ex_10-14.htm


  
    

       

       

      THIRD
AMENDMENT TO CREDIT AND SECURITY AGREEMENT

       

      THIS THIRD AMENDMENT (the “Amendment”),
dated September 15, 2009, is entered into by and between WELLS GARDNER
ELECTRONICS CORPORATION, an Illinois corporation (“Wells Gardner”) and AMERICAN
GAMING & ELECTRONICS, INC., a Nevada corporation (“American”), Wells Gardner
and American, each a Borrower are hereinafter, unless referenced individually,
collectively referred to as (the “Borrower”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (the “Lender”), acting through its Wells Fargo Business Credit
operating division.

      


      RECITALS

      


      The Borrower and the Lender are parties
to a Credit and Security Agreement dated August 21, 2006 (as amended from time
to time, the “Credit Agreement”). Capitalized terms used in these recitals have
the meanings given to them in the Credit Agreement unless otherwise
specified.

      


      The Borrower has requested that certain
amendments be made to the Credit Agreement, which the Lender is willing to make
pursuant to the terms and conditions set forth herein.

      


      NOW, THEREFORE, in consideration of the
premises and of the mutual covenants and agreements herein contained, it is
agreed as follows:

      


      1.           Terms
used in this Amendment, which are defined in the Credit Agreement shall have the
same meanings as defined therein, unless otherwise defined herein.

       

       

       
2.           The Credit
Agreement is hereby amended and modified as follows:

       

      (a)           The
following definitions in Section 1.1 Definitions shall be
amended to read as follows:

      


       

      “Borrowing
Base” means at any time the lesser of:

       

       

                                      (a)           The
Maximum Line Amount; or

       

                                      (b)           Subject
to change from time to time in the Lender’s sole discretion, the sum
of:

       

      (i)           The
lesser of (A) the product of the Accounts Advance Rate times Eligible Accounts
or (B) $12,000,000.00, plus

       

      (ii)           During
the Foreign Accounts Eligibility Period and subject to Lender’s and the
insurance underwriter’s approval, the lesser of


      
        
          
            


             

             

          

           


        

        
           


          
            

          

        

        
           


        

      


       

      (A) the
product of the Accounts Advance Rate times Eligible Foreign Accounts or
(B) $2,500,000.00, which shall only consist of Eligible Foreign Accounts
subject to insurance coverage in such amounts and from insurance carriers
acceptable to Lender (it being agreed that as of the date of the Third Amendment
to this Agreement only the following Eligible Foreign Accounts insured by Euler
Hermes as of such date shall be included under this clause (ii) calculation:
Aristocrat Leisure Industries PTY.LTD Australia only (not Macau) (limitation of
$2,000,000.00 shall apply) and Recreativos Franco S.A. (limitation of
$150,000.00 shall apply) and MSC/Keycorp (limitation of $100,000.00 shall
apply), and Konami Australia (limitation of $400,000.00 shall
apply).

       

       

      (iii)    The
lesser of (A) $8,000,000.00 or (B) the sum of:

       

       

      
        	
                (1)  

              	
                The
      lesser of (A) the product of the Raw Material Inventory Advance Rate times
      Eligible Raw Material Inventory or (B) $2,400,000.00,
  plus

              


      

       

       

      
        	
                (2)  

              	
                The
      lesser of (A) the product of the Work in Process Inventory Advance Rate
      times Eligible Work in Process Inventory or (B) $100,000.00,
      plus

              


      

       

       

      
        	
                (3)  

              	
                The
      lesser of (A) the product of the Finished Goods Inventory Advance Rate
      times Eligible Finished Goods Inventory or (B) $4,500,000.00,
      plus

              


      

       

       

      
        	
                (4)  

              	
                The
      lesser of (A) the product of the In-Transit Inventory Advance Rate times
      Eligible In-Transit Inventory or (B) $2,000,000.00,
  less

              


      

       

       

      (iv)          The
Borrowing Base Reserve, less

      (v)           Indebtedness
that the Borrower owes to the Lender that has not yet been advanced on the
Revolving Note, and the dollar amount that the Lender in its discretion believes
is a reasonable determination of the Borrower’s credit exposure with respect to
any swap, derivative, foreign exchange, hedge, deposit, treasury management or
other similar transaction or arrangement offered to Borrower by Lender that is
not described in Article II of this Agreement and any indebtedness owed by
Borrower to Wells Fargo Merchant Services, LLC.

       

      Clauses
(i) and (xii) of the “Eligible Accounts” definition shall be amended as
follows:

       


      
        
          
            


             

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      (i)           That
portion of Accounts unpaid 90 days or more after the invoice date except
that portion of accounts unpaid 120 days or more after invoice date only for Aristocrat
Technologies Leisure Industries Pty and Aristocrat Technologies
Inc.-LV;

       

       

      (xiii)           Accounts
owed by an account debtor, regardless of whether otherwise eligible, to the
extent that the aggregate balance of such Accounts exceeds fifteen percent (15%)
of the aggregate amount of all Eligible Accounts, except for Aristocrat
(limitation of 45% shall apply, Bally (limitation of 25% shall apply) and WMS
(limitation of 25% shall apply);

       

      Subsection
(xi) of the definition of “Eligible Foreign Accounts” shall be amended to read
as follows:

       

      (xi)           Subject
to Lender’s and the insurance underwriter’s approval, that portion of Accounts
owed by any one account debtor that would permit Revolving Advances supported by
such account debtor’s Accounts to exceed $2,500,000 at any one time only with
respect to all, excluding, Accounts subject to insurance coverage in such
amounts and from insurance carriers acceptable to Lender (it being agreed that
as of the date of the Third Amendment to this Agreement only the following
Accounts insured by Euler Hermes as of such date shall be so excluded:
Aristocrat Leisure Industries PTY.LTD Australia only (not Macau) (limitation of
$2,000,000.00 shall apply) and Recreativos Franco S.A. (limitation of
$150,000.00 shall apply) and MSC/Keycorp (limitation of $100,000.00 shall
apply), and Konami Australia (limitation of $400,000.00 shall apply), except as
otherwise provided in (b)(ii) of the definition of “Borrowing
Base.”

       

      “Eligible
In-Transit Inventory” means all Inventory of the Borrower that is in-transit,
valued at the lower of cost or market in accordance with GAAP, (but excluding
such Inventory excluded under the definition of Eligible Inventory) and that
has, at Lender’s sole discretion, as proper documentation for eligibility
consisting of the invoice, bill of lading, packing slips, FCC compliance
certificate and an In-transit report and documentation letter from the freight
forwarder detailing the goods and confirming that the shipment has departed. If
the freight forwarder is unable to provide the original bill of lading, an
agreement must be executed between the freight forwarder and Lender which
indicates that the freight forwarder ensures once the forwarder receives a bill
of lading on behalf of Borrower and Lender, such that forwarder will take
direction from Lender with respect to the goods providing further that such
In-Transit Inventory reporting to Lender is updated weekly, acceptable to the
Lender in its sole discretion.

       

      “Floating
Rate” means an annual interest rate equal to the sum of the three month daily
LIBOR plus 5.0%.

       

      “Maturity
Date” means August 21, 2013.


      
        
          
            


             

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      “Maximum
Line Amount” means $12,000,000.00.

       

      


       

      (b)           Section
2.5(b) shall be amended as follows:

      


         (b) Minimum Interest
Charge.  Notwithstanding any other terms of this Agreement to
the contrary, the Borrower shall pay to the Lender interest of not less than
$15,000.00 per calendar month in arrears (the “Minimum Interest Charge”) from
the date of the execution of this Third Amendment and for the next twelve
months, and the Borrower shall pay to the Lender interest of not less than
$10,000.00 per calendar month in arrears (the “Minimum Interest Charge”) from
the first anniversary of this Third Amendment and for the next twenty four
months, and the Borrower shall pay interest of not less than $5,000 per calendar
month from the third anniversary of this Third Amendment until the Termination
Date and any deficiency between the Minimum Interest Charge and the amount of
interest otherwise calculated under Section 2.5(a) on the first day of each
month and on the Termination Date.  When calculating this deficiency,
the Default Rate, if applicable, shall be disregarded, and any interest that
accrues on a payment following its receipt on those days specified in Section
2.6(d) shall be included in determining the total amount of interest otherwise
calculated under Section 2.6(a).

       

      (c)           Section
2.6(l) shall be added as follows:

       

        
(l) Administration
Fees.  The Borrower shall pay the Lender a fee with respect to
administering In-Transit Inventory eligibility of $25,000 per annum payable
monthly.

       

      (d)           Section
6.2 Financial
Covenants shall be amended as follows:

       

         (a) Minimum Book Net
Worth.  While any part of the Indebtedness remains unpaid, the
Borrower shall, unless waived in writing by Lender, continuously maintain: (a) a
minimum Book Net Worth as of the quarter ending June 30, 2006 of not more than a
negative Two Hundred Thirty-Four Thousand Dollars (<$234,000.00>) less
than the Book Net Worth as of the end of the preceding fiscal year end, (b) a
minimum Book Net Worth as of the quarter ending September 30, 2006 of not more
than a negative One Hundred Eighty-Four Thousand Dollars (<$184,000.00>)
less than the Book Net Worth as of the end of the preceding fiscal year end, (c)
a minimum Book Net Worth as of the fiscal year ending December 31, 2006 of not
more than a negative One Hundred Twenty-Five Thousand Dollars
(<$125,000.00>) less than the Book Net Worth as of the end of the
preceding fiscal year end, (d) a minimum Book Net Worth as of each quarter
ending March 31st,
commencing March 31, 2007, of not more than a negative One Hundred Thousand
Dollars (<$100,000.00>) less than the Book Net Worth as of the end of the


       


      
        
          
            


             

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      preceding
fiscal year end, (e) a minimum Book Net Worth as of each quarter ending June
30th,
commencing June 30, 2007, of not less than Seventy-Five Thousand Dollars
($75,000.00) more than the Book Net Worth as of the end of the preceding fiscal
year end, (f) a minimum Book Net Worth as of each quarter ending September
30th,
commencing September 30, 2007, of not less than One Hundred Twenty-Five Thousand
Dollars ($125,000.00) more than the Book Net Worth as of the end of the
preceding fiscal year end, and (g) a minimum Book Net Worth as of each fiscal
year ending December 31st,
commencing December 31, 2007, of not less than One Hundred Fifty Thousand
Dollars ($150,000.00) more than the Book Net Worth as of the end of the
preceding fiscal year end.  In calculating this covenant, the non-cash
goodwill impairment for American of up to One Million Three Hundred Twenty-Nine
Thousand Dollars ($1,329,000.00) shall be excluded.

       

       

      (b)           Net Earnings.  While
any part of the Indebtedness remains unpaid, the Borrower shall, unless waived
in writing by the Lender, demonstrate Net Earnings of: (i) not more than a
negative Two Hundred Thirty-Four Thousand Dollars (<$234,000.00>) for the
quarter ending June 30, 2006, (ii) not more than a negative One Hundred
Eighty-Four Thousand Dollars (<$184,000.00>) for the quarter ending
September 30, 2006, (iii) not more than a negative One Hundred Twenty-Five
Thousand Dollars (<$125,000.00>) for the fiscal year ending December 31,
2006, (iv) not more than a negative One Hundred Thousand Dollars
(<$100,000.00>), year to date, for each quarter ending March 31st,
commencing March 31, 2007, (v) not less than Seventy-Five Thousand Dollars
($75,000.00), year to date, for each quarter ending June 30th,
commencing June 30, 2007, (vi) not less than One Hundred Twenty-Five Thousand
Dollars ($125,000.00), year to date, for each quarter ending September 30th,
commencing September 30, 2007, and (vii) not less than One Hundred Fifty
Thousand Dollars ($150,000.00) for each fiscal year thereafter ending December
31st,
commencing on December 31, 2007.  In calculating this covenant, the
non-cash goodwill impairment for American of up to One Million Three Hundred
Twenty-Nine Thousand Dollars ($1,329,000.00) shall be excluded.

       

                 3.           No Other Changes.
Except as explicitly amended by this Amendment, all of the terms and conditions
of the Credit Agreement shall remain in full force and effect and shall apply to
any advance or letter of credit thereunder.

      


      4.           Conditions Precedent.
This Amendment shall be effective when the Lender shall have received an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:

      


      (a)           Such
other matters as the Lender may require.

      


       

      5.           The
Borrower shall pay the Lender as of the date hereof, a fully earned, non
refundable fee in the amount of Fifty Thousand Dollars ($50,000.00) in
consideration of the Lender’s
execution and delivery of this Amendment, which shall be paid upon execution of
this Amendment.


      
        
          
            


             

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      6.           Representations and
Warranties. The Borrower hereby represents and warrants to the Lender as
follows:

      


      (a)           The
Borrower has all requisite power and authority to execute this Amendment and any other agreements
or instruments required hereunder and to perform all of its obligations
hereunder, and this Amendment and all such other
agreements and instruments has been duly executed and delivered by the Borrower
and constitute the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.

      


      (b)           The
execution, delivery and performance by the Borrower of this Amendment and any other agreements
or instruments required hereunder have been duly authorized by all necessary
corporate action and do not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree presently in
effect, having applicability to the Borrower, or the articles of incorporation
or by-laws of the Borrower, or (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.

      


      (c)           All
of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of
such date, except to the extent that such representations and warranties relate
solely to an earlier date.

      


      7.           References.  All
references in the Credit Agreement to “this Agreement” shall be deemed to refer
to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.

      


      8.           No Waiver. The
execution of this Amendment and the acceptance of all other agreements and
instruments related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Credit Agreement or a waiver of any breach, default
or event of default under any Security Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on the
date of this Amendment.

      


      9.           Release. The Borrower
hereby absolutely and unconditionally releases and forever discharges the
Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.


      
        
          
            


             

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      10.           Costs and Expenses.
The Borrower hereby reaffirms its agreement under the Credit Agreement to pay or
reimburse the Lender on demand for all costs and expenses incurred by the Lender
in connection with the Loan Documents, including without limitation all
reasonable fees and disbursements of legal counsel. Without limiting the
generality of the foregoing, the Borrower specifically agrees to pay all fees
and disbursements of counsel to the Lender for the services performed by such
counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto. The Borrower hereby agrees that the Lender
may, at any time or from time to time in its sole discretion and without further
authorization by the Borrower, make a loan to the Borrower under the Credit
Agreement, or apply the proceeds of any loan, for the purpose of paying any such
fees, disbursements, costs and expenses and the fee required under Paragraph 5
of this Amendment.

      


      11.           Miscellaneous. This
Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same
instrument.

       

      


      IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.

       

       

      


      
        	
                WELLS
      FARGO BANK,

                NATIONAL
      ASSOCIATION

                By
      _/s/ Brian T.
      Sprink___________________

                Brian T. Sprink

                Its: Vice
    President

              	 	
                WELLS
      GARDNER ELECTRONICS CORPORATION

                By
      _/s/ James F.
      Brace  __________________

                James F. Brace

                Its: VP, Secretary, Treasurer
      and CFO

              
	 
      	 	
                AMERICAN
      GAMING & ELECTRONICS, INC.

                By
      _/s/ James F.
      Brace__________________

                James F. Brace

                Its: VP and
  CFO

              


      

       
 

       


      
        
          
            


             

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