1.4

the Board shall ensure that any Group President and the Property President competently fulfils his/her duties in accordance with Clause 13.2.

 

7.

Appointment of Directors

 

7.1

Number and identity of appointees

 

  7.1.1

The Board shall be comprised of a maximum of six Directors, appointed in accordance with the following:

 

  (i)

the Original CPZ Shareholder shall have the right to appoint one Director to the Board (the “CPZ Board Appointment Right”) subject to the following:

 

  (a)

the Original CPZ Shareholder may by written notice to the Company and the other Shareholders irrevocably transfer the CPZ Board Appointment Right to any CPZ Transferee which holds the Requisite Minimum CPZ Shareholding;

 

  (b)

any CPZ Transferee which is transferred and continues to hold the CPZ Board Appointment Right in accordance with Clause 7.1.1(i)(a) may by written notice to the Company and the other Shareholders irrevocably transfer the CPZ Board Appointment Right to any other CPZ Shareholder which holds the Requisite Minimum CPZ Shareholding;

 

  (c)

if any CPZ Shareholder which holds the CPZ Board Appointment Right in accordance with the terms of this Clause 7.1.1 ceases to hold the Requisite Minimum CPZ Shareholding, then:

 

  (I)

that CPZ Shareholder may immediately transfer the CPZ Board Appointment Right to a CPZ Shareholder which holds the Requisite Minimum CPZ Shareholding; or

 

  (II)

if no CPZ Shareholder holds the Requisite Minimum CPZ Shareholding, the CPZ Board Appointment Right shall lapse with immediate effect and may not be exercised by any person notwithstanding that any CPZ Shareholder may hold the Requisite Minimum CPZ Shareholding at any future time; and

 

  (d)

for the avoidance of doubt, nothing in this Clause 7.1.1(i) shall entitle the Original CPZ Shareholder or any CPZ Transferees to hold the right to appoint between them more than one Director in total.

 

  (ii)

The Original Melco Shareholder shall have the right to appoint up to four Directors in total to the Board for so long as the Original Melco Shareholder and any Associated Companies to which it transfers Shares hold at least 50% in aggregate of the total number of then outstanding Shares; and

 

  (iii)

if the Original Melco Shareholder and any Associated Companies to which it transfers Shares in aggregate hold less than 50% of the total number of then outstanding Shares, then so long as the Original Melco Shareholder and its Associated Companies hold:

 

16

  (a)

at least 10% in aggregate of the total number of then outstanding Shares, the Original Melco Shareholder shall have the right to appoint one Director in total to the Board;

 

  (b)

at least 20% in aggregate of the total number of then outstanding Shares, the Original Melco Shareholder shall have the right to appoint two Directors in total to the Board; and

 

  (c)

at least 40% in aggregate of the total number of then outstanding Shares, the Original Melco Shareholder shall have the right to appoint three Directors in total to the Board.

 

  (iv)

In addition to any rights to appoint Directors as set forth in paragraphs (ii) and (iii) above, for so long as the Original Melco Shareholder or any of its Associated Companies is responsible for the management of the casino or holds any preference shares in CoCo, the Original Melco Shareholder shall have the right to appoint one Director to the Board.

 

  7.1.2

No Shareholder shall have the right to object to the appointment of a Director by the other Shareholders, unless such appointee is an Unsuitable Director.

 

  7.1.3

Directors shall be permitted to communicate regularly with the relevant Shareholder that appointed them to:

 

  (i)

satisfy the relevant Shareholder’s reasonable request for information in order to comply with the external reporting and other legal requirements of that Shareholder and their Associated Companies; and

 

  (ii)

provide information on the Business and its financial performance.

 

7.2

Remuneration of Directors

The Company shall be responsible for remunerating the Directors.

 

8.

Removal of Directors

 

8.1

A Director may be removed as a director of the Company at any time:

 

  8.1.1

by notice in writing to the Company by the Shareholder who appointed him/her; or

 

  8.1.2

where such a Director is an Unsuitable Director, by notice in writing to the Company from a Shareholder,

and in either such event the Shareholders shall promptly remove such Director from their position(s) and the Shareholder that appointed such Director shall promptly appoint another Director in their place in accordance with Clause 7 and the Articles.

 

8.2

To ensure compliance with the terms of Clause 7 and this Clause 8, each Shareholder agrees to vote its Shares in the Company, and ensure that its respective appointed Directors shall exercise their voting rights, in such a manner as shall result in the appointment or removal of the appointees of the other Shareholders to the Board in accordance with such Clauses.

 

8.3

If a Director ceases to be qualified under the Articles to act as a director of the Company, then the Shareholder that appointed that Director shall immediately procure the resignation of that Director and shall appoint a new Director in accordance with Clause 7.

 

17

8.4

A Shareholder whose appointee has either been removed or has resigned as a Director shall fully indemnify and hold harmless the other Shareholders and the Group Companies against all Losses incurred by the other Shareholders and/or the Group Companies in respect of any claim made as a result of the removal or resignation of such Director.

 

9.

Chairman

 

9.1

The Chairman shall chair all meetings of the Board at which he/she is present, but shall not have a casting vote. The Chairman shall ensure that all relevant papers for any Board meeting are properly circulated in advance.

 

9.2

The Chairman shall be appointed annually by the Original Melco Shareholder, unless the Melco Shareholders hold less than 10% of the total number of then outstanding Shares, in which case the Chairman shall be appointed by the Shareholder holding the greatest number of Shares.

 

10.

Board meetings

 

10.1

Frequency

The Board shall decide when and how often Board meetings shall take place, provided that:

 

  10.1.1

Board meetings shall be held at least four times per calendar year unless all Directors agree otherwise; and

 

  10.1.2

any Director may convene a Board meeting at any time by complying with applicable notice requirements.

 

10.2

Place

 

  10.2.1

The Board shall decide where Board meetings shall take place, taking into account the respective Tax considerations of the Group Companies and each of the Shareholders and their Associated Companies and the convenience of a particular location to each Director.

 

  10.2.2

Subject to the requirements of any applicable Laws, the Board may decide to hold a meeting by video, teleconference and other electronic conferencing means available to each Director.

 

10.3

Notice/agenda

 

  10.3.1

At least:

 

  (i)

in the case of an emergency, 48 hours provided that Directors may participate telephonically or by video or other electronic-conferencing; and

 

  (ii)

in all other cases, five Business Days’,

written notice by email or courier shall be given to each of the Directors of all Board meetings, except where a Board meeting is adjourned under Clause 10.4 or where the Board agrees to a shorter notice period and all the Directors are notified of the shorter notice period.

 

  10.3.2

Any notice of a meeting of Directors must specify the location, date and time of the meeting.

 

  10.3.3

Subject to accommodating the time periods set out herein, any Shareholder or Director may propose an item for inclusion in the agenda.

 

18

  10.3.4

At least:

 

  (i)

in the case of an emergency, 24 hours; and

 

  (ii)

in all other cases, two Business Days,

(or such other period as may be agreed by all the Directors entitled to receive the notice) before a Board meeting, a reasonably detailed agenda shall be sent to each of the Directors by email or courier, which shall:

 

  (a)

specify the matters to be considered; and

 

  (b)

be accompanied by any relevant papers.

 

  10.3.5

Notice of any meeting which is determined by the Company to be an emergency meeting shall specify:

 

  (i)

the basis of that determination (which must be reasonable);

 

  (ii)

the nature of the emergency in reasonable detail; and

 

  (iii)

information for participating telephonically or by video or other electronic conferencing.

 

  10.3.6

Any Director may invite a member of Senior Management to attend a meeting of the Board unless such meeting is to discuss any such person’s remuneration, appraisal or performance.

 

  10.3.7

Prior to the Opening Date, the Original Melco Shareholder shall work with the Property President to provide an update to the Board in relation to the development of the Project at each Board meeting.

 

10.4

Quorum

 

  10.4.1

The quorum at a Board meeting shall be two Directors, including at least one Director appointed by the Original Melco Shareholder.

 

  10.4.2

The terms of Clause 15 shall apply with respect to any Shareholder Reserved Matter.

 

  10.4.3

Notice of the adjourned Board meeting shall be given to all of the Directors.

 

10.5

Voting

 

  10.5.1

Subject to the other provisions of this Agreement, at any Board meeting each Director shall have one vote and decisions at Board meetings shall require a simple majority of votes.

 

  10.5.2

A written resolution signed by all Directors shall be as valid and effective as a resolution passed at a Board meeting.

 

10.6

Alternate Directors

Each Director shall have the right by notice in writing to the Company to, subject to the approval of all the Directors, appoint an alternate director who shall have the same powers and rights as the Director who has appointed him.

 

19

11.

Committees of Directors

 

11.1

The Board may constitute committees of Directors.

 

11.2

The voting and quorum for Board committee meetings shall be the same as for Board meetings, except as determined otherwise by the Board.

 

11.3

The Director nominated by a CPZ Shareholder shall have the right, but not the obligation, to be an observer on all committees of Directors.

 

12.

Group Company boards

 

12.1

The directors of the boards of any Group Companies shall be appointed by the Board.

 

12.2

The provisions regulating the meetings of the boards of any Group Companies shall be the same as for Board meetings, except as determined otherwise by the Board.

 

12.3

Clauses 10.3.1 to 10.3.5 shall apply to any board meeting of any Group Company.

 

13.

Management team

 

13.1

Appointment of Property President

 

  13.1.1

The Board shall nominate and appoint the Property President.

 

  13.1.2

The Property President shall be an employee of a Group Company and may also be an employee or officer of other Group Companies. The Property President shall not be a Director.

 

  13.1.3

Remuneration of the Property President shall be determined by the Board.

 

  13.1.4

The Property President may be removed at any time for any reason by the Board.

 

13.2

Authority and accountability of Property President

The day-to-day operational affairs of the Company shall be run by the Property President or such other person as determined by the Board under the supervision of the Board:

 

  13.2.1

with reference to the Annual Budget; and

 

  13.2.2

in the interests of the Shareholders collectively so as to maximise the Company’s equity value, without regard to the individual interests of any of the Shareholders,

provided that the Property President or any such other person appointed by the Board shall not take any decision in relation to any of the Shareholder Reserved Matters without the prior approval of the Shareholders in accordance with Clause 15.

 

13.3

Appointment and removal of the management team

 

  13.3.1

Other key senior management, including a Head of Finance, Head of HR, Head of Marketing and Head of Legal (such persons, the “Senior Management”) shall be appointed in accordance with the delegation of authority policy to be adopted by the Board.

 

  13.3.2

Notwithstanding Clause 13.3.1, the Board may dismiss a member of Senior Management and/or appoint a new member of Senior Management at any time for any reason.

 

20

14.

Meetings of Shareholders

General meetings of Shareholders shall be held at least once per calendar year and shall take place in accordance with the applicable provisions of the Articles and this Agreement, including the following provisions:

 

14.1

the quorum shall be one duly authorised representative of each Shareholder holding at least 10% in aggregate of the Shares, provided that if at a duly convened meeting, a duly authorised representative of any or all of such Shareholders is not present, then such meeting shall be adjourned for at least seven Business Days (as determined by the chairman if present) and each Shareholder shall be notified at least three Business Days in advance of the time, date and place for the reconvened meeting;

 

14.2

the notice of meeting shall set out an agenda identifying in reasonable detail the matters to be discussed;

 

14.3

the chairman of the meeting shall not have a casting vote; and

 

14.4

subject to the requirements of any applicable Laws, meetings may be held by video, teleconference and other electronic conferencing means and the persons convening the meetings shall use reasonable endeavours to ensure they are held at locations reasonably convenient for all Shareholders.

 

15.

Shareholder Reserved Matters

 

15.1

Subject to the terms of Clauses 15.2 and 15.3 below but notwithstanding any other provision of this Agreement to the contrary, the Shareholders shall procure that no action is undertaken by the Company or any Group Company, and the Company shall not undertake and shall procure that no Group Company shall undertake any action with respect to the matters set out in Part A of Schedule 2 (“Shareholder Reserved Matters”) without the prior written consent of both the Original CPZ Shareholder (the “CPZ Consent Right”) and the Original Melco Shareholder.

 

15.2

The Original CPZ Shareholder may by written notice to the Company and the other Shareholders irrevocably transfer the CPZ Consent Right to any CPZ Transferee which holds the Requisite Minimum CPZ Shareholding, subject to the following:

 

  (i)

upon the transfer of the CPZ Consent Right by the Original CPZ Shareholder to any CPZ Transferee in accordance with this Clause 15.2, the applicable Shareholder Reserved Matters shall consist only of the matters set out in Part B of Schedule 2 (and for the avoidance of doubt, no consent of any CPZ Shareholder will be required under this Clause 15 at any time following such transfer in respect to the matters set out in Part A of Schedule 2, which shall cease to have any effect) (the “Modified Shareholder Reserved Matters”);

 

  (ii)

any CPZ Transferee which is transferred and continues to hold the CPZ Consent Right in accordance with this Clause 15.2 above may by written notice to the Company and the other Shareholders irrevocably transfer the CPZ Consent Right to any other CPZ Shareholder which holds the Requisite Minimum CPZ Shareholding; and

 

  (iii)

if any CPZ Shareholder which holds the CPZ Consent Right in accordance with the terms of this Clause 15 ceases to hold the Requisite Minimum CPZ Shareholding, then:

 

21

  (a)

that CPZ Shareholder may immediately transfer the CPZ Consent Right to a CPZ Shareholder which holds the Requisite Minimum CPZ Shareholding; or

 

  (b)

if no CPZ Shareholder holds the Requisite Minimum CPZ Shareholding, the CPZ Consent Right shall lapse with immediate effect and may not be exercised by any person notwithstanding that any CPZ Shareholder may hold the Requisite Minimum CPZ Shareholding at any future time.

 

15.3

For the avoidance of doubt:

 

  (i)

nothing in this Clause 15 shall entitle the Original CPZ Shareholder or any CPZ Transferee to both concurrently hold consent rights in relation to the Shareholder Reserved Matters or the Modified Shareholder Reserved Matters; and

 

  (ii)

the consent of the relevant CPZ Shareholder which holds the CPZ Consent Right under this Clause 15 shall be deemed to have been duly given if that CPZ Shareholder has voted in favour of any resolution or proposed resolution giving effect to or authorising a Shareholder Reserved Matter or Modified Shareholder Reserved Matter (as the case may be) which has been put to a vote at any general meeting of the Shareholders.

PART E - COMPANY FINANCE

 

16.

Distributions

 

16.1

The Board shall make distributions to the Shareholders in proportion to their then existing holding of Shares.

 

16.2

It shall be the policy of the Company that, subject to:

 

  16.2.1

applicable Laws;

 

  16.2.2

any financial covenants or undertakings given by a Group Company under any external financing arrangements; and

 

  16.2.3

working capital requirements and to maintaining cash reserves of not less than a value which, in the reasonable opinion of the Board, is adequate for the Company to continue its Business and provide for reasonable contingencies, including in relation to legal compliance, other prudential requirements, scheduled and unscheduled capital expenditure, maintenance requirements and insurable and uninsurable events,

the Company shall distribute not less than 70% of its profits to its Shareholders by way of dividend.

 

16.3

The Company shall use commercially reasonable endeavours to structure the payment of any dividends in a manner that is tax efficient to the Shareholders in relation to the Special Contribution for the Defence of the Republic Law of Cyprus.

 

16.4

The Shareholders shall procure that the Company promptly pays any deemed dividend distribution tax (“DDDT”) and that the Company shall only claim repayment of DDDT from any CPZ Shareholder by way of an offset against future dividends, provided that the Company shall be entitled to elect to do so at the earliest opportunity that such dividends are lawfully available against which such an offset may be made.

 

22

16.5

In the event that any CPZ Shareholder Transfers any of its Shares, such CPZ Shareholder shall repay any amounts owed to the Company in respect of DDDT.

 

16.6

For the avoidance of doubt, any Entitlement Fees or distributions on preferred shares payable by any Group Company to any Shareholder shall not be counted as a dividend or distribution to the applicable Shareholder when determining the amount of distributions payable to each Shareholder in accordance with this Clause 16.

 

16.7

The provisions of this Clause 16 shall apply to any Group Company mutatis mutandis.

 

17.

Additional finance for the Company

 

17.1

External finance

Unless expressly provided in this Clause 17, the Shareholders shall not be obliged to provide:

 

  17.1.1

any further capital to the Company either by way of subscription for Shares or Loan Notes or by advancing loans, or otherwise; or

 

  17.1.2

guarantees or security in connection with any third party financing (whether a loan facility, bond instrument or otherwise) to be provided to the Company (“Third Party Finance”),

and, unless otherwise agreed by the Shareholders, there shall be no recourse to the Shareholders in respect of the Third Party Finance.

 

17.2

Funding of the Development Budget

The Development Budget shall be funded in accordance with Part A of Schedule 6.

 

17.3

Funding of the Project post opening of the ICR

 

  17.3.1

The Shareholders acknowledge that following the Opening Date, their expectation is that the Company should be able to service future funding requirements for the Business from its internal resources.

 

  17.3.2

If, following the Opening Date, the Board determines that additional funding is required in excess of that available from the Company’s internal resources, then the provisions of Part B of Schedule 6 shall apply.

PART F - EXIT

 

18.

Transfers

 

18.1

General prohibition on disposal of Shares

A Shareholder may not Transfer any of its Shares or any Interest in Shares to any person other than in accordance with this Agreement.

 

18.2

Restrictions applicable to all Shareholders

Notwithstanding any other provision of this Agreement, a Shareholder may not Transfer any of its Shares or any interest in Shares unless:

 

  18.2.1

the person to whom the Shares are being transferred is not an Unsuitable Person; and

 

23

  18.2.2

all other consents, clearances, approvals or permissions necessary to enable the complete Transfer have been obtained, including, without limitation, those under: (a) the ICR Licence and Cyprus Law; and (b) the rules and regulations of any governmental, statutory or regulatory body which would be required in order to effect the Transfer.

 

18.3

Restrictions applicable to CPZ Shareholder

 

  18.3.1

No CPZ Shareholder shall Transfer any of its Shares or any interest in Shares unless the person to whom the Shares are being transferred:

 

  (i)

is not, and is not Controlled by, a Melco Competitor; and

 

  (ii)

has no present intention to on-sell Shares to a Melco Competitor or any entity Controlled by a Melco Competitor (unless the Original Melco Shareholder shall have otherwise consented to a Transfer to such Melco Competitor or other person in writing).

 

  18.3.2

In respect of, and as a condition to, any Transfer by any CPZ Shareholder, both the Original Melco Shareholder and the Board shall have the right to require any proposed transferee to provide evidence to them that the Transfer to such transferee would not breach the terms of Clause 18.3.1. If the Original Melco Shareholder or the Board (as the case may be) is not satisfied by such evidence that the proposed Transfer would not breach the terms of Clause 18.3.1, then the Board may refuse to register such proposed Transfer and such CPZ Shareholder shall not proceed with such proposed Transfer.

 

  18.3.3

No CPZ Shareholder shall Transfer any of its Shares or any Interest in Shares to any person prior to the date falling 12 months from the Effective Date, other than with the prior written consent of the Original Melco Shareholder, or unless required to do so under Clause 18.6 or 19.3 or permitted to do so under Clause 18.5.

 

  18.3.4

No CPZ Shareholder shall Transfer any of its Shares to the extent such Transfer would result in CPZ and its Associated Companies in aggregate holding less than 40% of their Updated Shareholding Amount prior to the date falling five years from the Effective Date, except with the prior written consent of the other Shareholders or unless required to do so under Clause 18.6, or 19.3 or permitted to do so under Clause 18.5.

 

  18.3.5

Any Transfer of Shares or any Interest in Shares by any CPZ Shareholder to any person at any time must comprise at a minimum a Transfer of at least 1% of the total outstanding Shares to such person, except with the prior written consent of the other Shareholders or unless required to do so under Clause 18.6, or 19.3 or permitted to do so under Clause 18.5.

 

18.4

Restrictions applicable to Melco Shareholder

Subject to Clause 18.5, no Melco Shareholder shall Transfer any of its Shares to the extent such Transfer would result in the Melco Shareholders in aggregate holding less than 662⁄3% of their Updated Shareholding Amount prior to the date falling five years from the Effective Date, except with the prior written consent of the other Shareholders or unless required to do so under Clause 19.3.

 

18.5

Transfer to Associated Companies permitted at any time

 

  18.5.1

Subject to Clause 18.5.2, a Shareholder (the “Transferor”) may at any time, and without compliance with Clause 18.1 or Clause 18.6, Transfer its Shares or any Interest in Shares to an Associated Company (the “Transferee”) on giving prior written notice to the other Shareholders, copied to the Company, provided that the Transferee shall, and the Transferor shall procure that the Transferee shall, retransfer its Shares and any Interest in Shares to the Transferor or another Associated Company of the relevant Shareholder’s Ultimate Parent Company immediately if the Transferee ceases to be an Associated Company of the relevant Shareholder’s Ultimate Parent Company prior to the date falling five years from the Effective Date.

 

24

  18.5.2

Notwithstanding Clause 18.5.1, any Melco Shareholder may at any time, and without compliance with any other restriction in this Agreement (including as set out in Clauses 18.1, 18.5.1 or 18.6), undertake a Permitted Melco Transfer. If a Melco Shareholder elects to undertake a Permitted Melco Transfer, then the other Shareholders shall provide all assistance and do all things as may be reasonably requested by such Melco Shareholder (including, if necessary, making amendments to this Agreement) in order to give effect to the Permitted Melco Transfer.

 

18.6

Transfer to other Shareholders or a third party pre-IPO

 

  18.6.1

Written offer from a third party/right of first refusal

Prior to the date of any IPO, a Shareholder (the “Transferring Shareholder”) may, subject to the general restrictions in Clauses 18.1 to 18.4, Transfer all or part of its Shares and any Interest in Shares (the “Transfer Shares”) and any Debt owed by the Company and/or any Group Company to the Transferring Shareholder and/or its Associated Companies (the “Transfer Debt” and, together with the Transfer Shares, the “Transfer Assets”) only if it receives an offer for such Transfer Assets (the “Third Party Offer”) from a bona fide third party (the “Offeror”) which:

 

  (i)

where the Transferring Shareholder is not the Original Melco Shareholder, provides written certification, including a representation and warranty (after conducting its own investigation), that the Offeror: (a) is not, and is not Controlled by, a Melco Competitor; and (b) has no present intention to on-sell Shares to a Melco Competitor or any entity Controlled by a Melco Competitor;

 

  (ii)

states whether the Third Party Offer is for all or part of the Transferring Shareholder’s Shares and confirms that it is also for such proportion of any Debt owed by the Company and/or any Group Company to the Transferring Shareholder and/or its Associated Companies as is equal to the proportion of Shares being acquired;

 

  (iii)

is irrevocable and unconditional except for any Permitted Regulatory Condition;

 

  (iv)

is governed by English, New York, Hong Kong or Cypriot law;

 

  (v)

states the price of the Third Party Offer which shall be for cash consideration in either Euro or U.S. Dollars only (the “Third Party Offer Price”) and immediately payable within one month of completion of the transfer;

 

  (vi)

contains all material terms and conditions (including the intended completion date of the offer and any Permitted Regulatory Conditions); and

 

  (vii)

in the case of a Transfer by a Melco Shareholder only, where such Transfer would result in a Change of Control of the Company, includes an offer to acquire, at the election of the Original CPZ Shareholder, either (a) all the Shares held by the Original CPZ Shareholder or its Associated Companies along with any Debt owed by the Company and/or any Group Company to the Original CPZ Shareholder (and its Associated Companies) or (b) the pro rata portion (relative to the number of Transfer Shares versus total Shares held all Melco Shareholders) (the “Relevant Proportion”) of the Shares held by the Original CPZ Shareholder or its Associated Companies and the Relevant Proportion of any Debt owed by the Company and/or any Group Company to the Original CPZ Shareholder, in each case at the same cash price per Share and on no less favourable terms than the Transfer Assets (a “Tag-along”).

 

25

  18.6.2

Issue of Transfer Notice to Remaining Shareholder

Within 15 Business Days of receiving a Third Party Offer which it wishes to accept, a Transferring Shareholder shall issue a written notice (the “Transfer Notice”) to the other Shareholder (the “Remaining Shareholder”), copied to the Company, containing notification and details of the Third Party Offer compliant with Clause 18.6.1 and, upon issuing such written notice, the Transferring Shareholder shall be deemed to make an offer to sell the Transfer Assets to the Remaining Shareholder (the “Offer”) at the same cash price per Share and on no less favourable terms and conditions than those set out in the Third Party Offer, except that the Remaining Shareholder shall have the right to request the addition of any necessary Permitted Regulatory Conditions, or adjustments to any existing Permitted Regulatory Conditions, but only to the extent necessary to be able to complete the transfer of the Transfer Assets and provide confirmation that:

 

  (i)

the Company shall be the agent of the Transferring Shareholder for the sale of the Transfer Assets; and

 

  (ii)

the Remaining Shareholder may elect to proceed in accordance with one of the options in Clause 18.6.3.

 

  18.6.3

Choices open to Remaining Shareholder

The Remaining Shareholder who receives a Transfer Notice may do one of the following:

 

  (i)

Accept the Offer

 

  (a)

Before the expiry of the Acceptance Period (the “Closing Date”), if the Remaining Shareholder wishes to buy the Transfer Assets at the Third Party Offer Price, it shall send a written notice to the Transferring Shareholder, copied to the Company, accepting the Offer (the “Acceptance Notice”). An Acceptance Notice shall be irrevocable. If the Remaining Shareholder does not wish to accept the Offer, it may either send a written notice to the Transferring Shareholder, copied to the Company, by the Closing Date declining the Offer or do nothing, in which case it shall be deemed to have declined the Offer.

 

  (b)

Notwithstanding the above, if the Remaining Shareholder is a Melco Shareholder, then if (in its sole discretion) such Melco Shareholder considers it reasonably necessary, such Melco Shareholder may (by notice in writing to the Transferring Shareholder no later than 21 days after receipt of the Transfer Notice) elect to extend the Acceptance Period by up to 30 days (such extension period, the “Additional Investigation Period”) in order to more fully investigate the identity of the relevant Offeror and satisfy itself that such Offeror is not, and is not controlled by, a Melco Competitor, nor has it any present intention to on-sell Shares to a Melco Competitor or an entity controlled by a Melco Competitor.

 

26

  (c)

If, three Business Days after the Closing Date, the Transferring Shareholder has not received an Acceptance Notice, the Transferring Shareholder shall then, subject to Clause 18.6.4, be free, for a period of six months thereafter, to accept the Third Party Offer and sell the Transfer Assets to the Offeror at the Third Party Offer Price and on terms being no more favourable than those of the Third Party Offer, provided that the Offeror (or other purchaser) enters into a Deed of Adherence in the form required by this Agreement.

 

  (d)

The transfer of the Transfer Assets to the Remaining Shareholder delivering an Acceptance Notice shall be completed in accordance with Clause 21 and the terms and conditions of the relevant Transfer. In the event of any conflict between the provisions of Clause 21 and the terms and conditions of the relevant Transfer, the former shall take precedence.

 

  (ii)

Tag-along

 

  (a)

If the Original CPZ Shareholder or its Associated Companies wish to sell all or the Relevant Proportion of the Shares held by them along with any Debt owed by the Company and/or any Group Company to them pursuant to Clause 18.6.1(vii), the Original CPZ Shareholder shall send a written notice (the “Tag-along Notice”) to the Original Melco Shareholder by the Closing Date, copied to the Company, electing to sell, at its option, either: (i) all; or (ii) the Relevant Proportion, of its Shares and any Interest in Shares (the “Tag-along Shares”) together with all or the Relevant Proportion (as relevant) of Debt owed by the Company and/or any Group Company to the Original CPZ Shareholder and/or its Associated Companies (the “Tag- along Debt” and, together with the Tag-along Shares, the “Tag-along Assets”) to the Offeror at the same cash price per Share and on no less favourable terms than those contained in the Third Party Offer, except that the Original CPZ Shareholder shall have the right to request the addition of any necessary Permitted Regulatory Conditions, or adjustments to any existing Permitted Regulatory Conditions, but only to the extent necessary to be able to complete the transfer of the Tag- along Assets. Notwithstanding the foregoing, the Tag-along shall not be exercisable and any Tag-along Notice delivered shall be deemed to be null and void in the event that the Original Melco Shareholder serves a Drag-along Notice pursuant to Clause 18.6.4.

 

  (b)

The Melco Shareholder shall then be prohibited from selling the Transfer Assets to the Offeror unless the Offeror agrees to purchase the Tag-along Assets at the same time, at the same cash price per Share as and on no less favourable terms than those contained in the Third Party Offer.

 

  18.6.4

Drag-along

 

  (i)

Subject to the right of the Remaining Shareholder under Clause 18.6.3(i) to exercise its right of first refusal, if a Melco Shareholder accepts a Third Party Offer and, as a result, the Offeror (together with any person acting in concert with it) will acquire all or a portion of the Shares held by the Melco Shareholders, then within 15 Business Days of the date on which a Melco Shareholder accepts the Third Party Offer, a Melco Shareholder may serve a written notice (a “Drag-along Notice”) on each CPZ Shareholder requiring it to sell to the Offeror the Relevant Proportion of its Shares and any Interest in Shares (the “Drag-along Shares”) together with all or the Relevant Proportion (as applicable) of any Debt owed by the Company and/or any Group Company to each CPZ Shareholder (the “Drag-along Debt” together with the Drag-along Shares, the “Drag-along Assets”) on no less favourable terms and conditions than the Third Party Offer except that each CPZ Shareholder shall have the right to request the addition of any necessary Permitted Regulatory Conditions, or adjustments to any existing Permitted Regulatory Conditions, but only to the extent necessary to be able to complete the transfer of the Drag-along Assets.

 

27

  (ii)

Completion of any transfer pursuant to this Clause 18.6.4 shall take place at the same time as completion of the transfer of the Transfer Assets. In order to effect such completion, the Offeror shall transfer the purchase price for the Drag-along Assets to the Company and each CPZ Shareholder shall deliver duly executed transfer forms for the Drag-along Shares, together with the relevant certificates, to the Company and duly executed instruments for assignment of the Drag-along Debt. The Company’s receipt of the purchase price shall be a good discharge to the Offeror who shall not be bound to see to the application of those moneys. The Company shall hold the purchase price in trust for each CPZ Shareholder without any obligation to pay interest. If any CPZ Shareholder fails to deliver a duly executed transfer form for its Drag-along Shares and duly executed instruments for assignment of the Drag-along Debt to the Company by completion of the transfer of the Transfer Assets, the Directors shall authorise any Director to transfer such Drag-along Shares and assign such Drag-along Debt on behalf of such CPZ Shareholder to the Offeror to the extent the Offeror has, by completion of the transfer of the Transfer Assets, put the Company in funds to pay the purchase price. The Directors shall then authorise registration of the transfer (in the case of any share transfer once appropriate stamp duty has been paid). Each CPZ Shareholder shall surrender its certificates (or an express indemnity in a form satisfactory to the Offeror in the case of any certificate found to be missing) for its Drag-along Shares to the Company. On surrender, the Company shall transfer to each CPZ Shareholder its relevant proportion of the purchase price, but no CPZ Shareholder shall be entitled to any interest which may have been earned by the Company on that amount.

 

  18.6.5

Failure to transfer

If a Transferring Shareholder or a Remaining Shareholder does not comply with its sale or purchase obligations in this Clause 18, then the provisions of Clause 21.3 shall apply.

 

  18.6.6

Failure of third party to complete sale

If the Offeror fails to acquire the Transfer Assets in accordance with this Clause 18, then the procedures set out in this Clause 18 shall be complied with in full in respect of each new or revised offer, whether by the same Offeror or not.

 

18.7

The Shareholders shall take such actions and exercise such rights and powers available to them in relation to the Company and waive or suspend any provisions or regulations contained in the Articles permitting or restricting any Transfer as any Shareholder may require or direct to give effect to and ensure the implementation of this Clause 18 to allow or restrict any Transfer as contemplated by this Clause 18.

 

28

19.

Default or Change of Control

 

19.1

Event of Default

If a Shareholder:

 

  19.1.1

or any of its Associated Companies or its Ultimate Parent Company is subject to an Insolvency Event which is reasonably likely to impair the ability of that Shareholder to comply with its obligations under this Agreement;

 

  19.1.2

is subject to a Licence Ineligibility Event and such Licence Ineligibility Event is not cured or remedied within 30 days of its occurrence;

 

  19.1.3

in the case of any CPZ Shareholder only, is subject to any Change of Control prior to the date falling five years from the Effective Date other than in connection with any Change of Control previously approved in writing by the other Shareholders;

 

  19.1.4

in the case of any Melco Shareholder only, and following any Transfer by any Melco Shareholder of its Shares (or any subsequent transfer) in each case in accordance with this Agreement, prior to the date which is five years after the Effective Date, the relevant transferee which holds those Shares ceases to be Controlled by either the Original Melco Shareholder or Melco International other than where such cessation has been approved in writing by the other Shareholders; or

 

  19.1.5

in the case of any CPZ Shareholder only, or any of its Associated Companies or its Ultimate Parent Company becomes or is reasonably likely to become a Melco Competitor or owned by a Melco Competitor (unless the Original Melco Shareholder shall have otherwise consented to a Transfer to a Melco Competitor in writing) or an Unsuitable Person,

then it shall have committed an “Event of Default”.

 

19.2

Notice of default

If an Event of Default occurs, the Shareholder who commits an Event of Default (the “Defaulting Shareholder”) shall notify the other Shareholders (the “Non-defaulting Shareholders”) as soon as it becomes aware of the occurrence of that Event of Default.

 

19.3

Default Notice (call option)

Following an Event of Default, any Non-defaulting Shareholder may give written notice (the “Default Notice”) within 30 days of receiving notification of an Event of Default or of it becoming aware of an Event of Default, whichever is earlier, requiring the Defaulting Shareholder, subject to the satisfaction or waiver of any Permitted Regulatory Condition set out in the Default Notice, to sell all of the Shares and any Interest in Shares held by the Defaulting Shareholder (the “Sale Shares”) together with any Debt owed by the Company and/or Group Company to the Defaulting Shareholder and/or its Associated Companies (together with the Sale Shares, the “Sale Assets”) to the Non-defaulting Shareholders or, at the option of each Non-defaulting Shareholder, an Associated Company of such Non-defaulting Shareholder, at a price equal to the Fair Market Value of the Sale Assets, on the basis that a Non-defaulting Shareholder or its Associated Company (as applicable):

 

29

  19.3.1

shall be entitled to buy such portion of the Sale Assets as reflects, as nearly as possible, the number of Shares for the time being held by such Shareholder as a proportion of the total number of Shares held by the Non-defaulting Shareholders; and

 

  19.3.2

may offer to buy any portion of the Sale Assets that are not accepted by the other Non-defaulting Shareholders.

In the event any portion of the Sale Assets is not purchased by the Non-defaulting Shareholders or their Associated Companies (as applicable), the Non-defaulting Shareholders may require the Defaulting Shareholder to sell such Sale Assets to a third party that is not a Melco Competitor, or Controlled by a Melco Competitor, or Unsuitable Person at a price equal to Fair Market Value of the Sale Assets.

 

19.4

Completion of transfer

The sale and purchase of the Sale Assets shall be made on the terms set out in Clause 21. The Shareholders waive their pre-emption rights to the Transfer of Shares contained in this Agreement and the Articles to the extent necessary to give effect to this Clause 19.4.

 

19.5

Other breaches of the Agreement

If a Shareholder commits a breach of this Agreement (other than those specified in Clause 19.1), the Non-defaulting Shareholders may serve written notice upon the Defaulting Shareholder specifying the breach and requiring the Defaulting Shareholder immediately to stop the breach and, to the extent possible, to make good the consequences of the breach within 30 Business Days. Where the breach has prejudiced the Non-defaulting Shareholders, they may seek an immediate remedy of an injunction, specific performance or similar order to enforce the Defaulting Shareholder’s obligations. This shall not limit, restrict or otherwise affect the Non-defaulting Shareholders’ right subsequently to claim damages or other compensation for breach under applicable law.

 

20.

Deadlock

 

20.1

Circumstances leading to deadlock

 

  20.1.1

If the Board is unable to reach a decision on a matter presented to it within one month of such presentation to the Board, then any Shareholder or any Director may refer the matter for discussion between the Shareholders.

 

  20.1.2

If:

 

  (i)

the Shareholders cannot reach agreement on any matter referred to them under Clause 20.1.1 within one month of that matter being referred to them; or

 

  (ii)

the Shareholders have not passed a resolution on a matter presented to them as a Shareholder Reserved Matter within one month of such presentation to the Shareholders, either because the requisite majority has not voted in favour of it or due to a lack of quorum,

the matter or resolution shall be termed a “Deadlock Matter”.

 

20.2

Referral to chairman/chief executive officers of Ultimate Parent Companies for resolution

The Shareholders shall refer the Deadlock Matter to the chairman or chief executive officers of the Ultimate Parent Companies of each Shareholder at the relevant time (or, in each case, their designees) for resolution. As at the date of this Agreement, these are Mr Menelaos Shiacolas, in the case of the Original CPZ Shareholder, and Mr Lawrence Ho, in the case of the Original Melco Shareholder.

 

30

21.

Terms and consequences of transfers of Shares

 

21.1

Definitions

In this Clause 21:

“Buyer” means, in the case of:

 

  (a)

Clause 18, a Remaining Shareholder buying Transfer Assets; and

 

  (b)

Clause 19, a Shareholder electing or required to buy Sale Assets.

 

  “Relevant

Notice” means, in the case of:

 

  (a)

Clause 18, the Transfer Notice; and

 

  (b)

Clause 19, the Default Notice.

“Relevant Securities” means, in the case of:

 

  (a)

Clause 18, the Transfer Assets; and

 

  (b)

Clause 19, the Sale Assets.

“Relevant Time” means, in the case of:

 

  (a)

Clause 18.6.3, the date of the last Acceptance Notice; and

 

  (b)

Clause 19, the date of the notice of determination of the Fair Market Value pursuant to Clause 22.2.

“Selling Shareholder” means, in the case of:

 

  (a)

Clause 18, the Transferring Shareholder; and

 

  (b)

Clause 19, the Defaulting Shareholder.

 

21.2

Completion of transfer

Any transfers of Relevant Securities made under the provisions of Clauses 18, 19 and 20 (except by a Transferring Shareholder to an accepting Offeror under Clause 18.6.3(i) which shall be made as agreed with the Offeror) shall be made in accordance with the following terms set out in this Clause 21.2.

 

  21.2.1

The Selling Shareholder and the Buyer shall have the right to request the addition of any necessary Permitted Regulatory Conditions or adjustments to existing Permitted Regulatory Conditions, but only to the extent necessary to be able to complete the transfer of the Relevant Securities.

 

  21.2.2

Each of the Selling Shareholder and the Buyer shall use reasonable endeavours to ensure the satisfaction of any Permitted Regulatory Condition applying to it as soon as possible.

 

  21.2.3

If any of the Permitted Regulatory Conditions is not satisfied or waived 90 days or, in the case of a regulatory approval, 180 days after service of the Relevant Notice (in each case, unless a longer period is agreed between the Selling Shareholder and the Buyer), then the Relevant Notice shall lapse and if the Relevant Notice is a Transfer Notice, then the Transfer Assets, for a period of six months thereafter, shall be offered to the Offeror who had previously made a Third Party Offer but was unable to proceed as a result of the rights of first refusal contained in Clause 18.6.2.

 

31

  21.2.4

Completion of the transfer of the Relevant Securities shall take place 21 days after the Relevant Time or the date of satisfaction or waiver of all Permitted Regulatory Conditions (whichever is the later) (the “Transfer Date”) and at such reasonable time and place as the Selling Shareholder and the Buyer shall agree or, failing which, at 11.00 a.m. at the registered office of the Company.

 

  21.2.5

On or before the Transfer Date, the Selling Shareholder shall deliver to the Buyer in respect of the Relevant Securities:

 

  (i)

duly executed instruments for share transfer;

 

  (ii)

duly executed instruments for assignment of Debt owed to the Selling Shareholder and/or its Associated Companies by the Company and/or any Group Company;

 

  (iii)

any relevant share certificates (or an express indemnity in a form satisfactory to the Buyer in the case of any certificate found to be missing); and

 

  (iv)

a power of attorney in such form and in favour of such person as the Buyer may nominate to enable the Buyer to exercise all rights of ownership, including, without limitation, voting rights.

 

  21.2.6

Against delivery of the documents referred to in Clause 21.2.5, the Buyer shall pay the total consideration due for the Relevant Securities to the Selling Shareholder by 5 p.m. (Cyprus time) on the Transfer Date.

 

21.3

Failure to transfer

If a Selling Shareholder fails or refuses to comply with its obligations to transfer Relevant Securities under Clauses 18 to 21 inclusive on or before the Transfer Date for a reason other than a failure to satisfy a Permitted Regulatory Condition:

 

  21.3.1

the Company may receive the purchase money in trust for a Selling Shareholder (without any obligation to pay interest) and cause a Buyer to be registered as the holder of the Relevant Securities being sold (once any appropriate stamp duty has been paid). The receipt by the Company of the purchase money shall be a good discharge to a Buyer (who shall not be bound to see to the application of those moneys). After a Buyer has been registered as holder of the Relevant Securities being sold in exercise of these powers:

 

  (i)

the validity of the transfer shall not be questioned by any person; and

 

  (ii)

the Selling Shareholder shall surrender his/her certificates (or an express indemnity in a form satisfactory to the Buyer in the case of any certificate found to be missing) for the Relevant Securities to the Company. On surrender, he/she shall be entitled to the purchase money for the Relevant Securities; and

 

  21.3.2

the Selling Shareholder shall not exercise any of its powers or rights in relation to management of, and participation in the profits of, the Company under this Agreement, the Articles or otherwise. The Directors appointed by the Selling Shareholder (or its predecessor in title) shall not:

 

32

  (i)

be entitled to vote at any Board meeting;

 

  (ii)

be required to attend any meeting of Directors in order to constitute a quorum; or

 

  (iii)

be entitled to receive or request any information from the Company.

 

21.4

Company to be informed of notices

The Shareholders shall keep the Company informed at all times of the issue and contents of any notices served pursuant to Clauses 18 to 21 and any election or acceptance relating to those notices.

 

21.5

Business to be run as going concern

The Shareholders shall use all commercially reasonable efforts to ensure that the Business continues to be run as a going concern during the period between the service of any notice pursuant to Clauses 18 to 21 and the completion of any transfers of Shares.

 

21.6

Transfer terms

Any sale and/or transfer of Relevant Securities under Clauses 18 to 21 shall be on terms that those Shares:

 

  21.6.1

are transferred free from all Encumbrances (other than those created under this Agreement and the Articles); and

 

  21.6.2

are transferred with the benefit of all rights attaching to them as at the date of the relevant transfer.

 

21.7

Further assurance

Each of the Shareholders and the Company shall use reasonable endeavours to effect a transfer of Relevant Securities in accordance with the terms of this Agreement as quickly as is practicable and in any event within any time period specified in this Agreement.

 

21.8

Return of documents etc.

On ceasing to be a Shareholder, a Shareholder shall hand over to the Company material correspondence, Annual Budgets, schedules, documents, records or other information relating to the Business held by it or any of its Associated Companies or any third party which has acquired such matter through that Shareholder and shall not keep any copies.

 

21.9

Debt and guarantees

 

  21.9.1

Loans owed by the Company to the Selling Shareholder

 

  (i)

Transfer of Relevant Securities to an Offeror

Without prejudice to any obligations regarding the transfer of Debt in Clause 18.6, where a Selling Shareholder Transfers its Relevant Securities to an Offeror, any Debt owed by the Company and/or any Group Companies to the Selling Shareholder and/or its Associated Companies shall be transferred to the Offeror at the same time for such value as may be agreed between the Selling Shareholder and the Offeror. In the event of a partial transfer of Relevant Securities, the same proportion of the Debt owed by the Company and/or any Group Company to such Shareholder and/or its Associated Companies shall be required to be transferred at the same time.

 

33

  (ii)

Transfer of Relevant Securities to a Buyer

Where a Selling Shareholder Transfers its Relevant Securities to a Buyer, the Selling Shareholder shall procure that all Debt owed by the Company and/or any Group Company to the Selling Shareholder and/or its Associated Companies is either assigned to the Buyer for such value as may be agreed between the Selling Shareholder and the Buyer or, failing agreement with the Buyer, is repaid by the Company.

 

  (iii)

Release of guarantees

Where a Selling Shareholder is transferring its Relevant Securities to a Buyer, the Buyer shall use reasonable endeavours to procure the release of any guarantees, indemnities, securities or other comfort given by the Selling Shareholder to or in respect of the Company or its Business and, pending such release, shall indemnify the Selling Shareholder in full in respect of them.

 

  21.9.2

Loans owed by the Selling Shareholder to the Company

 

  (i)

The transfer of any of the Relevant Securities held by a Selling Shareholder to a Buyer or an Offeror is conditional upon the repayment pro rata to the shareholding to be transferred, if applicable, of all Debt owed by the Selling Shareholder and/or its Associated Companies to the Company and/or any Group Company or the novation of the same to the Buyer or the Offeror, as the case may be, and the agreement of the Buyer or the Offeror, as the case may be, to be bound by the terms and obligations of all such Debt.

 

  (ii)

Any assumption of the obligations of a Selling Shareholder by the Buyer or the Offeror, as the case may be, is without prejudice to the right of either the Buyer, the Offeror, the Company and/or any Group Company to claim from the Selling Shareholder in respect of liabilities arising prior to the date of the transfer of the relevant Shares.

 

21.10

Deed of Adherence

The Shareholders shall procure that no person other than an existing Shareholder acquires any Relevant Securities unless it enters into a Deed of Adherence agreeing to be bound by this Agreement as a Shareholder and any other agreements entered into in connection with the Business as a Shareholder. The Shareholders agree that in signing a Deed of Adherence such person shall have the benefit of the terms of this Agreement and shall be a Party to this Agreement. Notwithstanding the foregoing any rights expressly afforded to the Original CPZ Shareholder under this Agreement shall not be capable of transfer or assignment to any CPZ Transferee, except to the extent otherwise expressly provided in this Agreement.

 

21.11

Removal of appointees

If a Shareholder ceases to be a Shareholder, it shall, and it shall procure that all its appointees to the Board and to the board of directors of any Group Company shall, do all such things and sign all such documents as may otherwise be necessary to ensure the resignation or dismissal of such persons from such appointments in a timely manner in accordance with Clause 8.

 

34

22. Determination of Fair Market Value

 

22.1

Definitions

In this Clause 22:

“Relevant Notice” means, in the case of:

 

  (a)

Clause 18, the Transfer Notice;

 

  (b)

Clause 19, the Default Notice; and

 

  (c)

Part B of Schedule 6, the Additional Finance Request.

 

22.2

Determination

 

  22.2.1

The value of Shares (and any debt, as applicable) (the “Fair Market Value”) in the Company shall be determined by one of any “Big 4” accounting firm or international investment bank listed in Schedule 3, or any other party nominated to determine the value of Shares (the “Valuer”).

 

  22.2.2

The Valuer shall be nominated by the Original Melco Shareholder.

 

  (i)

If the Valuer nominated is one of the parties listed in Schedule 3, the Original CPZ Shareholder shall have the right to veto the first Valuer nominated by the Original Melco Shareholder, exercisable within 10 Business Days of notice of the nomination, provided that, in the case of such exercise, the Original Melco Shareholder shall be free to nominate any other Valuer listed in Schedule 3 and such nomination shall be final and binding.

 

  (ii)

If the Valuer nominated is not one of the parties listed in Schedule 3, then the selection of such Valuer shall require the consent of the Original CPZ Shareholder, such consent not to be unreasonably withheld, conditioned or delayed.

 

  22.2.3

Any Valuer must provide a written statement confirming it has no conflicts in connection with the proposed valuation exercise, failing which an alternate Valuer will be appointed in accordance with the original appointment procedures.

 

  22.2.4

The Valuer shall determine the Fair Market Value within 45 Business Days of their appointment and shall notify the Shareholders of their determination within one Business Day of the same. The fees of the Valuer shall be borne by the Shareholders in proportion to their holding of Sale Shares or, in the case of a Default Notice, by the Defaulting Shareholder.

 

  22.2.5

The Valuer shall act as an expert and not as an arbitrator and its determination shall be final and binding on the Parties (in the absence of manifest error, in which case the determination shall be void and shall be remitted to the Valuer for correction).

 

  22.2.6

The Shareholders shall procure that the Valuer have such access to the accounting records and other relevant documents of the Company and any Group Company as they may reasonably require, subject to such confidentiality obligations as the Shareholders may consider appropriate.

 

35

22.3

Method

 

  22.3.1

The Fair Market Value as at the date of the Relevant Notice, as appropriate, shall be determined on the following assumptions and bases:

 

  (i)

valuing the Sale Shares on the basis of an arm’s length sale between a willing seller and a willing buyer who are acting knowledgeably, prudently and without compulsion;

 

  (ii)

if the Group Companies are then carrying on business as a going concern, on the assumption that they shall continue to do so;

 

  (iii)

on the basis that if there are any partly-paid Shares with respect to which an outstanding balance is owed to the Company, such outstanding balance as at the date of the Relevant Notice shall be taken into account; and

 

  (iv)

valuing the Sale Shares by reference to the percentage of the issued share capital of the Company which they represent (and any value derived from the size of such percentage in comparison to any other holding by any other Shareholder).

 

  22.3.2

The Valuers shall be entitled to make the following adjustments:

 

  (i)

they may determine the Fair Market Value to reflect any other factors which they reasonably believe should be taken into account; and

 

  (ii)

if they encounter any difficulty in applying any of the assumptions or bases set out in this Clause 22.3, then they shall resolve that difficulty in such manner as they shall in their absolute discretion think fit.

 

23.

IPO

 

23.1

Objectives

 

  23.1.1

The Shareholders acknowledge and agree that they expect at some point in the future to create a substantial public ownership interest in the Company and realise the value of their interests in the Company through an IPO of the Company which shall, among other things, provide efficient access to capital markets and require the Company to meet international standards of transparency and corporate governance.

 

  23.1.2

If the Board agrees to undertake an IPO, the Shareholders shall co-operate fully with each other and the Company and their respective financial and other advisers and use their reasonable endeavours to assist the Company to achieve an IPO in accordance with the rules and regulations of the relevant exchange and other applicable laws and regulations.

 

23.2

Sale and subscription

 

  23.2.1

If an IPO is undertaken, each Shareholder shall have the freedom to decide whether and in what proportion it wishes to sell its Shares in the IPO, and any Shares which are to be offered for sale in connection with such IPO shall be sold by the Shareholders in such proportions as they may choose at the relevant time.

 

  23.2.2

The Shareholders shall not be obliged to subscribe for any new Shares issued pursuant to any IPO.

 

36

24.

Duration, termination and survival

 

24.1

Duration and termination

This Agreement shall continue in full force and effect without limit in time until the earlier of:

 

  24.1.1

the Shareholders agreeing in writing to terminate it;

 

  24.1.2

the date on which all of the Shares, to the extent remaining in issue, are owned by one Shareholder;

 

  24.1.3

an effective resolution is passed or a binding order is made for the winding up of the Company; and

 

  24.1.4

the date of completion of any Qualifying IPO,

provided that this Agreement shall cease to have effect as regards any Shareholder who ceases to hold any Shares save for the Surviving Provisions which shall continue in force after termination generally or in relation to any such Shareholder.

 

24.2

Termination

Termination of this Agreement shall be without prejudice to any liability or obligation in respect of any matters, undertakings or conditions which shall not have been observed or performed by the relevant Party prior to such termination.

PART G - PROTECTION OF THE BUSINESS AND SHAREHOLDERS

 

25.

Confidentiality

 

25.1

Announcements

No public announcement of any kind shall be made in respect of this Agreement except as otherwise agreed in writing between the Shareholders or unless required by the Laws, in which case the Shareholder concerned shall notify the other Shareholders of the announcement and the Shareholder or the Associated Company of the Shareholder making the announcement (as the case may be) shall (unless it is not reasonably practicable to do so) give a copy of the text to the other Shareholders prior to the announcement being released. Nothing in this Clause 25.1 shall prevent a Shareholder from making statements in the ordinary course of business about the fact of the Shareholder’s holding of Shares or the fact of its individual participation in the Business or as required or desirable pursuant to any rules or regulations of any stock exchange on which a Shareholder (or any of its Associated Companies) has any securities listed.

 

25.2

Confidential Information

Subject to Clauses 25.1 and 25.3, each Shareholder shall use reasonable endeavours to keep confidential and to procure that its respective Associated Companies and their respective officers, employees, agents and advisers keep confidential the following (the “Confidential Information”):

 

  25.2.1

all communications between them and the Group Companies;

 

  25.2.2

all information and other materials supplied to or received by any of them from the Group Companies which are either marked “confidential” or are by their nature intended to be for the knowledge of the recipient alone; and

 

37

  25.2.3

any information relating to:

 

  (i)

this Agreement, the Business and the customers, assets or affairs of the Group Companies which a Shareholder may have or acquire through ownership of an interest in the Company, all information and Know-how concerning the operations, business transactions and/or financial arrangements of the Group Companies; and

 

  (ii)

the customers, business, assets, operations or affairs of a Shareholder or its Associated Companies and all information and Know-how concerning the operations, business transactions and/or financial arrangements of a Shareholder or its Associated Companies which the other Shareholders may have, or acquire, through being a Shareholder or making appointments to the Board,

and shall not use any Confidential Information for its own business purposes or disclose any Confidential Information to any third party without the consent of the other Shareholders.

 

25.3

Exclusions

 

  25.3.1

Clause 25.2 shall not prohibit disclosure or use of any information if and to the extent:

 

  (i)

the information is or becomes publicly available (other than by breach of this Agreement);

 

  (ii)

the other party has given prior written approval to the disclosure or use;

 

  (iii)

information about the Group Companies which the Board has confirmed in writing to the Shareholders is not confidential;

 

  (iv)

the information is independently developed by a party after the date of this Agreement;

 

  (v)

the disclosure or use is required by law, any governmental or regulatory body or any stock exchange on which the shares of either party or any of its Associated Companies is listed;

 

  (vi)

the disclosure or use is required for the purpose of any judicial or arbitral proceedings arising out of this Agreement or any documents to be entered into pursuant to it;

 

  (vii)

the disclosure of information to any Tax Authority to the extent such disclosure is reasonably required for the purposes of the tax affairs of the Shareholder concerned or any of its Associated Companies;

 

  (viii)

the disclosure of information to any gaming authority or commission having jurisdiction over a Shareholder or its Associated Companies;

 

  (ix)

the disclosure of information by a Shareholder or its Associated Companies to its Associated Companies, directors, employees, professional advisers, representatives or sources of financing on a need-to-know basis and on terms that such parties undertake to comply with the provisions of this Clause 25 as if they were a Party to this Agreement;

 

  (x)

the information has been disclosed to a Shareholder, its respective Associated Companies or their respective officers, employees, agents and advisers on a non-confidential basis by a third party, provided that such third party is not known to the relevant Shareholder, its respective Associated Companies or their respective officers, employees, agents and advisers to be subject to a contractual, legal, fiduciary or other obligation of confidentiality to a Party with respect to such information; or

 

38

  (xi)

the disclosure of information on a confidential basis to a bona fide third party (not being a Restricted Transferee) or professional advisers or financiers of such third party wishing to acquire Shares from a Shareholder in accordance with the terms of this Agreement to the extent that any such persons need to know the information for the purposes of considering, evaluating, advising on or furthering the potential purchase, provided that no such disclosure shall be made unless:

 

  (a)

such person has agreed to be bound to observe the restrictions under this Clause 25 to which the Shareholder concerned is subject; and

 

  (b)

the information being disclosed has been approved by the non-transferring Shareholders (such approval not to be unreasonably withheld or delayed),

provided that prior to disclosure or use of any information pursuant to paragraph (v) or (vi) above, the Party concerned shall promptly notify the other Party of such requirement with a view to providing that other Party with the opportunity to contest such disclosure or use or otherwise agreeing the timing and content of such disclosure or use.

 

25.4

Return of Confidential Information

Where a Shareholder ceases to be a Shareholder, such Shareholder shall promptly:

 

  25.4.1

return all written Confidential Information provided to it or its Associated Companies or its or their officers, employees, agents or advisers which is in such Shareholder’s possession or under its custody and control without keeping any copies thereof;

 

  25.4.2

destroy all analyses, compilations, notes, studies, memoranda or other documents prepared by it or its Associated Companies or its or their officers, employees, agents or advisers to the extent that the same contain, reflect or derive from Confidential Information relating to the other Shareholders, the Company, the Group Companies or the Business;

 

  25.4.3

so far as it is practicable to do so (but, in any event, without prejudice to the obligations of confidentiality contained in this Agreement), expunge any Confidential Information relating to the other Shareholders, the Company, the Group Companies or the Business from any computer, word processor or other device; and

 

  25.4.4

on request, supply a certificate signed by any of its directors confirming that, to the best of his/her knowledge, information and belief, having made all proper enquiries, the requirements of this Clause 25.4 have been fully complied with,

provided that such Shareholder may retain any Confidential Information relating to the other Shareholders, the Company, the Group Companies or the Business as may be required by the Laws or contained or referred to in board minutes or in documents referred to therein and such Shareholder’s advisers may keep one copy of any documents in their possession for record purposes without prejudice to any duties of confidentiality contained in this Agreement.

 

39

25.5

Damages not an adequate remedy

Without prejudice to any other rights or remedies which a Shareholder may have under this Agreement or any Related Agreement, the Shareholders acknowledge and agree that damages would not be an adequate remedy for any breach of this Clause 25 and the remedies of injunction, specific performance and other equitable relief are appropriate for any threatened or actual breach of any such provision and no proof of special damages shall be necessary for the enforcement of the rights under this Clause.

 

25.6

Duration of confidentiality obligations

The obligations contained in this Clause 25 shall last indefinitely, notwithstanding the termination of this Agreement or a person ceasing to be a party to this Agreement.

 

26.

Goods and Services MFN

 

26.1

To the extent that the business of a Shareholder’s Group (other than the Business) reasonably creates opportunities for value to the Business in respect of the supply of goods or services to the Business compared with third party providers, having regard to equivalent levels of quality and availability to those required by the Business, the relevant Shareholder agrees to use all commercially reasonable efforts to contract with the Company or another Group Company to supply such goods or services at a price and on terms no worse than those provided to any other third party customer.

 

26.2

Nothing in this Clause 26 shall affect the terms or relevant rights and obligations under any existing management, licence or services agreements entered into between a Shareholder (or its Associated Company) and the Company as of the Effective Date, including the Related Agreements.

PART H - GENERAL

 

27.

Related Agreements

 

27.1

The Parties shall negotiate in good faith to agree and execute the Commercial Agreements (to the extent not already executed as of the date of this Agreement) (or, in the case of the Melco Management Agreement, to re-execute any such Commercial Agreement which has been terminated solely in relation to and for the purpose of effecting a Permitted Melco Transfer):

 

  27.1.1

consistent with the terms set out in the Term Sheet (including, in particular, as to pricing, which shall not, without the Original CPZ Shareholder’s consent, exceed the pricing set out in paragraph 10 of the Term Sheet); and

 

  27.1.2

pursuant to which the Original Melco Shareholder (or an Associated Company nominated by the Original Melco Shareholder) will be responsible for:

 

  (i)

the design, construction and development process for the ICR and all elements of it, and the temporary casino and the satellite casinos;

 

  (ii)

the management of the ICR as a whole, as well as the temporary casino and satellite casinos, including but not limited to:

 

  (a)

management services including executives and functional leaders;

 

  (b)

corporate recruitment & expatriate services;

 

  (c)

executive payroll and recruiting;

 

40

  (d)

corporate training and development;

 

  (e)

corporate services including accounting & reporting, treasury, tax, corporate legal, corporate risk management & compliance, corporate procurement;

 

  (f)

policies & procedures; and

 

  (g)

operational & marketing methodologies,

(subject to its right, in its discretion, to elect to have all or a portion of the hotel, food & beverage, entertainment and other operations be managed by a third-party operator(s)),

as soon as practicable following the date of this Agreement.

 

27.2

In addition to the Commercial Agreements, the Parties shall procure that CoCo issues preference shares to the Original Melco Shareholder (or its nominee) in a manner consistent with the terms set out in the Term Sheet as soon as practicable following the date of this Agreement.

 

27.3

The Shareholders shall procure that the Company discharges all payment and other obligations under and in accordance with the Commercial Agreements, including in relation to the payment of fees and other entitlements, including the Entitlement Fees.

 

28.

General

 

28.1

Arbitration

 

  28.1.1

Venue

Subject to Clause 28.2, any dispute arising out of or in connection with this Agreement which cannot be solved amicably by the Parties, including a dispute as to the validity, existence or termination of this Agreement and/or this Clause 28.1 or any non-contractual obligation arising out of or in connection with this Agreement (a “Dispute”), shall be resolved by arbitration in London conducted in English by a single arbitrator pursuant to the rules of the London Court of International Arbitration, save that, unless the parties to the Dispute agree otherwise, no party shall be required to give general discovery of documents, but may be required only to produce specific, identified documents which are relevant to the Dispute.

 

  28.1.2

Nature of decision

The decision of the arbitrators shall be final, binding and enforceable upon the Parties and judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

 

  28.1.3

Costs

Each side to the arbitration shall be responsible for its own legal fees and costs, but the arbitrators may apportion the costs of the arbitration (including legal costs and arbitrators’ fees) among the Parties as they deem reasonable, taking into account the circumstances of the case, the conduct of the Parties during the arbitration and the overall result.

 

41

  28.1.4

Confidentiality in respect of arbitration

The parties to the arbitration and their employees and agents shall hold the substance and results of any negotiations or arbitration proceedings under this Clause 28 in strict confidence, except to the limited extent necessary to comply with a court order, to enforce a final settlement agreement, to obtain and secure enforcement of or a judgment on the arbitrator’s decision and award, or as otherwise required by Laws. All information and documents disclosed by any party to the arbitration shall remain private and confidential to the disclosing party, and may not be disclosed by any other party to the arbitration.

 

28.2

Governing law and submission to jurisdiction

 

  28.2.1

This Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

 

  28.2.2

Each of the Parties irrevocably submits to the non-exclusive jurisdiction of the courts of England to support and assist the arbitration process under Clause 28.1, including, if necessary, the grant of interlocutory relief pending the outcome of that process.

 

28.3

Notices

 

  28.3.1

Any notice or other communication in connection with this Agreement (each, a “Notice”) shall be:

 

  (i)

in writing;

 

  (ii)

in English; and

 

  (iii)

delivered by hand, fax, registered post, e-mail, pre-paid recorded delivery, pre-paid special delivery or courier using an internationally recognised courier company.

 

  28.3.2

A Notice to the Original CPZ Shareholder shall be sent to such party at the following address or such other person or address as the Original CPZ Shareholder may notify to the other Parties from time to time:

The Cyprus Phassouri (Zakaki) Limited

Fasouri 3601, Limassol, Cyprus

Fax: 00357 25 952225

Email: kyriacosk@cns.com.cy

Attention: Kyriacos Kyriakides (Group CFO)

 

  28.3.3

A Notice to the Original Melco Shareholder shall be sent to such party at the following address or such other person or address as the Original Melco Shareholder may notify to the other Parties from time to time:

MCO Europe Holdings (NL) B.V.

Prins Bernhardplein 200

1097JB Amsterdam, The Netherlands

Fax: +31 20 521 4888

Email: NL-Melco@intertrustgroup.com (copy to: Company Secretary at mco-comsec@melco-resorts.com)

Attention: Christiaan Zandstra

 

  28.3.4

A Notice to the Company shall be sent to such party at the following address or such other person or address as Company may notify to the other Parties from time to time:

 

42

ICR Cyprus Holdings Limited

Karpenisiou 30, 1077 Nicosia Cyprus

Fax: 00357 22 843444

Email: companysecretary@melco-resorts.com.cy

Attention: Company Secretary

 

  28.3.5

A Notice to Melco Resorts shall be sent to such party at the following address or such other person or address as Melco Resorts may notify to the other Parties from time to time:

Melco Resorts & Entertainment Limited

36/F, The Centrium

60 Wyndham Street, Central

Hong Kong

Email: mco-comsec@melco-resorts.com

Attention: Company Secretary

 

  28.3.6

A Notice shall be effective upon receipt and shall be deemed to have been received:

 

  (i)

at 11.00 am on the third Business Day after posting or at the time recorded by the delivery service;

 

  (ii)

at the time of delivery, if delivered by hand, e-mail or courier; or

 

  (iii)

at the time of transmission in legible form, if delivered by fax.

 

28.4

Whole agreement and remedies

 

  28.4.1

This Agreement contains the whole agreement between the Parties relating to the subject matter of this Agreement at the date of this Agreement to the exclusion of any terms implied by law which may be excluded by contract and supersede any previous written or oral agreement between the Parties in relation to the matters dealt with in this Agreement.

 

  28.4.2

Each Party agrees and acknowledges that:

 

  (i)

in entering into this Agreement, it is not relying on any representation, warranty or undertaking not expressly incorporated into it; and

 

  (ii)

its only right and remedy in relation to any representation, warranty or undertaking made or given in connection with this Agreement shall be for breach of the terms of this Agreement and each of the Parties waives all other rights and remedies (including those in tort or arising under statute) in relation to any such representation, warranty or undertaking.

 

  28.4.3

In this Clause 28.4, “this Agreement” includes all documents entered into pursuant to this Agreement.

 

  28.4.4

Nothing in this Clause 28.4 excludes or limits any liability for fraud.

 

28.5

Legal advice and reasonableness

Each Party to this Agreement confirms it has received independent legal advice relating to all the matters provided for in this Agreement, including the terms of Clause 28.4, and agrees that the provisions of this Agreement (including all documents entered into pursuant to this Agreement) are fair and reasonable.

 

43

28.6

Unlawful fetter

The Company is not bound by any provision of this Agreement to the extent it constitutes an unlawful fetter on any statutory power of the Company.

 

28.7

Conflict with the Articles

In the event of any ambiguity or discrepancy or conflict between the provisions of this Agreement and the Articles, it is intended that the provisions of this Agreement shall prevail (as between the Shareholders) but not so as to amend the Articles and accordingly the Shareholders shall exercise all voting and other rights and powers available to them so as to give effect to the provisions of this Agreement and shall further if necessary procure any required amendment to the Articles (provided that such amendment to the Articles shall not contravene applicable law) or waive any rights or suspend any restrictions or other regulations in the Articles, as the case may be. The Company is not bound by this Clause 28.7.

 

28.8

No partnership

Nothing in this Agreement shall be deemed to constitute a partnership between the Parties hereto or constitute any Party the agent of any other Party for any purpose.

 

28.9

Release etc.

Any liability owing from any Shareholder or the Company under this Agreement may in whole or in part be released, compounded or compromised or time or indulgence given by a Shareholder or the Company in its absolute discretion without in any way prejudicing or affecting its rights against any other Party under the same or a like liability, whether joint and several or otherwise, or the rights of any other Party.

 

28.10

Survival of rights, duties and obligations

 

  28.10.1

Termination of this Agreement for any cause shall not release a Party from any liability which at the time of termination has already accrued to another Party or which thereafter may accrue in respect of any act or omission prior to such termination.

 

  28.10.2

If a Party ceases to be a Party to this Agreement for any cause, such Party shall not be released from any liability which at the time of the cessation has already accrued to another Party or which thereafter may accrue in respect of any act or omission prior to such cessation.

 

28.11

Waiver

No failure of any Shareholder or the Company to exercise, and no delay by it in exercising, any Right shall operate as a waiver of that Right, nor shall any single or partial exercise of any Right preclude any other or further exercise of that Right or the exercise of any other Right. The Rights provided in this Agreement are cumulative and not exclusive of any other Rights (whether provided by law or otherwise). Any express waiver of any breach of this Agreement shall not be deemed to be a waiver of any subsequent breach.

 

28.12

Variation

No amendment to this Agreement shall be effective unless in writing and signed by or on behalf of each of the Parties.

 

44

28.13

No assignment

 

  28.13.1

Except as otherwise expressly provided in this Agreement, none of the Parties may, without the prior written consent of the others, assign, grant any security interest over, hold on trust or otherwise transfer the benefit of the whole or any part of this Agreement.

 

  28.13.2

This Agreement shall be binding on the Parties and their respective successors and assigns.

 

28.14

Further assurance

Each of the Parties shall: (i) from time to time execute such documents and perform such acts and things as any Party may reasonably request from time to time in order to carry out the intended purpose of this Agreement; (ii) vote its Shares so as to give full effect to this Agreement; (iii) cause each Director appointed by it to take all steps necessary to carry out the intended purposes of this Agreement; and (iv) use reasonable endeavours to procure that any necessary third party shall execute such documents and do such acts and things as may reasonably be required in order to carry out the intended purpose of this Agreement.

 

28.15

Invalidity/severance

 

  28.15.1

If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, the provision shall apply with whatever deletion or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the Parties.

 

  28.15.2

To the extent it is not possible to delete or modify the provision, in whole or in part, under Clause 28.15.1, then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 28.15.1, not be affected.

 

28.16

Counterparts

This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any Party may enter into this Agreement by signing any such counterpart.

 

28.17

Costs

Each Party shall bear all costs incurred by it in connection with the preparation, negotiation and execution of this Agreement and the Related Agreements.

 

28.18

Process agents

Appointment of process agents

 

  28.18.1

The Original CPZ Shareholder appoints Law Debenture Corporate Services Limited of 5th Floor, 100 Wood Street, London EC2V 7EX as its agent for the service of process in England in relation to any matter arising out of this Agreement and the Related Agreements, service upon whom shall be deemed completed whether or not forwarded to or received by that Party. Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law.

 

  28.18.2

The Company appoints Law Debenture Corporate Services Limited of 5th Floor, 100 Wood Street, London EC2V 7EX, as its agent for the service of process in England in relation to any matter arising out of this Agreement and the Related Agreements, service upon whom shall be deemed completed whether or not forwarded to or received by that Party. Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law.

 

45

  28.18.3

The Original Melco Shareholder appoints Law Debenture Corporate Services Limited of 5th Floor, 100 Wood Street, London EC2V 7EX, as its agent for the service of process in England in relation to any matter arising out of this Agreement and the Related Agreements, service upon whom shall be deemed completed whether or not forwarded to or received by that Party. Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law.

 

  28.18.4

Change of process agents

Any Party may from time to time appoint a new process agent acceptable to the other Parties (acting reasonably) to receive service of process in England in relation to any matter arising out of this Agreement and the Related Agreements, service upon whom shall be deemed completed whether or not forwarded to or received by that Party.

 

  28.18.5

Change of address of process agents

Each Party shall inform the other Parties, in writing, of any change in the address of its process agent within 28 days.

 

28.19

Grossing-up of indemnity payments, VAT

 

  28.19.1

All sums payable under this Agreement shall be paid free and clear of all deductions, withholdings, set-offs or counterclaims whatsoever save only as may be required by law. If any deductions or withholdings are required by law, the party making the payment shall be obliged to pay to the other party such sum as will after such deduction or withholding has been made leave the other party with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding.

 

  28.19.2

The recipient or expected recipient of a payment under this Agreement shall claim from the appropriate Tax Authority any exemption, rate reduction, refund, credit or similar benefit (including pursuant to any relevant double tax treaty) to which it is entitled in respect of any deduction or withholding in respect of which a payment has been or would otherwise be required to be made pursuant to Clause 28.19.1 and, for such purposes, shall, within any applicable time limits, submit any claims, notices, returns or applications and send a copy thereof to the payer.

 

28.20

Third party rights

A person who is not a Party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of, or enjoy any benefit under, this Agreement except that any person who enters into a Deed of Adherence in accordance with Clause 21.10 may enforce and rely on this Agreement to the same extent as if it were a Party to it.

 

46

In witness of which this Agreement has been duly executed.

 

SIGNED by

on behalf of The Cyprus Phassouri

(Zakaki) Limited:

   }   

/s/ THE CYPRUS PHASSOURI (ZAKAKI) LIMITED

 

SIGNED by

on behalf of MCO Europe Holdings

(NL) B.V.:

   }   

/s/ Stephanie Cheung

Managing director A

   

/s/ Sirian Bruijstens

Managing director B

SIGNED by

on behalf of ICR Cyprus Holdings

Limited:

   }   

/s/ Evan Andrew Winkler

 

   

SIGNED by

on behalf of Melco Resorts &

Entertainment Limited:

   }   

/s/ Stephanie Cheung

Authorised Signatory

   

Schedule 1

Deed of Adherence

(Clause 21.10)

This Deed of Adherence is made on [DATE] by [●], a company incorporated [in [●] /under the laws of [●]] under registered number [●] whose [registered/principal office is at [●]] (the “New Shareholder”).

Recitals:

 

(A)

[●] (the “Transferor”) is proposing to transfer to the New Shareholder [●] ordinary shares of €1 each in the capital of ICR Cyprus Holdings Limited (the “Company”).

 

(B)

This Deed of Adherence is entered into in compliance with Clause 21.10 of a shareholders’ agreement made on [●] 2019 between (1) ICR Cyprus Holdings Limited, (2) The Cyprus Phassouri (Zakaki) Limited, (3) MCO Europe Holdings (NL) B.V., and (4) Melco Resorts & Entertainment Limited, as such agreement has been or may be amended, supplemented or novated from time to time (the “Agreement”).

It is agreed as follows:

 

1.

Capitalised terms used in this Deed of Adherence and otherwise undefined shall have the meanings ascribed to such terms in the Agreement.

 

2.

The New Shareholder confirms that it has been supplied with and has read a copy of the Agreement.

 

3.

The New Shareholder agrees to: (a) assume the benefit of the rights of the Transferor under the Agreement; and (b) observe, perform and be bound by all the obligations and terms of the Agreement capable of applying to the New Shareholder and which are to be performed on or after the date of this Deed, to the intent and effect that the New Shareholder shall be deemed with effect from the date on which the New Shareholder is registered as a member of the Company to be a party to the Agreement (as if named as a party to the Agreement).

 

4.

Notwithstanding the foregoing, the New Shareholder acknowledges that any rights expressly afforded to the Original CPZ Shareholder under this Agreement shall not be capable of transfer or assignment to any CPZ Transferee, except to the extent otherwise expressly provided in the Agreement.

 

5.

This Deed is made for the benefit of: (a) the original Parties to the Agreement; and (b) any other person or persons who after the date of the Agreement (and whether or not prior to or after the date of this Deed) adhere to the Agreement.

 

6.

The address and fax number of the New Shareholder for the purposes of Clause 28.3 of the Agreement are as follows: [insert address and fax numbers].

 

7.

Clauses 28.1 and 28.2 of the Agreement shall apply to this Deed as if set out in full herein.

 

8.

The New Shareholder hereby appoints [●] as its agent for service of all process in any proceedings in respect of the Agreement.

In witness of which this Deed has been signed as a deed on the date stated at the beginning of this Deed.

 

48

SIGNED as a DEED by [●]

acting by [name of director] a

Director in the presence of:

   }   

Witness’s signature

Name

Address

Occupation

 

49

Schedule 2

Shareholder Reserved Matters

(Clause 15)

PART A

The following matters are Shareholder Reserved Matters in accordance with Clause 15:

 

1.

any transaction, arrangement or dealing by any Group Company with any member of a Shareholder’s Group other than those which:

 

  (i)

are included in the Development Budget;

 

  (ii)

are contemplated in this Agreement, the ICR Licence, any Related Agreements or agreements related thereto;

 

  (iii)

have otherwise been approved by the Original Melco Shareholder and the Original CPZ Shareholder;

 

  (iv)

are solely between two or more Group Companies (and not involving any member of a Shareholder’s Group outside of the Group Companies); or

 

  (v)

where such transaction, arrangement or dealing does not fall within paragraphs (i), (ii), (iii) or (iv) above, the cumulative aggregate value of all such transactions, arrangements or dealings which do not fall within paragraphs (i), (ii), (iii) or (iv) do not exceed [***] in any Financial Year, excluding any transactions to which the Original CPZ Shareholder has consented or subsequently ratified (such consent not to be unreasonably withheld, conditioned or delayed), and, for the avoidance of doubt, any documented amendment to any item within paragraph (ii) which has the effect of increasing payments to the relevant affiliated party shall be subject to the [***] threshold in any Financial Year;

 

2.

any amendment to the Articles;

 

3.

the creation or issue of any new Shares or of any other security in the capital of the Company or any shares or other security in the capital of any other Group Company other than in accordance with the terms of this Agreement or where the creation or issue of any Shares or other security in the capital of any Group Company is to the sole benefit of another Group Company;

 

4.

the appointment of any non-“Big Four” accounting firm as the statutory auditor of any Group Company (such consent not to be unreasonably withheld, conditioned or delayed);

 

5.

any sale or acquisition or merger of any Group Company or part of them (including by way of any increase in the share capital of the Company) which would have the effect of fundamentally changing the nature or scope of the core Business of the Group Companies; and

 

6.

any merger of any Group Companies or part of them (including by way of any increase in the share capital of the Company) which results in the Original Melco Shareholder (solely or together with its Associated Companies) no longer being the entity holding the largest number of Shares.

 

50

PART B

The following matters are Modified Shareholder Reserved Matters in accordance with Clause 15:

 

1.

any transaction, arrangement or dealing by any Group Company with any member of a Shareholder’s Group other than those which:

 

  (i)

are included in the Development Budget;

 

  (ii)

are contemplated in this Agreement, the ICR Licence, any Related Agreements or agreements related thereto;

 

  (iii)

have otherwise been approved by the Original Melco Shareholder and the CPZ Shareholder;

 

  (iv)

are solely between two or more Group Companies (and not involving any member of a Shareholder’s Group outside of the Group Companies); or

 

  (v)

where such transaction, arrangement or dealing does not fall within paragraph (i), (ii), (iii) or (iv) above, the cumulative aggregate value of all such transactions, arrangements or dealings which do not fall within paragraph (i), (ii), (iii) or (iv) above do not exceed [***] in any Financial Year, excluding any transactions to which the CPZ Shareholder has consented or subsequently ratified (such consent not to be unreasonably withheld, conditioned or delayed), and, for the avoidance of doubt, any documented amendment to any item within paragraph (ii) which has the effect of increasing payments to the relevant affiliated party shall be subject to the [***] threshold in any Financial Year;

 

2.

any amendment to the Articles;

 

3.

the creation or issue of any new Shares or of any other security in the capital of the Company or any shares or other security in the capital of any other Group Company other than in accordance with the terms of this Agreement or where the creation or issue of any Shares or other security in the capital of any Group Company is to the sole benefit of another Group Company;

 

51

Schedule 3

[***]

 

52

Schedule 4

Melco Competitors and Unacceptable Business Partners

 

(a)

[***];

 

(b)

[***];

 

(c)

Any other person or entity holding (or at the relevant time bidding or applying to hold) a gaming licence or concession/subconcession to operate games of fortune or chance in a casino in:

 

  (i)

Macau;

 

  (ii)

The Philippines;

 

  (iii)

Singapore;

 

  (iv)

Japan;

 

  (v)

The Republic of Korea;

 

  (vi)

Vietnam;

 

  (vii)

Cambodia;

 

  (viii)

Russia;

 

  (ix)

The United States;

 

  (x)

Northern Cyprus;

 

  (xi)

Greece;

 

  (xii)

The United Kingdom; or

 

  (xiii)

any other EU state;

 

(d)

Any person or entity (including any individual and any direct family member of any such individual) holding a direct or indirect interest in any person or entity specified in paragraphs (a)-(c) above or having a right to appoint a director on the board of any such entity;

 

(e)

Any subsidiary or affiliate of any person or entity specified in paragraphs (a)-(d) above; and

 

(f)

Any trust, fund or other entity controlled by any person or entity specified in (a)-(d) above.

 

53

Schedule 5

[***]

 

54

Schedule 6

Company Funding

PART A: FUNDING OF DEVELOPMENT BUDGET

 

1.

Funding Plan – Initial Development Budget

As at the date of this Agreement, the funding plan for the Initial Development Budget consists of the following:

 

TYPE OF FUNDING

   

SOURCE

   

AMOUNT

   

OTHER COMMENTS

Basic Shareholder Equity (“Basic Shareholder Equity”)    Shareholders in proportion to their shareholdings in the Company    [***]    Contributed in accordance with the terms of the Share Subscription Agreement.
[***]    [***]    [***]    [***]
[***]    [***]    [***]   

[***]

[***]    [***]    [***]   

[***]

[***]    [***]    [***]   

[***]

TOTAL TO BE FUNDED    €650,000,000   

 

55

2. [***]

 

2.1

The Original CPZ Shareholder and the Original Melco Shareholder shall use all commercially reasonable endeavours to source from the [***] (or such other bank or financial institution acceptable to the Shareholders):

 

  (a)

a [***] on terms broadly consistent with and reflecting the commercial conditions and outlook and risk profile of the Project at the relevant time; and

 

  (b)

a [***].

 

2.2

If, at the relevant time such funding is required as reasonably determined by the Board (having regard to the development schedule for the Project and any other available funding), there is any shortfall in the amount of the available [***], the Parties shall discuss in good faith the funding plan for the Project to seek an appropriate solution. If no appropriate solution can be agreed between the Parties, the Original Melco Shareholder shall fund the [***] itself by way of shareholder loans on the Acceptable Melco Financing Terms (as defined below).

 

2.3

If, at the relevant time such funding is required as reasonably determined by the Board (having regard to the development schedule for the Project and any other available funding), there is any shortfall in the amount of the available [***], then (subject to paragraph 2.2 above) the Original Melco Shareholder shall fund the [***] itself by way of shareholder loans on the Acceptable Melco Financing Terms (as defined below).

 

2.4

Notwithstanding the availability of [***] as contemplated by paragraph 2.1(b) above, the Original Melco Shareholder may (but is not obliged to) elect in writing to provide such [***] on terms which are equal to or more favourable to the Company than the relevant [***] available from third party sources, and in any event consistent with Acceptable Melco Financing Terms (as defined below).

 

2.5

For the avoidance of doubt, the Shareholders agree that, other than as agreed by the Shareholders, the Original CPZ Shareholder shall not be obliged to fund any funding shortfall amount prior to the Opening Date other than its pro rata share of Basic Shareholder Equity in accordance with the terms of the Share Subscription Agreement.

 

2.6

Unless otherwise agreed in writing by the Shareholders, total equity will be capped at [***] until the Opening Date.

 

2.7

Basic Shareholder Equity must be fully funded (including full payment in respect of partly paid shares) prior to:

 

  2.7.1

the effective date of any pledge or charge on the Specified Property (as such term is defined in the Share Subscription Agreement); and

 

  2.7.2

any drawdown of any [***].

 

3.

[***]

 

3.1

The Original Melco Shareholder, with the assistance of the Original CPZ Shareholder, shall use all commercially reasonable endeavours to source a term loan or notes from certain financial institutions or investors which is subordinated to [***] on Commercially Reasonable Pricing (as defined below) [***] in an amount up to [***].

 

56

3.2

If, at the relevant time such funding is required as reasonably determined by the Board (having regard to the development schedule for the Project and any other available funding), there is any shortfall in the amount of the available High Yield Debt (the “High Yield Debt Shortfall”), then (subject to paragraph 2 above) the Original Melco Shareholder agrees that it shall fund such High Yield Debt Shortfall on the Acceptable Melco Financing Terms (as defined below).

 

3.3

Notwithstanding the availability of [***] as contemplated by paragraph 3.1 above, the Original Melco Shareholder may (but is not obliged to) elect to provide such [***] on terms which are (in the aggregate and taken as a whole) the same as or more favourable to the Company than the relevant [***] available from third party sources (provided that, if such third party sources of available [***] required the pre-funding of interest, the Original Melco Shareholder shall use all reasonable efforts to provide an alternative structure for such [***] on terms which do not require pre-funding of interest (for example only, by accepting a higher interest rate), subject to such [***] being otherwise consistent with Acceptable Melco Financing Terms (as defined below).

 

4.

Funding of Development Budget Increase

 

4.1

If there is any increase in the Initial Development Budget which has been approved in accordance with Clause 5.3 (Development Budget) (each a “Development Budget Increase”), then the Shareholders will actively co-operate with the Company and use commercially reasonable endeavours to source Third Party Finance for that Development Budget Increase on the best terms reasonably available on the open market.

 

4.2

If, at the relevant time such funding is required as determined by the Board, Third Party Finance is not available from third parties on Commercially Reasonable Pricing, then (subject to paragraph 2.2 above) the Original Melco Shareholder agrees that it shall fund such Development Budget Increase on the Acceptable Melco Financing Terms (as defined below).

 

4.3

Notwithstanding the availability of Third Party Finance as contemplated by paragraph 4.1 above, the Original Melco Shareholder may (but is not obliged to) elect to provide a loan in the amount of the relevant Development Budget Increase (or part thereof) on terms which are (in the aggregate and taken as a whole) the same as or more favourable to the Company than the relevant Third Party Finance and otherwise consistent with Acceptable Melco Financing Terms (as defined below).

 

5.

Definitions used in this Part A of Schedule 6 (Company Funding)

In this Part A:

 

  (a)

“Acceptable Melco Financing Terms” means all of the following (or such other terms as agreed in writing by the Shareholders):

 

  (i)

the [***] must not provide for an interest rate which would exceed either:

 

  (A)

the maximum interest rate which would constitute Commercially Reasonable Pricing (as defined below); or

 

  (B)

[***]% per annum;

 

57

  (ii)

the Original Melco Shareholder may apply a commitment fee of up to [***]% on any unutilised amounts of the [***] (calculated from the date the commitment commences until the date of drawdown);

 

  (iii)

the [***] shall be capable of refinancing where the Company is able to obtain [***] financing from the external market at an overall funding cost no higher than that applicable to the relevant loans from the Original Melco Shareholder;

 

  (iv)

the loans shall be amortising starting [***] following the Opening Date at [***]% of the total initial loan amount per quarter for the first four quarters, then [***]% per quarter thereafter; and

 

  (v)

where any transaction with a third party for [***] is structured and generally viable (other than with respect to the advisor-recommended pricing), the terms of any funding provided by the Original Melco Shareholder in lieu of such third party [***] shall, subject to paragraphs (i) and (ii) above, be at least as favourable to the Original Melco Shareholder (as funder) as such third party debt.

 

  (b)

“Commercially Reasonable Pricing” means a blended funding cost (comprising interest and fees) across [***] which does not exceed [***]% per annum.

 

58

PART B: ADDITIONAL FUNDING POST OPENING OF THE ICR

 

1

Post opening of the ICR – additional Shareholder finance

 

1.1

The Shareholders agree that, save as provided in Part A of Schedule 6, the Company shall be self-financing and no Shareholder shall be required to contribute further capital or debt financing to the Company.

 

1.2

If at any time after the Opening Date, the Board determines that additional finance is required for the Project but is not available from third parties on terms which are reasonably acceptable to the Company (either in its entirety or for the full amount required) (with a target gearing of [***] debt to equity), then the Company may approach the Shareholders for assistance in obtaining additional finance, and the Shareholders will actively co-operate with the Company in sourcing additional finance from third parties.

 

1.3

In the event the Board determines that required additional finance is not available after the Company has complied with paragraph 1.2 above, then the Company may request (but may not require) that the Shareholders provide additional funding (on identical terms for each Shareholder), by giving written notice (an “Additional Finance Request”) to each of the Shareholders which specifies the following:

 

  1.3.1

the amount to be contributed by each Shareholder, which shall be pro rata to each Shareholder’s then holding of Shares (the “Additional Finance Amount”);

 

  1.3.2

the date on which the Additional Finance Amount shall be paid, which shall be no earlier than 20 Business Days from the date of the Additional Finance Request (the “Additional Finance Date”); and

 

  1.3.3

details of the number of fully paid Shares proposed to be issued and the per Share subscription price, which shall be equal to the Fair Market Value determined in accordance with Clause 22.

 

1.4

Each Shareholder shall have the right to participate in such funding in proportion to the respective percentage of Shares held by each of them as at the close of business on the date prior to the date on which the Additional Finance Request was received (the “Relevant Date”) and on the same terms as each other Shareholder.

 

1.5

Each Shareholder shall indicate their willingness to participate no later than 20 Business Days following the Additional Finance Request, failing which any Shareholder which has not responded shall be deemed to not wish to participate in the provision of additional finance.

 

1.6

Shareholders who wish to participate in such additional funding shall be entitled but not obliged to indicate by notice in writing to the Company that they would accept, on the same terms, some or all of the allocation of the new Shares which have not been accepted by other Shareholders (the aggregate balance of such new Shares being the “Excess Additional Shares”). Any Excess Additional Shares shall be allotted pro rata to the aggregate number of Shares held on the Relevant Date by the Shareholders accepting the Excess Additional Shares (provided that no such Shareholder shall be allotted more than the maximum number of Excess Additional Shares such Shareholder has indicated it is willing to accept). If any Excess Additional Shares remain unallocated following compliance with this paragraph 1.6, the Company shall issue no additional Shares pursuant to this Part B of Schedule 6.

 

1.7

Notwithstanding the foregoing, to the extent that each Shareholder which has agreed to provide the Additional Finance Amount agrees (or in the case where there is only a single Shareholder providing the Additional Finance Amount, that single Shareholder), such Shareholders or Shareholder may by written notice to the Company elect to provide the Additional Finance Amount by way of a shareholder loan (which election shall oblige the Company to obtain the Additional Finance Amount by way of a shareholder loan as opposed to an issuance of Shares) provided that:

 

59

  1.7.1

such loan does not confer any voting rights (present, future or contingent);

 

  1.7.2

the terms of such shareholder loan are no less favourable to the Company than those which could be obtained through arm’s length negotiations with third party lenders; and

 

  1.7.3

no prepayment fees or similar costs are charged or included.

 

1.8

On the Additional Finance Date, the Shareholders shall pay the Additional Finance Amount (as it may be adjusted pursuant to paragraph 1.6 above) into the Company’s bank account and the Company shall (as the case may be):

 

  1.8.1

in the case of subscriptions for Shares, issue and allot such amount of fully paid Shares as is determined by the Board in accordance with paragraph 1.6 above to each Shareholder and provide the Shareholders with duly executed certificates for the relevant number of Shares and register the same in the share register of the Company; or

 

  1.8.2

in the case of shareholder loans, enter into loan agreements or issue loan notes to each Shareholder (as such Shareholder shall direct) (or any Associated Company of a Shareholder as such Shareholder shall direct) in respect of the Additional Finance Amount.

 

60

EX-4.32

Exhibit 4.32

Contract Register No. 201908052

NetDoc ID 3465-1470-4397        

 

  CLAYTON UTZ

 

Amendment deed - Share sale

agreement

CPH Crown Holdings Pty Limited ACN 603 296 804

Seller

Melco Resorts & Entertainment Limited

Buyer

Clayton Utz

Lawyers

Level 15 1 Bligh Street

Sydney NSW 2000

GPO Box 9806

Sydney NSW 2001

 

Tel

    +61 2 9353 4000

Fax

    +61 2 8220 6700

www.claytonutz.com

Our reference 13515/20368/80206482

  CLAYTON UTZ

 

Contents

 

1.

   

Definitions and interpretation

   

1

  

1.1

   

Definitions

   

1

  

1.2

   

Interpretations

   

1

2.

   

Amendment

   

1

3.

   

Validity, rights and obligations

   

1

  

3.1

   

Affect

   

1

  

3.2

   

Confirmation

   

2

  

3.3

   

Acknowledgement

   

2

4.

   

General

   

2

  

4.1

   

Operating provisions

   

2

  

4.2

   

Counterparts

   

2

  

4.3

   

Costs

   

2

  

4.4

   

Further Acts

   

2

  

4.5

   

Severance

   

2

  

4.6

   

No representation or reliance

   

2

Schedule 1 Amended Share Sale Agreement

   

5

 

 

Amendment deed - Share sale agreement

  CLAYTON UTZ

 

Amendment deed - Share sale agreement

 

 

 

Date

28 August 2019

 

Parties

CPH Crown Holdings Pty Limited ACN 603 296 804 of ‘Liberty Place’, Level 39, 161 Castlereagh Street Sydney NSW 2000 (Seller)

 

    

Melco Resorts & Entertainment Limited of c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands (Buyer)

Background

 

A.

The Buyer and the Seller wish to amend the Share Sale Agreement to incorporate amendments to the terms and conditions of Second Tranche Completion.

 

B.

The Buyer and the Seller have agreed to amend the Share Sale Agreement on the terms and conditions set out in this deed.

Operative provisions

 

 

 

1.

Definitions and interpretation

 

1.1

Definitions

In this deed:

Amended Share Sale Agreement means the amended version of the Share Sale Agreement set out in Schedule 1.

Share Sale Agreement means the share sale agreement between the Buyer and the Seller dated 30 May 2019.

 

1.2

Interpretations

Capitalised terms not otherwise defined in this deed have the meaning given to them in the Amended Share Sale Agreement.

 

 

 

2.

Amendment

The parties agree that, on and from the date of this deed, the Share Sale Agreement is amended in the manner set out in Schedule 1.

 

 

 

3.

Validity, rights and obligations

 

3.1

Affect

 

  (a)

The amendment of the Share Sale Agreement does not affect its validity or enforceability as amended.

 

  (b)

Except as provided in the Amended Share Sale Agreement, nothing in this deed:

 

  (i)

prejudices or adversely affects any right, power, authority, discretion or remedy arising under the Share Sale Agreement before the date of this deed; or

 

  (ii)

discharges, releases or otherwise affects any other liability or obligation arising under the Share Sale Agreement before the date of this deed.

 

  (c)

Except as expressly amended by this deed, no changes to the Share Sale Agreement are to be inferred or implied, and in all other respects the Share Sale Agreement remains in full force and effect.

 

 

Amendment deed - Share sale agreement

  CLAYTON UTZ

 

3.2

Confirmation

Each party is bound by the Share Sale Agreement as amended by the Amended Share Sale Agreement.

 

3.3

Acknowledgement

Each party acknowledges that this deed is issued in accordance with the Share Sale Agreement.

 

 

 

4.

General

 

4.1

Operating provisions

Clauses 1.2 (Interpretation), 7 (Confidentiality), 9 (Notices), 10 (Entire agreement) and 12 (Governing law and jurisdiction) of the Amended Share Sale Agreement apply to this deed as if set out in full in this deed.

 

4.2

Counterparts

This deed may be executed in any number of counterparts and by the parties on separate counterparts. Each counterpart constitutes an original of this deed, and all together constitute one deed.

 

4.3

Costs

Except as otherwise provided in this deed, each party must pay its own costs and expenses in connection with negotiating, preparing, executing and performing this deed and the Amended Share Sale Agreement.

 

4.4

Further Acts

Each party must promptly do all further acts and execute and deliver all further documents (in form and content reasonably satisfactory to that party) required by law or reasonably requested by another party to give effect to this deed and the Amended Share Sale Agreement.

 

4.5

Severance

If at any time any provision of this deed is held or found to be void, invalid or otherwise unenforceable (whether in respect of a particular party or generally), it will be deemed to be severed to the extent that it is void or to the extent of violability, invalidity or unenforceability, but the remainder of that provision will remain in full force and effect.

 

4.6

No representation or reliance

Each party acknowledges that no party (nor any person acting on a party’s behalf) has made any representation or other inducement to it to enter into this deed, except for representations or inducements expressly set out in this deed.

 

 

Amendment deed - Share sale agreement

  CLAYTON UTZ

 

Executed as a deed

 

Executed by CPH Crown Holdings Pty Limited

ACN 603 296 804 in accordance with section 127

of the Corporations Act 2001 (Cth):

     

 

/s/ Michael Johnston

     

 

/s/ Catherine Davies

Signature of director

   

Signature of company secretary/director

 

Michael Johnston

   

 

Catherine Davies

Full name of director

     

Full name of company secretary/director

 

 

Amendment deed - Share sale agreement

  CLAYTON UTZ

 

Signed, sealed and delivered for and on behalf

of Melco Resorts & Entertainment Limited by

its authorised signatory in the presence of:

         

 

/s/ CHAU KAR HIM ALBERT

     

 

/s/ Stephanie Cheung

Signature of witness

     

Signature of authorised signatory

 

CHAU KAR HIM ALBERT

     

 

Stephanie Cheung

Full name of witness

     

Full name of authorised signatory

     LOGO

 

 

Amendment deed - Share sale agreement

  CLAYTON UTZ

 

Schedule 1 Amended Share Sale Agreement

 

 

Amendment deed - Share sale agreement

  CLAYTON UTZ

 

Share sale agreement

CPH Crown Holdings Pty Limited ACN 603 296 804

Seller

Melco Resorts & Entertainment Limited

Buyer

Clayton Utz

Level 15 1 Bligh Street

Sydney NSW 2000

GPO Box 9806

Sydney NSW 2001

 

Tel

    +61 2 9353 4000

Fax

    +61 2 8220 6700

www.claytonutz.com

Contents

 

1.

   

Definitions and interpretation

      32  
  

1.1

    Definitions      32  
  

1.2

    General rules of interpretation      64  
  

1.3

    Relationship between the parties      75  

2.

   

Sale and purchase of Shares

      75  
  

2.1

    Sale and Purchase of First Tranche Shares      75  
  

2.2

    Sale and Purchase of Second Tranche Shares      75  

3.

   

Period before completion

      85  

4.

   

Completion

      85  
  

4.1

    First Tranche Completion      85  
  

4.2

    Second Tranche Completion      97  
  

4.3

    Buyer liable for its obligations and obligations of Nominee(s)      129  

5.

   

Dividend entitlements

      129  

6.

   

Warranties

      129  
  

6.1

    Seller Warranties      129  
  

6.2

    Reliance      139  
  

6.3

    Adjustment      1310  
  

6.4

    Buyer Warranties      1310  

7.

   

Confidentiality

      1310  
  

7.1

    No announcement or other disclosure of transaction      1310  
  

7.2

    Permitted disclosure      1310  
  

7.3

    ASX and other disclosure      1410  

8.

   

GST

      1411  
  

8.1

    Interpretation      1411  
  

8.2

    Reimbursements and similar payments      1411  
  

8.3

    GST payable      1411  
  

8.4

    Variation to GST payable      1411  

9.

   

Notices

      1511  
  

9.1

    How notice to be given      1511  
  

9.2

    When notice taken to be received      1612  
  

9.3

    Notices sent by more than one method of communication      1713  

10.

   

Entire agreement

      1714  

11.

   

General

      1714  
  

11.1

    Amendments      1714  
  

11.2

    Assignment      1714  
  

11.3

    Consents      1714  
  

11.4

    Counterparts      1714  
  

11.5

    Costs      1714  
  

11.6

    Further acts and documents      1714  
  

11.7

    Stamp duties      1714  
  

11.8

    Operation of indemnities      1815  
  

11.9

    Waivers      1815  

12.

   

Governing law and jurisdiction

      1815  
  

12.1

   

Governing law and jurisdiction

      1815  

Schedule 1 Seller Warranties

      2017  

Schedule 2 - Buyer Warranties

      2219  

ANNEXURE A — Nominee Deed Poll

      2724  

1.

   

Definitions and interpretation

      3  
  

1.1

    Definitions      3  
  

1.2

    General rules of interpretation      6  
  

1.3

    Relationship between the parties      7  

2.

   

Sale and purchase of Shares

      7  
  

2.1

    Sale and Purchase of First Tranche Shares      7  
  

2.2

    Sale and Purchase of Second Tranche Shares      7  

3.

   

Period before completion

      8  

4.

   

Completion

      8  
  

4.1

    First Tranche Completion      8  
  

4.2

    Second Tranche Completion      9  
  

4.3

    Buyer liable for its obligations and obligations of Nominee(s)      12  

5.

   

Dividend entitlements

      12  

6.

   

Warranties

      12  
  

6.1

    Seller Warranties      12  
  

6.2

    Reliance      13  
  

6.3

    Adjustment      13  
  

6.4

    Buyer Warranties      13  

7.

   

Confidentiality

      13  
  

7.1

    No announcement or other disclosure of transaction      13  
  

7.2

    Permitted disclosure      13  
  

7.3

    ASX and other disclosure      14  

8.

   

GST

      14  
  

8.1

    Interpretation      14  
  

8.2

    Reimbursements and similar payments      14  
  

8.3

    GST payable      14  
  

8.4

    Variation to GST payable      14  

9.

   

Notices

      15  
  

9.1

    How notice to be given      15  
  

9.2

    When notice taken to be received      16  
  

9.3

    Notices sent by more than one method of communication      17  

10.

   

Entire agreement

      17  

11.

   

General

      17  
  

11.1

    Amendments      17  
  

11.2

    Assignment      17  
  

11.3

    Consents      17  
  

11.4

    Counterparts      17  
  

11.5

    Costs      17  
  

11.6

    Further acts and documents      17  
  

11.7

    Stamp duties      17  
  

11.8

    Operation of indemnities      18  
  

11.9

    Waivers      18  

12.

   

Governing law and jurisdiction

      18  
  

12.1

   

Governing law and jurisdiction

      18  

Schedule 1 Seller Warranties

      20  

Schedule 2 - Buyer Warranties

      22  

ANNEXURE A — Nominee Deed Poll

      27  

13.

   

Definitions and interpretation

      27  

  

13.1

    Definitions      27  
  

13.2

    General rules of interpretation      27  

14.

   

Undertaking

      27  

15.

   

Acknowledgements

      27  

16.

   

Warranties

      28  
  

16.1

    Nominee Warranties      28  

17.

   

Confidentiality

      28  

18.

   

Notices

      28  
  

18.1

    How notice to be given      28  

19.

   

General

      29  
  

19.1

    Deed Poll      29  
  

19.2

    Amendments      29  
  

19.3

    Assignment      29  
  

19.4

    Consents      29  
  

19.5

    Further acts and documents      29  

20.

   

Governing law and jurisdiction

      29  
  

20.1

    Governing law and jurisdiction      29  

Schedule 3 — Nominee Warranties

      32  

Share sale agreement

 

 

 

Date

 

Parties

CPH Crown Holdings Pty Limited ACN 603 296 804 of ‘Liberty Place’, Level 39, 161 Castlereagh Street Sydney NSW 2000 (Seller)

 

  

Melco Resorts & Entertainment Limited of c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands (Buyer)

Background

 

A.

The Seller owns the Shares, being 135,350,000 ordinary shares in the capital of the Company.

 

B.

The Seller wishes to sell the Shares and the Buyer (or its Nominee) wishes to buy the Shares on the terms and conditions of this agreement.

Operative provisions

 

 

 

1.

Definitions and interpretation

 

1.1

Definitions

In this agreement:

Adjustment means the amount calculated in accordance with the following formula:

Adjustment = Second Tranche Shares × (-DPS + TV)

For clarity the Adjustment may be a negative or positive number.

Affiliate means, in relation to a person:

 

  (a)

an Associate of that person;

 

  (b)

an entity (such as a natural person, body corporate, partnership or the trustee of a trust) that person Controls;

 

  (c)

an entity (such as a natural person, body corporate, partnership or the trustee of a trust) that Controls that person; and

 

  (d)

an entity (such as a natural person, body corporate, partnership or the trustee of a trust) that is controlled by an entity that Controls that person.

ASIC means the Australian Securities and Investments Commission.

Associate has the meaning given in the Corporations Act.

ASX means the Australian Securities Exchange or ASX Limited ACN 008 624 691, as the context requires.

Business Day means a day that is not a Saturday, Sunday or public holiday and on which banks are open for business generally in each of New South Wales, Australia, the People’s Republic of China and the Hong Kong and Macau Special Administrative Regions of the People’s Republic of China.

Buyer Warranties means the warranties set out in Schedule 2.

Commissioner means the Honourable Patricia Bergin SC or any other Commissioner appointed to conduct the ILGA Inquiry.

Company means Crown Resorts Limited ACN 125 709 953.

Condition means each condition set out in clause 4.2(a).

Control has the meaning given in section 50AA of the Corporations Act.

Corporations Act means the Corporations Act 2001 (Cth).

DPS means an amount equal to the dividends per Second Tranche Share paid to the Seller between the period commencing on date of the First Tranche Completion and ending on the date of the Second Tranche Completion.

Encumbrance means a mortgage, charge, pledge, lien, encumbrance, security interest, title retention, preferential right, trust arrangement, contractual right of set-off, or any other security agreement or arrangement in favour of any person, whether registered or unregistered, including any Security Interest.

Excluded Share has the meaning given in clause 1.3(a).

First Tranche Completion means the completion of the sale and purchase of the First Tranche Shares in accordance with clause 4.1.

First Tranche Completion Date has the meaning given in clause 4.1(a).

First Tranche Defaulting Party has the meaning given in clause 4.1(f).

First Tranche Nominee has the meaning given in clause 4.1(b).

First Tranche Purchase Price means $879,775,000.

First Tranche Shares means 67,675,000 Shares.

GST has the meaning given in the GST Act.

GST Act means the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

Indemnified Losses means, in relation to any fact, matter or circumstance, all losses, costs, charges, damages, expenses, penalties and other liabilities arising out of or in connection with that fact, matter or circumstance including all legal and other professional expenses on a solicitor-client basis incurred in connection with investigating, disputing, defending or settling any claim, action, demand or proceeding relating to that fact, matter or circumstance (including any claim, action, demand or proceeding based on the terms of this agreement).

ILGA means the Independent Liquor and Gaming Authority constituted under the Gaming and Liquor Administration Act 2007 (NSW).

ILGA Inquiry means the inquiry announced by ILGA on 8 August 2019.

Nominee means any one or more Related Bodies Corporate of the Buyer, who is nominated by the Buyer as the First Tranche Nominee or the Second Tranche Nominee.

Nominee Deed Poll means the deed poll to be entered into by a Nominee nominated by the Buyer under this agreement in the form set out in Annexure A.

Non First Tranche Defaulting Party has the meaning given in clause 4.1(f).

Non Second Tranche Defaulting Party has the meaning given in clause 4.2(j)4.2(f).

PPSA means the Personal Property Securities Act 2009 (Cth).

Recipient has the meaning given in clause 8.3.

Regulatory Approval Date means the date on which the last of the conditions set out in clauses 4.2(a)(i) and 4.2(a)(ii) are satisfied or waived.

Regulatory Authority means:

 

  (a)

any government or local authority and any department, minister or agency of any government; and

 

  (b)

any other authority, agency, commission or similar entity having powers or jurisdiction under any law or regulation or the listing rules of any recognised stock or securities exchange.

Related Body Corporate has the meaning given to it in the Corporations Act.

Revised Date means a date notified in writing by the Buyer to the Seller, such date must:

 

  (a)

be at least 2 Business Days after the date of the notice given by the Buyer; and

 

  (b)

occur in the period commencing on the Regulatory Approval Date and ending on the date that is 60 Business Days after that date.

Security Interest has the meaning given in section 12 of the PPSA.

Second Tranche Completion means the completion of the sale and purchase of the Second Tranche Shares in accordance with clause 4.2.

Second Tranche Completion Date has the meaning given in clause 4.2(e)4.2(a).

Second Tranche Defaulting Party has the meaning given in clause 4.2(j)4.2(f) .

Second Tranche Nominee has the meaning given in clause 4.2(f)4.2(b).

Second Tranche Purchase Price means $879,775,000 plus the Adjustment.

Second Tranche Shares means 67,675,000 Shares.

Seller Warranties means the warranties set out in Schedule 1.

Shares means the 135,350,000 ordinary shares in the capital of the Company (each of which is a Share).

Sunset Date means:

 

  (a)

31 May 2020; or

 

  (b)

30 November 2020 if either party gives a notice in writing to the other party prior to 31 May 2020 electing to extend the Sunset Date to 30 November 2020.

Supplier has the meaning given in clause 8.3.

TV means an amount determined in accordance with the following formula:

 

   

TV

  

=

  

(

  

0.05×12

365

  

)

  

× P

  

Where P is the period (in days) from 30 September 2019 (but excluding

30 September 2019) until the date of the Second Tranche Completion.

VCGLR means the Victorian Commission for Gambling and Liquor Regulation established under Part 2 of the Victorian Commission for Gambling and Liquor Regulation Act 2011 (Vic).

WA Commission means the Gaming and Wagering Commission established under the Gaming and Wagering Commission Act 1987 (WA).

Warranties means the Seller Warranties and the Buyer Warranties.

 

1.2

General rules of interpretation

In this agreement headings are for convenience only and do not affect interpretation and, unless the contrary intention appears:

 

  (a)

a word importing the singular includes the plural and vice versa, and a word of any gender includes the corresponding words of any other gender;

 

  (b)

the word including or any other form of that word is not a word of limitation;

 

  (c)

if a word or phrase is given a defined meaning, any other part of speech or grammatical form of that word or phrase has a corresponding meaning;

 

  (d)

a reference to a person includes an individual, the estate of an individual, a corporation, a Regulatory Authority, an incorporated or unincorporated association or parties in a joint venture, a partnership and a trust;

  (e)

a reference to a party includes that party’s executors, administrators, successors and permitted assigns, including persons taking by way of novation and, in the case of a trustee, includes any substituted or additional trustee;

 

  (f)

a reference to a document or a provision of a document is to that document or provision as varied, novated, ratified or replaced from time to time;

 

  (g)

a reference to this agreement is to this agreement as varied, novated, ratified or replaced from time to time;

 

  (h)

a reference to an agency or body; if that agency or body ceases to exist or is reconstituted, renamed or replaced or has its powers or function removed (obsolete body), means the agency or body which performs most closely the functions of the obsolete body;

 

  (i)

a reference to a party, clause, schedule, exhibit, attachment or annexure is a reference to a party, clause, schedule, exhibit, attachment or annexure to or of this agreement, and a reference to this agreement includes all schedules, exhibits, attachments and annexures to it;

 

  (j)

a reference to a statute includes any regulations or other instruments made under it (delegated legislation) and a reference to a statute or delegated legislation or a provision of either includes consolidations, amendments, re-enactments and replacements;

 

  (k)

a reference to $ or dollar is to Australian currency; and

 

  (l)

this agreement must not be construed adversely to a party just because that party prepared it or caused it to be prepared.

 

1.3

Relationship between the parties

 

  (a)

For the avoidance of doubt, there is no agreement, arrangement or understanding between the parties in relation to any share in the capital of the Company held by the Seller or any of its Affiliates that is not a Share (Excluded Share) (whether with respect to the voting or disposal of any Excluded Share, or otherwise).

 

  (b)

Without limiting clause 1.3(a), nothing in this agreement:

 

  (i)

gives the Buyer or its Nominee any right or interest of whatsoever nature in any Excluded Share;

 

  (ii)

in any way, or to any extent, restricts the ability of the Seller or any of its Affiliates to deal in, dispose of or exercise rights attaching to any Excluded Share.

 

 

 

2.

Sale and purchase of Shares

 

2.1

Sale and Purchase of First Tranche Shares

The Seller must sell, and the Buyer must buy (or procure that its Nominee buy), the First Tranche Shares for the First Tranche Purchase Price free from all Encumbrances and together with all rights attaching or accruing to the First Tranche Shares after the date of this agreement on the terms and conditions of this agreement. Completion of the sale and purchase of the First Tranche Shares will take place on the First Tranche Completion Date.

 

2.2

Sale and Purchase of Second Tranche Shares

The Seller must sell, and the Buyer must buy (or procure that its Nominee buy), the Second Tranche Shares for the Second Tranche Purchase Price free from all Encumbrances and together with all rights attaching or accruing to the Second Tranche Shares after the date of this agreement on the terms and conditions of this agreement. Completion of the sale and purchase of the Second Tranche Shares will take place on the Second Tranche Completion Date.

 

 

 

3.

Period before completion

From the date of this agreement until such time as Second Tranche Completion has occurred, the Seller must not dispose of or create any Encumbrance over any of the Shares (or any interest in any of them).

 

 

 

4.

Completion

 

4.1

First Tranche Completion

 

  (a)

First Tranche Completion must take place on the date that is 5 Business Days after the date of this agreement (which is currently expected to be 6 June 2019) (First Tranche Completion Date) at the time and place agreed by the parties in writing or at any other place, date or time as the Seller and the Buyer agree in writing.

 

  (b)

If the First Tranche Shares are to be purchased by a Nominee of the Buyer (First Tranche Nominee), the Buyer must, at least 2 Business Days before First Tranche Completion:

 

  (i)

give the Seller written notice specifying the name and the address of that Nominee; and

 

  (ii)

give, or procure that the First Tranche Nominee give, the Seller the Nominee Deed Poll duly executed by the First Tranche Nominee under which the First Tranche Nominee agrees to be bound by each of the Buyer’s obligations in relation to the First Tranche Shares under this agreement.

 

  (c)

At First Tranche Completion the Seller must deliver to the Buyer or the First Tranche Nominee (as the case may be):

 

  (i)

completed transfers of the First Tranche Shares in favour of the Buyer or the First Tranche Nominee as transferee duly executed by the registered holder as transferor including the Seller’s securityholder reference number(s) in respect of all of the First Tranche Shares, in a form acceptable to the Company’s share registry; and

 

  (ii)

all other documents as may be reasonably required to register the Buyer or the First Tranche Nominee as the registered holder of the First Tranche Shares.

 

  (d)

At First Tranche Completion the Buyer must pay, or procure that the First Tranche Nominee pays, the First Tranche Purchase Price to the Seller by:

 

  (i)

electronic funds transfer to an account with an Australian bank specified by written notice given from the Seller to the Buyer on the date of this agreement; or

 

  (ii)

otherwise, unendorsed bank cheque drawn on an Australian bank.

 

  (e)

The obligations of the parties under clause 4.1(c) and clause 4.1(d) are interdependent and must be performed, as nearly as possible, simultaneously. If any obligation specified in clause 4.1(c) and clause 4.1(d) is not performed on First Tranche Completion then, without prejudice to any other rights of the parties, First Tranche Completion is taken not to have occurred and any document delivered, or payment made, under this clause 4.1 must be returned to the party that delivered it or paid it.

  (f)

If First Tranche Completion does not occur in accordance with this clause 4.1 because of the failure of any party (First Tranche Defaulting Party) to satisfy any of its obligations under this clause 4.1 then:

 

  (i)

the Buyer or the First Tranche Nominee (where the First Tranche Defaulting Party is the Seller); or

 

  (ii)

the Seller (where the First Tranche Defaulting Party is the Buyer or the First Tranche Nominee),

(in either case the Non First Tranche Defaulting Party) may give the First Tranche Defaulting Party a notice requiring the First Tranche Defaulting Party to satisfy those obligations within a period of 5 Business Days after the date of the notice and specifying that time is of the essence in relation to that notice.

 

  (g)

If the First Tranche Defaulting Party fails to comply with a notice given under clause 4.1(f), the Non First Tranche Defaulting Party may without limiting its other rights or remedies available under this agreement or at law:

 

  (i)

immediately terminate this agreement, in which case the Non First Tranche Defaulting Party may seek damages for breach of this agreement; or

 

  (ii)

seek specific performance of this agreement, in which case:

 

  A.

if specific performance is obtained, the Non First Tranche Defaulting Party may also seek damages for breach of this agreement; and

 

  B.

if specific performance is not obtained, the Non First Tranche Defaulting Party may then terminate this agreement and may seek damages for breach of this agreement.

 

  (h)

Beneficial ownership of and risk in the First Tranche Shares will pass from the Seller to the Buyer or the First Tranche Nominee (as applicable) on First Tranche Completion.

 

4.2

Second Tranche Completion

 

  (a)

The obligations of the parties at Second Tranche Completion are subject to and conditional on the following conditions being satisfied or waived in accordance with clause 4.2(c):

 

  (i)

on conclusion of the ILGA Inquiry, there is no finding or recommendation by ILGA or the Commissioner which would, or which could reasonably be expected to, restrict Second Tranche Completion occurring and ILGA does not otherwise object to Second Tranche Completion (and this condition will be taken to be satisfied if conditions are imposed by ILGA or the Commissioner in connection with Second Tranche Completion which are acceptable to the Buyer and the Seller, each acting reasonably);

  (ii)

the Buyer receiving written notice from each of ILGA, VCGLR and the WA Commission that the Buyer is a suitable person to be associated with the management of a casino, each such notification being unconditional, or on conditions acceptable to the Buyer acting reasonably.

 

  (b)

Each party agrees to notify the other party as soon as they become aware that a Condition has been satisfied, or has, or is likely to become, incapable of being satisfied.

 

  (c)

The condition:

 

  (i)

in clause 4.2(a)(i) is for the benefit of both parties and may only be waived by both the Buyer and the Seller giving notice in writing to the other; and

 

  (ii)

in clause 4.2(a)(ii) is for the benefit of the Buyer alone and may only be waived by the Buyer giving written notice to the Seller.

 

  (d)

Either the Buyer or Seller may, by giving at least 2 Business Days’ notice in writing to the other party, terminate this agreement at any time before Second Tranche Completion if:

 

  (i)

any condition has become incapable of satisfaction and that condition has not been waived by the relevant parties; or

 

  (ii)

any condition is not satisfied or waived on or before the Sunset Date.

 

  (a)(e)

Second Tranche Completion must take place at:

 

  (i)

on the earlier of:

 

  A.(i)

30 September 2019Revised Date, at the time and place agreed by the parties in writing; andor

 

  B.

an earlier date than 30 September 2019 specified by the Buyer, and at a time and place on that date agreed by the parties in writing, provided the Buyer has given the Seller at least 2 Business Days’ notice of that earlier date; or

 

  (ii)

at any other place, date or time as the Seller and the Buyer agree in writing,

(Second Tranche Completion Date).

 

  (b)(f)

If the Second Tranche Shares are to be purchased by a Nominee of the Buyer (Second Tranche Nominee), the Buyer must, at least 2 Business Days before Second Tranche Completion:

 

  (i)

give the Seller written notice specifying the name and the address of that Nominee; and

 

  (ii)

give, or procure that the Second Tranche Nominee give, the Seller the Nominee Deed Poll duly executed by the Second Tranche Nominee under which the Second Tranche Nominee agrees to be bound by each of the Buyer’s obligations in relation to the Second Tranche Shares under this agreement.

 

  (c)(g)

At Second Tranche Completion the Seller must deliver to the Buyer or the Second Tranche Nominee (as the case may be):

  (i)

completed transfers of the Second Tranche Shares in favour of the Buyer or the Second Tranche Nominee as transferee duly executed by the registered holder as transferor including the Seller’s securityholder reference number(s) in respect of all of the Second Tranche Shares, in a form acceptable to the Company’s share registry; and

 

  (ii)

all other documents as may be reasonably required to register the Buyer or the Second Tranche Nominee as the registered holder of the Second Tranche Shares.

 

  (d)(h)

At Second Tranche Completion the Buyer must pay, or procure that the Second Tranche Nominee pays, the Second Tranche Purchase Price to the Seller by:

 

  (i)

electronic funds transfer to an account with an Australian bank specified by written notice given from the Seller to the Buyer at least 2 Business Days before Second Tranche Completion; or

 

  (ii)

otherwise, unendorsed bank cheque drawn on an Australian bank.

 

  (e)(i)

The obligations of the parties under clause 4.2(g)4.2(c) and clause 4.2(h)4.2(d) are interdependent and must be performed, as nearly as possible, simultaneously. If any obligation specified in clause 4.2(g)4.2(c) and clause 4.2(h)4.2(d) is not performed on Second Tranche Completion then, without prejudice to any other rights of the parties, Second Tranche Completion is taken not to have occurred and any document delivered, or payment made, under this clause 4.2 must be returned to the party that delivered it or paid it.

 

  (f)(j)

If Second Tranche Completion does not occur in accordance with this clause 4.24.2 because of the failure of any party (Second Tranche Defaulting Party) to satisfy any of its obligations under this clause 4.24.2 then:

 

  (i)

the Buyer or the Second Tranche Nominee (where the Second Tranche Defaulting Party is the Seller); or

 

  (ii)

the Seller (where the Second Tranche Defaulting Party is the Buyer or the Second Tranche Nominee),

(in either case the Non Second Tranche Defaulting Party) may give the Second Tranche Defaulting Party a notice requiring the Second Tranche Defaulting Party to satisfy those obligations within a period of 5 Business Days after the date of the notice and specifying that time is of the essence in relation to that notice.

 

  (g)(k)

If the Second Tranche Defaulting Party fails to comply with a notice given under clause 4.2(f)4.2(j), the Non Second Tranche Defaulting Party may without limiting its other rights or remedies available under this agreement or at law:

 

  (i)

immediately terminate this agreement, in which case the Non Second Tranche Defaulting Party may seek damages for breach of this agreement; or

 

  (ii)

seek specific performance of this agreement, in which case:

 

  A.

if specific performance is obtained, the Non Second Tranche Defaulting Party may also seek damages for breach of this agreement; and

 

  B.

if specific performance is not obtained, the Non Second Tranche Defaulting Party may then terminate this agreement and may seek damages for breach of this agreement.

  (h)(l)

Beneficial ownership of and risk in the Second Tranche Shares will pass from the Seller to the Buyer or the Second Tranche Nominee (as applicable) on Second Tranche Completion.

 

4.3

Buyer liable for its obligations and obligations of Nominee(s)

Notwithstanding any other provision of this agreement, the Buyer:

 

  (a)

is unconditionally and irrevocably liable for its obligations under this agreement; and

 

  (b)

guarantees, and is unconditionally and irrevocably liable for, the obligations of any Nominee appointed under this clause 4 and under any agreement entered into with the Seller pursuant to clauses 4.1(b)(ii) and 4.2(f)(ii)4.2(b)(ii).

If any Nominee appointed by the Buyer under this agreement breaches an obligation under any agreement entered into with the Seller under clauses 4.1(b)(ii) and 4.2(f)(ii)4.2(b)(ii), that breach will be deemed to also be a breach by the Buyer of this agreement (and the Seller will be entitled to all rights and remedies available to it under this agreement against the Buyer as if the breach by the Nominee had been a breach by the Buyer in addition to the rights it has against the Nominee).

 

 

 

5.

Dividend entitlements

Notwithstanding any other provision of this agreement, but subject to Second Tranche Completion occurring, the parties agree that:

 

  (a)

the Buyer or its Nominee (as the case may be) is entitled to any dividend that has not been taken into account in the Adjustment, distribution, return of capital, paid or credited amount, transferred property or similar, announced and/or paid in respect of the Second Tranche Shares at any time after the date of this agreement (each an Entitlement). ); and

 

  (b)

to the extent the Buyer or its Nominee (as the case may be) is entitled to an Entitlement under paragraph (a) above and that Entitlement is received by the Seller, the Second Tranche Purchase Price will be reduced by an amount equal to the amount of the Entitlement. For the avoidance of doubt, :

 

  (i)

no reduction of any kind is to be made to the Second Tranche Purchase Price in respect of a dividend that has been taken into account in the Adjustment; and

 

  (i)(ii)

the amount or value of any franking credit that is attached to a dividend or other distribution does not form part of, and is excluded from, the Entitlement of the Buyer or its Nominee (as the case may be) for all purposes including for the purposes of reducing the Second Tranche Purchase Price under this paragraph (b).

 

 

 

6.

Warranties

 

6.1

Seller Warranties

 

  (a)

The Seller warrants to the Buyer that each Warranty is correct and not misleading as at the date of execution of this agreement, as at the time immediately prior to First Tranche Completion and as at the time immediately prior to Second Tranche Completion, except where it is stated as being given on a particular date, in which case, the Seller warrants to the Buyer that it is correct and not misleading as at that date.

  (b)

The Buyer acknowledges that it has made, and relies on, its own independent searches, investigations and enquiries in relation to the Company, and has received independent professional advice in relation to the acquisition of the Shares and the terms of this agreement.

 

6.2

Reliance

 

  (a)

Each party acknowledges that each other party has entered into this agreement in reliance on the Warranties given to that party.

 

  (b)

Each party acknowledges that, except for the Warranties, no party nor their respective Affiliates nor any of their respective officers, employees or advisers makes or has made any warranty or representation (whether express, implied, written, oral or otherwise) to any person. To the fullest extent permitted by law, every warranty or representation (whether express, implied, written, oral or otherwise) other than the Warranties is excluded.

 

6.3

Adjustment

Any payment made to the Buyer for a breach of a Warranty will be treated as an adjustment in the purchase price of the Shares.

 

6.4

Buyer Warranties

The Buyer warrants to the Seller that each Buyer Warranty is correct and not misleading as at the date of execution of this agreement, as at the time immediately prior to First Tranche Completion and as at the time immediately prior to Second Tranche Completion.

 

 

 

7.

Confidentiality

 

7.1

No announcement or other disclosure of transaction

Except as permitted by clause 7.2 or 7.3, each party must keep confidential the existence of and the terms of this agreement and all negotiations between the parties in relation to the subject matter of this agreement.

 

7.2

Permitted disclosure

Nothing in this agreement prevents a person from disclosing matters referred to in clause 7.1:

 

  (a)

if disclosure is required to be made by law or the rules of a recognised stock or securities exchange and the party whose obligation it is to keep matters confidential or procure that those matters are kept confidential has before disclosure is made notified each other party of the requirement to disclose and, where the relevant law or rules permit and where practicable to do so, given each other party a reasonable opportunity to comment on the requirement for and proposed contents of the proposed disclosure;

 

  (b)

to any professional adviser of a party who has been retained to advise in relation to the transactions contemplated by this agreement or any auditor of a party who reasonably requires to know;

 

  (c)

with the prior written approval of the party other than the party whose obligation it is to keep those matters confidential or procure that those matters are kept confidential; or

 

  (d)

where the matter has come into the public domain otherwise than as a result of a breach by any party of this agreement.

7.3

ASX and other disclosure

 

  (a)

The parties acknowledge and agree that a copy of this agreement will be attached to:

 

  (i)

a substantial holder notice (ASIC Form 603) to be lodged with the Company and ASX by or on behalf of the Buyer and certain of its Affiliates within 2 Business Days following the date of this agreement; and

 

  (ii)

a substantial holder notice (ASIC Form 604) will be lodged with the Company and ASX by or on behalf of the Seller and certain of its Affiliates within 2 Business Days following the First Completion Date and the Second Completion Date.

 

  (b)

Each party must, to the extent practicable, give each other party a reasonable opportunity to review and comment on any announcement, communication, media release or similar document in connection with this agreement, the subject matter of this agreement or any negotiations or discussions between the parties in relation to this agreement or the subject matter of this agreement.

 

 

 

8.

GST

 

8.1

Interpretation

The parties agree that:

 

  (a)

except where the context suggests otherwise, terms used in this clause 8 have the meanings given to those terms by the GST Act (as amended from time to time);

 

  (b)

any part of a supply that is treated as a separate supply for GST purposes (including attributing GST payable to tax periods) will be treated as a separate supply for the purposes of this clause 8; and

 

  (c)

any consideration that is specified to be inclusive of GST must not be taken into account in calculating the GST payable in relation to a supply for the purpose of this clause.

 

8.2

Reimbursements and similar payments

Any payment or reimbursement required to be made under this agreement that is calculated by reference to a cost, expense, or other amount paid or incurred will be limited to the total cost, expense or amount less the amount of any input tax credit to which an entity is entitled for the acquisition to which the cost, expense or amount relates.

 

8.3

GST payable

If GST is payable in relation to a supply made under or in connection with this agreement then any party (Recipient) that is required to provide consideration to another party (Supplier) for that supply must pay an additional amount to the Supplier equal to the amount of that GST at the same time as other consideration is to be provided for that supply or, if later, within 5 Business Days of the Supplier providing a valid tax invoice to the Recipient.

 

8.4

Variation to GST payable

If the GST payable in relation to a supply made under or in connection with this agreement varies from the additional amount paid by the Recipient under clause 8.3 then the Supplier will provide a corresponding refund or credit to, or will be entitled to receive the amount of that variation from, the Recipient. Any ruling, advice, document or other information received by the Recipient from the Australian Taxation Office in relation to any supply made under this agreement will be conclusive as to the GST payable in relation to that supply. Any payment, credit or refund under this paragraph is deemed to be a payment, credit or refund of the additional amount payable under clause 8.3.

 

 

9.

Notices

 

9.1

How notice to be given

Each communication (including each notice, consent, approval, request and demand) under or in connection with this agreement:

 

  (a)

must be given to a party:

 

  (i)

using one of the following methods (and no other method) namely, hand delivery, courier service, prepaid express post, fax or email; and

 

  (ii)

using the address or other details for the party set out below (or as otherwise notified by that party to each other party from time to time under this clause 9):

 

  A.

if to the Seller:

 

Address:

   

‘Liberty Place’, Level 39, 161 Castlereagh Street, Sydney NSW 2000

Fax:

   

(02) 9126 3769

Email:

   

kandrews@cph.com.au

Attention:

   

Company Secretary

 

  B.

if to the Buyer:

 

Address:

   

c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands)

 

with copy to:

 

Legal Department

37/F, The Centrium, 60 Wyndham Street, Central, Hong Kong

Fax:

   

+853 8867 0632

Email:

   

MCO-COMSEC@melco-resorts.com

Email:

   

MCO-COMSEC@melco-resorts.com

Attention:

   

Company Secretary

 

  (b)

must be in legible writing and in English;

 

  (c)

(in the case of communications other than email) must be signed by the sending party or by a person duly authorised by the sending party;

 

  (d)

(in the case of email) must:

  (i)

state the name of the sending party or a person duly authorised by the sending party and state that the email is a communication under or in connection with this agreement; and

 

  (ii)

if the email contains attachments, ensure the attachments are in PDF or other non-modifiable format the receiving party can open, view and download at no additional cost,

and communications sent by email are taken to be signed by the named sender.

 

9.2

When notice taken to be received

Without limiting the ability of a party to prove that a notice has been given and received at an earlier time, each communication (including each notice, consent, approval, request and demand) under or in connection with this agreement is taken to be given by the sender and received by the recipient:

 

  (e)

(in the case of delivery by hand or courier service) on delivery;

 

  (f)

(in the case of prepaid express post sent to an address in the same country) on the second Business Day after the date of posting;

 

  (g)

(in the case of prepaid express post sent to an address in another country) on the fourth Business Day after the date of posting;

 

  (h)

(in the case of fax) at the time shown on the transmission confirmation report produced by the fax machine from which it was sent showing that the whole fax was sent to the recipient’s fax number,

 

  (i)

(in the case of email, whether or not containing attachments) the earlier of:

 

  (i)

the time sent (as recorded on the device from which the sender sent the email) unless, within 4 hours of sending the email, the party sending the email receives an automated message that the email has not been delivered;

 

  (ii)

receipt by the sender of an automated message confirming delivery; and

 

  (iii)

the time of receipt as acknowledged by the recipient (either orally or in writing),

provided that:

 

  (j)

the communication will be taken to be so given by the sender and received by the recipient regardless of whether:

 

  (i)

the recipient is absent from the place at which the communication is delivered or sent;

 

  (ii)

the communication is returned unclaimed; and

 

  (iii)

(in the case of email) the email or any of its attachments is opened by the recipient;

 

  (k)

if the communication specifies a later time as the time of delivery then that later time will be taken to be the time of delivery of the communication; and

 

  (l)

if the communication would otherwise be taken to be received on a day that is not a working day or:

  (i)

in the case of the Seller, after 5.00 pm (Sydney time), it is taken to be received at 9.00 am (Sydney time) on the next working day; and

 

  (ii)

in the case of the Buyer, after 5,00pm (Hong Kong time), it is taken to be received at 9.00am (Hong Kong time) on the next working day,

(where “working day” meaning a day that is not a Saturday, Sunday or public holiday and on which banks are open for business generally, in the place to which the communication is delivered or sent).

 

9.3

Notices sent by more than one method of communication

If a communication delivered or sent under this clause 9 is delivered or sent by more than one method, the communication is taken to be given by the sender and received by the recipient whenever it is taken to be first received in accordance with clause 9.3.

 

 

 

10.

Entire agreement

This agreement constitutes the entire agreement between the parties in relation to its subject matter including the sale and purchase of the Shares and supersedes all previous agreements and understandings between the parties in relation to its subject matter.

 

 

 

11.

General

 

11.1

Amendments

This agreement may only be varied by a document signed by or on behalf of each party.

 

11.2

Assignment

A party cannot assign or otherwise transfer any of its rights under this agreement without the prior consent of each other party.

 

11.3

Consents

Unless this agreement expressly provides otherwise, a consent under this agreement may be given or withheld in the absolute discretion of the party entitled to give the consent and to be effective must be given in writing.

 

11.4

Counterparts

This agreement may be executed in any number of counterparts and by the parties on separate counterparts. Each counterpart constitutes an original of this agreement, and all together constitute one agreement.

 

11.5

Costs

Except as otherwise provided in this agreement, each party must pay its own costs and expenses in connection with negotiating, preparing, executing and performing this agreement.

 

11.6

Further acts and documents

Each party must promptly do, and procure that its employees and agents promptly do, all further acts and execute and deliver all further documents (in form and content reasonably satisfactory to that party) required by law or reasonably requested by another party to give effect to this agreement.

 

11.7

Stamp duties

The Buyer:

 

  (a)

must pay, or procure that its Nominee pays, all stamp duties, other duties and similar taxes, together with any related fees, penalties, fines, interest or statutory charges, in respect of this agreement, the performance of this agreement and each transaction effected or contemplated by or made under this agreement; and

 

  (b)

indemnifies the Seller and each of its Affiliates (other than those referred to in paragraph (a) of the definition of Affiliates) (Relevant Affiliates) against, or must procure that its Nominee indemnifies the Seller and each of its Relevant Affiliates against, and must pay, or procure that its Nominee pays, to the Seller on demand the amount of, any Indemnified Loss suffered or incurred by the Seller or any of its Relevant Affiliates arising out of or in connection with any delay or failure to comply with clause 11.7(a).

 

11.8

Operation of indemnities

Without limiting any other provision of this agreement, the parties agree that:

 

  (a)

each indemnity in this agreement is a continuing obligation, separate and independent from the other obligations of the parties, and survives termination, completion or expiration of this agreement; and

 

  (b)

it is not necessary for a party to incur expense or to make any payment before enforcing a right of indemnity conferred by this agreement.

 

11.9

Waivers

Without prejudice to any other provision of this agreement, the parties agree that:

 

  (a)

failure to exercise or enforce, or a delay in exercising or enforcing, or the partial exercise or enforcement of, a right, power or remedy provided by law or under this agreement by a party does not preclude, or operate as a waiver of, the exercise or enforcement, or further exercise or enforcement, of that or any other right, power or remedy provided by law or under this agreement;

 

  (b)

a waiver given by a party under this agreement is only effective and binding on that party if it is given or confirmed in writing by that party; and

 

  (c)

no waiver of a breach of a term of this agreement operates as a waiver of another breach of that term or of a breach of any other term of this agreement.

 

 

 

12.

Governing law and jurisdiction

 

12.1

Governing law and jurisdiction

 

  (a)

This agreement is governed by the law applying in New South Wales, Australia.

 

  (b)

Each party irrevocably submits to the non exclusive jurisdiction of the courts having jurisdiction in that state and the courts competent to determine appeals from those courts, with respect to any proceedings that may be brought at any time relating to this agreement and waives any objection it may have now or in the future to the venue of any proceedings, and any claim it may have now or in the future that any proceedings have been brought in an inconvenient forum, if that venue falls within this clause 12.1.

 

  (c)

The Buyer appoints:

  (i)

any Partner in the Sydney office of Clayton Utz of 1 Bligh Street, Sydney NSW 2000; or

 

  (ii)

any other Australian person who is nominated by the Buyer from time-to- time, provided the Buyer gives the Seller at least 5 Business Days prior written notice specifying the name and the Australian address of that person,

as its agent to receive service of process for any proceedings arising out of or in connection with this document. The Buyer undertakes to maintain this appointment until termination of this document under clauses 4.1(g) and 4.2(k)4.2(g) and agrees that any such process served on that person is taken to be served on it.

Schedule 1 Seller Warranties

 

 

 

1.

Seller

 

1.1

Capacity and authorisation

The Seller:

 

  (a)

is a company properly incorporated and validly existing under the laws of the country or jurisdiction of its incorporation; and

 

  (b)

has the legal right and full corporate power and capacity to:

 

  (i)

execute and deliver this agreement; and

 

  (ii)

perform its obligations under this agreement and each transaction effected by or made under this agreement.

 

1.2

Valid obligations

This agreement constitutes (or will when executed constitute) valid legal and binding obligations of the Seller and is enforceable against the Seller in accordance with its terms.

 

1.3

Breach or default

The execution, delivery and performance of this agreement by the Seller does not and will not result in a breach by the Seller of or constitute a default by the Seller under:

 

  (a)

any agreement to which the Seller is party;

 

  (b)

any provision of the constitution of the Seller; or

 

  (c)

any:

 

  (i)

order, judgment or determination of any court or Regulatory Authority; or

 

  (ii)

to the Seller’s knowledge as at the date of this agreement, any law or regulation,

by which the Seller is bound as at the date of this agreement.

 

1.4

Solvency

None of the following events has occurred in relation to the Seller:

 

  (a)

a receiver, receiver and manager, liquidator, provisional liquidator, administrator or trustee is appointed in respect of the Seller or any of its assets or anyone else is appointed who (whether or not an agent for the Seller) is in possession, or has control, of any of the Seller’s assets for the purpose of enforcing an Encumbrance;

 

  (b)

an event occurs that gives any person the right to seek an appointment referred to in paragraph (a);

 

  (c)

an application is made to court or a resolution is passed or an order is made for the winding up or dissolution of the Seller or an event occurs that would give any person the right to make an application of this type;

  (d)

the Seller proposes or takes any steps to implement a scheme of arrangement or other compromise or arrangement with its creditors or any class of them;

 

  (e)

the Seller is declared or taken under any applicable law to be insolvent or the Seller’s board of directors resolves that the Seller is, or is likely to become at some future time, insolvent; or

 

  (f)

any person in whose favour the Seller has granted any Encumbrance becomes entitled to enforce any security under that Encumbrance or any floating charge under that Encumbrance crystallises.

 

 

 

2.

Shares

 

2.1

Ownership

 

  (a)

The Seller is the sole legal and beneficial owner of the Shares and has complete and unrestricted power and authority to sell the Shares to the Buyer free of any Encumbrance.

 

  (b)

The Shares are validly issued and fully paid up.

 

  (c)

As at the date of this agreement, the Shares represent 19.99% (rounded up to the nearest two decimal places) of the issued ordinary shares of the Company.

 

2.2

Third party rights

There is no Encumbrance, option, right of pre-emption, right of first or last refusal or other third party right over any of the Shares.

Schedule 2 - Buyer Warranties

 

 

 

1.

The Buyer

 

1.1

Capacity and authorisation

The Buyer:

 

  (a)

is a company properly incorporated and validly existing under the laws of the country or jurisdiction of its incorporation; and

 

  (b)

has the legal right and full corporate power and capacity to:

 

  (i)

execute and deliver this agreement; and

 

  (ii)

perform its obligations under this agreement and each transaction effected by or made under this agreement.

 

1.2

Valid obligations

This agreement constitutes (or will when executed constitute) valid legal and binding obligations of the Buyer and is enforceable against the Buyer in accordance with its terms.

 

1.3

Breach or default

The execution, delivery and performance of this agreement by the Buyer does not and will not result in a breach by the Buyer of or constitute a default by the Buyer under:

 

  (a)

any agreement to which the Buyer is party;

 

  (b)

any provision of the constitution of the Buyer; or

 

  (c)

any:

 

  (i)

order, judgment or determination of any court or Regulatory Authority; or

 

  (ii)

to the Buyer’s knowledge as at the date of this agreement, any law or regulation,

by which the Buyer is bound as at the date of this agreement.

 

1.4

Solvency

None of the following events has occurred in relation to the Buyer:

 

  (a)

a receiver, receiver and manager, liquidator, provisional liquidator, administrator or trustee is appointed in respect of the Buyer or any of its assets or anyone else is appointed who (whether or not an agent for the Buyer) is in possession, or has control, of any of the Buyer’s assets for the purpose of enforcing an Encumbrance;

 

  (b)

an event occurs that gives any person the right to seek an appointment referred to in paragraph (a);

 

  (c)

an application is made to court or a resolution is passed or an order is made for the winding up or dissolution of the Buyer or an event occurs that would give any person the right to make an application of this type;

  (d)

the Buyer proposes or takes any steps to implement a scheme of arrangement or other compromise or arrangement with its creditors or any class of them;

 

  (e)

the Buyer is declared or taken under any applicable law to be insolvent or the Buyer’s board of directors resolves that the Buyer is, or is likely to become at some future time, insolvent; or

 

  (f)

any person in whose favour the Buyer has granted any Encumbrance becomes entitled to enforce any security under that Encumbrance or any floating charge under that Encumbrance crystallises.

Signed as an agreement.

 

       

Executed by CPH Crown Holdings Pty Limited

ACN 603 296 804 in accordance with section 127 of the Corporations Act 2001 (Cth):

       

 

       

 

Signature of director

       

Signature of company secretary/director

 

       

 

Full name of director

       

Full name of company secretary/director

Signed for and on behalf of Melco Resorts &

Entertainment Limited by its authorised

signatory in the presence of:

       

 

       

 

Signature of witness

       

Signature of authorised signatory

 

       

 

Full name of witness

       

Full name of authorised signatory

 

 

[This page has intentionally been left blank]

 

 

 

ANNEXURE A — Nominee Deed Poll

Nominee Deed Poll

Date

 

By

[Nominee] of [insert address] (Nominee)

 

In favour of

CPH Crown Holdings Pty Limited ACN 603 296 804 of ‘Liberty Place’, Level 39, 161 Castlereagh Street Sydney NSW 2000 (Seller)

Background

 

A

The Seller and Melco Resorts & Entertainment Limited (Buyer) have entered into a Share Sale Agreement dated 30 May 2019 (as amended from time to time) (Share Sale Agreement) in relation to the sale and purchase of the Shares (as defined in the Share Sale Agreement).

 

B

Pursuant to clause [4.1 / 4.2] of the Share Sale Agreement, the Buyer nominates the Nominee to purchase the [First Tranche Shares / Second Tranche Shares] from the Seller.

 

C

The Nominee agrees to perform and be bound by each of the Buyer’s obligations in relation to the [First Tranche Shares / Second Tranche Shares] under the Share Sale Agreement on the terms and conditions of this Deed Poll.

Operative provisions

 

 

 

1.

Definitions and interpretation

 

1.1

Definitions

The following definitions apply in this document. Unless a contrary intention appears, capitalised terms used in this document (other than the terms defined in this clause 1.11.1) have the meaning given in the Share Sale Agreement.

Nominee Warranties means the warranties set out in Schedule 1.Schedule 1.

 

1.2

General rules of interpretation

Clauses 1.2 and 1.3 of the Share Sale Agreement apply to this document as if set out in full in this document, mutatis mutandis.

 

 

 

2.

Undertaking

On and from the date of this document, the Nominee agrees to perform and be bound by each of the Buyer’s obligations in relation to the [First Tranche Shares / Second Tranche Shares] under the Share Sale Agreement (including, for the avoidance of doubt, the Buyer’s obligations in respect of [First Tranche Completion / Second Tranche Completion] in clause [4.1 / 4.2] of the Share Sale Agreement) as if it was the Buyer under the Share Sale Agreement.

 

 

 

3.

Acknowledgements

The Nominee acknowledges and agrees that:

  (a)

without limiting the Nominee’s obligations under this document, the Buyer continues to be unconditionally and irrevocably liable for its obligations under the Share Sale Agreement; and

 

  (b)

breach by the Nominee of any obligation under this document will be deemed to also be a breach by the Buyer of its corresponding obligations under the Share Sale Agreement and, in addition to the Seller’s rights against the Nominee under this document, the Seller will be entitled to all rights and remedies available to it against the Buyer under the Share Sale Agreement.

 

 

 

4.

Warranties

 

4.1

Nominee Warranties

The Nominee warrants to the Seller that each Nominee Warranty is correct and not misleading as at the date of execution of this agreement and as at the time immediately prior to [First Tranche Completion / Second Tranche Completion].

 

 

 

5.

Confidentiality

Clause 7 of the Share Sale Agreement applies to this document as if set out in full in this document, mutatis mutandis.

 

 

 

6.

Notices

 

6.1

How notice to be given

Each communication (including each notice, consent, approval, request and demand) under or in connection with this document:

 

  (m)

must be given to the Nominee:

 

  (i)

using one of the following methods (and no other method) namely, hand delivery, courier service, prepaid express post, fax or email; and

 

  (ii)

using the address or other details set out below (or as otherwise notified by the Nominee to the Seller from time to time under this clause 6):

 

Address:   [insert]
Fax:   [insert]
Email:   [insert]
Attention:   [insert]

 

  (n)

must be in legible writing and in English;

 

  (o)

(in the case of communications other than email) must be signed by the sending party or by a person duly authorised by the sending party;

 

  (p)

(in the case of email) must:

  (i)

state the name of the sending party or a person duly authorised by the sending party and state that the email is a communication under or in connection with this agreement; and

 

  (ii)

if the email contains attachments, ensure the attachments are in PDF or other non-modifiable format the receiving party can open, view and download at no additional cost,

and communications sent by email are taken to be signed by the named sender.

Clauses 9.2 and 9.3 of the Share Sale Agreement apply to this document as if set out in full in this document, mutatis mutandis.

 

 

 

7.

General

 

7.1

Deed Poll

This document operates as a deed poll in favour of the Seller and may be enforced by the Seller against the Nominee.

 

7.2

Amendments

This document may only be varied with the prior written consent of the Seller.

 

7.3

Assignment

The Nominee cannot assign or otherwise transfer any of its rights under this document without the prior consent of the Seller.

 

7.4

Consents

Unless this document expressly provides otherwise, a consent given in relation to this document may be given or withheld in the absolute discretion of the party entitled to give the consent and to be effective must be given in writing.

 

7.5

Further acts and documents

The Nominee must promptly do, and procure that its employees and agents promptly do, all further acts and execute and deliver all further documents (in form and content reasonably satisfactory to that party) required by law or reasonably requested by the Seller to give effect to this document.

 

 

 

8.

Governing law and jurisdiction

 

8.1

Governing law and jurisdiction

 

  (a)

This document is governed by the law applying in New South Wales, Australia.

 

  (b)

The Nominee irrevocably submits to the non exclusive jurisdiction of the courts having jurisdiction in that state and the courts competent to determine appeals from those courts, with respect to any proceedings that may be brought at any time relating to this agreement and waives any objection it may have now or in the future to the venue of any proceedings, and any claim it may have now or in the future that any proceedings have been brought in an inconvenient forum, if that venue falls within this clause 8.1.

  (c)

The Nominee appoints:

 

  (i)

any Partner in the Sydney office of Clayton Utz of 1 Bligh Street, Sydney NSW 2000; or

 

  (i)

any other Australian person who is nominated by the Buyer from time-to-time, provided the Buyer gives the Seller at least 5 Business Days prior written notice specifying the name and the Australian address of that person,

as its agent to receive service of process for any proceedings arising out of or in connection with this document. The Nominee undertakes to maintain this appointment until termination of the Share Sale Agreement under clauses 4.1(g) and 4.2(gl) of the Share Sale Agreement and agrees that any such process served on that person is taken to be served on it.

EXECUTED as a DEED POLL

 

       

Signed for and on behalf of [Nominee] by its

authorised signatory in the presence of:

       

 

       

 

Signature of witness

       

Signature of authorised signatory

 

       

 

Full name of witness

       

Full name of authorised signatory

Schedule 3             Schedule 1 — Nominee Warranties

 

 

 

 

1.

The Nominee

 

1.1

Capacity and authorisation

The Nominee:

 

  (a)

is a company properly incorporated and validly existing under the laws of the country or jurisdiction of its incorporation; and

 

  (b)

has the legal right and full corporate power and capacity to:

 

  (i)

execute and deliver this document; and

 

  (ii)

perform its obligations under this document and each transaction effected by or made under this document.

 

1.2

Valid obligations

This document constitutes (or will when executed constitute) valid legal and binding obligations of the Nominee and is enforceable against the Nominee in accordance with its terms.

 

1.3

Breach or default

The execution, delivery and performance of this document by the Nominee does not and will not result in a breach by the Nominee of or constitute a default by the Nominee under:

 

  (a)

any agreement to which the Nominee is party;

 

  (b)

any provision of the constitution of the Nominee; or

 

  (c)

any:

 

  (i)

order, judgment or determination of any court or Regulatory Authority; or

 

  (ii)

to the Nominee’s knowledge as at the date of this agreement, any law or regulation,

by which the Nominee is bound as at the date of this agreement.

 

1.4

Solvency

None of the following events has occurred in relation to the Nominee:

 

  (a)

a receiver, receiver and manager, liquidator, provisional liquidator, administrator or trustee is appointed in respect of the Nominee or any of its assets or anyone else is appointed who (whether or not an agent for the Nominee) is in possession, or has control, of any of the Nominee’s assets for the purpose of enforcing an Encumbrance;

 

  (b)

an event occurs that gives any person the right to seek an appointment referred to in paragraph (a);

  (c)

an application is made to court or a resolution is passed or an order is made for the winding up or dissolution of the Nominee or an event occurs that would give any person the right to make an application of this type;

 

  (d)

the Nominee proposes or takes any steps to implement a scheme of arrangement or other compromise or arrangement with its creditors or any class of them;

 

  (e)

the Nominee is declared or taken under any applicable law to be insolvent or the Nominee’s board of directors resolves that the Nominee is, or is likely to become at some future time, insolvent; or

 

  (f)

any person in whose favour the Nominee has granted any Encumbrance becomes entitled to enforce any security under that Encumbrance or any floating charge under that Encumbrance crystallises.

EX-4.33

Exhibit 4.33

EXECUTION VERSION

Contract Register No. 201911018

NetDoc ID 3457-0557-6206 v.2

MELCO RESORTS FINANCE LIMITED

US$900,000,000 5.375% Senior Notes due 2029

PURCHASE AGREEMENT

WHITE & CASE

9/F, Central Tower

28 Queen’s Road Central

Hong Kong

November 26, 2019

Each of the institutions named in Schedule A hereto

(each, an “Initial Purchaser” and, collectively, the “Initial Purchasers”)

Ladies and Gentlemen:

Melco Resorts Finance Limited, an exempted company incorporated with limited liability in the Cayman Islands (the “Issuer”), confirms its agreement with the Initial Purchasers with respect to the issuance and sale by the Issuer and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts set forth in Schedule A hereto of US$900,000,000 aggregate principal amount of the Issuer’s 5.375% Senior Notes due 2029 (the “Notes”), subject to the terms and conditions set forth in this purchase agreement (this “Agreement”). The Notes are to be issued pursuant to an indenture (the “Indenture”), dated as of the Closing Date (as defined below), between the Issuer and Deutsche Bank Trust Company Americas, as trustee (the “Trustee”).

The Issuer intends to use the net proceeds from the offering of the Notes to make a full repayment of the principal amount outstanding under the HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility, and a partial prepayment of the principal amount outstanding amounts under the HK$3.90 billion term loan facility, each under the amended and restated credit facilities entered into by Melco Resorts Macau (as defined below) on June 19, 2015 (the “2015 Credit Facilities”).

This Agreement, the Indenture and the Notes are referred to herein as the “Operative Documents.”

The offer of the Notes by the Initial Purchasers is herein called the “Offering.” All references to “U.S. dollars” or “US$” herein are to United States dollars. In connection with the Offering, the Issuer has made a listing application to, and approval-in-principle has been obtained from, the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing on the SGX-ST of the Notes.

The Issuer understands that the Initial Purchasers propose to make the Offering on the terms and in the manner set forth herein and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Notes to purchasers (“Subsequent Purchasers”) at any time after this Agreement has been executed and delivered. The Notes are to be offered and sold through the Initial Purchasers without being registered under the United States Securities Act of 1933, as amended (the “Securities Act”), in reliance upon exemptions therefrom. Pursuant to the terms of the Notes and the Indenture, investors that acquire Notes may only resell or otherwise transfer such Notes (A) (i) if such Notes are hereafter registered under the Securities Act or (ii) if an exemption from the registration requirements of the Securities Act is available for such resale or transfer (including, without limitation, the exemptions afforded by Rule 144A under the Securities Act (“Rule 144A”), or Regulation S under the Securities Act (“Regulation S”) and (B) in compliance with transfer restrictions set forth in the Offering Memorandum under the caption “Transfer Restrictions”.

 

1

In connection with the sale of the Notes, the Issuer confirms that it has prepared and delivered to each of the Initial Purchasers copies of a preliminary offering memorandum dated November 25, 2019 (the “Preliminary Offering Memorandum”) and a pricing supplement, in the form attached hereto as Schedule C (the “Pricing Supplement”), and that it will prepare and deliver to each of the Initial Purchasers, dated the date hereof, a final offering memorandum (the “Final Offering Memorandum”), each for use by each of the Initial Purchasers in connection with its solicitation of purchases of, or offering of, the Notes. “Offering Memorandum” means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document) which has been prepared and delivered by the Issuer to each of the Initial Purchasers in connection with their solicitation of purchases of, or offering of the Notes.

For purposes of this Agreement:

“Gaming License” means a license for operating games of chance and other casino games in Macau, pursuant to a valid subconcession contract;

“Sanction Target” means any person who is (i) the subject or the target of any sanctions or trade embargos administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council (“UNSC”), the European Union (“EU”), Her Majesty’s Treasury (“HMT”) or the Monetary Authority of Singapore (“MAS”) or any other applicable sanctions regulation (collectively, “Sanctions”); (ii) 50% or more owned by or otherwise controlled by or acting on behalf of one or more persons referenced in clause (i) above, or (iii) located, organized or resident in a country or territory that is the subject or the target of Sanctions (including but not limited to, Cuba, Iran, North Korea, Sudan, the Crimea region in the Ukraine and Syria) (each, a “Sanctioned Country”); and

“Subconcession Contract” means the Subconcession Contract dated September 8, 2006 between Wynn Resorts (Macau), S.A. and Melco Resorts (Macau) Limited (formerly known as Melco Crown (Macau) Limited and before that as Melco Crown Gaming (Macau) Limited or Melco PBL Gaming (Macau) Limited and before that as PBL Entertainment (Macau) Limited) (“Melco Resorts Macau”).

SECTION 1.     Representations and Warranties by the Issuer.

The Issuer represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Date referred to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows:

(i)    Disclosure Package and Final Offering Memorandum. As of the Applicable Time (as defined below), neither (x) the Preliminary Offering Memorandum as supplemented by the Pricing Supplement, all considered together (collectively, the “Disclosure Package”), nor (y) any individual Supplemental Offering Materials (as defined below), when considered together with the Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. “Applicable Time” means the time when sales of the Notes were first made.

 

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“Supplemental Offering Materials” means any “written communication” (within the meaning of the rules and regulations promulgated under the Securities Act by the U.S. Securities and Exchange Commission (the “Commission”)), prepared by or on behalf of the Issuer, or used or referred to by the Issuer, that constitutes an offer to sell or a solicitation of an offer to buy the Notes other than the Offering Memorandum or amendments or supplements thereto (including the Pricing Supplement), including, without limitation, any roadshow material relating to the Notes that constitutes such a written communication.

As of its date of issue and as of the Closing Date, the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the representations, warranties and agreements in this Section 1(i) shall not apply to statements in or omissions from the Disclosure Package or the Final Offering Memorandum or any amendments or supplements thereto made in reliance upon and in conformity with information furnished to the Issuer in writing by an Initial Purchaser expressly for use in the Disclosure Package or the Final Offering Memorandum or any amendments or supplements thereto, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the information described as such in Section 7(b) hereof.

(ii)    Existence. The Issuer and each of its subsidiaries has been duly incorporated and is existing and (where such concept is applicable) in good standing under the laws of the jurisdiction of its incorporation or establishment, with power and authority (corporate and other) to own its properties and conduct its business as described in the Disclosure Package and the Final Offering Memorandum and to enter into, execute and perform its obligations under the Operative Documents to which it is a party, and is duly qualified to do business as a foreign corporation (where such concept is applicable) in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified in such jurisdiction, individually or in the aggregate, would not have a material adverse effect on the condition (financial or other), business, properties, business prospects or results of operations of the Issuer and its subsidiaries taken as a whole (“Material Adverse Effect”).

(iii)    Subsidiaries. The Issuer does not have any subsidiaries other than the ones listed on Schedule B. All of the issued and outstanding authorized shares of each subsidiary of the Issuer have been duly authorized and validly issued and are fully paid and non-assessable; and except for authorized shares which have been pledged pursuant to prior financings as disclosed in the Disclosure Package and the Final Offering Memorandum, the authorized shares of each subsidiary owned by the Issuer, directly or through subsidiaries, are owned free from liens, encumbrances and defects.

(iv)    Capitalization. The capitalization of the Issuer is as set forth in the Disclosure Package and the Final Offering Memorandum in the column entitled “Actual” under the caption “Capitalization”; all of the issued and outstanding shares of the Issuer have been duly authorized.

 

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(v)    Absence of Further Requirements.     No consent, approval, or order of, clearance by, or filing or registration with, any person (including any governmental agency or body or any court or any stock exchange) is required to be obtained or made by the Issuer or any of its subsidiaries for the consummation by the Issuer of the transactions contemplated by the Operative Documents, except such as may be required (A) under the blue sky or similar laws of any jurisdiction in connection with the purchase and distribution of the Notes by the Initial Purchasers in the manner contemplated in the Operative Documents, the Disclosure Package and the Final Offering Memorandum and (B) by the SGX-ST in connection with its granting approval-in-principle for the listing and quotation of the Notes when such approval is obtained. No governmental authorization is required to effect payments of principal, premium, if any, and interest on the Notes.

(vi)    Title to Property. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, the Issuer and its subsidiaries have good and marketable title to all real property and all other property and assets owned by them as are necessary to conduct their respective businesses in the manner described in the Disclosure Package and the Final Offering Memorandum, in each case free from liens, charges, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them, and the Issuer and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no terms or provisions that would materially interfere with the use made or to be made thereof by them and except for such liens, encumbrances, charges, defects, claims, options or restrictions which, individually or in the aggregate, would not have a Material Adverse Effect.

(vii)    Compliance. Neither the Issuer nor any of its subsidiaries is (A) in violation of its respective constitutional documents, (B) in default of the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, license, lease or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which it may be bound, or to which any of the properties or assets of the Issuer or any of its subsidiaries may be subject (and no event has occurred which, with the giving of notices or lapse of time or both, would constitute such default), or (C) in violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Issuer or such subsidiary or any of its properties, as applicable, except, in the case of (B) and (C) only, any defaults or violations which, individually and in the aggregate, would not have a Material Adverse Effect.

 

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(viii)    Absence of Defaults and Conflicts Resulting from Transaction. The execution, delivery and performance of each Operative Document and the consummation of the transactions contemplated herein and therein by the Issuer, the issuance and sale of the Notes and the application of the proceeds from the sale of the Notes by the Issuer, as described in the Disclosure Package and the Final Offering Memorandum under the caption “Use of Proceeds,” and compliance by the Issuer with its obligations hereunder and thereunder do not and will not result in (A) a violation of the respective constitutional documents of the Issuer or any of its subsidiaries, (B) a violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Issuer or any of its subsidiaries or any of their properties, or (C) a breach or violation of any of the terms and provisions of, or constitute a default or a Debt Repayment Triggering Event (as defined below) under, or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Issuer or any of its subsidiaries pursuant to, the constitutional documents of the Issuer or any of its subsidiaries, any statute, rule, regulation or order of any governmental agency or body or any court, arbitrator or other authority, domestic or foreign, having jurisdiction over the Issuer or any of its subsidiaries or any of their properties, or any agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries is bound or to which any of the properties of the Issuer or any of its subsidiaries is subject (including but not limited to the 2015 Credit Facilities, the 4.875% senior notes due 2025 of the Issuer, the 5.250% senior notes due 2026 of the Issuer and the 5.625% Senior Notes due 2027 of the Issuer), except in the case of (B) and (C) above, where any such breach, violation, contravention, default, Debt Repayment Triggering Event, lien, charge or encumbrance would not, individually or in the aggregate, have a Material Adverse Effect. A “Debt Repayment Triggering Event” means any event or condition that gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture, or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Issuer or any of its subsidiaries.

(ix)    Subconcession Contract. The Subconcession Contract has been duly authorized, executed and delivered by Melco Resorts Macau, and assuming due authorization, execution and delivery by the other parties thereto, constitutes a legal, valid and binding agreement of such parties, enforceable against Melco Resorts Macau in accordance with its terms, in each case, except as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

(x)    Licenses. The Issuer and its subsidiaries possess, and are in compliance with the terms of, all licenses, certificates, authorizations, and franchise permits (collectively, “Licenses”) issued by appropriate governmental agencies or bodies necessary to the conduct of the business now operated by them, except for such non-compliance that would not, individually or in the aggregate, have a Material Adverse Effect and have not received any notice of proceedings relating to the revocation or modification of any License that, if determined adversely to the Issuer or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. To the best knowledge of the Issuer, the Gaming License of Melco Resorts Macau remains in full force and effect and validly authorizes Melco Resorts Macau to carry on the gaming business as is and is proposed to be conducted and on the terms and conditions, in each case as described in the Disclosure Package and the Final Offering Memorandum, and to the knowledge of the Issuer, no notice of any proceeding or claim or action for the invalidation, revocation, cancellation or imposition of any further condition or requirement of or in connection with the Gaming License has occurred or is pending.

(xi)    Absence of Labor Dispute. Except as would not have a Material Adverse Effect, no labor dispute with the employees of the Issuer or any of its subsidiaries exists or, to the knowledge of the Issuer or any of its subsidiaries, is imminent.

 

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(xii)    Possession of Intellectual Property. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, the Issuer and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, “intellectual property rights”) necessary to conduct the business now operated or employed by them, and if such business is described in the Disclosure Package and the Final Offering Memorandum, as described in the Disclosure Package and the Final Offering Memorandum. Neither the Issuer nor any of its subsidiaries has received any notice or communication of infringement of or conflict with asserted rights of others with respect to any intellectual property rights of others that, if determined adversely to the Issuer or any of its subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect.

(xiii)    Offering Memorandum. The statements set forth in the Disclosure Package and the Final Offering Memorandum (i) under the sections headed “Summary,” “Description of Notes” and “Description of Other Material Indebtedness,” insofar as they purport to constitute a summary of the material terms of the Notes and the material indebtedness of the Issuer and its subsidiaries, respectively, and (ii) under the sections headed “Related Party Transactions,” “Plan of Distribution” and “Taxation,” insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and fair in all material respects. The Operative Documents will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum.

(xiv)    Environmental Laws. Neither the Issuer nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances or relating to the safety of employees in the workplace (collectively, “environmental laws”), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any civil, criminal or administrative action, suit, claim, hearing, notice of violation, investigation or proceeding (“Proceeding”) relating to any environmental laws, which violation, contamination, liability or Proceeding would, individually or in the aggregate, have a Material Adverse Effect; and neither the Issuer nor any of its subsidiaries is aware of any pending hearing or investigation which would lead to such a claim.

(xv)    Insurance. The Issuer and its subsidiaries maintain insurance in such amounts and covering such risks as the Issuer and each subsidiary reasonably considers adequate for the conduct of its business, all of which insurance is in full force and effect. There are no material claims by the Issuer or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. Neither the Issuer nor any of its subsidiaries has a reason to believe that it will not be able to renew its existing renewable insurance as and when such coverage expires or will not be able to obtain replacement insurance adequate for the conduct of the business and the value of its properties at a cost that would not have a Material Adverse Effect.

(xvi)    Statistical and Market-Related Data. Any third-party statistical and market-related data included in the Disclosure Package or the Final Offering Memorandum are based on or derived from sources that the Issuer believes to be reliable and accurate.

 

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(xvii)    Absence of Accounting Issues. A member of the Board of Directors of the Issuer has confirmed that the Board of Directors is not reviewing or investigating, and neither the Issuer’s independent auditors nor its internal auditors have recommended that the Board of Directors review or investigate adding to, deleting, changing the application of, or changing the Issuer’s disclosure with respect to, the Issuer’s material accounting policies, other than in connection with any proposed change in U.S. GAAP (as defined below).

(xviii)    Taxes. No taxes, imposts or duties of any nature (including, without limitation, stamp or other issuance or transfer taxes or duties and capital gains, income, withholding or other taxes) are payable by or on behalf of the Initial Purchasers to the governments of the Cayman Islands or Macau or, in each case, any political subdivision or taxing authority thereof or therein in connection with (A) the execution and delivery of the Operative Documents, except Cayman Islands stamp duty will be payable if originals of the Operative Documents are executed or brought into the Cayman Islands, or (B) except as disclosed in the Disclosure Package and the Final Offering Memorandum under the heading “Taxation,” the resale and delivery of such Notes by the Initial Purchasers in the manner contemplated in the Disclosure Package and the Final Offering Memorandum.

(xix)    Filing of Tax Returns. Each of the Issuer and its subsidiaries has filed on a timely basis all necessary tax returns, reports and filings (except in any case in which the failure to file on a timely basis would not have a Material Adverse Effect), and all such returns, reports or filings are true, correct and complete in all material aspects, and are not the subject of any disputes with revenue or other authorities and to the Issuer’s knowledge there are no circumstances giving rise to, or which could give rise to, such disputes. None of the Issuer or its subsidiaries is delinquent in the payment of any taxes due thereunder or has any knowledge of any tax deficiency which might be assessed against any of them, which, if so assessed, would have a Material Adverse Effect.

(xx)    Litigation. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, there are no pending actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) against or affecting the Issuer, any of its subsidiaries or any of their respective properties that, if determined adversely to the Issuer or any of its subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect, or would materially or adversely affect the ability of the Issuer to perform its obligations under the Operative Documents, or which are otherwise material in the context of the sale of the Notes by the Issuer; and to the Issuer’s and each of its subsidiaries’ best knowledge, no such actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) are threatened or contemplated.

(xxi)    Auditors. Ernst & Young (“EY”), who audited the consolidated financial statements of the Issuer as of and for the years ended December 31, 2017 and 2018 and reviewed the condensed consolidated financial statements of the Issuer as of September 30, 2019 and for the nine months ended September 30, 2018 and 2019 included in the Disclosure Package and the Final Offering Memorandum, is the current independent public accountant of the Issuer.

 

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(xxii)    Financial Statements. The consolidated financial statements of the Issuer and its consolidated subsidiaries, together with the applicable related notes, included in the Disclosure Package and the Final Offering Memorandum present fairly, in all material respects, the consolidated financial position of the Issuer and its consolidated subsidiaries at the dates indicated and their consolidated statement of operations, stockholders’ equity and cash flows for the periods specified. Such consolidated financial statements of the Issuer and its consolidated subsidiaries have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and, except as disclosed therein, applied on a consistent basis throughout the periods involved. The selected financial data and the summary financial information included in the Disclosure Package and the Final Offering Memorandum present fairly in all material respects the information shown therein. Such data have been, except as disclosed therein, compiled on a basis consistent with that of the audited financial statements included in the Disclosure Package and the Final Offering Memorandum and the other financial information included in the Disclosure Package and the Final Offering Memorandum has been derived from the accounting records of the Issuer and its subsidiaries and presents fairly the information shown thereby.

(xxiii)    No Material Adverse Change in Business. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, since September 30, 2019, neither the Issuer nor any of its subsidiaries has (i) incurred, assumed or acquired any material liability (including contingent liability) or other material obligation except for any obligation incurred in the ordinary course of its business including renovation, construction or development of properties owned or leased by the Issuer or its subsidiaries, (ii) received notice of any cancellation, termination or revocation of the Subconcession Contract or of any Debt Repayment Triggering Event, (iii) acquired or disposed of or agreed to acquire or dispose of any business or any other asset material to the Issuer and its subsidiaries taken as a whole, (iv) entered into a letter of intent or memorandum of understanding (or announced an intention to do so) relating to any matter identified in clauses (i) through (iii) above, or (v) sustained any material loss or interference with its business from strike, fire, explosion or other calamity, whether or not covered by insurance, or from any court or governmental action, order or decree, and since the respective dates as of which information is given in the Disclosure Package and the Final Offering Memorandum, except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, there has been no change, nor any development or event, that would have a Material Adverse Effect. Except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, since September 30, 2019, there has been no dividend or distribution of any kind declared, paid or made by the Issuer on any class of its authorized shares.

(xxiv)    Management’s Discussion and Analysis of Financial Condition and Results of Operations. The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the Disclosure Package and the Final Offering Memorandum accurately and fully describes, in all material respects, (A) accounting policies which the Issuer believes are the most important in the portrayal of the consolidated financial condition and results of operations of the Issuer and its consolidated subsidiaries and which require management’s most difficult, subjective or complex judgments (“critical accounting policies”); (B) judgments and uncertainties affecting the application of critical accounting policies; and (C) explanation of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

 

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(xxv)    No Prohibition on Subsidiaries from Paying Dividends or Making Other Distributions. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, no subsidiary of the Issuer is currently prohibited, directly or indirectly, (i) from paying any dividends to the Issuer, (ii) from making any other distribution on such subsidiary’s authorized shares, (iii) from repaying to the Issuer any loans or advances to such subsidiary from the Issuer or (iv) from transferring any of such subsidiary’s property or assets to the Issuer or any other subsidiary of the Issuer; provided that in the case of clause (iv) only, it is acknowledged that the transfer of gaming assets by Melco Resorts Macau and of casinos and/or gaming areas will be subject to compliance with the Gaming License and related requirements under Macau law.

(xxvi)    Investment Company Act. The Issuer is not required to register, and after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Disclosure Package and the Final Offering Memorandum, would not be required to register, as an investment company under the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”).

(xxvii)    No Undisclosed Relationships. No relationship, direct or indirect, exists between or among the Issuer or any of its subsidiaries, on the one hand, and the directors, officers, shareholders, customers, suppliers or other affiliates of the Issuer or any of its subsidiaries, on the other hand, that is required to be described in the Disclosure Package and the Final Offering Memorandum that is not so described.

(xxviii)    Stabilization Activities. None of the Issuer, its subsidiaries, their respective Affiliates (as defined below) or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation or warranty is made), has taken, directly or indirectly, any action for the purpose of stabilizing or manipulating the price of any security to facilitate the sale or resale of the Notes in violation of any applicable law.

(xxix)    Choice of Law. The agreement of the Issuer to the choice of law provisions set forth in Section 21 hereof will be recognized by the courts of the Cayman Islands and Macau and are legal, valid and binding; the Issuer can sue and be sued in its own name under the laws of the Cayman Islands and Macau; the irrevocable submission by the Issuer to the jurisdiction of the federal and state courts in the Borough of Manhattan in The City of New York and the appointment of Law Debenture Corporate Services Inc., 801 2nd Avenue, Suite 403, New York, NY10017, as its authorized agent for the purpose described in Section 21 hereof is legal, valid and binding; service of process effected in the manner set forth in Section 21 hereof will be effective to confer valid personal jurisdiction over the Issuer; and, except as disclosed in the Disclosure Package and the Final Offering Memorandum, a judgment obtained in the federal and state courts in the Borough of Manhattan in The City of New York arising out of or in relation to the obligations of the Issuer under this Agreement would be enforceable against the Issuer in the courts of the Cayman Islands and Macau, in each case, without further review of the merits.

(xxx)    Compliance with Anti-bribery Laws. None of the Issuer, any of its subsidiaries or any of their respective directors or officers, nor to the knowledge of the Issuer, any agent, employee or other person acting on behalf of and at the direction of the Issuer or any of its subsidiaries has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or made any direct or indirect unlawful payment to any government official or employee from corporate funds. None of the Issuer, its subsidiaries and any of their respective officers, directors, supervisors or managers, and to the knowledge of the Issuer, their respective affiliates, agents or employees, has violated any applicable anti-bribery law, rule or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the United States Foreign Corrupt Practices Act or any other applicable law, rule or regulation of similar purpose and scope, or any amendment thereto (collectively, the “Anti-Bribery Laws”). The Issuer and its subsidiaries have instituted and maintain policies and procedures designed to (a) ensure continued compliance with the Anti-Bribery Laws and (b) detect the violations of the Anti-Bribery Laws.

 

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(xxxi)    Compliance with Money Laundering Laws. Each of the Issuer and its subsidiaries has not violated, and the Issuer and its subsidiaries operate and will continue to operate their businesses in compliance with, any applicable financial recordkeeping and reporting requirements and anti-money laundering laws of applicable jurisdictions, including but not limited to, applicable federal, state, international, foreign or other applicable laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 U.S. Code sections 1956 and 1957, the U.S. Patriot Act, the U.S. Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended and as applicable, and any executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any applicable orders or licenses issued thereunder (collectively, the “Anti-Money Laundering Laws”).

(xxxii)    Sanctions. None of the Issuer, its subsidiaries and their respective officers, directors, supervisors, managers, nor to the knowledge of the Issuer, any affiliate, agent, or employee or other person acting on behalf or at the direction of the Issuer or its subsidiaries is a person that is a Sanction Target or domiciled or registered in or operating from a Sanctioned Country. Neither the Issuer nor any of its subsidiaries has or intends to have any business operations or other dealings (a) in any Sanctioned Country, (b) with any Specially Designated National (“SDN”) on OFAC’s SDN list or, to its knowledge, any person that at the time of the business operations or other dealings is or was the subject of Sanctions, or (c) involving commodities or services of a Sanctioned Country origin or shipped to, through, or from a Sanctioned Country, or on Sanctioned Country owned or registered vessels or aircraft, or finance or subsidize any of the foregoing in an amount exceeding 5% of the total assets or revenues of the Issuer and its subsidiaries on a consolidated basis. The Issuer and its subsidiaries have instituted and maintain policies and procedures designed to prevent sanctions violations (by the Issuer and its subsidiaries and by persons associated with the Issuer and its subsidiaries). Neither the Issuer nor any of its subsidiaries knows or has reason to believe that any of them are or may become subject of sanctions-related investigations or juridical proceedings. The Issuer and each Initial Purchaser (other than Morgan Stanley & Co. LLC) acknowledges, agrees and confirms that the representation, warranty and covenant contained in this Section 1(xxxii) is only sought, given or repeated, as appropriate, to the extent that to do so would be permissible pursuant to Council Regulation (EC) No. 2271/96 of 22 November 1996 or any applicable anti-boycott laws or regulations.

(xxxiii)    Forward-Looking Statements. Each “forward-looking statement” (within the meaning of Section 27A of the Act and Section 21E of the U.S. Securities Exchange Act of 1934 Act, as amended (the “Exchange Act”)) included in the Disclosure Package or the Final Offering Memorandum has been made or reaffirmed by the Issuer with a reasonable basis, in good faith and based on reasonable assumptions.

 

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(xxxiv)    Authorization of this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Issuer.

(xxxv)    Authorization of the Notes. The Notes have been duly authorized and, at the Closing Date, will have been duly executed by the Issuer and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the Purchase Price (as defined below) as provided in this Agreement, will constitute legal, valid and binding obligations of the Issuer, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture.

(xxxvi)    Authorization of the Indenture. The Indenture has been duly authorized by the Issuer and, when executed and delivered by the Issuer (assuming the due authorization, execution and delivery by the Trustee), will constitute a legal, valid and binding agreement of the Issuer, enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(xxxvii)    No Qualification under Trust Indenture Act. No qualification of the Indenture under the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (the “TIA”) is required in connection with the offer and sale of the Notes by the Issuer to the Initial Purchasers hereunder or the resales thereof by the Initial Purchasers in the manner contemplated hereby.

(xxxviii)    Payments without Withholding. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, all payments on the Notes will be made by the Issuer without withholding or deduction for or on account of any and all taxes, duties or other charges or whatsoever nature (including, without limitation, income taxes) imposed by the Cayman Islands or Macau, or, in each case, any political subdivision or taxing authority thereof or therein.

(xxxix)    Sovereign Immunity. None of the Issuer or any of its subsidiaries or any of their respective properties has any sovereign immunity from jurisdiction or suit of any court or from set-off or from any legal process or remedy (whether through service, notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of Macau.

(xl)    Solvency. Immediately after the Closing Time, the Issuer individually, and the Issuer and its subsidiaries on a consolidated basis (the “Group”), will be Solvent. As used herein, the term “Solvent” means, with respect to the Issuer and the Group, on a particular date, that on such date (1) the fair market value of the assets of the entity is greater than the total amount of liabilities (including contingent liabilities) of such entity, (2) the present fair saleable value of the assets of such entity is greater than the sum of its stated liabilities and identified contingent liabilities, (3) such entity is able to realize upon its assets and pay its debts and other liabilities, including contingent obligations, as they mature, and (4) such entity does not have unreasonably small capital. No proceedings have been commenced by the Issuer or its subsidiaries for, nor has the Issuer or any of its subsidiaries passed any resolutions or presented petitions for purposes of, and no judgment has been rendered for, the liquidation, bankruptcy, winding-up, administration or analogous event of the Issuer or any of its subsidiaries, except with respect to any subsidiary of the Issuer, for any such resolutions in respect of a voluntary reorganization.

 

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(xli)    Undisclosed Liabilities. There are (i) no liabilities of the Issuer or any of its subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and (ii) no existing situations or set of circumstances that would reasonably be expected to result in such a liability, other than (x) liabilities set forth in the Disclosure Package and the Final Offering Memorandum, or (y) other undisclosed liabilities which would not, individually or in the aggregate, have a Material Adverse Effect.

(xlii)    Accounting Controls. The Issuer and its consolidated subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(xliii)    Similar Offerings. None of the Issuer, its Affiliates, as such term is defined in Rule 501(b) under the Securities Act (each, an “Affiliate”), or any other person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any U.S. person (as defined in Regulation S), any security which is or would be integrated with the sale of the Notes in a manner that would require the Notes to be registered under the Securities Act.

(xliv)    Rule 144A Eligibility. The Notes are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated interdealer quotation system. Each of the Disclosure Package and the Final Offering Memorandum, as of its date, contain all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.

(xlv)    No General Solicitation. None of the Issuer, its subsidiaries, their Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has engaged or will engage, in connection with the Offering, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

(xlvi)    Public Announcements Relating to Stabilization Actions. The Issuer represents, warrants and agrees that in relation to any Notes for which Deutsche Bank AG, Singapore Branch is named as a Stabilizing Coordinator (the “Stabilizing Coordinator”), each of the Issuer and its subsidiaries will not issue, without the prior consent of the Stabilizing Coordinator, any press release or other public announcement referring to the proposed issue of Notes unless the announcement adequately discloses the fact that stabilizing action may take place in relation to the Notes and the Issuer authorizes the Initial Purchasers to make adequate public disclosure of the information required by Article 6 of the Commission Delegated Regulation 2016/1052 instead of the Issuer or such subsidiaries.

 

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(xlvii)    No Registration Required. Subject to compliance by the Initial Purchasers with the representations, warranties and procedures set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Notes under the Securities Act.

(xlviii)    No Directed Selling Efforts. With respect to those Notes sold in reliance on Regulation S, (A) none of the Issuer, its subsidiaries, their respective Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (B) each of the Issuer, its subsidiaries and their respective Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom no representation, warranty or agreement is made) has complied with and will comply with the offering restrictions requirements of Regulation S.

(xlix)    Foreign Private Issuer. The Issuer is a “foreign private issuer” as defined in Rule 405 under the Securities Act.

SECTION 2.     Sale and Delivery to Initial Purchasers; Closing.

(a)                 Notes. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Issuer agrees to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Issuer, at the purchase price of 99.30% (consisting of the issue price for the Notes, being 100.00% of the principal amount thereof, net the commission thereon, being 0.70% of the principal amount of the Notes (the “Fees”)) of the principal amount thereof (the “Purchase Price”), the principal amounts of the Notes set forth in Schedule A opposite the name of such Initial Purchaser, plus any additional principal amount of the Notes which such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 10 hereof (any such additional principal amount purchased, a “Default Purchase”).

The Fees shall be allocated among the Initial Purchasers as follow: subject to any adjustment to account for any Default Purchase, (i) Deutsche Bank AG, Singapore Branch, Morgan Stanley & Co. LLC and Australia and New Zealand Banking Group Limited shall be entitled to 50.0%, 22.5% and 10.0% of the aggregate amount of the Fees, respectively, (ii) and Bank of Communications Co., Ltd. Macau Branch, BOCI Asia Limited, Industrial and Commercial Bank of China (Macau) Limited and Mizuho Securities Asia Limited shall be entitled to 2.5%, 7.5%, 2.5% and 5.0% of the aggregate amount of the Fees, respectively.

(b)                 Payment of Purchase Price. Payment of the Purchase Price for the Notes shall be made by the Initial Purchasers in U.S. dollars in immediately available funds by wire transfer to the account of the Issuer notified to Deutsche Bank AG, Singapore Branch, acting as settlement lead manager, at least three business days before 9:30A.M. New York City time on December 4, 2019 (the “Closing Date”), or at least three business days before such other date, not later than seven calendar days after the foregoing date, as shall be agreed upon by the Representatives, acting jointly (as defined below) and the Issuer (such time and date of payment being herein called the “Closing Time”).

 

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Payment shall be made to the Issuer against delivery to the Initial Purchasers for the respective accounts of the Initial Purchasers or the accounts of the persons procured by the Initial Purchasers to purchase the Notes. Each Initial Purchaser shall accept delivery of, receipt for, and make payment of the Purchase Price for, the Notes which it has agreed to purchase, or procure the purchase of. Each of the Initial Purchasers may (but shall not be obligated to) make payment of the Purchase Price for the Notes to be purchased by any persons procured by such Initial Purchaser whose funds have not been received by the Closing Time.

(c)                 Delivery. The Issuer will deliver to the Initial Purchasers, against payment of the Purchase Price thereof pursuant to Section 2(b) above, the Notes to be purchased by the Initial Purchasers hereunder and to be offered and sold by the Initial Purchasers in reliance on Regulation S in the form of one or more global notes (the “Regulation S Global Notes”) registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), and deposited with the Trustee as custodian for DTC for the respective accounts of the DTC participants for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”). The Issuer will deliver to the Initial Purchasers against payment of the Purchase Price thereof the Notes to be purchased by the Initial Purchasers hereunder and to be offered and sold by the Initial Purchasers in reliance on Rule 144A in the form of one or more global notes (the “Rule 144A Global Notes”) deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global Notes and the Rule 144A Global Notes shall be assigned separate CUSIP numbers. The Regulation S Global Notes and the Rule 144A Global Notes shall include the legend regarding restrictions on transfer set forth under “Transfer Restrictions” in the Offering Memorandum. Interests in the Regulation S Global Notes and the Rule 144A Global Notes will be held only in book-entry form through DTC except in the limited circumstances described in the Indenture when they may be exchanged for definitive certificated Notes.

(d)                 Stabilization. Deutsche Bank AG, Singapore Branch, as Stabilizing Coordinator (or any person duly appointed as acting for the Stabilizing Coordinator) may, to the extent permitted by applicable laws and regulations, over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail, but in doing so the Stabilizing Coordinator shall act as principal and not as agent of the Issuer.

SECTION 3.     Covenants of the Issuer. The Issuer covenants with each Initial Purchaser as follows:

(a)                 Disclosure Package and Offering Memorandum. During the period from the date hereof to that indicated in Section 3(b)(ii) below, the Issuer, as promptly as practicable, will furnish to each Initial Purchaser, without charge, such number of copies of the Disclosure Package and the Final Offering Memorandum and any amendments and supplements thereto as such Initial Purchaser may reasonably request.

 

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(b)                 Notice and Effect of Material Events. The Issuer will promptly notify each Initial Purchaser, and confirm such notice in writing, of (i) any filing made by the Issuer of information relating to the Offering with any securities exchange or any other regulatory body in any applicable jurisdiction, and (ii) at any time prior to the earlier of (A) two months after the Closing Date and (B) the completion of the resale of the Notes by the Initial Purchasers (which the Initial Purchasers shall provide prompt notice thereof to the Issuer), any material changes in or affecting the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Issuer and its subsidiaries considered as one enterprise which (x) make any statement in the Disclosure Package, any Offering Memorandum or any Supplemental Offering Material false or misleading or (y) are not disclosed in the Disclosure Package or Offering Memorandum. During such time as described in clause (ii) of the preceding sentence, if any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order that the Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances under which they were made and then existing, or if in the reasonable opinion of the Initial Purchasers or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Issuer will, upon receiving reasonable request from the Representatives, amend or supplement the Offering Memorandum by promptly preparing and furnishing, at its own expense, to each Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchasers) so that, as so amended or supplemented, the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made and existing at the time it is furnished to the Initial Purchasers, not misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law.

(c)                 Amendments and Supplements to the Offering Memorandum; Preparation of Pricing Supplement; Supplemental Offering Materials. The Issuer will promptly submit for review and approval to each Initial Purchaser any proposed amendment or supplement to the Disclosure Package and Offering Memorandum, such approval not to be unreasonably withheld or delayed. Neither the approval of the Initial Purchasers, nor the Initial Purchasers’ delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof. The Issuer represents that it has not made, and agrees that unless it obtains the prior consent of the Representatives, acting jointly, it will not make, any offer relating to the Notes by means of any Supplemental Offering Materials other than the roadshow presentation dated November 2019 relating to the Notes.

(d)                 Qualification of Notes for Offer and Sale. The Issuer will use its commercially reasonable best efforts, in cooperation with the Initial Purchasers and counsel for the Initial Purchasers, to qualify the Notes for offering and sale under the applicable securities laws of such states and other jurisdictions as the Initial Purchasers may designate and will maintain such qualifications in effect as long as required for the sale of the Notes; provided, however, that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities or take any other action in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Issuer will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Notes for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Issuer shall use its commercially reasonable best efforts to obtain the withdrawal thereof as soon as practicable.

 

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(e)                 DTC. The Issuer will cooperate with the Initial Purchasers and use its best efforts to permit the Notes to be eligible for clearance and settlement through the facilities of DTC and will assist the Initial Purchasers in obtaining the approval of DTC for “book-entry” transfer of the Notes in global form.

(f)                Euroclear and Clearstream. The Issuer will cooperate with the Initial Purchasers and use its best efforts to permit the Notes to be eligible for clearance and settlement through the facilities of Euroclear and Clearstream and will assist the Initial Purchasers in obtaining the approval of Euroclear and Clearstream for “book-entry” transfer of the Notes in global form.

(g)                 Use of Proceeds. The Issuer will apply the net proceeds received by it from the sale of the Notes in the manner specified in the Disclosure Package and the Final Offering Memorandum under “Use of Proceeds” and will not directly or indirectly use, lend, contribute or otherwise make available to any subsidiary, joint venture partner or other person or entity, such net proceeds (i) to fund or facilitate any activities of or business with persons that, at the time of such funding or facilitation, is a Sanction Target, (ii) to fund or facilitate any activities of or business in any Sanctioned Country, or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as initial purchaser, advisor, investor or otherwise) of any Sanctions, Anti-Money Laundering Laws or any applicable anti-terrorism financing laws of applicable jurisdictions, including without limitation, applicable rules, regulations or guidelines, issued, administered or enforced by governmental authorities or regulatory agencies having jurisdictions over the Issuer and its subsidiaries (collectively, the “Anti-Terrorism Financing Laws”). The proceeds from the sale of the Notes will not be used, directly or indirectly, for any purpose in violation of the Anti-Bribery Laws.

(h)                 Restriction on Sale of Securities. For a period of 90 days from the date of this Agreement, the Issuer agrees not to, directly or indirectly, sell, offer to sell, contract to sell, grant any option to purchase, issue any instrument convertible into or exchangeable for, or otherwise transfer or dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition in the future of), any debt securities of the Issuer with terms substantially similar (including having equal rank) to the Notes (other than the Notes), except with the prior consent of Deutsche Bank AG, Singapore Branch.

(i)                 Listing on Securities Exchange. The Issuer will use commercially reasonable efforts to have the Notes listed or admitted to trading on the SGX-ST.

(j)                 Stabilization and Manipulation. In connection with the issuance and sale of the Notes, until the Initial Purchasers have notified the Issuer of the completion of the placement and resales of the Notes by the Initial Purchasers (which notice the Initial Purchasers shall provide promptly after such completion), neither the Issuer nor any of its Affiliates will take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Notes to facilitate the sale or resale of the Notes.

 

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SECTION 4.     Payment of Expenses.

The Issuer agrees to reimburse the Initial Purchasers upon request for all fees, stamp duty (if any), expenses and other costs reasonably and properly incurred in connection with the Offering, including, without limitation, telecommunications, postage, document production and other pre-agreed out-of-pocket expenses; provided that except as otherwise provided for in Section 13 hereof, the fees and expenses of the Initial Purchasers’ legal advisors shall not be reimbursed by the Issuer.

The Issuer must pay for its own fees, expenses and other costs incurred in connection with the Offering (or reimburse any Initial Purchaser to the extent that such Initial Purchaser incurs such costs on the Issuer’s behalf) including, without limitation, (i) its own legal, accounting and auditors’ fees and expenses, (ii) the fees and expenses (including legal fees) of the Trustee, rating agencies, the paying agent(s), the listing agent and all other agents involved in the Offering, (iii) all listing fees and other listing costs payable to the relevant stock exchange and/or any other relevant competent authority in connection with the listing, (iv) the cost of roadshows and any other presentations to investors prepared in connection with the Offering, printing and distribution of the Offering Memorandum and any other marketing materials for the Notes other than the Initial Purchasers’ travel expenses (and each Initial Purchaser shall be responsible for its own travel expenses), (v) the cost of printing, authenticating and distributing any Notes in definitive form, and (vi) the cost of publishing any notices.

Unless set out otherwise in this Agreement, all payments under this Agreement must be made: (i) on the due date in accordance with the payment instructions of the Initial Purchasers or within 30 days of the invoice (as the case may be), (ii) together with any applicable VAT, sales and any similar taxes which will be invoiced to or otherwise payable by the Issuer, and (iii) in full without set-off, condition, restriction, counterclaim, deduction or withholding, unless required by law. If any deduction or withholding is required by any applicable law in connection with any such payment, the Issuer will increase the amount paid so that the full amount of such payment is received by the Initial Purchasers as if no such deduction or withholding had been made.

SECTION 5.    Conditions of Initial Purchasers’ Obligations.

The obligations of the several Initial Purchasers to purchase and pay for, or procure the purchase of and payment for, the Notes hereunder are subject to the accuracy of the representations and warranties of the Issuer contained in Section 1 hereof, as of the date hereof and as of the Closing Date, or in certificates of any officer or director of the Issuer, delivered pursuant to the provisions hereof, to the performance by the Issuer of its covenants and other obligations hereunder, and to the following further conditions (any of which may be waived by the Representatives, acting jointly):

(a)                 Opinion of U.S. Counsel for the Issuer. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received (x) the opinion, (y) the tax opinion and (z) the 10b-5 disclosure letter, dated as of the Closing Date, of Latham & Watkins, U.S. counsel for the Issuer, in each case substantially in the form as attached hereto as Exhibits A-1, A-2 and A-3, respectively.

 

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(b)                 Opinion of Cayman Islands Counsel for the Issuer. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Harney Westwood & Riegels, special Cayman Islands counsel for the Issuer incorporated under the laws of the Cayman Islands, substantially in the form as attached hereto as Exhibit B.

(c)                 Opinion of Macau Counsel for the Issuer. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Manuela António Lawyer and Notaries, special Macau counsel for the Issuer incorporated under the laws of Macau, substantially in the form as attached hereto as Exhibit C.

(d)                 Opinion of U.S. Counsel for the Initial Purchasers. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received (x) the opinion and (y) the 10b-5 disclosure letter, dated as of the Closing Date, of White & Case, U.S. counsel for the Initial Purchasers, in the form and substance satisfactory to the Representatives.

(e)                 Opinion of Cayman Islands Counsel for the Initial Purchasers. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Maples and Calder (Hong Kong) LLP, special Cayman Islands counsel for the Initial Purchasers, in form and substance satisfactory to the Representatives.

(f)                 Opinion of Macau Counsel for the Initial Purchasers. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received the opinion, dated as of the Closing Date, of Henrique Saldanha, Advogados e Notàrios, special Macau counsel for the Initial Purchasers, in form and substance satisfactory to the Representatives.

(g)                 Compliance Certificate of the Issuer. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received a certificate signed by an executive officer or director of the Issuer, dated as of the Closing Date, to the effect that (i) since the respective dates as of which information is given in the Disclosure Package and the Final Offering Memorandum, except as disclosed in or contemplated by the Disclosure Package and the Final Offering Memorandum, there shall have been no event or development, and no information shall have become known, that, individually or in the aggregate, has a Material Adverse Effect, (ii) the representations and warranties of the Issuer in Section 1 hereof are true and correct in all material respects with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Issuer has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Time.

(h)                 Comfort Letter of the Accountants. At the time of the execution of this Agreement, the Representatives, on behalf of the Initial Purchasers, shall have received from EY a letter dated the date hereof, in form and substance satisfactory to the Representatives, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to the Initial Purchasers, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletins), with respect to the financial statements and certain financial information contained in the Disclosure Package.

 

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(i)                 Bring-down Comfort Letter. At the Closing Time, the Representatives, on behalf of the Initial Purchasers, shall have received from EY a letter, dated as of the Closing Date, to the effect that EY reaffirms the statements made in its letter furnished pursuant to subsection (h) of this Section 5, except that (i) it shall cover the financial statements and certain financial information contained in the Final Offering Memorandum and (ii) the specified date referred to shall be a date not more than three business days prior to the Closing Time.

(j)                 Approval of Listing. At the Closing Time, the Notes shall have been approved in principle for listing on the SGX-ST, subject only to official notice of issuance.

(k)                 No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and prior to the Closing Date:

(i) in the judgment of the Initial Purchasers, there shall not have occurred any event or development, and no information shall have become known, that, individually or in the aggregate, would have a Material Adverse Effect (“Material Adverse Change”); and

(ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Issuer or any of its subsidiaries by any “nationally recognized statistical rating organization” as such term is defined in Section 3(a)(62) of the Exchange Act.

(l)                 DTC. At the Closing Time, the Notes shall be eligible for clearance and settlement through DTC.

(m)                 Indenture. Executed copies of the Indenture in form and substance reasonably satisfactory to the Representatives shall have been delivered to the Representatives, on behalf of the Initial Purchasers.

(n)                 Additional Documents. On or before the Closing Time, the Representatives, on behalf of the Initial Purchasers, or counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Notes as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained.

(o)                 Termination of Agreement. If any condition specified in this Section 5 shall not have been fulfilled in all material respects when and as required to be fulfilled, this Agreement may be terminated by the Representatives, acting jointly, on behalf of the Initial Purchasers, by notice to the Issuer at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 hereof and except that Sections 7 and 8 hereof shall survive any such termination and remain in full force and effect.

The documents required to be delivered by this Section 5 will be delivered at the offices of White & Case, counsel for the Initial Purchasers, at 9th Floor, Central Tower, 28 Queen’s Road, Central, Hong Kong.

 

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SECTION 6.     Offers and Sales of the Notes.

(a)                 Offer and Sale Procedures. Each of the Initial Purchasers hereby, severally and not jointly, establishes and agrees to observe the following procedures in connection with the offer and sale of the Notes:

(i)    Offers and Sales only to Qualified Institutional Buyers in the United States or to Non-U.S. Persons. Initial offers and sales of the Notes shall only be made (A) by the U.S. registered broker-dealer affiliates of such Initial Purchaser to persons whom such Initial Purchaser reasonably believes to be qualified institutional buyers, as defined in Rule 144A (“QIBs”) in accordance with Rule 144A or (B) to non-U.S. persons (as defined in Regulation S) outside the United States in reliance upon Regulation S.

(ii)    Each of the Initial Purchasers hereby, severally and not jointly, represents and agrees that:

 

  (1)

it, or the U.S. registered broker-dealer affiliates of such Initial Purchaser making sales pursuant to Rule 144A, is a QIB; and

 

  (2)

if it is not a QIB, then it represents and agrees with the Issuer and the other Initial Purchasers that it shall offer and sell the Notes only outside the United States in offshore transactions to persons who are not U.S. persons (as defined in Rule 902 under the Securities Act).

(iii)    No Directed Selling Efforts. Neither such Initial Purchaser nor its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Regulation S and such Initial Purchaser, its Affiliates and any person acting on its or their behalf has complied and will comply with the offering restrictions of Regulation S.

(iv)    No General Solicitation. No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) has been or will be used in connection with the offering or sale of the Notes.

(v)    Purchases by Non-Bank Fiduciaries. In the case of a non-bank Subsequent Purchaser of a Note acting as a fiduciary for one or more third parties, each third party shall, in the judgment of the Initial Purchaser, be a QIB or a non-U.S. person outside the United States.

(vi)    Restrictions on Transfer. The selling and transfer restrictions and the other provisions set forth in the Offering Memorandum under the heading “Transfer Restrictions” including, without limitation, the legend required thereby, shall apply to the Notes except as otherwise agreed by the Issuer and the Initial Purchasers.

(b)                 Restriction on Repurchases. The Issuer covenants with each Initial Purchaser that, until the expiration of one year after the later of the date of the original issuance of the Notes and the last date on which the Issuer or any of its Affiliates were the owner of Notes, neither the Issuer nor any of its subsidiaries will, and will cause persons acting on its or their behalf (other than the Initial Purchasers, as to whom no covenant is made), not to, resell any such Notes which are “restricted securities” (as such term is defined under Rule 144(a)(3) under the Securities Act), whether as beneficial owner or otherwise (except an agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker’s transactions).

 

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(c)                 Resale Pursuant to Rule 903 of Regulation S or Rule 144A. Each Initial Purchaser understands that the Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each of the Initial Purchasers, severally and not jointly, represents and agrees, that, except as permitted by Section 6(a) above, it has not offered and sold Notes and will not offer and sell Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date upon which the Offering commences and the Closing Time, except in accordance with Rule 903 of Regulation S, Rule 144A or another applicable exemption from the registration requirements of the Securities Act. Accordingly, none of such Initial Purchaser, its Affiliates or any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to Notes sold hereunder pursuant to Regulation S, and such Initial Purchaser, its Affiliates and any person acting on its or their behalf have complied and will comply with the offering restrictions of Regulation S. Each of the Initial Purchasers, severally and not jointly, agrees that, at or prior to confirmation of a sale of Notes pursuant to Regulation S, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it or through it during the restricted period a confirmation or notice to substantially the following effect:

“This Note has not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or with any securities regulatory authority of any jurisdiction and may not be reoffered, resold, pledged or otherwise transferred within the United States or to a U.S. person (as defined in Regulation S under the Securities Act) except pursuant to applicable exemption from registration under the Securities Act. The Issuer of this Note has agreed that this legend shall be deemed to have been removed on the 41st day following the later of the commencement of the offering of the Notes and the final delivery date with respect thereof.”

SECTION 7.     Indemnification.

(a)                 Indemnification of Initial Purchasers. The Issuer will indemnify and hold harmless each Initial Purchaser, its partners, members, directors, officers, employees, agents, affiliates and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “Indemnified Party”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Securities Act, the Exchange Act, other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Package as of any time, the Final Offering Memorandum (or any amendment or supplement thereto) or any Supplemental Offering Materials, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating, defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Indemnified Party is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Issuer shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Issuer by any Initial Purchaser specifically for use therein, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the information described as such in subsection (b) below.

 

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(b)                 Indemnification of Issuer. Each Initial Purchaser will, severally and not jointly, indemnify and hold harmless the Issuer and each person, if any, who controls the Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “Initial Purchaser Indemnified Party”), against any losses, claims, damages or liabilities to which such Initial Purchaser Indemnified Party may become subject, under the Securities Act, the Exchange Act, other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of the Disclosure Package as of any time, the Final Offering Memorandum (or any amendment or supplement thereto) or in any Supplemental Offering Materials or arise out of or are based upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuer by such Initial Purchaser specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by such Initial Purchaser Indemnified Party in connection with investigating or defending against any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Initial Purchaser Indemnified Party is a party thereto), whether threatened or commenced, based upon any such untrue statement or omission, or any such alleged untrue statement or omission as such expenses are incurred, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the following information in the Offering Memorandum furnished on behalf of each Initial Purchaser: its name as set forth under the table in the second paragraph under the section “Plan of Distribution” in the Disclosure Package and the Final Offering Memorandum.

(c)                 Actions against Parties; Notification. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above hereafter, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7, as the case may be, for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.

 

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(d)     Control Persons. The obligations of the Issuer under this Section 7 shall be in addition to any liability which the Issuer may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Initial Purchaser, within the meaning of the Securities Act; and the obligations of the Initial Purchasers under this Section 7 shall be in addition to any liability which the respective Initial Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each director of the Issuer and to each person, if any, who controls the Issuer within the meaning of the Securities Act.

SECTION 8.     Contribution.

If the indemnification provided for in Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7 (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in Section 7 (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other from the Offering or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuer on the one hand and the Initial Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Issuer bear to the total underwriting discounts and commissions received by the Initial Purchasers. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer or the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section 8. Notwithstanding the provisions of this Section 8, no Initial Purchaser shall be required to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by such Initial Purchaser under this Agreement, less the aggregate amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers’ obligations in this Section 8 to contribute are several in proportion to their respective underwriting obligations and not joint. The Issuer and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8.

 

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SECTION 9.     Agreement among Initial Purchasers.

The execution of this Agreement on behalf of all parties hereto will constitute the acceptance by each Initial Purchaser of the International Capital Market Association Standard Form Agreement Among Managers Version 1 with amendments set out in the New York Law Schedule for Non-Equity Related Issues governed by New York Law (“AAM”). The Initial Purchasers further agree that references in the AAM to the “Lead Manager”, the “Joint Bookrunners” and the “Managers” shall mean the Initial Purchasers, references in the AAM and this Agreement to the “Settlement Lead Manager” shall mean Deutsche Bank AG, Singapore Branch (or persons acting on its behalf) and references in the AAM to the “Stabilisation Coordinator” shall mean Deutsche Bank AG, Singapore Branch (or persons acting on its behalf). The Initial Purchasers agree as between themselves to amend the AAM as follows:

 

  (a)

in Clause 3, the term “Lead Manager” shall be deemed to refer to the Settlement Lead Manager;

 

  (b)

the following sentence shall be deemed to be added to the end of Clause 3(2):

“In addition, any profits incurred by the Settlement Lead Manager as a result of any action taken pursuant to this Clause shall be shared among the non-defaulting Initial Purchasers (including the Settlement Lead Manager) in proportion to their Commitments or on such other basis as the Settlement Lead Manager considers, in its absolute discretion, to be fair.”

 

  (c)

the following clause shall be deemed to be inserted into the AAM as a new Clause 6A:

“6A. OVERALLOTMENT

Each Manager acknowledges and agrees that, in order to assist in the orderly distribution of the Securities, and subject to compliance with applicable laws and regulations, including the EU Market Abuse Regulation (EU) No 596/20 14 as amended where applicable, one or more of the managers (for the purposes of this Clause, the “participating Initial Purchasers”) may agree to over allot in arranging subscriptions, sales and purchases of the Securities and may subsequently make purchases and sales of the Securities, in addition to their respective underwriting commitments, in the open market or otherwise, on such terms as the participating Initial Purchasers deem advisable. Such overallotment positions may be allocated among all or some of the participating Initial Purchasers equally or in such proportions as the participating Initial Purchasers may agree. The participating Initial Purchasers shall agree among themselves whether (i) each participating Initial Purchaser is responsible for managing its own position and is liable for any loss or entitled to any profit arising from the management of such position or (ii) the positions should be aggregated with one or more participating Initial Purchasers being responsible for managing the combined position and to aggregate profits and losses and share them among all or some of the participating Initial Purchasers in such proportions as they may agree. Nothing in Clause 6(2) shall prohibit the purchases, sales and overallotments of Securities described in this Clause as such purchases, sales and overallotments shall not, for the purposes of the AAM, be treated as Stabilization Transactions as defined in the AAM.”

 

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  (d)

Clause 7 shall be deleted in entirety and replaced with the following:

“The Managers agree that any fees and expenses that are the joint responsibility of the Managers and payable by the Managers, and any out-of-pocket expenses that are the joint responsibility of the Managers and reimbursable but not reimbursed by the Issuer, shall be aggregated and allocated among the Managers pro rata to their respective Commitments and each Manager authorizes the Settlement Lead Manager to charge or credit to each Manager’s account for its proportional share of such fees and expenses.”

 

  (e)

Clause 8 shall be deemed to be deleted in its entirety;

 

  (f)

The definition of “Commitments” shall be deleted in its entirety and replaced with the following:

““Commitments” means, (i) for the purposes of Clauses 3, 6, 7 and 10, the fee allocation proportion paid to each of the Managers under the Subscription Agreement and any related fee letters, or, if such fee allocation is not known at the relevant time, the amounts severally underwritten by the Managers as set out in the Subscription Agreement, and (ii) for the purposes of all other clauses of this Agreement, the amounts severally underwritten by the Initial Purchasers as set out in the Subscription Agreement.”; and

 

  (g)

Each of Deutsche Bank AG, Singapore Branch and Morgan Stanley & Co. LLC shall act as Representative of each of them for administrative purposes (in such capacity, each a “Representative” and together the “Representatives”).

Where there are any inconsistencies between this Agreement and the AAM, the terms of this Agreement shall prevail.

SECTION 10.     Default of Initial Purchasers.

If any Initial Purchaser or Initial Purchasers default in their obligations to purchase Notes hereunder at the Closing Time and the principal amount of Notes that such defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase does not exceed 10% of the aggregate principal amount of Notes that the Initial Purchasers are obligated to purchase at such Closing Time, the Representatives may make arrangements satisfactory to the Issuer for the purchase of such Notes by other persons, including any of the Initial Purchasers, but if no such arrangements are made by such Closing Time, the non-defaulting Initial Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Notes that such defaulting Initial Purchasers agreed but failed to purchase at such Closing Time. If any Initial Purchaser or Initial Purchasers so default and the principal amount of Notes with respect to which such default or defaults occur exceeds 10% of the aggregate principal amount of Notes that the Initial Purchasers are obligated to purchase at such Closing Time and arrangements satisfactory to the Representatives and the Issuer for the purchase of such Notes by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Initial Purchaser or the Issuer, except as provided in Section 12 hereof. As used in this Agreement, the term “Initial Purchaser” includes any person substituted for an Initial Purchaser under this Section 10. Nothing herein will relieve a defaulting Initial Purchaser from liability for its default.

 

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SECTION 11.     Representations, Warranties and Agreements to Survive Delivery.

All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Issuer submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or controlling person, or by or on behalf of the Issuer, and shall survive delivery of the Notes to the Initial Purchasers.

SECTION 12.     Termination of Agreement.

(a)                 Termination; General.     Prior to the Closing Time, this Agreement may be terminated by the Initial Purchasers by notice given to the Issuer if at any time: (i) trading in securities generally on the New York Stock Exchange, NASDAQ or the SGX-ST shall have been suspended or materially limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the SGX-ST, or maximum ranges for prices shall have been generally required by any of said exchanges or by such system or by order of the Commission or any other governmental authority in the United States or otherwise or a material disruption has occurred in commercial banking or securities, settlement or clearance services with respect to DTC in the United States or with respect to Euroclear and Clearstream in Europe; (ii) a general banking moratorium shall have been declared by any of federal, New York, Macau, Hong Kong, Singapore or European authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States’ or international political, financial or economic conditions or currency exchange rates or exchange controls, in each case the effect of which is such as to make it, in the judgment of the Initial Purchasers, impracticable or inadvisable to market the Notes in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of the Notes; (iv) in the judgment of the Initial Purchasers there shall have occurred any Material Adverse Change; or (v) the Issuer and its subsidiaries shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Initial Purchasers may interfere materially with the conduct of the business and operations of the Issuer and its subsidiaries taken as a whole regardless of whether or not such loss shall have been insured; provided that in the case of (iv) or (v), any such change or loss shall have occurred from and after the date of this Agreement and prior to the Closing Time.

 

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(b)                 Liabilities. If this Agreement is terminated pursuant to this Section 12, such termination shall be without liability of any party to any other party; provided that Sections 7 and 8 hereof shall survive such termination and remain in full force and effect.

SECTION 13.     Reimbursement of Initial Purchasers’ Expenses.

If the sale to the Initial Purchasers of the Notes on the Closing Date pursuant to this Agreement is not consummated because of any refusal, inability or failure on the part of the Issuer to perform any agreement herein or to comply with any provision hereof (provided that the occurrence of any event under Section 12 or failure to satisfy any condition under Section 5 shall not be deemed as any refusal, inability or failure on the part of the Issuer), the Issuer agrees to reimburse the Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all reasonable expenses as set forth in Section 4 hereof and the legal fees and expenses incurred by the Initial Purchasers.

SECTION 14.     Notices.

All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given upon receipt if mailed, delivered or transmitted by telefax at the address set forth below:

 

  (a)

if to the Initial Purchasers:

c/o Deutsche Bank AG, Singapore Branch

One Raffles Quay

#17-00 South Tower

Singapore 048583

Telephone: +65 6423 5342

Attention: Global Risk Syndicate

Facsimile: +65 6883 1769

 

  (b)

if to the Issuer:

Melco Resorts Finance Limited

INTERTRUST CORPORATE SERVICES (CAYMAN) LIMITED, 190 Elgin

Avenue, George Town

Grand Cayman KY1-9005, Cayman Islands

with a copy to:

Melco Resorts & Entertainment Limited

36/F, The Centrium

60 Wyndham Street

Central, Hong Kong

Telephone: 852 2598 3600

Attention: Company Secretary

Facsimile: 852 2537 3618

 

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SECTION 15.     Parties.

This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Issuer and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers, the Issuer and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 hereof and their heirs and legal representative, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers, the Issuer and their respective successors, and said controlling persons and officers and directors and their heirs and legal representative, and for the benefit of no other person, firm or corporation. No purchaser of Notes from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase.

SECTION 16.     Counterparts.

This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

SECTION 17.     Absence of Fiduciary Relationship. The Issuer acknowledges and agrees that:

(a)                 No Other Relationship. The Initial Purchasers have been retained solely to act as the initial purchasers of the Notes and that no fiduciary, advisory or agency relationship between the Issuer and the Initial Purchasers has been created in respect of any of the transactions contemplated by this Agreement, the Disclosure Package or the Final Offering Memorandum, irrespective of whether the Initial Purchasers have advised or are advising the Issuer on other matters;

(b)                 Arms’ Length Negotiations. The price of the Notes set forth in this Agreement was established by the Issuer following discussions and arms-length negotiations with the Initial Purchasers and each of the Issuer is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;

(c)                 Absence of Obligation to Disclose. The Issuer has been advised that the Initial Purchasers and their respective affiliates are engaged in a broad range of transactions which may involve interests that differ from or conflict with those of the Issuer and that the Initial Purchasers have no obligation to disclose such interests and transactions to the Issuer by virtue of any fiduciary, advisory or agency relationship; and

(d)                 Waiver. The Issuer waives, to the fullest extent permitted by law, any claims it may have against the Initial Purchasers for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Initial Purchasers shall have no liability (whether direct or indirect) to the Issuer in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Issuer, including shareholders, employees or creditors of the Issuer.

 

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SECTION 18.     MiFID Product Governance.

Solely for the purposes of the requirements of Article 9(8) of the MIFID Product Governance rules under EU Delegated Directive 2017/593 (the “Product Governance Rules”) regarding the mutual responsibilities of manufacturers under the Product Governance Rules, Deutsche Bank AG, Singapore Branch (the “Manufacturer”) acknowledges that it understands the responsibilities conferred upon it under the Product Governance Rules relating to each of the product approval process, the target market and the proposed distribution channels as applying to the Notes and the related information set out in the Offering Memorandum and any announcements in connection with the Notes. The parties to this Agreement note the application of the Product Governance Rules to the Manufacturer and acknowledge the target market and distribution channels identified as applying to the Notes by the Manufacturer and the related information set out in the Offering Memorandum and any announcements in connection with the Notes.

SECTION 19.     Recognition of the U.S. Special Resolution Regimes.

(a)                 In the event that any Initial Purchaser that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Initial Purchaser of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

(b)                 In the event that any Initial Purchaser that is a Covered Entity or a BHC Act affiliate of such Initial Purchaser becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Initial Purchaser are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

For the purpose of this Section 19:

“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).

“Covered Entity” means any of the following:

 

  (i)

a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

 

  (ii)

a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

 

  (iii)

a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

 

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“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

SECTION 20.     Waiver of Immunity.

To the extent that the Issuer has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment in aid or otherwise) with respect to itself or any of its property, the Issuer hereby irrevocably waives and agrees not to plead or claim such immunity in respect of its obligations under this Agreement.

SECTION 21.     Applicable Law.

This Agreement shall be governed by and construed in accordance with the laws of the state of New York.

The Issuer hereby submits to the non-exclusive jurisdiction of the federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Issuer irrevocably and unconditionally waives any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in federal and state courts in the Borough of Manhattan in The City of New York and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum. The Issuer irrevocably appoints Law Debenture Corporate Services Inc., 801 2nd Avenue, Suite 403, New York, NY10017, as its authorized agent in the Borough of Manhattan in The City of New York upon which process may be served in any such suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Issuer by the person serving the same to the address provided in Section 14, shall be deemed in every respect effective service of process upon the Issuer in any such suit or proceeding. The Issuer further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of five years from the date of this Agreement.

The obligations of the Issuer pursuant to this Agreement in respect of any sum due to any Initial Purchaser shall, notwithstanding any judgment in a currency other than U.S. dollars, not be discharged until the first business day, following receipt by such Initial Purchaser of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such Initial Purchaser may in accordance with normal banking procedures purchase U.S. dollars with such other currency; if the U.S. dollars so purchased are less than the sum originally due to such Initial Purchaser hereunder, the Issuer agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Initial Purchaser against such loss. If the U.S. dollars so purchased are greater than the sum originally due to such Initial Purchaser hereunder, such Initial Purchaser agrees to pay to the Issuer an amount equal to the excess of the dollars so purchased over the sum originally due to such Initial Purchaser hereunder.

 

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SECTION 22.     Waiver of Jury Trial. Each party hereto hereby waives its rights to a jury trial of any claim or cause of action based upon or arising out of this Agreement or the subject matter hereof. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. This Section 22 has been fully discussed by each of the parties hereto and these provisions shall not be subject to any exceptions. Each party hereto hereby further warrants and represents that such party has reviewed this waiver with its legal counsel, and that such party knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, supplements or modifications to (or assignments of) this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial (without a jury) by the court.

SECTION 23.     Effect of Headings.

The section headings herein are for convenience only and shall not affect the construction hereof.

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between each of the Initial Purchasers and the Issuer in accordance with its terms.

 

Very truly yours,

[Signature Pages to Follow]

 

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Issuer

MELCO RESORTS FINANCE LIMITED

By:    

  

/s/ Chung Yuk Man

 

Name: Chung Yuk Man

 

Title:   Director

[Signature page to Purchase Agreement]

The foregoing Agreement is hereby confirmed and accepted as of the date first above written:

DEUTSCHE BANK AG, SINGAPORE BRANCH

 

By:    

  

/s/ Haitham Ghattas

 

Name: Haitham Ghattas

 

Title:   Managing Director

 

By:    

  

/s/ Edward Tsui

 

Name: Edward Tsui

 

Title:   Managing Director

[Signature page to Purchase Agreement]

MORGAN STANLEY & CO. LLC

 

By:    

  

/s/ Ian Drewe

 

Name: Ian Drewe

 

Title:   ED

[Signature page to Purchase Agreement]

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

 

By:    

  

/s/ Dipti Thakar

 

Name: Dipti Thakar

 

Title:   Director, Transaction Management

[Signature page to Purchase Agreement]

BANK OF COMMUNICATIONS CO., LTD. MACAU BRANCH

 

By:    

  

/s/ Leng San

 

Name: Leng San

 

Title:   Vice President

[Signature page to Purchase Agreement]

BOCI ASIA LIMITED

 

By:    

  

/s/ Michael Mak

 

Name: Michael Mak

 

Title:   Managing Director,

Co-Head of Debt Capital Markets

[Signature page to Purchase Agreement]

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (MACAU) LIMITED

 

By:    

  

/s/ Chan Kam Lun

 

Name: Chan Kam Lun

 

Title:   DCEO

 

By:    

  

/s/ Deng Wan Hong

 

Name: Deng Wan Hong

 

Title:   DCEO

[Signature page to Purchase Agreement]

MIZUHO SECURITIES ASIA LIMITED

 

By:    

  

/s/ Andrew Loong

 

Name: Andrew Loong

 

Title:   Head of Transaction Management, Asia (ex-Japan)

[Signature page to Purchase Agreement]

SCHEDULE A

 

Name of Initial Purchaser

    Principal Amount of Notes
(US$)		  

Deutsche Bank AG, Singapore Branch

      450,000,000  

Morgan Stanley & Co. LLC

      202,500,000  

Australia and New Zealand Banking Group Limited1

      90,000,000  

Bank of Communications Co., Ltd. Macau Branch

      22,500,000  

BOCI Asia Limited

      67,500,000  

Industrial and Commercial Bank of China (Macau) Limited

      22,500,000  

Mizuho Securities Asia Limited

      45,000,000  
  

 

 

  

Total

      900,000,000  
  

 

 

  

 

 

1 

Incorporated with limited liability in Australia.

SCHEDULE B

SUBSIDIARIES OF THE ISSUER

MCO International Limited

MCO Nominee One Limited

MCO Investments Limited

Melco Resorts (Macau) Limited

MCO (Macau) Hotel Limited

MCO (Macau) Consulting Limited

Golden Future (Management Services) Limited

Melco Resorts (Cafe) Limited

COD Resorts Limited

Altira Resorts Limited

Jumbo Watertours Limited

MCO Nominee Two Limited

Melco International Investments (Henan) Limited

SCHEDULE C

PRICING SUPPLEMENT

STRICTLY CONFIDENTIAL

US$ 900,000,000 5.375% Senior Notes due 2029

Melco Resorts Finance Limited

November 26, 2019

 

 

Pricing Supplement dated November 26, 2019 to the

Preliminary Offering Memorandum dated November 25, 2019

This Pricing Supplement is qualified in its entirety by reference to the Preliminary Offering Memorandum. Capitalized terms used but not defined in this Pricing Supplement have the meanings ascribed to them in the Preliminary Offering Memorandum. The information in this Pricing Supplement supplements the Preliminary Offering Memorandum and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with the information in the Preliminary Offering Memorandum.

The US$900,000,000 5.375% Senior Notes due 2029 (the “Notes”) have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and are being offered only (1) to “qualified institutional buyers” as defined in Rule 144A under the Securities Act and (2) outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.

Distribution of this Pricing Supplement to any persons other than the person receiving this electronic transmission, its agents and any persons retained to advise the person receiving this electronic transmission, is unauthorized. Any photocopying, disclosure or alteration of the contents of this Pricing Supplement or any portion thereof by electronic mail or any other means to any person other than the person receiving this electronic transmission is prohibited. By accepting delivery of this Pricing Supplement, the recipient agrees to the foregoing.

 

Issuer:

   

Melco Resorts Finance Limited (the “Company”)

Security Description:

   

5.375% Senior Notes due 2029

Distribution:

   

144A and Regulation S

Notes:

   

Aggregate Principal Amount:

   

US$900,000,000

Currency:

   

U.S. Dollars

Maturity Date:

   

December 4, 2029

Interest Payment Dates:

   

June 4 and December 4, beginning on June 4, 2020

Trade Date:

   

November 26, 2019

Issue Date:

   

December 4, 2019 (T+5)

  

Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of pricing or the next three succeeding business days will be required, by virtue of the fact that the Notes initially will settle in T+5, to specify alternative settlement arrangements to prevent a failed settlement

Coupon:

   

5.375%

Issue Price:

   

100.000%

Yield to Maturity:

   

5.375%

Optional Redemption Provisions:

   

Optional Redemption:

   
Optional Redemption Prices:   

On or after December 4, 2024: 102.688%

  

On or after December 4, 2025: 101.792%

  

On or after December 4, 2026: 100.896%

  

December 4, 2027 and thereafter: 100.000%

Make-Whole Call:

   

Prior to December 4, 2024

Redemption with proceeds from certain equity offerings:

   

Prior to December 4, 2024, up to 35% may be redeemed at 105.375%

Gaming Redemption:

   

The Notes may be redeemed if the gaming authority of any relevant jurisdictions requires that holders or beneficial owners of the Notes be licensed, qualified or found suitable under applicable gaming laws and such holders or beneficial owners, as the case may be, fail to apply or become licensed or qualified within the required time period or are found unsuitable

Offer to Repurchase Provisions:

   

Change of Control Triggering

   

101%

Event

         

Special Put Option Triggering Event

   

Upon the occurrence of (1) any event after which none of the Company or any Subsidiary of the Company has such licenses, concessions, subconcessions or other permits or authorizations as are necessary for the Company and its Subsidiaries to own or manage casino or gaming areas or operate casino games of fortune and chance in Macau in substantially the same manner and scope as the Company and its Subsidiaries are entitled to at the Issue Date, for a period of ten consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole; or (2) the termination, rescission, revocation or modification of any Gaming License which has had a material adverse effect on the financial condition, business, properties, or results of operations of the Company and its Subsidiaries, taken as a whole, each holder of the Notes will have the right to require the Company to repurchase all or any part of such holder’s Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Amounts, if any, to but excluding the date of repurchase

Security Codes:

      

Rule 144A Notes

   

Regulation S Notes

  

CUSIP No.:

   

58547D AD1

   

G5975L AE6

  

ISIN:

   

US58547DAD12

   

USG5975LAE68

Denominations:

   

US$200,000 minimum; US$1,000 increments

Issue Ratings:

   

BB / Ba2 (S&P / Moody’s)

Sole Global Coordinator and Left Lead Bookrunner:   

Deutsche Bank AG, Singapore Branch

Joint Bookrunners:

   

Morgan Stanley & Co. LLC, Australia and New Zealand Banking Group Limited, Bank of Communications Co., Ltd. Macau Branch, BOCI Asia Limited, Industrial and Commercial Bank of China (Macau) Limited and Mizuho Securities Asia Limited

Initial Purchasers and Principal Amount of Notes Purchased:    Initial Purchaser    Principal Amount of Notes Purchased
  

Deutsche Bank AG, Singapore Branch

    US$450,000,000
  

Morgan Stanley & Co. LLC

    US$202,500,000
  

Australia and New Zealand Banking Group Limited1

    US$90,000,000
  

Bank of Communications Co., Ltd. Macau Branch

    US$22,500,000
  

BOCI Asia Limited

    US$67,500,000
  

Industrial and Commercial Bank of China (Macau) Limited

    US$22,500,000
  

Mizuho Securities Asia Limited

    US$45,000,000

Listing:

   

Approval-in-principle has been obtained from the Singapore Exchange Securities Trading Limited (“SGX-ST”) for the listing and quotation of the Notes on the Official List of the SGX-ST

Trustee, Paying Agent, Registrar and Transfer Agent:   

Deutsche Bank Trust Company Americas

In addition to reflecting the information set forth above, the Preliminary Offering Memorandum is hereby supplemented, amended and modified as follows (page references are to page numbers in the Preliminary Offering Memorandum), which reflect certain recent developments and other updated information. Any conforming amendments or modifications within the Preliminary Offering Memorandum as a result of the following amendments or modifications have not been repeated in this Pricing Supplement (unless otherwise specified, additions are shown in double-underline):

 

 

1 

Incorporated with limited liability in Australia.

The second sentence in the first paragraph under the section “Risks Relating to Our Indebtedness and the Notes—We will have substantial amount of indebtedness, which could have important consequences for holders of the Notes and significant effects on our business and future operations” on page 38 of the Preliminary Offering Memorandum is amended by this Pricing Supplement as follows:

Assuming we had completed this offering of the Notes and applied the net proceeds therefrom to make a full repayment of the principal amount outstanding under the 2015 Revolving Credit Facility and a partial prepayment of the principal amount outstanding under the 2015 Term Loan Facility as intended, we would have had total indebtedness of US$2.97 billion, comprising primarily the 2015 Credit Facilities, the 2017 Notes, the 2019 Notes due 2026, the 2019 Notes due 2027 and the Notes, which would require significant interest and principal payments.

The section “Use of Proceeds” on page 46 of the Preliminary Offering Memorandum is amended by this Pricing Supplement as follows:

We estimate that the net proceeds from this Offering will be approximately US$890.5 million after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this Offering to make a full repayment of the principal amount outstanding under the 2015 Revolving Credit Facility and a partial prepayment of the principal amount outstanding under the 2015 Term Loan Facility.

The section “Capitalization” on page 48 of the Preliminary Offering Memorandum is amended by the Pricing Supplement by being replaced in its entirety with the following:

The following table sets out the cash and cash equivalents, indebtedness and capitalization of Melco Resorts Finance and its subsidiaries as of September 30, 2019 on an actual basis and as adjusted to give effect to the following:

 

  •  

the issuance of US$900 million aggregate principal amount of the Notes offered hereby;

  •  

the application of the net proceeds of the Notes to make a full repayment of the principal amount outstanding under the 2015 Revolving Credit Facility and a partial prepayment of the principal amount outstanding under the 2015 Term Loan Facility; and

  •  

the declaration of dividends of US$137,271.22 per share totaling US$165.0 million to the Parent. See “Summary—Recent Developments”.

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds,” “Summary—Recent Developments” and our consolidated financial statements prepared in accordance with U.S. GAAP, the related notes and other financial information contained elsewhere in this offering memorandum.

     As of September 30, 2019  
     Actual     As Adjusted  
     (in thousands of U.S. dollars)  

Cash and cash equivalents

      724,172       559,172  
  

 

 

    

 

 

  

Indebtedness:

     

2015 Credit Facilities, net (1)

      888,679       1,193  

2017 Notes, net (1)

     979,390       979,390  

2019 Notes due 2026, net (1)

      493,856       493,856  

2019 Notes due 2027, net (1)

      592,511       592,511  

The Notes offered hereby (2)

      -       900,000  

Advance from an affiliated company

      2,074       2,074  
  

 

 

    

 

 

  

Total indebtedness

      2,956,510       2,969,024  
  

 

 

    

 

 

  

Shareholder’s Equity:

     

Ordinary shares at US$0.01 par value per share

      -       -  

Additional paid-in capital

      1,849,785       1,849,785  

Accumulated other comprehensive losses

      (20,847 )      (20,847 ) 

Retained earnings (3)(4)

      489,734       312,220  
  

 

 

    

 

 

  

Total shareholder’s equity

      2,318,672       2,141,158  
  

 

 

    

 

 

  

Total capitalization

      5,275,182       5,110,182  
  

 

 

    

 

 

  

 

(1)    

As of September 30, 2019, the outstanding principal amounts under 2015 Credit Facilities, 2017 Notes, 2019 Notes due 2026 and 2019 Notes due 2027 were US$891.7 million, US$1,000 million, US$500 million and US$600 million, respectively. The amounts presented in the above table were net of unamortized deferring financing costs and original issue premiums.

 

(2)    

Reflects the principal amount of the Notes.

 

(3)    

Assumes the estimated fees and expenses related to this Offering, which may be capitalized as deferred financing costs under U.S. GAAP, are instead recognized as expenses in the consolidated statements of operations.

 

(4)    

Assumes the unamortized deferred financing costs related to the 2015 Term Loan Facility as of September 30, 2019 of US$3.0 million, part of which may remain capitalized as deferred financing costs under U.S. GAAP, are instead written off and recognized as expenses in the consolidated statements of operations upon the repayment of amounts outstanding under the 2015 Credit Facilities using the net proceeds from this Offering.

The Company has prepared the Preliminary Offering Memorandum to which this communication relates. Before you invest, you should read the Preliminary Offering Memorandum and the contents of this pricing supplement for more complete information about the Issuer and this offering. You should already have a copy of the Preliminary Offering Memorandum, but the Initial Purchasers will arrange to send you another copy, if you request it.

THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY NOTES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. THE NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, OR ANY OTHER JURISDICTION IN THE UNITED STATES.

Singapore Securities and Futures Act Product Classification: Solely for the purposes of its obligations pursuant to sections 309B(1)(a) and 309B(1)(c) of the Securities and Futures Act (Chapter 289 of Singapore) (the “SFA”), the Issuer has determined, and hereby notifies all relevant persons (as defined in Regulation 3(b) of the Securities and Futures (Capital Markets Products) Regulations 2018 (the “SF (CMP) Regulations”) that the Notes are “prescribed capital markets products” (as defined in the SF (CMP) Regulations) and “Excluded Investment Products” (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

EX-4.34

Exhibit 4.34

 

  CLAYTON UTZ

 

Execution Version

Termination of certain obligations-

Share sale agreement

CPH Crown Holdings Pty Limited ACN 603 296 804

Seller

Melco Resorts & Entertainment Limited

Buyer

Clayton Utz

Lawyers

Level 15 1 Bligh Street

Sydney NSW 2000

GPO Box 9806

Sydney NSW 2001

 

Tel

    +61 2 9353 4000

Fax

    +61 2 8220 6700

www.claytonutz.com

Our reference 13515/20368/80206482

  CLAYTON UTZ

 

Contents

 

1.    Definitions and interpretation    1
     1.1    Definitions    1
     1.2    Interpretations    1
2.    Termination    1
     2.1    Terminated provisions    1
   2.2    Releases    1
   2.3    Bar to suit    1
3.    General    2
     3.1    Operating provisions    2
     3.2    Counterparts    2
     3.3    Costs    2
     3.4    Further Acts    2
     3.5    Severance    2
     3.6    No representation or reliance    2

 

 

Termination of certain obligations - Share sale agreement

  CLAYTON UTZ

 

Termination of certain obligations - Share sale agreement

 

 

 

Date

6 February 2020

 

Parties

CPH Crown Holdings Pty Limited ACN 603 296 804 of ‘Liberty Place’, Level 39, 161 Castlereagh Street Sydney NSW 2000 (Seller)

 

  

Melco Resorts & Entertainment Limited of c/o lntertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands (Buyer)

Background

 

A.

The Buyer and the Seller are parties to the Share Sale Agreement and wish to terminate certain obligations relating to Second Tranche Completion on the terms and conditions set out in this deed.

Operative provisions

 

 

 

1.

Definitions and interpretation

 

1.1

Definitions

In this deed:

Share Sale Agreement means the share sale agreement between the Buyer and the Seller dated 30 May 2019 and as amended by the deed dated 28 August 2019.

 

1.2

Interpretations

Capitalised terms not otherwise defined in this deed have the meaning given to them in the Share Sale Agreement.

 

 

 

2.

Termination

 

2.1

Terminated provisions

The parties agree that, on and from the date of this deed, the following provisions of the Share Sale Agreement as set out in Schedule 1 have no further force and effect:

 

  (a)

clause 2.2;

 

  (b)

clause 3;

 

  (c)

clause 4.2;

 

  (d)

clause 5; and

 

  (e)

each provision of clause 6 to the extent it relates to the Second Tranche Shares.

 

2.2

Releases

The Buyer and the Seller release the other from all actions, demands, claims’ and proceedings under or in connection with the Share Sale Agreement (except those under or in connection with a Seller Warranty in clause 2.1 of Schedule 1 of the Share Sale Agreement).

 

2.3

Bar to suit

 

  (a)

Except for claims relating to the enforcement of this document, the parties must not bring or pursue, or procure a third party to bring or pursue, a claim against the other party in respect of any claims referred to in clause 2.2.

 

  (b)

This document may be pleaded as a bar to any suit, action or legal proceeding by any party against any other party in respect of any claims referred to in clause 2.2.

 

 

Termination of certain obligations - Share sale agreement

  CLAYTON UTZ

 

 

 

3.

General

 

3.1

Operating provisions

Clauses 1.2 (Interpretation), 7 (Confidentiality), 9 (Notices), 10 (Entire agreement) and 12 (Governing law and jurisdiction) of the Share Sale Agreement apply to this deed as if set out in full in this deed.

 

3.2

Counterparts

This deed may be executed in any number of counterparts and by the parties on separate counterparts. Each counterpart constitutes an original of this deed, and all together constitute one deed.

 

3.3

Costs

Except as otherwise provided in this deed, each party must pay its own costs and expenses in connection with negotiating, preparing, executing and performing this deed and the Share Sale Agreement.

 

3.4

Further Acts

Each party must promptly do all further acts and execute and deliver all further documents (in form and content reasonably satisfactory to that party) required by law or reasonably requested by another party to give effect to this deed and the Share Sale Agreement.

 

3.5

Severance

If at any time any provision of this deed is held or found to be void, invalid or otherwise unenforceable (whether in respect of a particular party or generally), it will be deemed to be severed to the extent that it is void or to the extent of violability, invalidity or unenforceability, but the remainder of that provision will remain in full force and effect.

 

3.6

No representation or reliance

Each party acknowledges that no party (nor any person acting on a party’s behalf) has made any representation or other inducement to it to enter into this deed, except for representations or inducements expressly set out in this deed.

 

 

Termination of certain obligations - Share sale agreement

  CLAYTON UTZ

 

Executed as a deed

 

Executed by CPH Crown Holdings Pty Limited

ACN 603 296 804 in accordance with section 127

of the Corporations Act 2001 (Cth):

     

 

/s/ Michael Johnston

     

 

/s/ Catherine Davies

Signature of director

   

Signature of company secretary/director

 

Michael Johnston

Director

   

 

Catherine Davies

Company Secretary

Full name of director

     

Full name of company secretary/director

 

 

Termination of certain obligations - Share sale agreement

  CLAYTON UTZ

 

Signed, sealed and delivered for and on behalf

of Melco Resorts & Entertainment Limited by

its authorised signatory in the presence of:

         

 

/s/ Christy Law

     

 

/s/ Stephanie Cheung

Signature of witness

     

Signature of authorised signatory

 

Christy Law

     

 

Stephanie Cheung

Full name of witness

     

Full name of authorised signatory

     LOGO

 

 

Termination of certain obligations - Share sale agreement

EX-8.1

Exhibit 8.1

Melco Resorts & Entertainment Limited

List of Significant Subsidiaries

As of December 31, 2019

 

1.

   

COD Resorts Limited, incorporated in the Macau Special Administrative Region of the People’s Republic of China

2.

   

MCO (NEA) Holdings Limited, incorporated in the Hong Kong Special Administrative Region of the People’s Republic of China

3.

   

MCO (Philippines) Investments Limited, incorporated in the British Virgin Islands

4.

   

MCO Cotai Investments Limited, incorporated in the Cayman Islands

5.

   

MCO Holdings Limited, incorporated in the Cayman Islands

6.

   

MCO International Limited, incorporated in the Cayman Islands

7.

   

MCO Investments Limited, incorporated in the Cayman Islands

8.

   

MCO Nominee One Limited, incorporated in the Cayman Islands

9.

   

Melco Resorts (Macau) Limited, incorporated in the Macau Special Administrative Region of the People’s Republic of China

10.

   

Melco Resorts and Entertainment (Philippines) Corporation, incorporated in the Philippines

11.

   

Melco Resorts Finance Limited, incorporated in the Cayman Islands

12.

   

Melco Resorts Leisure (PHP) Corporation, incorporated in the Philippines

13.

   

MPHIL Holdings No. 1 Corporation, incorporated in the Philippines

14.

   

MPHIL Holdings No. 2 Corporation, incorporated in the Philippines

15.

   

MSC Cotai Limited, incorporated in the British Virgin Islands

16.

   

SCP Holdings Limited, incorporated in the British Virgin Islands

17.

   

Studio City Company Limited, incorporated in the British Virgin Islands

18.

   

Studio City Developments Limited, incorporated in the Macau Special Administrative Region of the People’s Republic of China

19.

   

Studio City Entertainment Limited, incorporated in the Macau Special Administrative Region of the People’s Republic of China

20.

   

Studio City Finance Limited, incorporated in the British Virgin Islands

21.

   

Studio City Holdings Limited, incorporated in the British Virgin Islands

22.

   

Studio City Holdings Three Limited, incorporated in the British Virgin Islands

23.

   

Studio City Holdings Two Limited, incorporated in the British Virgin Islands

24.

   

Studio City International Holdings Limited, incorporated in the Cayman Islands

25.

   

Studio City Investments Limited, incorporated in the British Virgin Islands

EX-12.1

Exhibit 12.1

Certification by the Chief Executive Officer

I, Lawrence Yau Lung Ho, certify that:

 

1.

I have reviewed this annual report on Form 20-F of Melco Resorts & Entertainment Limited;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.

The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 31, 2020

 

By:

  

/s/ Lawrence Yau Lung Ho

 

Name: Lawrence Yau Lung Ho

Title: Chairman and Chief Executive Officer

EX-12.2

Exhibit 12.2

Certification by the Chief Financial Officer

I, Geoffrey Stuart Davis, certify that:

 

1.

I have reviewed this annual report on Form 20-F of Melco Resorts & Entertainment Limited;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.

The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 31, 2020

 

By:

  

/s/ Geoffrey Stuart Davis

 

Name: Geoffrey Stuart Davis

Title: Chief Financial Officer

EX-13.1

Exhibit 13.1

Certification by the Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Melco Resorts & Entertainment Limited (the “Company”) on Form 20-F for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lawrence Yau Lung Ho, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2020

 

By:

  

/s/ Lawrence Yau Lung Ho

 

Name: Lawrence Yau Lung Ho

Title: Chairman and Chief Executive Officer

EX-13.2

Exhibit 13.2

Certification by the Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Melco Resorts & Entertainment Limited (the “Company”) on Form 20-F for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Geoffrey Stuart Davis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2020

 

By:

  

/s/ Geoffrey Stuart Davis

 

Name: Geoffrey Stuart Davis

 

Title: Chief Financial Officer

EX-15.1

Exhibit 15.1

Our Ref: DW/JT/AH/M4237-H01577

31 March 2020

The Board of Directors

Melco Resorts & Entertainment Limited

36th Floor

The Centrium

60 Wyndham Street

Central

Hong Kong

Dear Sirs

FORM 20-F

We consent to the reference to our firm under the heading “Board Practices”, the heading “Documents on Display” and the heading “Corporate Governance” in the Annual Report on Form 20-F of Melco Resorts & Entertainment Limited for the year ended 31 December 2019, which will be filed with the U.S. Securities and Exchange Commission (the “Commission”) on 31 March 2020 under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under the Exchange Act, or the Rules and Regulations of the Commission thereunder.

Yours faithfully

/s/ WALKERS

WALKERS (HONG KONG)

EX-15.2

Exhibit 15.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

 

1.

Registration Statement (Form S-8 No. 333-143866) pertaining to the 2006 Share Incentive Plan of Melco Resorts & Entertainment Limited and

 

2.

Registration Statement (Form S-8 No. 333-185477) pertaining to the 2011 Share Incentive Plan of Melco Resorts & Entertainment Limited;

of our reports dated March 31, 2020, with respect to the consolidated financial statements of Melco Resorts & Entertainment Limited and the effectiveness of internal control over financial reporting of Melco Resorts & Entertainment Limited included in this Annual Report (Form 20-F) of Melco Resorts & Entertainment Limited for the year ended December 31, 2019.

/s/ Ernst & Young

Hong Kong

March 31, 2020