GameStop 2006 Annual Report Download - page 54

lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio
covenant of 1.5:1.0.
The interest rate on the Revolver is variable and, at the Company’s option, is calculated by applying a margin
of (1) 0.0% to 0.25% above the higher of the prime rate of the administrative agent or the federal funds effective rate
plus 0.50% or (2) 1.25% to 1.75% above the LIBO rate. The applicable margin is determined quarterly as a function
of the Company’s consolidated leverage ratio. As of February 3, 2007, the applicable margin was 0.0% for prime
rate loans and 1.50% for LIBO rate loans. In addition, the Company is required to pay a commitment fee, currently
0.375%, for any unused portion of the total commitment under the Revolver.
As of February 3, 2007, there were no borrowings outstanding under the Revolver and letters of credit
outstanding totaled $4.3 million.
On September 28, 2005, the Company, along with GameStop, Inc. (which was then a direct wholly-owned
subsidiary of Historical GameStop and is now, as a result of the mergers, an indirect wholly-owned subsidiary of the
Company) as co-issuer (together with the Company, the “Issuers”), completed the offering of U.S. $300 million
aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and
U.S. $650 million aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the
Senior Floating Rate Notes, the “Notes”). The Notes were issued under an indenture (the “Indenture”), dated
September 28, 2005, by and among the Issuers, the subsidiary guarantors party thereto, and Citibank, N.A., as
trustee (the “Trustee”). Concurrently with the consummation of the mergers on October 8, 2005, EB and its direct
and indirect domestic wholly-owned subsidiaries (together, the “EB Guarantors”) became subsidiaries of the
Company and entered into a first supplemental indenture, dated October 8, 2005, by and among the Issuers, the EB
Guarantors and the Trustee, pursuant to which the EB Guarantors assumed all the obligations of a subsidiary
guarantor under the Notes and the Indenture. The net proceeds of the offering were used to pay the cash portion of
the merger consideration paid to the stockholders of EB in connection with the mergers.
The Senior Floating Rate Notes bear interest at LIBOR plus 3.875%, mature on October 1, 2011 and were
priced at 100%. The rate of interest on the Senior Floating Rate Notes as of February 3, 2007 was 9.235% per
annum. The Senior Notes bear interest at 8.0% per annum, mature on October 1, 2012 and were priced at 98.688%,
resulting in a discount at the time of issue of $8.5 million. The discount is being amortized using the effective
interest method. As of February 3, 2007, the unamortized original issue discount was $6.7 million.
The Issuers pay interest on the Senior Floating Rate Notes quarterly, in arrears, every January 1, April 1, July 1
and October 1, to holders of record on the immediately preceding December 15, March 15, June 15 and
September 15, and at maturity. The Issuers pay interest on the Senior Notes semi-annually, in arrears, every
April 1 and October 1, to holders of record on the immediately preceding March 15 and September 15, and at
maturity.
The Indenture contains affirmative and negative covenants customary for such financings, including, among
other things, limitations on (1) the incurrence of additional debt, (2) restricted payments, (3) liens, (4) sale and
leaseback transactions and (5) asset sales. Events of default provided for in the Indenture include, among other
things, failure to pay interest or principal on the Notes, other breaches of covenants in the Indenture, and certain
events of bankruptcy and insolvency.
As of February 3, 2007, the Company was in compliance with all covenants associated with the Revolver and
the Indenture.
The offering of the Notes was conducted in a private transaction under Rule 144A under the United States
Securities Act of 1933, as amended (the “Securities Act”), and in transactions outside the United States in reliance
upon Regulation S under the Securities Act. In connection with the closing of the offering, the Issuers also entered
into a registration rights agreement, dated September 28, 2005, by and among the Issuers, the subsidiary guarantors
listed on Schedule I-A thereto, and Citigroup Global Markets Inc., for themselves and as representatives of the
several initial purchasers listed on Schedule II thereto (the “Registration Rights Agreement”). The Registration
Rights Agreement required the Issuers to, among other things, (1) file a registration statement with the SEC to be
used in connection with the exchange of the Notes for publicly registered notes with substantially identical terms,
(2) use their reasonable best efforts to cause the registration statement to be declared effective within 210 days from
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