Exhibit 10.1

 

PROMISSORY NOTE

 

FOR VALUE RECEIVED, on November 30, 2016, subject to the terms and conditions
set forth herein, AG&E HOLDINGS INC., an Illinois corporation (“Issuer”), hereby
unconditionally promises to pay to the order of Anthony Tomasello (the
“Noteholder”, and together with Issuer, the “Parties”), the principal amount of
$1,000,000 (as the same may be adjusted or modified as provided herein, the
“Principal Amount”), together with all accrued interest thereon, as provided in
this Promissory Note (this “Note”).

 

This Note has been executed and delivered pursuant to, and in connection with
the closing of the transactions contemplated by, that certain Agreement and Plan
of Merger, dated as of April 12, 2016, entered into by and among Issuer,
American Gaming & Electronics, Inc., a Nevada corporation and a wholly-owned
subsidiary of Issuer, Advanced Gaming Associates LLC, a Pennsylvania limited
liability company, the Noteholder and Anthony Tomasello, in his capacity as the
company representative (the “Merger Agreement”).

 

1.     Definitions. Capitalized terms used herein and not otherwise defined
herein or in the Merger Agreement shall have the meanings set forth in this
Section 1.

 

“Applicable Law” means all laws, statutes, constitutions, rules, regulations,
principles of common law, resolutions, codes, ordinances, requirements,
judgments, orders, decrees, injunctions, and writs of any Governmental Entity.

 

“Applicable Rate” means the rate equal to 5% per annum.

 

“Business Day” means any day except Saturday, Sunday or any other day on which
commercial banks located in Chicago, Illinois are authorized or required by
Applicable Law to be closed for business.

 

“Debt” of Issuer, means all: (a) indebtedness for borrowed money; (b)
obligations for the deferred purchase price of property or services, except
trade payables arising in the ordinary course of business; (c) obligations
evidenced by notes, bonds, debentures or other similar instruments;
(d) obligations as lessee under capital leases; (e) obligations in respect of
any interest rate swaps, currency exchange agreements, commodity swaps, caps,
collar agreements or similar arrangements entered into by Issuer providing for
protection against fluctuations in interest rates, currency exchange rates or
commodity prices or the exchange of nominal interest obligations, either
generally or under specific contingencies; (f) obligations under acceptance
facilities and letters of credit; (g) guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person, or otherwise to assure a creditor against loss, in each case, in
respect of indebtedness set out in clauses (a) through (f) of a Person other
than Issuer; and (h) indebtedness set out in clauses (a) through (g) of any
Person other than Issuer secured by any Lien on any asset of Issuer, whether or
not such indebtedness has been assumed by Issuer.

 

“Default Rate” means, at any time, the Applicable Rate plus two percentage
points (2.0%).

 

“Event of Default” has the meaning set forth in Section 8.

 

“First Earn-out Period” means the twelve consecutive months commencing on the
first day of the first full month following the date hereof.

 

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time and as consistently applied by Issuer.

 

 

 
 

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“Governmental Entity” means any national, state, municipal, local or foreign
government, any instrumentality, subdivision, court, administrative agency or
commission or other governmental authority or instrumentality, or any
quasi-governmental or private body (e.g., stock exchange) exercising any
regulatory, taxing, importing or other governmental or quasi-governmental
authority.

 

“Lien” means lien, pledge, mortgage, deed of trust, security interest, charge,
claim, easement, encroachment or other similar encumbrance.

 

“Maturity Date” means the earlier of: (a) fifth anniversary of the date hereof
and (b) the date on which all amounts under this Note shall become due and
payable pursuant to Section 9.

 

“Person” means any individual, corporation, limited liability company, trust,
joint venture, association, company, limited or general partnership,
unincorporated organization, Governmental Entity or other entity.

 

“Second Earn-out Period” means the twelve consecutive months commencing on the
first day following the expiration of the First Earn-out Period.

 

“Service Revenue” means the aggregate dollar amount of revenue of the Surviving
Entity (as defined in the Merger Agreement) following the date hereof, as
calculated by Issuer in accordance with GAAP, of the services listed in Exhibit
A attached hereto.

 

2.     Adjustments to the Principal Amount.

 

2.1     Post-Closing Working Adjustment. The Principal Amount shall be increased
or reduced, as applicable, in accordance with the terms of Section 2.08
(Post-Closing Adjustment to Parent Note Amount) of the Merger Agreement.

 

2.2     Principal Amount Escalators and Procedure.

 

(a)     Escalators.

 

(i)     The Principal Amount shall be increased by an additional $1,000,000 (the
“First Earn-out Amount”) if the Surviving Entity exceeds $5,000,000 in Service
Revenue during the First Earn-out Period (the “First Earn-out Target”).

 

(ii)     The Principal Amount shall be increased by an additional $1,000,000
(the “Second Earn-out Amount”) if the Surviving Entity exceeds $7,000,000 in
Service Revenue during the Second Earn-out Period (the “Second Earn-out
Target”).

 

(iii)     For greater certainty, in no event shall the application of Section
2.2 cause the Principal Amount due under this Note to exceed $3,000,000 (except
to the extent such Principal Amount is increased as a result of the application
of Section 2.1).

 

(b)     Procedure. Within 30 days after the end of the First Earn-out Period and
Second Earn-out Period, as applicable, Issuer shall prepare and deliver to the
Noteholder a statement setting forth its calculation of (x) the Service Revenue
earned by the Surviving Entity during the First Earn-out Period or Second
Earn-out Period, as applicable and (y) the amount of the resulting increase, if
any, to the Principal Amount by virtue of the First Earn-out Target or Second
Earn-out Target, as applicable, being satisfied (the “Earn-out Statement”). No
increase to the Principal Amount by virtue of the First Earn-out Target or
Second Earn-out Target, as applicable, being satisfied shall occur until the
date that Issuer receives the Noteholder’s unequivocal acceptance of the
applicable Earn-out Statement.

 

 

 
 

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2.3     Issuer’s Set-off Rights. Notwithstanding anything to the contrary in
this Note, and without prejudice to any other right or remedy it has or may
have, Issuer may set off any amount it owes the Noteholder hereunder against any
Damages (as defined in the Merger Agreement) for which the Noteholder is liable
to Issuer under Article VII (Indemnification) of the Merger Agreement.

 

3.     Final Payment Date; Optional Prepayments.

 

3.1     Monthly Payments. Subject to the terms of Section 9, commencing on the
first day of the calendar month immediately subsequent to the date of this Note
and continuing on the same day of each calendar month thereafter for the next
following sixty (60) months, Issuer shall pay to the Noteholder the principal
and interest amount of $29,971 (the “Monthly Payments”). The Monthly Payments
may be increased or reduced to account for the Post-Closing Adjustment to the
Parent Note Amount.

 

3.2     Final Payment Date. The aggregate unpaid Principal Amount, all accrued
and unpaid interest and all other amounts payable under this Note, shall be due
and payable on the applicable Maturity Date.

 

3.3     Optional Prepayment. Issuer may prepay the Principal Amount, in whole or
in part, at any time or from time to time (but if in part only in amounts of
$50,000 or integral multiples of $25,000 in excess thereof) at any time upon
three (3) Business Days’ written notice to the Noteholder, without penalty or
premium by paying the principal to be prepaid together with accrued interest
thereon to the date of prepayment. Any partial payments of principal shall not
reduce the Monthly Payments, shall be applied to the Monthly Payments last
falling due, and no partial prepayment shall postpone or interrupt payments of
the Monthly Payments, or the payment of the remaining Principal Amount, all of
which shall continue to be due and payable at the time and in the manner set
forth herein; provided however the amount of interest accruing shall be so
adjusted based on the then outstanding amount of principal due.

 

4.     Interest.

 

4.1     Interest Rate. Except as otherwise provided herein, any outstanding
Principal Amount shall bear interest at the Applicable Rate from the date such
amount was outstanding until such amount is paid in full, whether at maturity,
upon acceleration, by prepayment or otherwise; provided that, for greater
certainty, the First Earn-out Amount and the Second Earn-out Amount shall not be
considered outstanding Principal Amount unless and until the Noteholder is
entitled to the First Earn-out Amount and/or the Second Earn-out Amount in
accordance with the applicable Earn-out Statement prepared by Issuer, and Issuer
receives the Noteholder’s unequivocal acceptance of the applicable Earn-out
Statement, in each case in accordance with the Section 2.2.

 

4.2     Default Interest. If any amount payable hereunder is not paid when due
(without regard to any applicable grace periods), whether at stated maturity, by
acceleration or otherwise, such overdue amount shall bear interest at the
Default Rate from the date of such non-payment until such amount is paid in
full.

 

4.3     Computation of Interest. All computations of interest shall be made on
the basis of a year of 365 days and the actual number of days elapsed, with
monthly compounding.

 

4.4     Interest Rate Limitation. If at any time and for any reason whatsoever,
the interest rate payable hereunder shall exceed the maximum rate of interest
permitted to be charged by the Noteholder to Issuer under Applicable Law, that
portion of each sum paid attributable to that portion of such interest rate that
exceeds the maximum rate of interest permitted by Applicable Law shall be deemed
a voluntary prepayment of principal by Issuer.

 

 

 
 

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5.     Payment Mechanics.

 

5.1     Manner of Payments. All payments of interest and principal shall be made
in lawful money of the United States of America no later than 1:00 P.M.
(prevailing Eastern Time) on the date on which such payment is due by wire
transfer of immediately available funds to the Noteholder’s account at a bank
specified by the Noteholder in writing to Issuer from time to time.

 

5.2     Application of Payments. All payments made hereunder shall be applied
first to the payment of any costs or expenses incurred by the Noteholder, second
to fees or charges (including without limitation late charges) outstanding
hereunder, third to accrued interest, and fourth to the payment of principal of
the Principal Amount outstanding under the Note.

 

5.3     Business Day Convention. Whenever any payment to be made hereunder shall
be due on a day that is not a Business Day, such payment shall be made on the
next succeeding Business Day and each such non-Business Day shall be included
for purposes of calculating the amount of interest payable under this Note.

 

5.4     Rescission of Payments. If at any time any payment made by Issuer under
this Note is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy or reorganization of Issuer or otherwise, Issuer’s
obligation to make such payment shall be reinstated as though such payment had
not been made.

 

5.5     Late Charges. Issuer acknowledges that the failure of Issuer to make any
payment of the Monthly Payments, or of the payment due at the applicable
Maturity Date, within (3) Business Days after such payments are due and payable,
will cause the Noteholder to incur additional expense in servicing the
indebtedness evidenced by this Note and will deprive the Noteholder of the use
of the monies so due to the Noteholder, the precise measure of which expense and
loss is not susceptible to exact determination. Accordingly Issuer agrees that
in the event any Monthly Payments, including the payment due at the applicable
Maturity Date, shall be overdue for a period in excess of three (3) Business
Days, Issuer shall pay to the Noteholder a late charge of five ($0.05) cents for
each dollar so overdue, which Issuer acknowledges is a reasonable basis on which
to compensate the Noteholder for the additional expense incident to such
delinquency. This shall not be construed to obligate the Noteholder to accept
any overdue installment nor to limit the Noteholder’s rights and remedies for
Issuer’s default, as hereinafter set forth.

 

6.     Representations and Warranties of Issuer. Issuer hereby represents and
warrants to the Noteholder on the date hereof as follows:

 

6.1     Existence. Issuer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Illinois.

 

6.2     Power and Authority. Issuer has the power and authority, and the legal
right, to execute and deliver this Note and to perform its obligations
hereunder.

 

6.3     Authorization; Execution and Delivery. The execution and delivery of
this Note by Issuer and the performance of its obligations hereunder have been
duly authorized by all necessary corporate action. Issuer has duly executed and
delivered this Note.

 

 

 
 

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6.4     Enforceability. The Note is a valid, legal and binding obligation of
Issuer, enforceable against Issuer in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency (including,
without limitation, all laws relating to fraudulent transfers), moratorium or
similar laws affecting creditors’ rights and remedies generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

 

7.     Covenants. During such time as any amount is outstanding under this Note,
the Noteholder acknowledges and agrees that: (a) Issuer may incur, create or
assume any other Debt in its sole discretion; (b) Issuer may incur, create,
assume or suffer to exist any Lien on any of its property or assets in its sole
discretion; and (c) upon the request of any holder of any such other Debt
incurred, created or assumed by Issuer (a “Senior Lender”), the Noteholder shall
subordinate its rights to any and all amounts due under this Note to the extent
and in the manner required by any Senior Lender (but only up to $5,000,000 of
the Debt held by all Senior Lenders), including, without limitation the
Noteholder’s entering into and execution of a subordination agreement with such
Senior Lender at such time, and on such terms and conditions, as such Senior
Lender deems necessary or otherwise requires (a “Subordination Agreement”).

 

8.     Events of Default. The occurrence and continuance of any of the following
shall constitute an Event of Default hereunder:

 

8.1     Failure to Pay. Issuer fails to make any payment required by this Note,
including, without limitation, the Monthly Payments, within (3) Business Days of
the due date thereof and such failure continues, and is not cured by Issuer,
within 30 days after written notice is made to Issuer of such failure.

 

8.2     Breach of Representations and Warranties. Any representation or warranty
made by Issuer to the Noteholder herein is incorrect in any material respect on
the date as of which such representation or warranty was made.

 

8.3     Bankruptcy.  

 

(a)     Issuer commences any case, proceeding or other action: (i) under any
existing or future Applicable Law relating to bankruptcy, insolvency,
reorganization, or other relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts; or (ii) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial part
of its assets, or Issuer makes a general assignment for the benefit of its
creditors;

 

(b)     there is commenced against Issuer any case, proceeding or other action
of a nature referred to in Section 8.3(a) above which: (i) results in the entry
of an order for relief or any such adjudication or appointment; or (ii) remains
undismissed, undischarged or unbonded for a period of 90 days;

 

(c)     there is commenced against Issuer any case, proceeding or other action
seeking issuance of a warrant of attachment, execution or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which has not been vacated, discharged, or stayed
or bonded pending appeal within 90 days from the entry thereof; or

 

 

 
 

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(d)     Issuer takes any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in Section 8.3(a),
Section 8.3(b) or Section 8.3(c) above.

 

8.4     Judgments. One or more judgments or decrees (in each case in excess of
$250,000) shall be entered against Issuer and all of such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
180 days from the entry thereof.

 

9.     Remedies. Upon the occurrence of any Event of Default and at any time
thereafter during the continuance of such Event of Default, the Noteholder may
at its option, by written notice to Issuer: (a) declare the entire outstanding
principal under this Note, together with all accrued interest thereon and all
other amounts payable hereunder, immediately due and payable; and (b) exercise
any or all of its rights, powers or remedies under Applicable Law; provided,
however that, if an Event of Default described in Section 8.3 shall occur, the
entire outstanding principal under this Note, and all accrued interest thereon
and all other amounts payable hereunder, shall become immediately due and
payable without any notice, declaration or other act on the part of the
Noteholder. Notwithstanding the foregoing, in all cases the Noteholder’s rights
under this Section 9 shall be subject to any and all rights of a Senior Lender,
including rights of a Senior Lender under a Subordination Agreement with the
Noteholder.

 

10.     Miscellaneous.

 

10.1     Notices.  All notices, requests, consents, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been given: (a) when delivered by hand (with written confirmation of receipt);
(b) when received by the addressee if sent by a nationally recognized overnight
courier (postage prepaid, receipt requested); (c) on the date sent by facsimile
or e-mail (with confirmation of transmission) if sent during normal business
hours of the recipient, and on the next Business Day if sent after normal
business hours of the recipient; or (d) on the third day after the date mailed,
by certified or registered mail, return receipt requested, postage prepaid. Such
communications must be sent to the respective Parties at the addresses set forth
on the signature page hereto (or at such other address for a Party as shall be
specified in a notice given in accordance with this Section 10.1).

 

10.2     Governing Law. This Note and any claim, controversy, dispute or cause
of action (whether in contract or tort or otherwise) based upon, arising out of
or relating to this Note and the transactions contemplated hereby shall be
governed by the laws of the State of Illinois, without giving effect to any
choice or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdiction).

 

10.3     Submission to Jurisdiction. ANY LEGAL SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR BASED UPON THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY
SHALL BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR
THE NORTHERN DISTRICT OF ILLINOIS OR THE COURTS OF THE STATE OF ILLINOIS LOCATED
IN COOK COUNTY. EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS,
NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL
BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT
IN ANY SUCH COURT.

 

10.4     Venue. Each Party irrevocably and unconditionally waives, to the
fullest extent permitted by Applicable Law, any objection that it may now or
hereafter have to the laying of venue of any action or proceeding arising out of
or relating to this Note in any court referred to in Section 10.3 and the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

 

 

 
 

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10.5     Waiver of Jury Trial. EACH OF ISSUER AND THE NOTEHOLDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY.

 

10.6     Counterparts; Integration; Effectiveness. This Note and any amendments,
waivers, consents or supplements hereto may be executed in counterparts, each of
which shall constitute an original, but all taken together shall constitute a
single contract. This Note constitutes the entire contract between the Parties
with respect to the subject matter hereof and supersedes all previous agreements
and understandings, oral or written, with respect thereto. Delivery of an
executed counterpart of a signature page to this Note by facsimile or in
electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a
manually executed counterpart of this Note.

 

10.7     Successors and Assigns. Neither Party hereto may assign this Note or
any of the rights and obligations hereunder without the prior written consent of
the other Party. This Note shall inure to the benefit of, and be binding upon,
the Parties and their permitted assigns.

 

10.8     Waiver of Notice. Issuer hereby waives demand for payment, presentment
for payment, protest, notice of payment, notice of dishonor, notice of
nonpayment, notice of acceleration of maturity and diligence in taking any
action to collect sums owing hereunder, and all other notices in connection with
the delivery, acceptance, performance, default, or enforcement of the payment of
this Note; liability hereunder shall be unconditional and shall not be affected
in any manner by any indulgence, extension, of time, renewal, waiver, or
modification granted or consented to by the Noteholder.

 

10.9     Interpretation. For purposes of this Note: (a) the words “include,”
“includes” and “including” shall be deemed to be followed by the words “without
limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,”
“hereof,” “hereby,” “hereto” and “hereunder” refer to this Note as a whole. The
definitions given for any defined terms in this Note shall apply equally to both
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. Unless the context otherwise requires, references herein: (x) to
an agreement, instrument or other document means such agreement, instrument or
other document as amended, supplemented and modified from time to time to the
extent permitted by the provisions thereof; and (y) to a statute means such
statute as amended from time to time and includes any successor legislation
thereto and any regulations promulgated thereunder. This Note shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting an instrument or causing any
instrument to be drafted.

 

10.10     Amendments and Waivers. No term of this Note may be waived, modified
or amended except by an instrument in writing signed by both of the Parties
hereto. Any waiver of the terms hereof shall be effective only in the specific
instance and for the specific purpose given.

 

10.11     Headings. The headings of the various Sections and subsections herein
are for reference only and shall not define, modify, expand or limit any of the
terms or provisions hereof.

 

10.12     No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising on the part of any Party, of any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by Applicable Law. The failure of the Noteholder to exercise any such
right or remedy shall in no event be construed as a waiver or release of any
such right or remedy.

 

 

 
 

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10.13     Severability. If any term or provision of this Note is invalid,
illegal or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Note or
invalidate or render unenforceable such term or provision in any other
jurisdiction. Upon such determination that any term or other provision is
invalid, illegal or unenforceable, the Parties hereto shall negotiate in good
faith to modify this Note so as to effect the original intent of the Parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 
 

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IN WITNESS WHEREOF, the Parties have executed and delivered this Note as of the
date above first written above.

 

ISSUER:

 

AG&E HOLDINGS INC.

     

Address for Notices:

 

By:

/s/ Anthony Spier

9500 West 55th Street, Suite A

 

Name: Anthony Spier

McCook, Illinois 60525

 

Title: Chief Executive Officer

     

Attention:

Board of Directors

   

 

 

NOTEHOLDER:

 

Anthony Tomasello

     

Address for Notices:

 

/s/ Anthony Tomasello

109 E. Wilmont Ave.

   

Somers Point NJ 08244-2735

         

Attention:

Anthony Tomasello

   

E-mail:

tony@advancedgamingassociates.com

   

 

 

 
 

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Exhibit A

Service Revenue

  

“Service Revenue” is the aggregate dollar amount of revenue generated by the
Surviving Entity (as defined in the Merger Agreement) to install or repair slot
machines, video game terminals, video lottery terminals, machine parts, or other
similar gaming devices or non-gaming devices installed and used for gaming
purposes, performed by a service technician of the Surviving Entity, and
maintenance contract revenue for casinos and manufacturers where the work is
performed at the casino site or manufacturing sites.