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Exhibit 10.4  


 
 

SECOND AMENDMENT TO
  LOAN AND SECURITY AGREEMENT    
    



        THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is entered into as of April 14, 2004, by and among, on the one hand, Lenders, WELLS
FARGO FOOTHILL, INC., a California corporation, as the arranger and administrative agent for the Lenders ("Agent") and, on the other hand, MIDWAY
HOME ENTERTAINMENT INC., a Delaware corporation ("Midway"), MIDWAY AMUSEMENT GAMES, LLC, a Delaware limited liability company ("MAG"; Midway and
MAG are referred to hereinafter each individually as a "Borrower", and individually and collectively, jointly and severally, as the
"Borrowers"), MIDWAY GAMES INC., a Delaware corporation ("Parent"), MIDWAY GAMES
WEST INC., a California corporation ("MGW"), MIDWAY INTERACTIVE INC., a Delaware corporation
("MI"), MIDWAY SALES COMPANY, LLC, a Delaware limited liability company ("MSC"), MIDWAY HOME
STUDIOS INC., a Delaware corporation ("MHS"), and SURREAL SOFTWARE INC., a Washington corporation
("Surreal"; Parent, MGW, MI, MSC, MHS and Surreal, are referred to hereinafter each individually as a "U.S. Credit
Party" and individually and collectively, jointly and severally, as the "U.S. Credit Parties") 


        WHEREAS,
Borrowers, U.S. Credit Parties, Agent, and Lenders are parties to that certain Loan and Security Agreement dated as of March 3, 2004 (as amended, modified or supplemented
from time to time, the "Loan Agreement"); and 


        WHEREAS,
Borrowers, U.S. Credit Parties, Agent and Lenders have agreed to amend the Loan Agreement in certain respects, subject to the terms and conditions contained herein. 


        NOW
THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree as follows: 



        1.     Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such
terms in the Loan Agreement. 


        2.     Amendment to Loan Agreement. Subject to the satisfaction of the conditions set forth in Section 4 hereof, the Loan
Agreement is amended as follows: 


        (a)   The
definition of "Applicable Margin" in Section 1.1 is amended and restated as follows: 


        "Applicable Margin" means: 



        (A)  with
respect to Advances that are LIBOR Rate Loans and Base Rate Loans, from the date hereof to, but not including, the first date of adjustment provided for below, the
percentages set forth below (on a per annum basis): 








 



	Base Rate Loans	 	0.00	%
	LIBOR Rate Loans	 	2.75	%







Commencing
with the delivery of the audited financial statements required to be delivered pursuant to Section 6.3(b) for the fiscal year ending
December 31, 2004, the percentages described in this definition of "Applicable Margin" related to Advances will be adjusted (effective prospectively) on the first day of the month following
delivery to Agent of the audited financial statements corresponding to the end of a fiscal year required to be delivered pursuant to  Section 6.3(b) by reference to EBITDA for such fiscal year, in
accordance with the following: 




	EBITDA
 
	 	Applicable Margin

for Base Rate Loans
	 	Applicable Margin for

LIBOR Rate Loans
	 
	Greater than $12,000,000	 	0.00	%	2.75	%
	Equal to or lesser than $12,000,000 but greater than $8,000,000	 	0.50	%	3.25	%
	Equal to or lesser than $8,000,000	 	1.00	%	3.75	%







provided, that if Borrowers fail to deliver the relevant financial statements required to be delivered pursuant to  Section 6.3(b) of this Agreement on or
before the due date thereof, the Applicable Margin for each type of loan shall be the highest Applicable
Margin set forth above for such type of loan until the actual delivery of such financial statements, at which time the Applicable Margin shall adjust as set forth above (effective prospectively). 




        (B)  with
respect to the portions of the Term Loan that are LIBOR Rate Loans and Base Rate Loans, from April 14, 2004 to, but not including, the first date of
adjustment provided for below, the percentages set forth below (on a per annum basis): 



	Base Rate Loans	 	0	%
	LIBOR Rate Loans	 	2.75	%







Commencing
with the delivery of the financial statements required to be delivered pursuant to Section 6.3(a) for the most recently ended fiscal month, the percentages described in this
definition of "Applicable Margin" related to the Term Loan will be adjusted (effective prospectively) on the first day of the month following delivery to Agent of the such financial statements by
reference to average daily Liquidity for such fiscal month, in accordance with the following: 




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	Liquidity
 
	 	Term Loan Margin

for Base Rate Loans
	 	Term Loan Margin for

LIBOR Rate Loans
	 
	Greater than $85,000,000	 	0.00	%	2.75	%
	Equal to or lesser than $85,000,000 but greater than $60,000,000	 	1.00	%	3.75	%
	Equal to or lesser than $60,000,000 but greater than $30,000,000	 	3.00	%	5.75	%
	Equal to or lesser than $30,000,000	 	6.00	%	N/A	 







provided,
that if Borrowers fail to deliver the relevant financial statements required to be delivered pursuant to Section 6.3(a) of this
Agreement on or before the due date thereof, the Applicable Margin for each type of loan shall be the highest Applicable Margin set forth above for such type of loan until the actual delivery of such
financial statements, at which time the Applicable Margin shall adjust as set forth above (effective prospectively). The Applicable Margin for the Term Loan prior to April 14, 2004 shall be
6.00%. 





        (b)   The
definition of "LIBOR Rate Loan" in Section 1.1 is amended and restated as follows: 



        "LIBOR Rate Loan" means each portion of an Advance or Term Loan that bears interest at a rate determined by reference to the LIBOR Rate. 




        (c)   A
new definition of "Liquidity" shall be added to Section 1.1 to read as follows: 



        "Liquidity" means, as of any date of determination, Qualified Cash plus Modified Excess Availability. 




        (d)   A
new definition of "Modified Excess Availability" shall be added to Section 1.1 to read as follows: 



        "Modified Excess Availability" means Excess Availability calculated as if the Maximum Revolver Amount is $25,000,000. 




        (e)   The
definition of "Term Loan Margin" in Section 1.1 is hereby deleted in its entirety. 


        (f)    Section 2.6(a)
of the Loan Agreement is amended and restated as follows: 



        (a)    Interest Rates.    Except as provided in clause (c) below, all Obligations
(except for undrawn Letters of Credit and except for Bank Product Obligations) that have been charged 



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to
the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof as follows (i) if the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to
the LIBOR Rate plus the LIBOR Rate Margin and (ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin. 


        The
foregoing notwithstanding, at no time shall any portion of the Obligations (other than Bank Product Obligations) bear interest on the Daily Balance thereof at a per annum rate less
than 4%. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate. 




        (g)   Section 2.13(a)
of the Loan Agreement is amended and restated as follows: 



        Interest and Interest Payment Dates.    In lieu of having interest charged at the rate based upon the Base Rate, Borrowers shall
have the option (the "LIBOR Option") to have interest on all or a portion of the Advances or Term Loan be charged at a rate of interest based upon the
LIBOR Rate; provided that the Borrowers shall not have the option to have interest charged at a rate of interest based upon the LIBOR Rate on any portion of the Term Loan for any period prior to
April 14, 2004 or if Liquidity is less than $30,000,000 for any time period. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period
applicable thereto, (ii) the occurrence of an Event of Default in consequence of which the Required Lenders or Agent on behalf thereof have elected to accelerate the maturity of all or any
portion of the Obligations, or (iii) termination of this Agreement pursuant to the terms hereof. On the last day of each applicable Interest Period, unless Administrative Borrower properly has
exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same
type hereunder. At any time that an Event of Default has occurred and is continuing, Borrowers no longer shall have the option to request that Advances or any portion of the Term Loan bear interest at
the LIBOR Rate and Agent shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder. 




        (h)   Section 2.13(b)(i) of
the Loan Agreement is amended and restated as follows: 



        Administrative
Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Agent prior
to 11:00 a.m. (California time) at least 3 Business Days prior to the commencement of the 



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proposed
Interest Period (the "LIBOR Deadline"). Notice of Administrative Borrower's election of the LIBOR Option for a permitted portion of the
Advances or Term Loan and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received
by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California time) on the same day). Promptly upon its receipt of
each such LIBOR Notice, Agent shall provide a copy thereof to each of the Lenders having a Revolver Commitment or Term Loan Commitment, as applicable. 




        (i)    Section 2.13(d)(ii) of
the Loan Agreement is amended and restated as follows: 



        In
the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time
after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain Advances or any portion of the Term Loan as LIBOR Rate Loans or to
continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Administrative Borrower and
Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender's notice shall
be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base
Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so. 




        (j)    The
following sentence is hereby added to the end of Section 12 of the Loan Agreement: "Notwithstanding the foregoing, deliveries by the Borrower to Agent
pursuant to Sections 6.2 and 6.3(a) through (e) shall be delivered only to Agent's address in Boston, Massachusetts, attention Account Executive, with copy to Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd." 


        3.    Ratification.    This Amendment, subject to satisfaction of the conditions provided below, shall constitute an
amendment to the Loan Agreement and all of the Loan Documents as appropriate to express the agreements contained herein. In all other respects, the Loan Agreement and the Loan Documents shall remain
unchanged and in full force and effect in accordance with their original terms. 


        4.    Conditions to Effectiveness.    This Amendment shall become effective as of the date hereof and upon the
satisfaction of the following conditions precedent: 


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        (a)   Parent
shall have received cash proceeds of at least $82,000,000 from the closing of its common stock offering on April 14, 2004; 


        (b)   Each
party hereto shall have executed and delivered this Amendment to Agent; 


        (c)   Companies
shall have delivered to Agent such documents, agreements and instruments as may be requested or required by Agent in connection with this Amendment, each in
form and content acceptable to Agent; 


        (d)   No
Default or Event of Default shall have occurred and be continuing on the date hereof or as of the date of the effectiveness of this Amendment; and 


        (e)   All
proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be
satisfactory to Agent and its legal counsel. 


        5.    Miscellaneous.    



        (a)    Warranties and Absence of Defaults.    In order to induce Agent to enter into this Amendment, each Company
hereby warrants to Agent, as of the date hereof, that the representations and warranties of Companies contained in the Loan Agreement are true and correct as of the date hereof as if made on the date
hereof (other than those which, by their terms, specifically are made as of certain dates prior to the date hereof). 


        (b)    Expenses.    Companies, jointly and severally, agree to pay on demand all costs and expenses of Agent
(including the reasonable fees and expenses of outside counsel for Agent) in connection with the preparation, negotiation, execution, delivery and administration of this Amendment and all other
instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided herein shall survive any termination of this Amendment and
the Loan Agreement as amended hereby. 


        (c)    Governing Law.    This Amendment shall be a contract made under and governed by the internal laws of the State
of Illinois. 


        (d)    Counterparts.    This Amendment may be executed in any number of counterparts, and by the parties hereto on the
same or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same
Amendment. 




        6.    Release.    


        (a)   In
consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each Company, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever
discharges Agent and Lenders, 


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and
their successors and assigns, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other
representatives (Agent, each Lender and all such other Persons being hereinafter referred to collectively as the "Releasees" and individually as a "Releasee"), of and from all demands, actions, causes
of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of
set-off, demands and liabilities whatsoever (individually, a "Claim" and collectively, "Claims") of every name and nature, known or unknown, suspected or unsuspected, both at law and in
equity, which such Company or any of its successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by
reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, including, without limitation, for or on account of, or in
relation to, or in any way in connection with any of the Loan Agreement, or any of the other Loan Documents or transactions thereunder or related thereto. 



        (b)   Each
Company understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an
injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release. 


        (c)   Each
Company agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any
manner the final, absolute and unconditional nature of the release set forth above. 


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        IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized and delivered as of the date first above written. 



	 	MIDWAY HOME ENTERTAINMENT INC.,

a Delaware corporation
	

 	
MIDWAY AMUSEMENT GAMES, LLC,

Delaware limited liability company
	

 	
MIDWAY GAMES INC.,

a Delaware corporation
	

 	
MIDWAY GAMES WEST INC.,

a California corporation
	

 	
MIDWAY INTERACTIVE INC.,

a Delaware corporation
	

 	
MIDWAY SALES COMPANY, LLC,

a Delaware limited liability company
	

 	
MIDWAY HOME STUDIOS INC.,

a Delaware corporation
	

 	
SURREAL SOFTWARE INC.,

a Washington corporation
	

 	

Each By	
 	

/s/  THOMAS E. POWELL      

	 	Title	 	EVP Finance, CFO and Treasurer
	

 	
WELLS FARGO FOOTHILL, INC.,

a California corporation, as Agent, as UK Security Trustee and as a Lender
	

 	

By	
 	

/s/  JOHN T. LEONARD      
	 	 	 	

	 	Title	 	Vice President




Signature
page to Second Amendment to Loan and Security Agreement 


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SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT