Exhibit 10.1


 


SECOND AMENDMENT

TO LOAN AND SECURITY AGREEMENT


 


THIS SECOND AMENDMENT (this “Amendment”) is made as of
the 17th day of January, 2005 to the Loan and Security Agreement
dated as of June 30, 2003 (as amended or otherwise modified from time to time,
the “Loan Agreement”; unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Loan Agreement) by and
among Wells-Gardner Electronics Corporation, an Illinois corporation (“WGE”),
American Gaming & Electronics, Inc., a Nevada corporation (“AGE”) and
LaSalle Bank National Association, a national banking association (“Lender”).


 


WHEREAS, Borrowers have requested that Lender amend
the Loan Agreement in certain respects as provided herein;


 


WHEREAS, Lender has agreed to amend the Loan Agreement
on the terms, and subject to the conditions set forth below;


 


NOW, THEREFORE, in consideration of the foregoing, and
the mutual covenants herein contained, and such other consideration as the
parties mutually agree, the parties hereto agree as follows:


 


1.             Amendment.  Subject to the condition set forth in Section
3 below, Borrowers and Lender agree to amend the Loan Agreement as follows:


 


(a)           Subsection
2(a) is hereby amended and restated in its entirety as follows:


 


2(a)         Revolving Loans.


 


Subject to the
terms and conditions of this Agreement and the Other Agreements, during the
Original Term and any Renewal Term, Lender shall, so long as no Event of
Default is then continuing, make revolving loans and advances to Borrowers (the
“Revolving Loans”) in an amount up to
following (the “Revolving Loan Limit”):


 


(i)            Eighty-five
percent (85%) of the face amount (less maximum discounts, credits and
allowances which may be taken by or granted to Account Debtors in connection
therewith in the ordinary course of Borrowers’ business) of Eligible Accounts;
plus


 


(ii)           Fifty
percent (50%) of the lower of cost or market value of Eligible Inventory; minus


 


(iii)          such
reserves as Lender elects, in its sole discretion, exercised in good faith, to
establish from time to time;


 





















 


provided, that (w)
advances pursuant to clause (i) above with respect to Accounts owing by
Aristocrat shall at no time exceed in the aggregate Two Million and No/100
Dollars ($2,000,000) outstanding; (x) advances pursuant to clause (ii) above
shall at no time exceed in the aggregate Six Million and No/100 Dollars
($6,000,000) outstanding; (y) advances pursuant to clause (ii) above with
respect to sub-assembly Inventory which constitutes Eligible Inventory shall at
no time exceed Three Hundred Thousand and No/100 Dollars ($300,000), and (z)
the Revolving Loan Limit shall in no event exceed Twelve Million and No/100
Dollars ($12,000,000) (the “Maximum Revolving Loan
Limit”).  Notwithstanding the
foregoing, the advance rates, sublimits and Maximum Revolving Loan Limit may be
adjusted up or down by Lender in its sole discretion, exercised in good faith,
on an annual basis based on the results of Lender’s audits of the Borrowers or
at any time following the occurrence of an Event of Default.


 


Notwithstanding
the foregoing, at any time that Excess Availability of Borrowers on a
consolidated basis is less than One Million Dollars ($1,000,000), subject to
the terms and conditions of this Agreement and the Other Agreements, during the
Original Term and any Renewal Term, Lender shall, so long as no Event of
Default is then continuing, make Revolving Loans to Borrowers such that the
Revolving Loan Limit shall be equal to an amount up to the following:


 


(I)            With
respect to WGE (the “WGE Revolving Loan Limit”):


 


(A)          Eighty-five
percent (85%) of the face amount (less maximum discounts, credits and
allowances which may be taken by or granted to Account Debtors in connection
therewith in the ordinary course of such Borrower’s business) of WGE’s Eligible
Accounts; plus


 


(B)           Fifty
percent (50%) of the lower of cost or market value of WGE’s Eligible Inventory;
plus


 


(C)           such
reserves as Lender elects, in its sole discretion, exercised in good faith, to
establish from time to time; and


 


(II)           With
respect to AGE (the “AGE Revolving Loan Limit”):


 


(A)          Eighty-five
percent (85%) of the face amount (less maximum discounts credits and allowances
which may be taken by or granted to Account Debtors in connection therewith in
the ordinary course of such Borrower’s business) of AGE’s Eligible Accounts;
plus


 


(B)           Fifty
percent (50%) of the lower of cost or market value of AGE’s Eligible Inventory;
minus


 


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(C)           reserves
as Lender elects in its sole discretion, exercised in good faith, from time to
time;


 


provided, that (w)
advances pursuant to clauses (I)(A) and (II)(A) above with respect to Accounts
owing by Aristocrat shall  at no time
exceed in the aggregate Two Million and No/100 Dollars ($2,000,000)
outstanding; (x) advances pursuant to clauses (I)(B) and (II)(B) above shall at
no time exceed in the aggregate Six Million and No/100 Dollars ($6,000,000)
outstanding; (y) advances pursuant to clauses (I)(B) and (II)(B) above with
respect to sub-assembly Inventory which constitutes Eligible Inventory shall at
no time exceed Three Hundred Thousand and No/100 Dollars ($300,000), and (z)
the Revolving Loan Limit shall in no event exceed the Maximum Revolving Loan
Limit.  Notwithstanding the foregoing,
the advance rates, sublimits and Maximum Revolving Loan Limit may be adjusted
up or down by Lender in its sole discretion, exercised in good faith, on an
annual basis based on the results of Lender’s audits of the Borrowers or at any
time following the occurrence of an Event of Default.


 


The aggregate
unpaid principal balance of the Revolving Loans shall not at any time exceed
the lesser of the (i) Revolving Loan Limit minus the Letter of Credit
Obligations and (ii) the Maximum Revolving Loan Limit minus the Letter of
Credit Obligations.  The aggregate unpaid
principal balance of the Revolving Loans outstanding to WGE and AGE
respectively shall not, at any time that Excess Availability of Borrowers on a
consolidated basis is less than One Million Dollars ($1,000,000), exceed the
WGE Revolving Loan Limit minus the Letter of Credit Obligations outstanding
with respect to WGE or the AGE Revolving Loan Limit minus the Letter of Credit
Obligations outstanding with respect to AGE, as applicable.  If at any time the outstanding Revolving
Loans exceeds either the Revolving Loan Limit or the Maximum Revolving Loan
Limit, in each case minus the Letter of Credit Obligations, or, at any time
that Excess Availability of Borrowers on a consolidated basis is less than One
Million Dollars ($1,000,000), any portion of the Revolving Loans and Letter of
Credit Obligations exceeds any applicable sublimit within the Revolving Loan
Limit (including the WGE Revolving Loan Limit and the AGE Revolving Loan Limit,
as applicable), Borrowers (or the applicable Borrower) shall immediately, and
without the necessity of demand by Lender, pay to Lender such amount as may be
necessary to eliminate such excess and Lender shall apply such payment to the
Revolving Loans in such order as Lender shall determine in its sole discretion;
provided, however, that if Excess Availability of Borrowers on a consolidated
basis is less than One Million Dollars ($1,000,000) and the amount of Revolving
Loans outstanding to AGE exceeds the AGE Revolving Loan Limit minus the Letter
of Credit Obligations (an “AGE Overadvance”),
an Event of Default shall not occur so long as (x) Borrowers deliver to Lender
an intercompany note issued by AGE to WGE as permitted pursuant to Section
13(f)


 


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hereof and (y) AGE pays all or a portion of the
proceeds of such intercompany note in an amount equal to the AGE Overadvance to
Lender for application to the AGE Overadvance within five (5) Business Days of
the occurrence of such AGE Overadvance.


 


Each Borrower
hereby authorizes Lender, in its sole discretion, to charge any of such
Borrower’s accounts or advance Revolving Loans to make any payments of
principal, interest, fees, costs or expenses required to be made under this
Agreement or the Other Agreements.


 


A request for a
Revolving Loan shall be made or shall be deemed to be made, each in the
following manner:  the Borrower
requesting such Revolving Loan shall give Lender same day notice, no later than
1:00 P.M. (determined based on the local time of each Borrower at its principal
place of business) for such day, of its request for a Revolving Loan as a Prime
Rate Loan, and at least three (3) Business Days prior notice of its request for
a Revolving Loan as a LIBOR Rate Loan, in which notice such Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date;
provided, however, that no such request may be made at a time when there exists
an Event of Default or an event which, with the passage of time or giving of
notice, will become an Event of Default. 
In the event that a Borrower maintains a controlled disbursement account
at Lender, each check presented for payment against such controlled
disbursement account and any other charge or request for payment against such
controlled disbursement account shall constitute a request for a Revolving Loan
as a Prime Rate Loan.  As an
accommodation to Borrowers, Lender may permit telephone requests for Revolving
Loans and electronic transmittal of instructions, authorizations, agreements or
reports to Lender by Borrowers.  Unless a
Borrower specifically directs Lender in writing not to accept or act upon
telephonic or electronic communications from such Borrower, Lender shall have
no liability to Borrowers for any loss or damage suffered by a Borrower as a
result of Lender’s honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Lender by
a Borrower and Lender shall have no duty to verify the origin of any such
communication or the authority of the Person sending it.


 


Each Borrower
hereby irrevocably authorizes Lender to disburse the proceeds of each Revolving
Loan requested by such Borrower, or deemed to be requested by such Borrower, as
follows:  the proceeds of each Revolving
Loan requested under Section 2(a) shall be disbursed by Lender in lawful
money of the United States of America in immediately available funds, in the
case of the initial borrowing, in accordance with the terms of the written
disbursement letter from such Borrower, and in the case of each subsequent
borrowing, by wire transfer or Automated Clearing House (ACH) transfer to


 


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such bank account as may be agreed upon by such
Borrower and Lender from time to time, or elsewhere if pursuant to a written
direction from such Borrower.


 


(b)           Subsection
2(b)(ii) is hereby amended and restated in its entirety, as follows:


 


2(b)(ii)    Intentionally
Omitted.


 


(c)           Subsection
9(a) is hereby amended and restated in its entirety, as follows:


 


9(a)         Weekly/Monthly Reports.


 


Borrowers shall
deliver to Lender consolidated executed loan reports and certificates in
Lender’s then current form, within fifteen (15) days after the end of each
month; provided, that if Excess Availability of Borrowers on a consolidated
basis is less than One Million Dollars ($1,000,000), Borrowers shall deliver to
Lender consolidated and consolidating executed loan reports and certificates in
Lender’s then current form, (i) within fifteen (15) days after the end of each
month so long as Excess Availability of Borrowers on a consolidated basis is
equal to or exceeds Five Hundred Thousand Dollars ($500,000), and (ii) on
Monday of each week at all times that Excess Availability of Borrowers on a
consolidated basis is less than Five Hundred Thousand Dollars ($500,000), such
reports to be accompanied by copies of each Borrower’s sales journal, cash
receipts journal and credit memo journal for the relevant period.  Such reports shall reflect the activity of
each Borrower with respect to Accounts for the immediately preceding month or
week, as applicable, and shall be in a form and with such specificity as is
reasonably satisfactory to Lender and shall contain such additional information
concerning Accounts and Inventory as may be reasonably requested by Lender
including, without limitation, but only if specifically requested by Lender,
copies of all invoices prepared in connection with such Accounts.


 


(d)           Subsection
11(c) is hereby amended and restated in its entirety, as follows:


 


11(c)       Loans by Borrower.


 


Neither of the
Borrowers have made any loans or advances to any Affiliate or other Person
except for (i) advances authorized hereunder to employees, officers and
directors of such Borrower for travel and other expenses arising in the
ordinary course of such Borrower’s business and (ii) loans to and from the
other Borrower as permitted pursuant to subsection 13(f) hereof.


 


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(e)           Subsection
11(i) is hereby amended and restated in its entirety, as follows:


 


11(i)        Affiliate Transactions.


 


Except as set
forth on Schedule 11(i) hereto or as permitted pursuant to subsection
11(c) or 13(f) hereof, no Borrower is conducting, permitting or
suffering to be conducted, transactions with Affiliates other than transactions
for the purchase or sale of Inventory or services in the ordinary course of
business pursuant to terms that are no less favorable to such Borrower than the
terms upon which such transactions would have been made had they been made to
or with a Person that is not an Affiliate.


 


(f)            Subsection
11(n) is hereby amended and restated in its entirety, as follows:


 


11(n)       Indebtedness.


 


Except as set
forth on Schedule 11(n) hereto or as permitted pursuant to subsection13(f)
hereof, no Borrower is obligated (directly or indirectly), for any loans or
other indebtedness for borrowed money other than the Loans.


 


2.             Representations
and Warranties of Borrowers.  Each
Borrower represents and warrants that, as of the date hereof:


 


(a)           Borrowers
have the right and power and are duly authorized to enter into this Amendment
and all other agreements executed in connection herewith;


 


(b)           The execution,
delivery and performance by Borrowers of this Amendment and the other
agreements to which each Borrower is a party (i) have been duly authorized by
all necessary action on its part; (ii) do not and will not, by the lapse of
time, giving of notice or otherwise, violate the provisions of the terms of
their respective Certificates of Incorporation or By-Laws, or of any mortgage,
indenture, security agreement, contract, undertaking or other agreement to
which a Borrower is a party, or which purports to be binding on a Borrower or
any of its properties; (iii) do not and will not, by lapse of time, the giving
of notice or otherwise, contravene any governmental restriction to which a
Borrower or any of its properties may be subject; and (iv) do not and will not,
except as contemplated in the Loan Agreement, result in the imposition of any
lien, charge, security interest or encumbrance upon any of a Borrower’s
properties under any indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument to which a Borrower is a party or
which purports to be binding on a Borrower or any of its properties;


 


(c)           No
consent, license, registration or approval of any governmental authority bureau
or agency is required in connection with the execution, delivery, performance,
validity or enforceability of this Amendment and the other agreements executed
by Borrowers in connection herewith; and


 


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(d)           This
Amendment and the other agreements executed by each Borrower in connection
herewith have been duly executed and delivered by Borrowers and are enforceable
against Borrowers in accordance with their terms.


 


3.             Condition
to Effectiveness of this Amendment. 
The effectiveness of the terms and provisions of this Amendment shall be
subject to  the execution and delivery by
Borrowers and Lender of this Amendment.


 


4.             Costs
and Expenses.  Borrower agrees to pay
all reasonable legal fees and other expenses, whether for in-house or outside
counsel, incurred by Lender in connection with this Amendment and the
transactions contemplated hereby.


 


5.             Repayment
and Cancellation of Intercompany Revolving Note.  In conjunction with the execution of this
Amendment, AGE shall repay in full all of the outstanding principal and accrued
interest owing under that certain Revolving Note dated as of June 30, 2003
issued by AGE in favor of WGE, in the original principal amount of Five Hundred
Thousand and 00/100 Dollars ($500,000) (the “Intercompany Note”) and
collaterally assigned by WGE to Lender pursuant to that certain allonge dated
as of June 30, 2003.  Upon said
repayment, WGE shall execute a notice of repayment and cancellation addressed
to AGE and Lender in the form of Exhibit A attached
hereto (the “Repayment Notice”).  Upon
Lender’s receipt of the executed Repayment Notice, Lender shall mark the
original Intercompany Note “cancelled” and promptly return it to AGE.  The parties hereto hereby agree that upon
Lender marking the original Intercompany Note “cancelled”, such Intercompany
Note shall be of no further force or effect.


 


6.             Loan
Agreement Remains in Force.  Except
as specifically waived and amended hereby, all of the terms and conditions of
the Loan Agreement shall remain in full force and effect and this Amendment shall
not be a waiver of any rights or remedies which Lender has provided for in the
Loan Agreement and all such terms and conditions are herewith ratified,
adopted, approved and accepted.


 


7.             No
Novation.  This Amendment and all
other agreements executed by Borrowers on the date hereof are not intended to
nor shall be construed to create a novation or accord and satisfaction, and
shall only be a modification and extension of the existing Liabilities of
Borrowers to Lender.


 


8.             Entire
Agreement.  This Amendment comprises
the entire agreement relating to the subject matter it covers and supersedes
any and all prior written or oral agreements between Lender and Borrowers
relating thereto.


 


9.             Severability.  Any provision of this Amendment that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


 


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10.           Amendment.  No amendment hereto shall be valid unless
contained in a writing duly executed by the party or parties to be bound by it.


 


 


[Signature Page Follows]


 


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IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their proper and duly authorized officers
as of the day and year first set forth above.


 


	
   

  	
   

  	
  WELLS-GARDNER
  ELECTRONICS CORPORATION, 

  
	
   

  	
   

  	
  as a Borrower

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ George B. Toma

  	
   

  
	
   

  	
   

  	
  Its Vice President of
  Finance & CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMERICAN GAMING &
  ELECTRONICS, INC.,

  
	
   

  	
   

  	
  as a Borrower

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ George B. Toma

  	
   

  
	
   

  	
   

  	
  Its Vice President of
  Finance & CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LASALLE BANK NATIONAL
  ASSOICATION, 

  
	
   

  	
   

  	
  as Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Hollis J. Griffin

  	
   

  
	
   

  	
   

  	
  Its

  	
  First Vice President

  	
   

  
						



 


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EXHIBIT A


 


FORM OF REPAYMENT
AND CANCELLATION NOTICE


 


January
17, 2005


 


American Gaming & Electronics, Inc.


9500 West 55th Street


Suite A


McCook, Illinois 60525-3605


 


LaSalle Bank National Association


135 South LaSalle Street


Suite 1112


Chicago, Illinois 60603


Attention:  Hollis Griffin


 


 


Re:          Repayment
and Cancellation of Intercompany Revolving Note


 


Ladies and Gentlemen:


 


Reference is made to that certain Revolving Note dated
as of June 30, 2003 issued by American Gaming & Electronics, Inc. (“AGE”)
in favor of Wells-Gardner Electronics Corporation (“WGE”), in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000) (the
“Intercompany Note”) and collaterally assigned by WGE to LaSalle Bank National
Association pursuant to that certain allonge dated as of June 30, 2003.


 


The undersigned hereby confirms that it has received
payment in full of all indebtedness and liabilities, including all principal
and interest, owing by AGE to WGE in respect of the Intercompany Note and that,
as of the date hereof, the Intercompany Note is terminated and of no further
force or effect and all obligations of WGE to make further advances to AGE, and
all rights of AGE to request advances, under the Intercompany Note are hereby
terminated.


 


	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  WELLS-GARDNER
  ELECTRONICS 

  
	
   

  	
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George B. Toma

  
	
   

  	
  George
  B. Toma

  
	
   

  	
  Vice President of Finance
  & CFO

  



 


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