Document:

Exhibit 10.1

 

Loan and Security Agreement

 

DATED AS OF JUNE 30, 2003

 

 

BETWEEN

 

 

LASALLE BANK NATIONAL ASSOCIATION

 

 

THE LENDER,

 

 

WELLS-GARDNER ELECTRONICS CORPORATION

 

 

AND

 

 

AMERICAN GAMING & ELECTRONICS, INC.

 

 

THE BORROWERS

 

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND
SECURITY AGREEMENT (as amended, modified or supplemented from time to time,
this “Agreement”)
made this 30th day of June, 2003 by and among LASALLE BANK NATIONAL
ASSOCIATION, a national banking association (“Lender”), 135 South LaSalle
Street, Chicago, Illinois 60603-4105, and WELLS-GARDNER ELECTRONICS
CORPORATION, an Illinois corporation,
having its principal place of business at 9500 West 55th Street,
McCook, Illinois 60525-3605 (“WGE”)
and AMERICAN GAMING & ELECTRONICS, INC., a Nevada corporation, having its
principal place of business at 9500 West 55th Street, McCook,
Illinois 60525-3605(“AGE”) (WGE
and AGE are collectively referred to as “Borrowers”).

 

WITNESSETH:

 

WHEREAS,
Borrowers may, from time to time, request Loans from Lender, and the parties
wish to provide for the terms and conditions upon which such Loans or other
financial accommodations, if made by Lender, shall be made;

 

NOW,
THEREFORE, in consideration of any Loan (including any Loan by renewal or
extension) hereafter made to a Borrower by Lender, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrowers, the parties agree as follows:

 

1.             DEFINITIONS.

 

“Account”,
“Account
Debtor”, “Chattel Paper”, “Commercial Tort Claims”, “Deposit
Accounts”, “Documents”, “Electronic Chattel Paper”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”,
“Instruments”,
“Inventory”,
“Investment
Property”, “Letter-of-Credit Right”,
“Proceeds” and “Tangible Chattel Paper” shall have the
respective meanings assigned to such terms in the Illinois Uniform Commercial
Code, as the same may be in effect from time to time.

 

“Affiliate”
shall mean any Person (i) which directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with,
either of the Borrowers, (ii) which beneficially owns or holds five
percent (5%) or more of the voting control or equity interests of either of the
Borrowers, or (iii) five percent (5%) or more of the voting control or
equity interests of which is beneficially owned or held by either of the
Borrowers.

 

“AGE Revolving Loan Limit” shall have the
meaning set forth in subsection 2(a).

 

“Aristocrat” means Aristocrat Technologies
Australia PLY Ltd. And its Subsidiaries.

 

“Business Day”
shall mean any day other than a Saturday, a Sunday or (i) with respect to all matters, determinations, fundings and payments in
connection with LIBOR Rate

 

2

 

Loans,
any day on which banks in London, England or Chicago, Illinois are required or
permitted to close, and (ii) with respect to all other matters,
any day that banks in Chicago, Illinois are required or permitted to close.

 

“Capital
Expenditures” shall mean with respect to any period, the aggregate
of all expenditures (whether paid in cash or accrued as liabilities and
including expenditures for capitalized lease obligations) by Borrowers and
their Subsidiaries during such period that are required by generally accepted
accounting principles, consistently applied, to be included in or reflected by
the property, plant and equipment or similar fixed asset accounts (or
intangible accounts subject to amortization) on the balance sheet of Borrowers
and their Subsidiaries.

 

“Collateral”
shall mean all of the property of each Borrower described in Section 5
hereof, together with all other real or personal property of any Obligor or any
other Person now or hereafter pledged to Lender to secure, either directly or
indirectly, repayment of any of the Liabilities.

 

“EBITDA”  shall mean, with
respect to any period, Borrowers’ and their Subsidiaries’ net income after
taxes for such period (excluding any after-tax gains or losses on the sale of
assets (other than the sale of Inventory in the ordinary course of business)
and excluding other after-tax extraordinary gains or losses) plus
interest expense, income tax expense, depreciation and amortization for such
period, plus or minus any other non-cash charges or gains which
have been subtracted or added in calculating net income after taxes for such
period, all on a consolidated basis.

 

“Eligible
Account” shall mean an Account owing to a Borrower which is
acceptable to Lender in its sole discretion, exercised in good faith, for
lending purposes.  Without limiting
Lender’s discretion, Lender shall, in general, consider an Account to be an
Eligible Account if it meets, and so long as it continues to meet, the
following requirements:

 

(i)            it
is genuine and in all respects what it purports to be;

 

(ii)           it
is owned by such Borrower, such Borrower has the right to subject it to a
security interest in favor of Lender or assign it to Lender and it is subject
to a first priority perfected security interest in favor of Lender and to no
other claim, lien, security interest or encumbrance whatsoever, other than
Permitted Liens;

 

(iii)          it
arises from (A) the performance of services by such Borrower in the
ordinary course of such Borrower’s business, and such services have been fully
performed and acknowledged and accepted by the Account Debtor thereunder; or
(B) the sale or lease of Goods by such Borrower in the ordinary course of
such Borrower’s business, and (x) such Goods have been completed in accordance
with the Account Debtor’s specifications (if any) and delivered to the Account
Debtor, (y) such Account Debtor has not refused to accept, returned or offered
to return, any of the Goods which are the subject of such Account, and (z) such
Borrower has possession of, or such Borrower has delivered to Lender (at Lender’s
request) shipping and delivery receipts evidencing delivery of such Goods;

 

3

 

(iv)          it
is evidenced by an invoice rendered to the Account Debtor thereunder, is due
and payable within forty-five (45) days after the date of the invoice and does
not remain unpaid sixty (60) days past the due date thereof; provided, however,
that if more than twenty-five percent (25%) of the aggregate dollar amount of
invoices owing by a particular Account Debtor remain unpaid sixty (60) days
after the respective due dates thereof, then all Accounts owing by that Account
Debtor shall be deemed ineligible;

 

(v)           it
is a valid, legally enforceable and unconditional obligation of the Account
Debtor thereunder, and is not subject to setoff, counterclaim, credit,
allowance or adjustment by such Account Debtor, or to any claim by such Account
Debtor denying liability thereunder in whole or in part;

 

(vi)          it
does not arise out of a contract or order which fails in any material respect
to comply with the requirements of applicable law;

 

(vii)         the
Account Debtor thereunder is not a director, officer, employee or agent of a
Borrower, or a Subsidiary, Parent or Affiliate;

 

(viii)        it
is not an Account with respect to which the Account Debtor is the United States
of America or any state or local government, or any department, agency or
instrumentality thereof, unless such Borrower assigns its right to payment of
such Account to Lender pursuant to, and in full compliance with, the Assignment
of Claims Act of 1940, as amended, or any comparable state or local law, as
applicable;

 

(ix)           it
is not an Account with respect to which the Account Debtor is located in a
state which requires such Borrower, as a precondition to commencing or
maintaining an action in the courts of that state, either to (A) receive a
certificate of authority to do business and be in good standing in such state;
or (B) file a notice of business activities report or similar report with
such state’s taxing authority, unless (x) such Borrower has taken one of
the actions described in clauses (A) or (B); (y) the failure to take one
of the actions described in either clause (A) or (B) may be cured retroactively
by such Borrower at its election; or (z) such Borrower has proven, to Lender’s
satisfaction, that it is exempt from any such requirements under any such
state’s laws;

 

(x)            the
Account Debtor is located within the United States of America or Canada; provided that Accounts
owing by Aristocrat shall not be ineligible as a result of this clause (x);

 

(xi)           it
is not an Account with respect to which the Account Debtor’s obligation to pay
is subject to any repurchase obligation or return right, as with sales made on
a bill-and-hold, guaranteed sale, sale on approval, sale or return or
consignment basis;

 

(xii)          it
is not an Account (A) with respect to which any representation or warranty
contained in this Agreement is untrue; or (B) which violates any of the
covenants of such Borrower contained in this Agreement;

 

4

 

(xiii)         it
is not an Account which, when added to a particular Account Debtor’s other
indebtedness to such Borrower, exceeds twenty
percent (20%) of all Accounts of such Borrower or  a credit limit determined by
Lender in its sole discretion for that Account Debtor (except that Accounts
excluded from Eligible Accounts solely by reason of this clause (xiii) shall be
Eligible Accounts to the extent of such credit limit); and

 

(xiv)        it
is not an Account with respect to which the prospect of payment or performance
by the Account Debtor is or will be impaired, as determined by Lender in its
sole discretion exercised in good faith.

 

“Eligible
Inventory” shall mean Inventory of a Borrower which is acceptable to
Lender in its sole discretion, exercised in good faith, for lending
purposes.  Without limiting Lender’s
discretion, Lender shall, in general, consider Inventory to be Eligible
Inventory if it meets, and so long as it continues to meet, the following
requirements:

 

(i)            it
is owned by such Borrower, such Borrower has the right to subject it to a
security interest in favor of Lender and it is subject to a first priority
perfected security interest in favor of Lender and to no other claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens;

 

(ii)           it
is located on one of the premises listed on Exhibit A (or other
locations of which Lender has been advised in writing pursuant to subsection
12(b)(i) hereof) and is not in transit;

 

(iii)          if
held for sale or lease or furnishing under contracts of service, it is (except
as Lender may otherwise consent in writing) new and unused and free from
defects which would, in Lender’s sole, good faith determination, affect its
market value; provided, that Inventory that consists of previously used
finished Goods which have been refurbished by the Borrowers shall not be
ineligible as a result of this clause (iii);

 

(iv)          it
is not stored with a bailee, consignee, warehouseman, processor or similar
party unless Lender has given its prior written approval and such Borrower has
caused any such bailee, consignee, warehouseman, processor or similar party to
issue and deliver to Lender, in form and substance acceptable to Lender, such
Uniform Commercial Code financing statements, warehouse receipts, waivers and
other documents as Lender shall require; provided, that Inventory on
consignment to Aristocrat located at the Bright Mech, International PLY Ltd.
warehouse in Mortlake, Australia or the Aristocrat warehouse in Australia shall
not be ineligible as a result of this clause (iv) notwithstanding Borrowers’
failure to provide the necessary bailee, consignment or similar agreements
necessary to perfect Lender’s lien on such Inventory and provide access to the
premises as Lender shall require for thirty (30) days following the date hereof
and shall remain eligible thereafter only to the extent such requirements are
satisfied;

 

(v)           Lender
has determined, in accordance with Lender’s customary business practices, that
it is not unacceptable due to age, type, category or quantity;

 

5

 

(vi)          It
is not work-in-progress, being inspected or being serviced;

 

(vii)         It
does not consist of gaming cores or sub-assemblies; provided, that Lender may
consider certain sub-assemblies acceptable to Lender and which otherwise
satisfy the criteria for Eligible Inventory to be Eligible Inventory; and

 

(viii)        it
is not Inventory (A) with respect to which any of the representations and
warranties contained in this Agreement are untrue; or (B) which violates
any of the covenants of such Borrower contained in this Agreement.

 

“Environmental
Laws” shall mean all federal, state, district, local and foreign
laws, rules, regulations, ordinances, and consent decrees relating to health,
safety, hazardous substances, pollution and environmental matters, as now or at
any time hereafter in effect, applicable to a Borrower’s business or facilities
owned or operated by a Borrower, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise relating
to the generation, manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.

 

“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended, modified
or restated from time to time.

 

“Event of
Default” shall have the meaning specified in Section 15
hereof.

 

“Excess Availability” shall mean, as of any
date of determination by Lender, the excess, if any, of the lesser of (i) the
Maximum Revolving Loan Limit less the sum of the outstanding Revolving Loans
and Letter of Credit Obligations and (ii) the Revolving Loan Limit less the sum
of the outstanding Revolving Loans and Letter of Credit Obligations, in each
case as of the close of business on such date and assuming, for purposes of
calculation, that all accounts payable which remain unpaid more than sixty (60)
days after the due dates thereof as the close of business on such date are
treated as additional Revolving Loans outstanding on such date; provided, that
payables owing to Wells Eastern Asia Display (M) SDN GHD and ATL Electronics
(M) SDN GHD which are more than sixty (60) days past due shall not be treated
as additional outstanding Revolving Loans to the extent of the amount of any
Accounts owing by such companies to either Borrower.

 

“Fiscal Year”  shall
mean each twelve (12) month accounting period of Borrowers, which ends on
December 31 of each year.

 

“Hazardous
Materials” shall mean any hazardous, toxic or dangerous substance,
materials and wastes, including, without limitation, hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and
any other kind and/or type of pollutants or contaminants (including, without
limitation, materials which include hazardous constituents), sewage, sludge,
industrial slag, solvents and/or any other similar substances, materials, or
wastes and including any other substances, materials or wastes that are or
become regulated under any Environmental Law

 

6

(including, without limitation any that are or become classified as
hazardous or toxic under any Environmental Law).

 

“Indemnified
Party” shall have the meaning specified in Section 18 hereof.

 

“Interest Period”  shall have the
meaning specified in subsection 4(a)(ii) hereof.

 

“Letter of
Credit” shall mean any Letter of Credit issued on behalf of a
Borrower in accordance with this Agreement.

 

“Letter of
Credit Obligations” shall mean, as of any date of determination, the
sum of (i) the aggregate undrawn face amount of all Letters of Credit, and (ii)
the aggregate unreimbursed amount of all drawn Letters of Credit not already
converted to Loans hereunder.

 

“Liabilities”
shall mean any and all obligations, liabilities and indebtedness of Borrowers
to Lender or to any parent, affiliate or subsidiary of Lender of any and every
kind and nature, howsoever created, arising or evidenced and howsoever owned,
held or acquired, whether now or hereafter existing, whether now due or to
become due, whether primary, secondary, direct, indirect, absolute, contingent
or otherwise (including, without limitation, obligations of performance),
whether several, joint or joint and several, and whether arising or existing
under written or oral agreement or by operation of law.

 

“LIBOR Rate” shall mean, with respect to any LIBOR Rate Loan for any Interest Period,
a rate per annum equal to (a) the offered rate for deposits in United States
dollars for a period equal to such Interest Period as displayed in the Bloomberg Financial Markets system (or
such other authoritative source as selected by Lender in its sole discretion)
as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of
such Interest Period divided by (b) a number equal to 1.0 minus the maximum
reserve percentages (expressed as a decimal fraction) including, without
limitation, basic supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect thereto, as now and
from time to time in effect, for Eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of such Board) which are required to
be maintained by Lender by the Board of Governors of the Federal Reserve
System.  The LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in such
reserve percentage.

 

“LIBOR Rate Loans” shall mean the Loans bearing interest with reference to the LIBOR Rate.

 

“Loans”
shall mean all loans and advances made by Lender to or on behalf of Borrowers
hereunder.

 

“Lock Box”
and “Lock
Box Account” shall have the meanings specified in subsection 8(a)
hereof.

 

“Material
Adverse Effect” shall mean a material adverse effect on the
business, property, assets, prospects, operations or condition, financial or
otherwise, of a Person.

 

7

 

“Maximum Loan
Limit” shall mean Twelve Million and No/100 Dollars ($12,000,000).

 

“Maximum
Revolving Loan Limit” shall have the meaning specified in subsection 2(a)
hereof.

 

“Obligor”
shall mean Borrowers and each other Person who is or shall become primarily or
secondarily liable for any of the Liabilities.

 

“Original
Term” shall have the meaning specified in Section 10 hereof.

 

“Other
Agreements” shall mean all agreements, instruments and documents,
other than this Agreement, including, without limitation, guaranties,
mortgages, trust deeds, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and all
other writings heretofore, now or from time to time hereafter executed by or on
behalf of a Borrower or any other Person and delivered to Lender or to any
parent, affiliate or subsidiary of Lender in connection with the Liabilities or
the transactions contemplated hereby, as each of the same may be amended,
modified or supplemented from time to time.

 

“Parent”
shall mean any Person now or at any time or times hereafter owning or
controlling (alone or with any other Person) at least a majority of the issued
and outstanding equity of a Borrower and, if a Borrower is a partnership, the
general partner of such Borrower.

 

“PBGC”
shall have the meaning specified in subsection 12(b)(v) hereof.

 

“Permitted
Liens” shall mean (i) statutory liens of landlords, carriers,
warehousemen, processors, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder; (ii) liens or security interests in favor
of Lender; (iii) zoning restrictions and easements, licenses, covenants
and other restrictions affecting the use of real property that do not
individually or in the aggregate have a material adverse effect on a Borrower’s
ability to use such real property for its intended purpose in connection with
such Borrower’s business; (iv) liens in connection with purchase money
indebtedness and capitalized leases otherwise permitted pursuant to this
Agreement, provided, that such liens attach only to the assets the purchase of
which was financed by such purchase money indebtedness or which is the subject
of such capitalized leases; (v) liens arising out of judgments or awards
against either of the Borrowers or with respect to which the applicable
Borrower shall concurrently therewith be prosecuting a timely appeal or proceeding
for review and with respect to which such Borrower shall have secured a stay of
execution pending such appeal or proceedings for review, provided, that such
judgment does not violate Section 15(i) hereof; (vi) pledges or deposits to
secure obligations under worker’s compensation laws or similar legislation;
(vii) good faith deposits in connection with contracts or leases to which
either of the Borrowers is a party; (viii) deposits to secure public or
statutory obligations of either Borrower; (ix) liens set forth on Schedule 1;
and (x) liens specifically permitted by Lender in writing.

 

“Person”
shall mean any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company,

 

8

 

institution, entity, party or
foreign or United States government (whether federal, state, county, city,
municipal or otherwise), including, without limitation, any instrumentality,
division, agency, body or department thereof.

 

“Plan”
shall have the meaning specified in subsection 12(b)(v) hereof.

 

“Prime Rate”
shall mean Lender’s publicly announced prime rate (which is not intended to be
Lender’s lowest or most favorable rate in effect at any time) in effect from
time to time.

 

“Prime Rate Loans” shall mean the Loans bearing interest with reference to the Prime Rate.

 

“Renewal Term”
shall have the meaning specified in Section 10 hereof.

 

“Revolving
Loan Limit” shall have the meaning specified in subsection 2(a)
hereof.

 

“Revolving
Loans” shall have the meaning specified in subsection 2(a)
hereof.

 

“Subsidiary”
shall mean any corporation of which more than fifty percent (50%) of the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
stock of any other class of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly
or indirectly, owned by either of the Borrowers, or any partnership, joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by either of the Borrowers or any partnership of which either of the Borrowers
is a general partner.

 

“Tangible Net
Worth” shall have the meaning specified in subsection 14(a)
hereof.

 

“Tax”
shall mean, in relation to any LIBOR Rate Loans and the applicable LIBOR Rate,
any tax, levy, impost, duty, deduction, withholding or charges of whatever
nature required to be paid by Lender and/or to be withheld or deducted from any
payment otherwise required hereby to be made by either of the Borrowers to
Lender; provided, that the term “Tax” shall not include any taxes imposed upon
the net income of Lender.

 

“WGE Revolving Loan Limit” shall have the
meaning specified in subsection 2(a).

 

2.             LOANS.

 

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

 

9

 

then continuing, make revolving
loans and advances to each Borrower (the “Revolving Loans”) in an amount up to
following (the “Revolving Loan Limit”):

 

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

 

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

 

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

 

Two Million Four Hundred
Thousand and No/100 Dollars ($2,400,000) as such amount may be reduced from
time to time pursuant to subsection 2(b)(ii); minus

 

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”):

 

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

 

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

 

Such 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 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.

 

10

 

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 and the aggregate unpaid principal balance of the Revolving
Loans outstanding to WGE and AGE respectively shall not at any time exceed the
WGE Loan Limit minus the Letter of Credit Obligations outstanding with respect
to WGE or the AGE 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 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.

 

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

 

11

 

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 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)            Repayments and Curtailments.

 

The
Liabilities shall be repaid as follows:

 

(i)            Repayment of
Revolving Loans.  The Revolving
Loans and all other Liabilities shall be repaid on the last day of the Original
Term or any Renewal Term if this Agreement is renewed pursuant to Section 10
hereof.

 

(ii)           Curtailment of
Certain Availability.  The
availability set forth in subsection 2(a)(i)(C) shall be automatically
be curtailed by One Hundred Thousand Dollars ($100,000) on the 1st day of each
month commencing August 1, 2003 until such availability is reduced to $0.

 

(iii)          Mandatory Additional
Curtailments.

 

Sales of Assets.  Upon receipt of the proceeds of the sale or
other disposition of any Equipment or real property of a Borrower which is
subject to a mortgage in favor of Lender, or if any of the Equipment or real
property subject to such mortgage is damaged, destroyed or taken by
condemnation in whole or in part, the proceeds thereof shall be paid by such
Borrower to Lender and, to the extent any such sale, damage, destruction or
condemnation results in excess of Fifty Thousand Dollars ($50,000), the
availability set forth in subsection 2(a)(i)(C) shall be curtailed
dollar-for-dollar by the amount of such proceeds, such curtailments to be
applied against the remaining scheduled curtailments in the inverse order of
their maturities until curtailed in full, and then against the other
Liabilities (without permanently reducing availability), as determined by
Lender, in its sole discretion.

 

c)             Notes.

 

The Loans
shall, in Lender’s sole discretion, be evidenced by one or more promissory
notes in form and substance satisfactory to Lender.  However, if such Loans are not so evidenced, such Loans may be
evidenced solely by entries upon the books and records maintained by Lender.

 

12

 

3.             LETTERS OF CREDIT.

 

a)             General Terms.

 

Subject to the
terms and conditions of this Agreement and the Other Agreements, during the
Original Term or any Renewal Term, Lender may, in its sole discretion, from
time to time issue, upon a Borrower’s request, commercial and/or standby
Letters of Credit; provided, that the aggregate undrawn face amount of all such
Letters of Credit shall at no time exceed Five Hundred Thousand and No/100
Dollars ($500,000).  Payments made by
Lender to any Person on account of any Letter of Credit shall be immediately
payable to Borrowers without notice, presentment or demand and Borrowers agree
that each payment made by Lender in respect of a Letter of Credit issued on
behalf of such Borrower shall constitute a request by such Borrower for a Prime
Rate Loan hereunder.  In the event such
Loan is not advanced by Lender for any reason, such reimbursement obligations
shall become part of the Liabilities hereunder and shall bear interest at the
rate then applicable to Prime Rate Loans until repaid.  Borrowers shall remit to Lender a Letter of
Credit fee equal to one percent (1.00%) per annum on the aggregate undrawn face
amount of all Letters of Credit outstanding, which fee shall be payable monthly
in arrears on the last Business Day of each month.  Borrowers shall also pay on demand the normal and customary
administrative charges of the Lender for issuance, amendment, negotiation,
renewal or extension of any Letter of Credit.

 

b)            Requests for Letters of Credit.

 

Each Borrower
shall make requests for Letters of Credit in writing at least two (2) Business Days prior to the
date such Letter of Credit is to be issued. 
Each such request shall specify the date such Letter of Credit is to be
issued, the amount thereof, the name and address of the beneficiary thereof and
a description of the transaction to be supported thereby.  Any such notice shall be accompanied by the
form of Letter of Credit requested and any application or reimbursement
agreement required by the issuer of such Letter of Credit.  If any term of such application or
reimbursement agreement is inconsistent with this Agreement, then the
provisions of this Agreement shall control to the extent of such inconsistency.

 

c)             Obligations Absolute.

 

Each Borrower
shall be obligated to reimburse Lender for any payments made in respect of any
Letter of Credit, which obligation shall be unconditional and irrevocable and
shall be paid regardless of:  (i) any
lack of validity or enforceability of any Letter of Credit, (ii) any amendment
or waiver of or consent or departure from all or any provisions of any Letter
of Credit, this Agreement or any Other Agreement, (iii) the existence of any
claim, set off, defense or other right which a Borrower or any other Person may
have against any beneficiary of any Letter of Credit or Lender, (iv) any draft
or other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid, or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect, (v) any payment under any Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, and (vi) any other act or omission to
act or delay of any kind of the Lender or any other Person or any other event
or circumstance that might otherwise constitute a legal or equitable discharge
of a Borrower’s obligations hereunder; provided, however that the Borrowers
shall not be obligated to reimburse the Lender for any wrongful payment made by
Lender under a Letter of Credit issued by it as a result of acts or omissions
constituting willful misconduct or gross negligence by Lender.  It is understood and agreed by each Borrower
that Lender may accept

 

13

 

documents that appear on their
face to be in order without further investigation or inquiry, regardless of any
notice or information to the contrary.

 

d)            Expiration Dates of Letters of Credit.

 

The expiration
date of each Letter of Credit shall be no later than the earlier of (i) one (1)
year from the date of issuance and (ii) the ninetieth (90th) day after the end
of the Original Term or any Renewal Term. 
Notwithstanding the foregoing, a Letter of Credit may provide for
automatic extensions of its expiration date for one or more one (1) year
periods, so long as the issuer thereof has the right to terminate the Letter of
Credit at the end of each one (1) year period and no extension period extends
past the ninetieth (90th) day after the end of the Original Term or any Renewal
Term.

 

4.             INTEREST, FEES AND CHARGES.

 

a)             Interest Rate.

 

Subject to the
terms and conditions set forth below, the Loans shall bear interest at the per
annum rate of interest set forth in subsection (i), (ii) or (iii)
below:

 

(i)            One-half of one
percent (0.50%) per annum in excess of the Prime Rate in effect from time to
time, payable on the first Business Day of each month in arrears.  Said rate of interest shall increase or
decrease by an amount equal to each increase or decrease in the Prime Rate
effective on the effective date of each such change in the Prime Rate.

 

(ii)           Three percent (3.00%)
in excess of the LIBOR Rate for the applicable Interest Period, such rate to
remain fixed for such Interest Period. 
“Interest
Period” shall mean any continuous period of thirty (30), sixty (60)
or ninety (90) days, as selected from time to time by the Borrower requesting
such LIBOR Rate Loan by irrevocable notice (in writing, by telecopy, telex,
electronic mail, or cable) given to Lender not less than three (3) Business
Days prior to the first day of each respective Interest Period; provided,
that:  (A) each such period occurring
after such initial period shall commence on the day on which the immediately preceding
period expires; (B) the final Interest Period shall be such that its expiration
occurs on or before the end of the Original Term or any Renewal Term; and (C)
if for any reason a Borrower shall fail to timely select a period, then such
Loans shall continue as, or revert to, Prime Rate Loans.  Interest shall be payable on the last
Business Day of such Interest Period.

 

(iii)          Upon the occurrence of
an Event of Default and during the continuance thereof, the Loans shall bear
interest at the rate of two percent (2.0%) per annum in excess of the interest
rate otherwise payable thereon, which interest shall be payable on demand.  All interest shall be calculated on the
basis of a 360-day year.

 

14

 

b)            Other LIBOR Provisions.

 

(i)            Subject to the provisions
of this Agreement, each Borrower shall have the option (A) as of any date, to
convert all or any part of the Prime Rate Loans to, or request that new Loans
be made as, LIBOR Rate Loans of various Interest Periods, (B) as of the last
day of any Interest Period, to continue all or any portion of the relevant
LIBOR Rate Loans as LIBOR Rate Loans; (C) as of the last day of any Interest
Period, to convert all or any portion of the LIBOR Rate Loans to Prime Rate
Loans; and (D) at any time, to request new Loans as Prime Rate Loans; provided,
that Loans may not be continued as or converted to LIBOR Rate Loans, if the
continuation or conversion thereof would violate the provisions of subsections
4(b)(ii) or 4(b)(iii) of this Agreement or if an Event of Default
has occurred.

 

(ii)           Lender’s determination
of the LIBOR Rate as provided above shall be conclusive, absent manifest
error.  Furthermore, if Lender
determines, in good faith (which determination shall be conclusive, absent
manifest error), prior to the commencement of any Interest Period that (A) U.S.
Dollar deposits of sufficient amount and maturity for funding the Loans are not
available to Lender in the London Interbank Eurodollar market in the ordinary
course of business, or (B) by reason of circumstances affecting the London
Interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the rate of interest to be applicable to the Loans requested by a
Borrower to be LIBOR Rate Loans or the Loans bearing interest at the rates set
forth in subsection 4(a)(ii) of this Agreement shall not represent the
effective pricing to Lender for U.S. Dollar deposits of a comparable amount for
the relevant period (such as for example, but not limited to, official reserve
requirements required by Regulation D to the extent not given effect in
determining the rate), Lender shall promptly notify such Borrower and (1) all
existing LIBOR Rate Loans shall convert to Prime Rate Loans upon the end of the
applicable Interest Period, and (2) no additional LIBOR Rate Loans shall be
made until such circumstances are cured.

 

(iii)          If, after the date
hereof, the introduction of, or any change in any applicable law, treaty, rule,
regulation or guideline or in the interpretation or administration thereof by
any governmental authority or any central bank or other fiscal, monetary or
other authority having jurisdiction over Lender or its lending offices (a
“Regulatory Change”), shall, in the opinion of counsel to Lender, make it
unlawful for Lender to make or maintain LIBOR Rate Loans, then Lender shall
promptly notify the requesting Borrower and (A) the LIBOR Rate Loans shall
immediately convert to Prime Rate Loans on the last Business Day of the then
existing Interest Period or on such earlier date as required by law and (B) no
additional LIBOR Rate Loans shall be made until such circumstance is cured.

 

(iv)          If, for any reason, a
LIBOR Rate Loan is paid prior to the last Business Day of any Interest Period
or if a LIBOR Rate Loan does not occur on a

 

15

 

date specified by the
requesting Borrower in its request (other than as a result of a default by
Lender), each Borrower agrees to indemnify Lender against any loss (including
any loss on redeployment of the deposits or other funds acquired by Lender to
fund or maintain such LIBOR Rate Loan) cost or expense incurred by Lender as a
result of such prepayment.

 

(v)           If any Regulatory
Change (whether or not having the force of law) shall (A) impose, modify or
deem applicable any assessment, reserve, special deposit or similar requirement
against assets held by, or deposits in or for the account of or loans by, or
any other acquisition of funds or disbursements by, Lender; (B) subject Lender
or the LIBOR Rate Loans to any Tax or change the basis of taxation of payments
to Lender of principal or interest due from a Borrower to Lender hereunder
(other than a change in the taxation of the overall net income of Lender); or
(C) impose on Lender any other condition regarding the LIBOR Rate Loans or
Lender’s funding thereof, and Lender shall determine (which determination shall
be conclusive, absent any manifest error) that the result of the foregoing is
to increase the cost to Lender of making or maintaining the LIBOR Rate Loans or
to reduce the amount of principal or interest received by Lender hereunder,
then Borrowers shall pay to Lender, on demand, such additional amounts as
Lender shall, from time to time, determine are sufficient to compensate and
indemnify Lender from such increased cost or reduced amount.

 

(vi)          Lender shall receive
payments of amounts of principal of and interest with respect to the LIBOR Rate
Loans free and clear of, and without deduction for, any Taxes.  If (A) Lender shall be subject to any Tax in
respect of any LIBOR Rate Loans or any part thereof or, (B) Borrowers shall be
required to withhold or deduct any Tax from any such amount, the LIBOR Rate
applicable to such LIBOR Rate Loans shall be adjusted by Lender to reflect all
additional costs incurred by Lender in connection with the payment by Lender or
the withholding by a Borrower of such Tax and Borrowers shall provide Lender
with a statement detailing the amount of any such Tax actually paid by
Borrowers.  Determination by Lender of
the amount of such costs shall be conclusive, absent manifest error.  If after any such adjustment any part of any
Tax paid by Lender is subsequently recovered by Lender, Lender shall reimburse
Borrowers to the extent of the amount so recovered.  A certificate of an officer of Lender setting forth the amount of
such recovery and the basis therefor shall be conclusive, absent manifest
error.

 

(vii)         Each request for LIBOR
Rate Loans shall be in an amount not less than Five Hundred Thousand and No/100
Dollars ($500,000), and in integral multiples of, One Hundred Thousand and
No/100 Dollars ($100,000).

 

(viii)        Unless otherwise specified
by a Borrower, all Loans shall be Prime Rate Loans.

 

16

 

(ix)           No more than five (5)
Interest Periods may be in effect with respect to outstanding LIBOR Rate Loans
at any one time.

 

c)             Fees And Charges.

 

(i)            Closing Fee:  Borrowers shall jointly and severally pay to
Lender a closing fee of One Hundred Ten Thousand Dollars ($110,000), which fee
shall be fully earned on the date of disbursement of the initial Loans
hereunder and payable as follows: (x) Eighty Thousand Dollars ($80,000) on the
date of disbursement of the initial Loans hereunder and (y) Thirty Thousand
Dollars ($30,000) on the first anniversary of the date hereof.

 

(ii)           Unused Line Fee:  Borrowers shall jointly and severally pay to
Lender an unused line fee of one-quarter of one percent (0.25%) of the
difference between the Maximum Revolving Loan Limit and the average daily
balance of the Revolving Loans plus the Letter of Credit Obligations for each
month, which fee shall be fully earned by Lender and payable quarterly in
arrears on the first Business
Day of each calendar quarter.  Said fee
shall be calculated on the basis of a 360 day year.

 

(iii)          Costs and Expenses:  Borrowers shall reimburse Lender for all
costs and expenses, including, without limitation, legal expenses and
reasonable attorneys’ fees (whether for internal or outside counsel) incurred
by Lender in connection with the (i) documentation and consummation of
this transaction and any other transactions between Borrowers and Lender,
including, without limitation, Uniform Commercial Code and other public record
searches and filings, overnight courier or other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs; (ii) collection, protection or enforcement of any rights in or to
the Collateral; (iii) collection of any Liabilities; and
(iv) administration and enforcement of any of Lender’s rights under this
Agreement or any Other Agreement. 
Borrowers shall also pay all normal service charges with respect to all
accounts maintained by each Borrower with Lender and any additional services
requested by a Borrower from Lender. 
All such costs, expenses and charges shall constitute Liabilities  hereunder,
shall be payable by Borrowers to Lender on demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.

 

(iv)          Capital Adequacy
Charge.  If Lender shall have
determined that the adoption of any law, rule or regulation regarding capital
adequacy, or any change therein or in the interpretation or application
thereof, or compliance by Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or governmental authority enacted after the date hereof, does or shall have the
effect of reducing the rate of return on such party’s capital as a consequence
of its obligations hereunder to a level below that which

 

17

 

Lender could have
achieved but for such adoption, change or compliance (taking into consideration
Lender’s policies with respect to capital adequacy) by a material amount, then
from time to time, after submission by Lender to Borrowers of a written demand
therefor (“Capital Adequacy Demand”)
together with the certificate described below, Borrowers shall pay to Lender
such additional amount or amounts (“Capital
Adequacy Charge”) as will compensate Lender for such reduction, such
Capital Adequacy Demand to be made with reasonable promptness following such
determination.  A certificate of Lender
claiming entitlement to payment as set forth above shall be conclusive in the
absence of manifest error.  Such
certificate shall set forth the nature of the occurrence giving rise to such
reduction, the amount of the Capital Adequacy Charge to be paid to Lender, and
the method by which such amount was determined.  In determining such amount, Lender may use any reasonable
averaging and attribution method, applied on a non-discriminatory basis.

 

d)            Maximum Interest.

 

It is the
intent of the parties that the rate of interest and other charges to each
Borrower under this Agreement and the Other Agreements shall be lawful;
therefore, if for any reason the interest or other charges payable under this
Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Lender may lawfully charge such
Borrower, then the obligation to pay interest and other charges shall
automatically be reduced to such limit and, if any amount in excess of such
limit shall have been paid, then such amount shall be refunded to such
Borrower.

 

5.             COLLATERAL.

 

a)             Grant of Security Interest to Lender.

 

As security
for the payment of all Loans now or in the future made by Lender to Borrowers
hereunder and for the payment or other satisfaction of all other Liabilities,
each Borrower hereby assigns to Lender and grants to Lender a continuing security
interest in the following property of each of the Borrowers, whether now or
hereafter owned, existing, acquired or arising and wherever now or hereafter
located:  (a) all Accounts (whether
or not Eligible Accounts) and all Goods whose sale, lease or other disposition
by such Borrower has given rise to Accounts and have been returned to, or
repossessed or stopped in transit by, such Borrower; (b) all Chattel
Paper, Instruments, Documents and General Intangibles (including, without
limitation, all patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, goodwill, copyrights, copyright
applications, registrations, licenses, software, franchises, customer lists,
tax refund claims, claims against carriers and shippers, guarantee claims,
contract rights, payment intangibles, security interests, security deposits and
rights to indemnification); (c) all Inventory (whether or not Eligible
Inventory); (d) all Goods (other than Inventory), including, without
limitation, Equipment, vehicles and Fixtures; (e) all Investment Property;
(f) all Deposit Accounts, bank accounts, deposits and cash; (g) all
Letter-of-Credit Rights; (h) Commercial Tort Claims listed on Exhibit C
hereto, (i) any other property of such Borrower now or hereafter in the
possession, custody or control of Lender or any agent or any parent,

 

18

 

affiliate or subsidiary of
Lender or any participant with Lender in the Loans, for any purpose (whether
for safekeeping, deposit, collection, custody, pledge, transmission or
otherwise) and (j) all additions and accessions to, substitutions for, and
replacements, products and Proceeds of the foregoing property, including,
without limitation, proceeds of all insurance policies insuring the foregoing
property, and all of the Borrowers’ books and records relating to any of the
foregoing and to the Borrowers’ businesses.

 

b)            Other Security.

 

Lender, in its
sole discretion, without waiving or releasing any obligation, liability or duty
of Borrowers under this Agreement or the Other Agreements or any Event of
Default, may at any time or times hereafter, but shall not be obligated to,
pay, acquire or accept an assignment of any security interest, lien,
encumbrance or claim asserted by any Person in, upon or against the
Collateral.  All sums paid by Lender in
respect thereof and all costs, fees and expenses including, without limitation,
reasonable attorney fees, all court costs and all other charges relating
thereto incurred by Lender shall constitute Liabilities, payable by Borrowers
to Lender on demand and, until paid, shall bear interest at the highest rate
then applicable to Loans hereunder.

 

c)             Possessory Collateral.

 

Immediately
upon receipt by either Borrower of any portion of the Collateral evidenced by
an agreement, Instrument or Document, including, without limitation, any
Tangible Chattel Paper and any Investment Property consisting of certificated
securities, such Borrower shall deliver the original thereof to Lender together
with an appropriate endorsement or other specific evidence of assignment
thereof to Lender (in form and substance acceptable to Lender).  If an endorsement or assignment of any such
items shall not be made for any reason, Lender is hereby irrevocably authorized,
as each Borrower’s attorney and agent-in-fact, to endorse or assign the same on
such Borrower’s behalf.

 

d)            Electronic Chattel Paper.

 

To the extent
that either Borrower obtains or maintains any Electronic Chattel Paper, such
Borrower shall create, store and assign the record or records comprising the
Electronic Chattel Paper in such a manner that (i) a single authoritative copy
of the record or records exists which is unique, identifiable and except as
otherwise provided in clauses (iv), (v) and (vi) below, unalterable, (ii) the
authoritative copy identifies Lender as the assignee of the record or records,
(iii) the authoritative copy is communicated to and maintained by the Lender or
its designated custodian, (iv) copies or revisions that add or change an
identified assignee of the authoritative copy can only be made with the
participation of Lender, (v) each copy of the authoritative copy and any copy
of a copy is readily identifiable as a copy that is not the authoritative copy
and (vi) any revision of the authoritative copy is readily identifiable as an
authorized or unauthorized revision.

 

19

 

6.             PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.

 

Each of the
Borrowers shall, at Lender’s request, at any time and from time to time,
authenticate, execute and deliver to Lender such financing statements,
documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed necessary or desirable by
Lender) and do such other acts and things or cause third parties to do such
other acts and things as Lender may deem necessary or desirable in its sole
discretion in order to establish and maintain a valid, attached and perfected
security interest in the Collateral in favor of Lender (free and clear of all
other liens, claims, encumbrances and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection of the
Collateral.  Each of the Borrowers
irrevocably hereby make, constitute and appoint Lender (and all Persons
designated by Lender for that purpose) as such Borrower’s true and lawful
attorney and agent-in-fact to execute and file such financing statements,
documents and other agreements and instruments and do such other acts and
things as may be necessary to preserve and perfect Lender’s security interest
in the Collateral.  Each of the
Borrowers further agree that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement, each of the Borrowers further ratify and confirm the
prior filing by Lender of any and all financing statements which identify
either of the Borrowers as debtor, Lender as secured party and any or all
Collateral as collateral.

 

7.             POSSESSION OF COLLATERAL AND RELATED MATTERS.

 

Until an Event
of Default has occurred, each Borrower shall have the right, except as
otherwise provided in this Agreement, in the ordinary course of such Borrower’s
business, to (a) sell, lease or furnish under contracts of service any of
such Borrower’s Inventory normally held by such Borrower for any such purpose;
and (b) use and consume any raw materials, work in process or other
materials normally held by such Borrower for such purpose; provided, however,
that a sale in the ordinary course of business shall not include any transfer
or sale in satisfaction, partial or complete, of a debt owed by such Borrower.

 

8.             COLLECTIONS.

 

(a)           Each Borrower shall
direct all of its Account Debtors to make all payments on the Accounts directly
to a post office box (the “Lock Box”) designated by, and under the
exclusive control of, Lender, at Lender. 
Each Borrower shall establish an account (the “Lock Box Account”) in
Lender’s name with Lender, into which all payments received in the Lock Box
shall be deposited, and into which such Borrower will immediately deposit all
payments received by such Borrower on Accounts in the identical form in which
such payments were received, whether by cash or check.  If a Borrower, any Affiliate or Subsidiary,
any shareholder, officer, director, employee or agent of a Borrower or any
Affiliate or Subsidiary, or any other Person acting for or in concert with a
Borrower shall receive any monies, checks, notes, drafts or other payments
relating to or as Proceeds of Accounts or other Collateral, such Borrower and
each such Person shall receive all such items in trust for, and as the sole and
exclusive property of, Lender and, immediately upon receipt thereof, shall
remit the same (or cause the same to be remitted) in kind to the Lock Box
Account.  Each Borrower agrees that all
payments made to such Lock Box Account or otherwise received by Lender, whether
in respect of the Accounts or as Proceeds of other Collateral or otherwise,
will be applied on account of the Liabilities in accordance with the terms of
this Agreement; provided, that so long
as no Event of

 

20

 

Default has occurred, payments
received by Lender shall not be applied to the unmatured portion of the LIBOR
Rate Loans, but shall be held in an interest bearing cash collateral account
maintained by Lender, until the earlier of (i) the last Business Day of the
Interest Period applicable to such LIBOR Rate Loan and (ii) the occurrence of
an Event of Default; provided, further, that so long as no Event of Default has
occurred, the immediately available funds in such cash collateral account may
be disbursed, at such Borrower’s discretion, to such Borrower so long as after
giving effect to such disbursement, such Borrower’s availability under subsection
2(a) hereof at such time, equals or exceeds the outstanding Revolving Loans
at such time.  Each Borrower agrees to
pay all fees, costs and expenses in connection with opening and maintaining the
Lock Box and Lock Box Account.  All of
such fees, costs and expenses if not paid by a Borrower, may be paid by Lender
and in such event all amounts paid by Lender shall constitute Liabilities
hereunder, shall be payable to Lender by Borrowers upon demand, and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder.  All checks, drafts,
instruments and other items of payment or Proceeds of Collateral shall be
endorsed by the applicable Borrower to Lender, and, if that endorsement of any
such item shall not be made for any reason, Lender is hereby irrevocably
authorized to endorse the same on such Borrower’s behalf.  For the purpose of this section, each
Borrower irrevocably hereby makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as such Borrower’s true and
lawful attorney and agent-in-fact (i) to endorse such Borrower’s name upon
said items of payment and/or Proceeds of Collateral and upon any Chattel Paper,
Document, Instrument, invoice or similar document or agreement relating to any
Account of such Borrower or Goods pertaining thereto; (ii) to take control
in any manner of any item of payment or Proceeds thereof and (iii) to have
access to any lock box or postal box into which any of such Borrower’s mail is
deposited, and open and process all mail addressed to such Borrower and
deposited therein.

 

(b)           Lender may, at any time
and from time to time after the
occurrence and during the continuance of an Event of Default, whether
before or after notification to any Account Debtor and whether before or after
the maturity of any of the Liabilities, (i) enforce collection of any of
Borrowers’ Accounts or other amounts owed to a Borrower by suit or otherwise;
(ii) exercise all of such Borrower’s rights and remedies with respect to
proceedings brought to collect any Accounts or other amounts owed to such
Borrower; (iii) surrender, release or exchange all or any part of any
Accounts or other amounts owed to such Borrower, or compromise or extend or
renew for any period (whether or not longer than the original period) any
indebtedness thereunder; (iv) sell or assign any Account of such Borrower
or other amount owed to such Borrower upon such terms, for such amount and at
such time or times as Lender deems advisable; (v) prepare, file and sign
such Borrower’s name on any proof of claim in bankruptcy or other similar document
against any Account Debtor or other Person obligated to such Borrower; and
(vi) do all other acts and things which are necessary, in Lender’s sole
discretion, to fulfill such Borrower’s obligations under this Agreement and the
Other Agreements and to allow Lender to collect the Accounts or other amounts
owed to such Borrower.  In addition to
any other provision hereof, Lender may at any time, after the occurrence and during the continuance of an Event
of Default, at Borrowers’ expense, notify any parties obligated on any of the
Accounts to make payment directly to Lender of any amounts due or to become due
thereunder.

 

(c)           For purposes of
calculating interest and fees, Lender shall, within two (2) Business Days after
receipt by Lender at its office in Chicago, Illinois of (i) checks and
(ii) cash

 

21

 

or other immediately available
funds from collections of items of payment and Proceeds of any Collateral,
apply the whole or any part of such collections or Proceeds against the
Liabilities in such order as Lender shall determine in its sole
discretion.  For purposes of determining
the amount of Loans available for borrowing purposes, checks and cash or other
immediately available funds from collections of items of payment and Proceeds
of any Collateral shall be applied in whole or in part against the Liabilities,
in such order as Lender shall determine in its sole discretion, on the day of
receipt, subject to actual collection.

 

(d)           On a monthly basis,
Lender shall deliver to Borrowers an account statement showing all Loans,
charges and payments, which shall be deemed final, binding and conclusive upon
Borrowers unless a Borrower notifies Lender in writing, specifying any error
therein, within thirty (30) days of the date such account statement is sent to
Borrowers and any such notice shall only constitute an objection to the items
specifically identified.

 

9.             COLLATERAL,
AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.

 

a)             Weekly/Monthly Reports.

 

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.

 

b)            Additional Monthly Reports.

 

Borrowers
shall deliver to Lender, in addition to any other reports, as soon as
practicable and in any event: (i) within fifteen (15) days after the end of
each month, (A) a detailed trial balance of each Borrower’s Accounts aged per
invoice date, in form and substance reasonably satisfactory to Lender
including, without limitation, the names and addresses of all Account Debtors
of each Borrower, and (B) a detailed report of accounts payable (such Accounts
and accounts payable divided into such time intervals as Lender may require in
its sole and reasonable discretion), including a listing of any held checks;
and (ii) within fifteen (15) days after the end of each month, the general
ledger inventory account balance, a perpetual inventory report and Lender’s
standard form of Inventory report then in effect or the form most recently
requested from Borrowers by Lender, for each Borrower by each category of
Inventory, together with a description of the monthly change in each category
of Inventory.

 

22

 

c)             Financial Statements.

 

Borrowers
shall deliver to Lender the following financial information, all of which shall
be prepared in accordance with generally accepted accounting principles
consistently applied: (i) no later than thirty (30) days after each calendar
month, copies of internally prepared financial statements, including, without
limitation, balance sheets and statements of income of Borrowers on a
consolidated and consolidating basis, certified by the Chief Financial Officer
or Controller of each Borrower; and (ii) no later than one hundred twenty (120)
days after the end of each of Borrowers’ Fiscal Years, audited annual financial
statements with an unqualified opinion by independent certified public
accountants selected by Borrowers and reasonably satisfactory to Lender, which
financial statements shall be accompanied by copies of any management letters
sent to a Borrower by such accountants. 
In addition, Borrowers shall deliver to Lender a Compliance Certificate
in the form of Exhibit B attached hereto, which Compliance Certificate shall
include a calculation of all financial covenants contained in this Agreement,
on a quarterly basis, within thirty (30) days after the end of each calendar
quarter.

 

d)            Annual Projections.

 

As soon as
practicable and in any event prior to the beginning of each Fiscal Year,
Borrowers shall deliver to Lender projected balance sheets, statements of
income and cash flow for Borrowers on a consolidated and consolidating basis,
for each of the twelve (12) months during such Fiscal Year, which shall include
the assumptions used therein, together with appropriate supporting details as
reasonably requested by Lender.

 

e)             Explanation of Budgets and
Projections.

 

In conjunction
with the delivery of the annual presentation of projections or budgets referred
to in subsection 9(d) above, Borrowers shall deliver a letter
signed by the President or a Vice President of each Borrower and by the
Treasurer or Chief Financial Officer of each Borrower, describing, comparing
and analyzing, in detail, all changes and developments between the anticipated
financial results included in such projections or budgets and the historical
financial statements of Borrowers in the same form such information is provided
to the Board of Directors of Borrowers.

 

f)             Public Reporting.

 

Promptly upon
the filing thereof, each Borrower shall deliver to Lender copies of all
registration statements and annual, quarterly, monthly or other regular reports
which such Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission, as well as promptly providing to Lender copies of any reports
and proxy statements delivered to its shareholders.

 

g)            Other Information.

 

Promptly
following request therefor by Lender, such other business or financial data,
reports, appraisals and projections as Lender may reasonably request.

 

23

 

10.           TERMINATION; AUTOMATIC RENEWAL.

 

THIS AGREEMENT SHALL BE IN EFFECT FROM THE
DATE HEREOF UNTIL JUNE 30, 2006 (THE “ORIGINAL TERM”) AND SHALL AUTOMATICALLY
RENEW ITSELF FROM YEAR TO YEAR THEREAFTER (EACH SUCH ONE-YEAR RENEWAL BEING
REFERRED TO HEREIN AS A “RENEWAL TERM”) UNLESS (A) LENDER ELECTS TO
TERMINATE THIS AGREEMENT AT THE END OF THE ORIGINAL TERM OR ANY RENEWAL TERM BY
PROVIDING BORROWERS WITH WRITTEN NOTICE OF SUCH ELECTION AT LEAST THIRTY (30)
DAYS PRIOR TO THE EXPIRATION OF THE ORIGINAL TERM OR AT THE END OF ANY RENEWAL
TERM; (B) THE DUE DATE OF THE LIABILITIES IS ACCELERATED PURSUANT TO SECTION
16 HEREOF; OR (C) A BORROWER ELECTS TO TERMINATE THIS AGREEMENT AT THE
END OF THE ORIGINAL TERM OR AT THE END OF ANY RENEWAL TERM BY GIVING LENDER
WRITTEN NOTICE OF SUCH ELECTION AT LEAST THIRTY (30) DAYS PRIOR TO THE END OF
THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM AND BY PAYING ALL OF THE
LIABILITIES IN FULL ON THE LAST DAY OF SUCH TERM (INCLUDING PROVIDING CASH
COLLATERAL FOR ANY OUTSTANDING UNDRAWN LETTERS OF CREDIT IN AN AMOUNT
ACCEPTABLE TO LENDER, BUT IN NO EVENT LESS THAN ONE HUNDRED FIVE PERCENT (105%)
OF THE UNDRAWN FACE AMOUNT OF SUCH LETTERS OF CREDIT).  If one or more of the events specified in
clauses (A), (B) and (C) occurs or this Agreement otherwise expires, then
(i) Lender shall not make any additional Loans on or after the date
identified as the date on which the Liabilities are to be repaid; and
(ii) this Agreement shall terminate on the date thereafter that the
Liabilities are paid in full.  At such
time as Borrowers have repaid all of the Liabilities (or provided cash
collateral with respect to outstanding Letters of Credit as described above)
and this Agreement has terminated, if Borrowers are obtaining new financing
from another lender, Borrowers shall deliver such lender’s indemnification of
Lender, in form and substance reasonably satisfactory to Lender, for checks
which Lender has credited to such Borrower’s account, but which subsequently
are dishonored for any reason or for automatic clearinghouse or wire transfers
not yet posted to such Borrower’s account.

 

11.           REPRESENTATIONS AND WARRANTIES.

 

Each Borrower
hereby represents and warrants to Lender, which representations and warranties (whether
appearing in this Section 11 or elsewhere) shall be true at the time of
Borrowers’ execution hereof and the closing of the transactions described
herein or related hereto, shall remain true until the repayment in full and
satisfaction of all the Liabilities and termination of this Agreement (except
to the extent that such representation and warranty relates to a specific date
or dates in which event such representations and warranties shall remain true
as of such date or dates), and shall be remade by each Borrower at the time
each Loan is made pursuant to this Agreement.

 

a)             Financial Statements and Other
Information.

 

The financial
statements and other information delivered or to be delivered by Borrowers to
Lender at or prior to the date of this Agreement accurately reflect the
financial condition of Borrowers, and there has been no material adverse change
in the financial condition, the operations or any other status of either of the
Borrowers since the date of the financial

 

24

 

statements delivered to Lender
most recently prior to the date of this Agreement.  All written information now or heretofore furnished by each
Borrower to Lender is true and correct in all material respects as of the date
with respect to which such information was furnished.

 

b)            Locations.

 

The office
where each Borrower keeps its books, records and accounts (or copies thereof)
concerning the Collateral, each Borrower’s principal place of business and all
of each Borrower’s other places of business, locations of Collateral and post
office boxes and locations of bank accounts are as set forth in Exhibit A
and at other locations within the continental United States (and Australia,
with respect to Inventory stored for purposes of sale to Aristocrat) of which
Lender has been advised by a Borrower in accordance with subsection 12(b)(i).  The Collateral, including, without
limitation, the Equipment (except any part thereof which a Borrower shall have
advised Lender in writing consists of Collateral normally used in more than one
state) is kept, or, in the case of vehicles, based, only at the addresses set
forth on Exhibit A, and at other locations within the continental United
States (and Australia, with respect to Inventory stored for purposes of sale to
Aristocrat) of which Lender has been advised by a Borrower in writing in
accordance with subsection 12(b)(i) hereof.

 

c)             Loans by Borrower.

 

Neither of the
Borrowers have made any loans or advances to any Affiliate or other Person except
for 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.

 

d)            Accounts and Inventory.

 

Each Account
or item of Inventory which either Borrower shall, expressly or by implication,
request Lender to classify as an Eligible Account or as Eligible Inventory,
respectively, shall, as of the time when such request is made, conform in all
respects to the requirements of such classification as set forth in the
respective definitions of “Eligible Account” and “Eligible Inventory” as set
forth herein and as otherwise established by Lender from time to time.

 

e)             Liens.

 

Each Borrower
is the lawful owner of all Collateral now purportedly owned or hereafter
purportedly acquired by such Borrower, free from all liens, claims, security
interests and encumbrances whatsoever, whether voluntarily or involuntarily
created and whether or not perfected, other than the Permitted Liens.

 

f)             Organization, Authority and No
Conflict.

 

WGE is a
corporation, duly organized, validly existing and in good standing in the State
of Illinois, its state organizational identification number is 18348551 and
such Borrower is duly qualified and in good standing in all states where the
failure to be qualified and in good standing would have a Material Adverse
Effect.  AGE is a corporation, duly
organized,

 

25

 

validly existing and in good
standing in the State of Nevada, its state organizational identification number
is C29604-1999 and such Borrower is duly qualified and in good standing in all
states where the failure to be qualified and in good standing would have a
Material Adverse Effect.  Each Borrower
has the right and power and is duly authorized and empowered to enter into,
execute and deliver this Agreement and the Other Agreements and perform its
obligations hereunder and thereunder. 
Each Borrower’s execution, delivery and performance of this Agreement
and the Other Agreements does not conflict with the provisions of the
organizational documents of such Borrower, any statute, regulation, ordinance
or rule of law, or any agreement, contract or other document which is binding
on such Borrower, and each Borrower’s execution, delivery and performance of
this Agreement and the Other Agreements shall not result in the imposition of
any lien or other encumbrance upon any of such Borrower’s property under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument by which such Borrower or any of its property may be
bound or affected (other than a lien in favor of the Lender).

 

g)            Litigation.

 

There are no
actions or proceedings which are pending or threatened against a Borrower which
might have a Material Adverse Effect on such Borrower, and each Borrower shall,
promptly upon becoming aware of any such pending or threatened action or
proceeding, give written notice thereof to Lender.  No Borrower has any Commercial Tort Claims pending other than
those set forth on Exhibit C hereto as Exhibit C may be amended
from time to time.

 

h)            Compliance with Laws and Maintenance
of Permits.

 

Each Borrower
has obtained all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which would have a Material
Adverse Effect on such Borrower.  Each
Borrower is in compliance in all material respects with all applicable federal,
state, local and foreign statutes, orders, regulations, rules and ordinances (including,
without limitation, Environmental Laws and statutes, orders, regulations, rules
and ordinances relating to taxes, employer and employee contributions and
similar items, securities, ERISA or employee health and safety) the failure to
comply with which would have a Material Adverse Effect on such Borrower.

 

i)              Affiliate Transactions.

 

Except as set
forth on Schedule 11(i) hereto or as permitted pursuant to subsection
11(c) hereof, no Borrower is conducting, permitting or suffering to be
conducted, transactions with any Affiliate other than transactions with
Affiliates 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.

 

j)              Names and Trade Names.

 

Except as set
forth in Schedule 11(j) hereto, each Borrower’s name has always been as
set forth on the first page of this Agreement and no Borrower uses trade names,
assumed

 

26

 

names, fictitious names or
division names in the operation of its business, except as set forth on Schedule
11(j) hereto.

 

k)             Equipment.

 

Each Borrower
has good and indefeasible and merchantable title to and ownership of all
Equipment.  No Equipment is a Fixture to
real estate unless such real estate is owned by such Borrower and is subject to
a mortgage in favor of Lender, or if such real estate is leased, is subject to
a landlord’s agreement in favor of Lender on terms acceptable to Lender, or an
accession to other personal property unless such personal property is subject
to a first priority lien in favor of Lender.

 

l)              Enforceability.

 

This Agreement
and the Other Agreements to which either of the Borrowers is a party are the
legal, valid and binding obligations of such Borrower and are enforceable
against such Borrower in accordance with their respective terms.

 

m)            Solvency.

 

Each Borrower
is, after giving effect to the transactions contemplated hereby, solvent, able
to pay its debts as they become due, has capital sufficient to carry on its
business, now owns property having a value both at fair valuation and at
present fair saleable value greater than the amount required to pay its debts,
and will not be rendered insolvent by the execution and delivery of this
Agreement or any of the Other Agreements or by completion of the transactions
contemplated hereunder or thereunder.

 

n)            Indebtedness.

 

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

 

o)            Margin Security and Use of Proceeds.

 

Neither of the
Borrowers own any margin securities, and none of the proceeds of the Loans
hereunder shall be used for the purpose of purchasing or carrying any margin
securities or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.

 

p)            Parent, Subsidiaries and Affiliates.

 

Except as set
forth on Schedule 11(p) hereto, neither of the Borrowers has any Parents,
Subsidiaries or other Affiliates or divisions, nor is any Borrower engaged in
any joint venture or partnership with any other Person.

 

27

 

q)            No Defaults.

 

Neither of the
Borrowers are in default under any material contract, lease or commitment to
which it is a party or by which it is bound, nor does any Borrower know of any
dispute regarding any contract, lease or commitment which would have a Material
Adverse Effect on such Borrower.

 

r)             Employee Matters.

 

There are no
controversies pending or threatened between either of the Borrowers and any of
their respective employees, agents or independent contractors other than
employee grievances arising in the ordinary course of business which would not,
in the aggregate, have a Material Adverse Effect on such Borrower, and each
Borrower is in compliance with all federal and state laws respecting employment
and employment terms, conditions and practices except for such non-compliance
which would not have a Material Adverse Effect on such Borrower.

 

s)             Intellectual Property.

 

Each Borrower
possesses adequate licenses, patents, patent applications, copyrights, service
marks, trademarks, trademark applications, trade styles and trade names to
continue to conduct its business as heretofore conducted by it.

 

t)             Environmental Matters.

 

No Borrower
has generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates any
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of each Borrower comply in all
material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder.  There has been no investigation, proceeding,
complaint, order, directive, claim, citation or notice by any governmental
authority or any other Person, nor is any pending or, to the best of each
Borrower’s knowledge threatened with respect to any non-compliance with or
violation of the requirements of any Environmental Law by either of the
Borrowers or the release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects a Borrower or its
business, operations or assets or any properties at which either of the
Borrowers has transported, stored or disposed of any Hazardous Materials.  Neither of the Borrowers has any material
liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.

 

u)            ERISA Matters.

 

Each Borrower
has paid and discharged all obligations and liabilities arising under ERISA of
a character which, if unpaid or unperformed, might result in the imposition of
a lien against any of its properties or assets.

 

28

 

12.           AFFIRMATIVE COVENANTS.

 

Until payment
and satisfaction in full of all Liabilities and termination of this Agreement,
unless Borrowers obtain Lender’s prior written consent waiving or modifying any
of Borrowers’ covenants hereunder in any specific instance, each Borrower
covenants and agrees as follows:

 

a)             Maintenance of Records.

 

Each Borrower
shall at all times keep accurate and complete books, records and accounts with
respect to all of such Borrower’s business activities, in accordance with sound
accounting practices and generally accepted accounting principles consistently
applied, and shall keep such books, records and accounts, and any copies
thereof, only at the addresses indicated for such purpose on Exhibit A
or any such addresses disclosed to Lender by Borrowers from time to time.

 

b)            Notices.

 

Each Borrower
shall:

 

(i)            Locations.  Promptly (but in no event less than ten (10)
days prior to the occurrence thereof) notify Lender of the proposed opening of
any new place of business or new location of Collateral, the closing of any
existing place of business or location of Collateral, any change in the
location of such Borrower’s books, records and accounts (or copies thereof),
the opening or closing of any post office box, the opening or closing of any
bank account or, if any of the Collateral consists of Goods of a type normally
used in more than one state, the use of any such Goods in any state other than
a state in which such Borrower has previously advised Lender that such Goods
will be used.

 

(ii)           Eligible
Accounts and Inventory.  Promptly
upon becoming aware thereof, notify Lender if any Account or Inventory
identified by such Borrower to Lender as an Eligible Account or Eligible
Inventory becomes ineligible for any reason.

 

(iii)          Litigation
and Proceedings.  Promptly upon
becoming aware thereof, notify Lender of any actions or proceedings which are
pending or threatened against such Borrower which might have a Material Adverse
Effect on such Borrower and of any Commercial Tort Claims of such Borrower
which may arise, which notice shall constitute such Borrower’s authorization to
amend Exhibit C to add such Commercial Tort Claim.

 

(iv)          Names
and Trade Names.  Notify Lender
within ten (10) days of the change of its name or the use of any trade name,
assumed name, fictitious name or division name not previously disclosed to
Lender in writing.

 

(v)           ERISA
Matters.  Promptly notify Lender of
(x) the occurrence of any “reportable event” (as defined in ERISA) which might
result in the termination by the Pension Benefit Guaranty Corporation (the
“PBGC”) of

 

29

 

any employee
benefit plan (“Plan”) covering any officers or employees of such Borrower, any
benefits of which are, or are required to be, guaranteed by the PBGC, (y)
receipt of any notice from the PBGC of its intention to seek termination of any
Plan or appointment of a trustee therefor or (z) its intention to terminate or
withdraw from any Plan.

 

(vi)          Environmental
Matters.  Immediately notify Lender
upon becoming aware of any investigation, proceeding, complaint, order,
directive, claim, citation or notice with respect to any non-compliance with or
violation of the requirements of any Environmental Law by such Borrower or the
generation, use, storage, treatment, transportation, manufacture handling, production
or disposal of any Hazardous Materials or any other environmental, health or
safety matter which affects such Borrower or its business operations or assets
or any properties at which such Borrower has transported, stored or disposed of
any Hazardous Materials.

 

(vii)         Default;
Material Adverse Change.  Promptly
advise Lender of any change in the business, property, assets, prospects,
operations or condition, financial or otherwise, of such Borrower, which could
reasonably be expected to have a Material Adverse Effect upon such Borrower;
the occurrence of any Event of Default hereunder or the occurrence of any event
which, if uncured, will become an Event of Default after notice or lapse of
time (or both).

 

All of the foregoing notices
shall be provided by Borrowers to Lender in writing.

 

c)             Compliance with Laws and Maintenance
of Permits.

 

Each Borrower
shall maintain all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which would have a Material
Adverse Effect on such Borrower and each Borrower shall remain in compliance
with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, Environmental
Laws and statutes, orders, regulations, rules and ordinances relating to taxes,
employer and employee contributions and similar items, securities, ERISA or
employee health and safety), the failure with which to comply would have a
Material Adverse Effect on such Borrower. 
Following any determination by Lender that there is non-compliance, or
any condition which requires any action by or on behalf of either Borrower in
order to avoid non-compliance, with any Environmental Law, at such Borrower’s
expense cause an independent environmental engineer acceptable to Lender to
conduct such tests of the relevant site(s) as are appropriate and prepare and
deliver a report setting forth the results of such tests, a proposed plan for
remediation and an estimate of the costs thereof.

 

d)            Inspection and Audits.

 

Each Borrower
shall permit Lender, or any Persons designated by Lender, to call at such
Borrower’s places of business at any reasonable times, and, without hindrance
or delay but upon at least five (5) days prior written notice to such Borrower
unless an Event of Default is

 

30

 

continuing in which case no
prior notice is required, to inspect the Collateral and to inspect, audit,
check and make extracts from such Borrower’s books, records, journals, orders,
receipts and any correspondence and other data relating to such Borrower’s
business, the Collateral or any transactions between the parties hereto, and
shall have the right to make such verification concerning such Borrower’s
business as Lender may consider reasonable under the circumstances.  Each Borrower shall furnish to Lender such
information relevant to Lender’s rights under this Agreement and the Other
Agreements as Lender shall at any time and from time to time reasonably
request.  Each Borrower authorizes
Lender to discuss the affairs, finances and business of such Borrower with any
officers, employees or directors of such Borrower or with its Parent or any
Affiliate or the officers, employees or directors of its Parent or any Affiliate,
and to discuss the financial condition of such Borrower with such Borrower’s
independent public accountants, provided, that contact and discussion with
employees who are not officers or directors of either Borrower shall only be
permitted (i) in the ordinary course during any audit or inspection of
Borrowers by Lender, (ii) following the occurrence of an Event of Default and
(iii) in all other cases following five (5) days prior notice to an officer of
either Borrower.  Any such discussions
shall be without liability to Lender or to Borrowers’ independent public
accountants.  Borrowers shall pay to
Lender all customary fees and all costs and out-of-pocket expenses incurred by
Lender in the exercise of its rights hereunder, and all of such fees, costs and
expenses shall constitute Liabilities hereunder, shall be payable on demand
and, until paid, shall bear interest at the highest rate then applicable to
Loans hereunder; provided, that if no Event of Default has occurred or is
continuing, Borrowers’ obligations with respect to such fees, costs and
expenses shall not exceed Six Thousand Dollars ($6,000) plus all out-of-pocket
costs and expenses in any calendar year.

 

e)             Insurance.

 

Each Borrower
shall:

 

(i)            Keep
the Collateral properly housed and insured for the full insurable value thereof
against loss or damage by fire, theft, explosion, sprinklers, collision (in the
case of motor vehicles) and such other risks as are customarily insured against
by Persons engaged in businesses similar to that of such Borrower, with such
companies, in such amounts, with such deductibles, and under policies in such
form, as shall be satisfactory to Lender. 
Original (or certified) copies of such policies of insurance have been
or shall be, delivered to Lender upon request by Lender, together with evidence
of payment of all premiums therefor, and shall contain an endorsement, in form
and substance acceptable to Lender, showing loss under such insurance policies
payable to Lender.  Such endorsement, or
an independent instrument furnished to Lender, shall provide that the insurance
company shall give Lender at least thirty (30) days written notice before any
such policy of insurance is altered or canceled and that no act, whether
willful or negligent, or default of such Borrower or any other Person shall
affect the right of Lender to recover under such policy of insurance in case of
loss or damage.  In addition, each
Borrower shall cause to be executed and delivered to Lender an assignment of
proceeds of its business interruption insurance policies.  Each Borrower hereby directs

 

31

 

all insurers
under all policies of insurance to pay all proceeds payable thereunder directly
to Lender.  Lender shall promptly notify
Borrower of the receipt by Lender of any such insurance proceeds.  Each Borrower irrevocably makes, constitutes
and appoints Lender (and all officers, employees or agents designated by
Lender) as such Borrower’s true and lawful attorney (and agent-in-fact) for the
purpose of making, settling and adjusting claims under such policies of
insurance, endorsing the name of such Borrower on any check, draft, instrument
or other item of payment for the proceeds of such policies of insurance and
making all determinations and decisions with respect to such policies of
insurance.

 

(ii)           Maintain,
at its expense, such public liability and third party property damage insurance
as is customary for Persons engaged in businesses similar to that of such
Borrower with such companies and in such amounts, with such deductibles and
under policies in such form as shall be satisfactory to Lender and original (or
certified) copies of such policies have been or shall be delivered to Lender
upon request by Lender, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing Lender as
additional insured thereunder and providing that the insurance company shall
give Lender at least thirty (30) days written notice before any such policy
shall be altered or canceled.

 

If a Borrower at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay any premium relating thereto, then Lender,
without waiving or releasing any obligation or default by Borrowers hereunder,
may (but shall be under no obligation to) obtain and maintain such policies of
insurance and pay such premiums and take such other actions with respect
thereto as Lender deems advisable.  Such
insurance, if obtained by Lender, may, but need not, protect such Borrower’s
interests or pay any claim made by or against such Borrower with respect to the
Collateral.  Such insurance may be more
expensive than the cost of insurance such Borrower may be able to obtain on its
own and may be cancelled only upon such Borrower providing evidence that it has
obtained the insurance as required above. 
All sums disbursed by Lender in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys’ fees, shall constitute Loans hereunder, shall
be payable on demand by Borrowers to Lender and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.

 

f)             Collateral.

 

Each Borrower
shall keep the Collateral in good condition, repair and order (normal wear and
tear expected) and shall make all necessary repairs to the Equipment and
replacements thereof so that the operating efficiency and the value thereof
shall at all times be preserved and maintained.  Each Borrower shall permit Lender to examine any of the
Collateral at any time and wherever the Collateral may be located at all
reasonable times and upon receipt of at least five (5) days prior written
notice of such inspection unless an Event of Default is continuing, in which
event no prior notice shall be required, and, each Borrower shall, immediately
upon request therefor by Lender, deliver to Lender any and all evidence of

 

32

 

ownership of any of the Equipment
including, without limitation, certificates of title and applications of
title.  Each Borrower shall, at the
request of Lender, indicate on its records concerning the Collateral a
notation, in form satisfactory to Lender, of the security interest of Lender
hereunder.

 

g)            Use of Proceeds.

 

All monies and
other property obtained by a Borrower from Lender pursuant to this Agreement
shall be used solely for business purposes of such Borrower.

 

h)            Taxes.

 

Each Borrower
shall file all required tax returns and pay all of its taxes when due,
including, without limitation, taxes imposed by federal, state or municipal
agencies, and shall cause any liens for taxes to be promptly released;
provided, that such Borrower shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the
amount so contested is shown on such Borrower’s financial statements;
(ii) the contesting of any such payment does not give rise to a lien for
taxes; (iii) such Borrower keeps on deposit with Lender (such deposit to
be held without interest) an amount of money which, in the sole judgment of
Lender, is sufficient to pay such taxes and any interest or penalties that may
accrue thereon, a reserve against the availability to borrow money under
Section 2(a) hereof in such amount is maintained or such amount is insured
against or bonded over to the satisfaction of Lender; and (iv) if such
Borrower fails to prosecute such contest with reasonable diligence, Lender may
apply the money so deposited or reserved in payment of such taxes.  If either Borrower fails to pay any such
taxes and in the absence of any such contest by such Borrower, Lender may (but
shall be under no obligation to) advance and pay any sums required to pay any
such taxes and/or to secure the release of any lien therefor, and any sums so
advanced by Lender shall constitute Loans hereunder, shall be payable by such
Borrower to Lender on demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder.

 

i)              Intellectual
Property.

 

Each Borrower
shall maintain adequate licenses, patents, patent applications, copyrights,
service marks, trademarks, trademark applications, tradestyles and trade names
to continue its business as heretofore conducted by it or as hereafter
conducted by it.

 

j)              Checking Accounts.

 

Each Borrower
shall maintain its general checking/controlled disbursement account with
Lender.  Normal charges shall be
assessed thereon.  Although no
compensating balance is required, each Borrower must keep monthly balances in
order to merit earnings credits which will cover Lender’s service charge for
demand deposit account activities.

 

13.           NEGATIVE COVENANTS.

 

Until payment
and satisfaction in full of all Liabilities and termination of this Agreement,
unless Borrowers obtain Lender’s prior written consent waiving or modifying any
of Borrowers’ covenants hereunder in any specific instance, each Borrower
agrees as follows:

 

33

 

a)             Guaranties.

 

No Borrower
shall assume, guarantee or endorse, or otherwise become liable in connection
with, the obligations of any Person, except by endorsement of instruments for
deposit or collection or similar transactions in the ordinary course of
business.

 

b)            Indebtedness.

 

No Borrower
shall create, incur, assume or become obligated (directly or indirectly), for
any loans or other indebtedness for borrowed money other than the Loans, except
that a Borrower may (i) borrow money from a Person other than Lender on an unsecured
and subordinated basis if a subordination agreement in favor of Lender and in
form and substance satisfactory to Lender is executed and delivered to Lender
relative thereto; (ii) maintain its present indebtedness listed on Schedule 11(n)
hereto; (iii) incur unsecured indebtedness to trade creditors in the ordinary
course of business; (iv) incur purchase money indebtedness or capitalized lease
obligations in connection with Capital Expenditures permitted pursuant to subsection 14(d) hereof; and (v) incur
operating lease obligations (other than existing leasehold interests as of the
date of this Agreement set forth on Schedule 13(b) hereto)
requiring payments not to exceed Two Hundred Fifty Thousand and No/100 Dollars
($250,000) in the aggregate during any Fiscal Year of Borrowers.  In addition, AGE may incur indebtedness to
WGE to the extent permitted pursuant to subsection 13(f).

 

c)             Liens.

 

No Borrower
shall grant or permit to exist (voluntarily or involuntarily) any lien, claim,
security interest or other encumbrance whatsoever on any of its assets, other
than Permitted Liens.

 

d)            Mergers,
Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary
Course of Business.

 

Neither of the
Borrowers shall (i) enter into any merger or consolidation;
(ii) change their respective state of organization or enter into any
transaction which has the effect of changing its state of organization
(iii) sell, lease or otherwise dispose of any of their respective assets
other than in the ordinary course of business; (iv) purchase the stock,
other equity interests or all or a material portion of the assets of any Person
or division of such Person; or (v) enter into any other transaction
outside the ordinary course of such Borrower’s business, including, without
limitation, any purchase, redemption or retirement of any shares of any class
of its stock or any other equity interest, and any issuance of any shares of,
or warrants or other rights to receive or purchase any shares of, any class of
its stock or any other equity interest (other than equity compensation plans
for their respective officers, employees or members of boards of
directors).  Neither of the Borrowers
shall form any Subsidiaries or enter into any joint ventures or partnerships
with any other Person.

 

e)             Dividends
and Distributions.

 

No Borrower
shall declare or pay any cash dividend or other distribution (whether in cash
or in kind) on any class of its stock (if such Borrower is a corporation) or on
account of

 

34

 

any equity interest in such
Borrower (if such Borrower is a partnership, limited liability company or other
type of entity); provided, however, that WGE may declare and pay an annual 5%
stock dividend.

 

f)             Investments;
Loans.

 

Neither
Borrower shall purchase or otherwise acquire, or contract to purchase or
otherwise acquire, the obligations or stock of any Person, other than direct
obligations of the United States or investments in certificates of deposit or
other investment products issued or offered by the Lender; nor shall either
Borrower lend or otherwise advance funds to any Person except for advances made
to employees, officers and directors for travel and other expenses arising in
the ordinary course of business. 
Notwithstanding the foregoing, WGE may advance loans to AGE from time to
time, provided, that such loans are evidenced by a note or notes and such
note(s) are pledged to Lender and delivered to Lender by WGE as Collateral.

 

g)            Fundamental
Changes, Line of Business.

 

Neither of the
Borrowers shall amend its organizational documents or change its Fiscal Year or
enter into a new line of business materially different from such Borrower’s
current business.

 

h)            Equipment.

 

Neither of the
Borrowers shall (i) permit any Equipment to become a Fixture to real property
unless such real property is owned by such Borrower and is subject to a
mortgage in favor of Lender, or if such real property is leased, is subject to
a landlord’s agreement in favor of Lender on terms acceptable to Lender, or
(ii) permit any Equipment to become an accession to any other personal property
unless such personal property is subject to a first priority lien in favor of
Lender or a Permitted Lien.

 

i)              Affiliate
Transactions.

 

Except as set
forth on Schedule 11(i) hereto or as permitted pursuant to subsection
11(c) or 13(f) hereof, neither of the Borrowers shall conduct,
permit or suffer 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.

 

j)              Settling
of Accounts.

 

Neither of the
Borrowers shall settle or adjust any Account identified by such Borrower as an
Eligible Account or with respect to which the Account Debtor is an Affiliate
without providing notice thereof to the Lender, provided, that following the
occurrence and during the continuance of an Event of Default, such Borrower
shall not settle or adjust any Account without the consent of Lender.

 

35

 

14.           FINANCIAL COVENANTS.

 

Each Borrower
shall maintain and keep in full force and effect each of the financial
covenants set forth below:

 

a)             Tangible
Net Worth.

 

Borrowers’
Tangible Net Worth shall not at any time be less than the Minimum Tangible Net
Worth; “Minimum
Tangible Net Worth” being defined for purposes of this subsection as
(i) Five Million Five Hundred Thousand and No/100 Dollars ($5,500,000) as
of June 30, 2003, September 30, 2003 or December 31, 2003 and
(ii) thereafter, as of the last day of each calendar quarter, the Minimum
Tangible Net Worth as of the last day of the immediately preceding fiscal year
plus fifty percent (50%) of Borrowers’
net income (but without reduction for any net loss) for the Fiscal Year
immediately preceding the date of calculation as reflected on Borrowers’
audited year end financial statement; and “Tangible Net Worth” being
defined for purposes of this Agreement as Borrowers’ shareholders’ equity
(including retained earnings) less the book value of all intangible
assets as determined solely by Lender on a consistent basis plus the amount
of any LIFO reserve plus the amount of any debt subordinated to Lender, all as
determined under generally accepted accounting principles applied on a basis
consistent with the financial statement dated December 31, 2002 except as set
forth herein;

 

b)            Leverage.

 

Borrowers
shall not permit, as of the last day of each calendar quarter, the ratio of
their consolidated total liabilities as of the date of calculation, to Tangible
Net Worth as of the date of calculation to be greater than 3.50:1.0.

 

c)             Interest
Coverage.

 

Borrowers
shall not permit the ratio of (i) EBITDA to (ii) scheduled payments of interest
and fees, to the extent carried as interest expense on Borrowers’ financial
statements, with respect to indebtedness for borrowed money (including the interest
component payments with respect to capitalized leases), to be less than
2.50:1.00 as of the last day of each quarter for the twelve (12) month period
ending on such date.

 

d)            Capital
Expenditure Limitations.

 

Borrowers and
their Subsidiaries shall not make any Capital Expenditures if, after giving
effect to such Capital Expenditure, the aggregate cost of all such fixed assets
purchased or otherwise acquired would exceed Two Hundred Fifty Thousand and
No/100 Dollars ($250,000) during any Fiscal Year.

 

15.           DEFAULT.

 

The occurrence
of any one or more of the following events shall constitute an “Event of
Default” by Borrowers hereunder:

 

36

 

a)             Payment.

 

The failure of
any Obligor to pay when due, declared due, or demanded by Lender, any of the
Liabilities.

 

b)            Breach of
this Agreement and the Other Agreements.

 

The failure of
any Obligor to perform, keep or observe any of the covenants, conditions,
promises, agreements or obligations of such Obligor under this Agreement or any
of the Other Agreements; provided, that any such failure by either Borrowers
under subsections 12(b)(i), (iv), (v), (vi), 12(c)
and 12(i) of this Agreement shall not constitute an Event of Default
hereunder until the thirtieth (30th) day following the occurrence thereof.

 

c)             Breaches
of Other Obligations.

 

The failure of
any Obligor to perform, keep or observe any of the covenants, conditions,
promises, agreements or obligations of such Obligor under any other agreement
with any Person, after giving effect to any applicable cure period under any
such agreement, if such failure might have a Material Adverse Effect on such
Obligor.

 

d)            Breach of
Representations and Warranties.

 

The making or
furnishing by any Obligor to Lender of any representation, warranty,
certificate, schedule, report or other communication within or in connection
with this Agreement or the Other Agreements or in connection with any other
agreement between such Obligor and Lender, which is untrue or misleading in any
respect.

 

e)             Loss of
Collateral.

 

The loss,
theft, damage or destruction of, or (except as permitted hereby) sale, lease or
furnishing under a contract of service of, any of the Collateral having a book
value in excess of $250,000

 

f)             Levy,
Seizure or Attachment.

 

The making or
any attempt by any Person to make any levy, seizure or attachment upon any of
the Collateral having a book value in excess of $50,000.

 

g)            Bankruptcy
or Similar Proceedings.

 

The
commencement of any proceedings in bankruptcy by or against any Obligor or for
the liquidation or reorganization of any Obligor, or alleging that such Obligor
is insolvent or unable to pay its debts as they mature, or for the readjustment
or arrangement of any Obligor’s debts, whether under the United States Bankruptcy
Code or under any other law, whether state or federal, now or hereafter
existing, for the relief of debtors, or the commencement of any analogous
statutory or non-statutory proceedings involving any Obligor; provided,
however, that if such commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
proceedings are not dismissed within forty-five (45) days after the
commencement of such proceedings, though Lender shall have no obligation to

 

37

 

make Loans or issue Letters of
Credit to any Borrower during such forty-five (45) day period or, if earlier,
until such proceedings are dismissed.

 

h)            Appointment
of Receiver.

 

The appointment
of a receiver or trustee for any Obligor, for any of the Collateral or for any
substantial part of any Obligor’s assets or the institution of any proceedings
for the dissolution, or the full or partial liquidation, or the merger or
consolidation, of any Obligor which is a corporation, limited liability company
or a partnership; provided, however, that if such appointment or commencement
of proceedings against such Obligor is involuntary, such action shall not
constitute an Event of Default unless such appointment is not revoked or such
proceedings are not dismissed within forty-five (45) days after the
commencement of such proceedings, though Lender shall have no obligation to
make Loans or issue Letters of Credit to any Borrower during such forty-five (45)
day period or, if earlier, until such appointment is revoked or such
proceedings are dismissed.

 

i)              Judgment.

 

The entry of
any judgment or order against any Obligor which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution.

 

j)              Death or Dissolution of Obligor.

 

The death of
any Obligor who is a natural Person, or of any general partner who is a natural
Person of any Obligor which is a partnership, or any member who is a natural
Person of any Obligor which is a limited liability company or the dissolution
of any Obligor which is a partnership, limited liability company, corporation
or other entity.

 

k)             Default or Revocation of Guaranty.

 

The occurrence
of an event of default under, or the revocation or termination of, any
agreement, instrument or document executed and delivered by any Person to
Lender pursuant to which such Person has guaranteed to Lender the payment of
all or any of the Liabilities or has granted Lender a security interest in or
lien upon some or all of such Person’s real and/or personal property to secure
the payment of all or any of the Liabilities.

 

l)              Criminal Proceedings.

 

The
institution in any court of a criminal proceeding against any Obligor, or the
indictment of any Obligor for any crime.

 

m)            Change of Control.

 

(i) Any Person
or Persons acting in concert shall acquire beneficial ownership of more than
thirty percent (30%) or more of the outstanding shares of the voting equity of
WGE (ii) as of any date a majority of the board of directors of WGE consists of
individuals who were

 

38

 

not directors as of the date
hereof, or (iii) the failure of WGE to own and have voting control of at least
one hundred percent (100%) of the issued and outstanding voting equity interest
of AGE.

 

n)            Material Adverse Change.

 

Any material
adverse change in the Collateral, business, property, assets, prospects,
operations or condition, financial or otherwise of any Obligor, as determined
by Lender in its sole judgment or the occurrence of any event which, in
Lender’s sole judgment, could have a Material Adverse Effect.

 

16.           REMEDIES UPON AN EVENT OF DEFAULT.

 

(a)           Upon the occurrence of
an Event of Default described in subsection 15(g) hereof, all of the
Liabilities shall immediately and automatically become due and payable, without
notice of any kind.  Upon the occurrence
of any other Event of Default, all Liabilities may, at the option of Lender,
and without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable.

 

(b)           Upon the occurrence of
an Event of Default, Lender may exercise from time to time any rights and
remedies available to it under the Uniform Commercial Code and any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any of the Other Agreements and all
of Lender’s rights and remedies shall be cumulative and non-exclusive to the
extent permitted by law.  In particular,
but not by way of limitation of the foregoing, Lender may, without notice,
demand or legal process of any kind, take possession of any or all of the
Collateral (in addition to Collateral of which it already has possession),
wherever it may be found, and for that purpose may pursue the same wherever it
may be found, and may enter onto any of Borrowers’ premises where any of the
Collateral may be, and search for, take possession of, remove, keep and store
any of the Collateral until the same shall be sold or otherwise disposed of,
and Lender shall have the right to store the same at any of Borrowers’ premises
without cost to Lender.  At Lender’s
request, each Borrower shall, at Borrowers’ expense, assemble the Collateral
and make it available to Lender at one or more places to be designated by
Lender and reasonably convenient to Lender and such Borrower.  Each Borrower recognizes that if a Borrower
fails to perform, observe or discharge any of its Liabilities under this
Agreement or the Other Agreements, no remedy at law will provide adequate
relief to Lender, and agrees that Lender shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.  Any notification of
intended disposition of any of the Collateral required by law will be deemed to
be a reasonable authenticated notification of disposition if given at least ten
(10) days prior to such disposition and such notice shall (i) describe Lender
and the applicable Borrower(s), (ii) describe the Collateral that is the
subject to the intended disposition, (iii) state the method of the intended
disposition, (iv) state that the applicable Borrower(s) is entitled to an
accounting of the Liabilities and state the charge, if any, for an accounting
and (v) state the time and place of any public disposition or the time after
which any private sale is to be made. 
Lender may disclaim any warranties that might arise in connection with
the sale, lease or other disposition of the Collateral and has no obligation to
provide any warranties at such time. 
Any Proceeds of any disposition by Lender of any of the Collateral may
be applied by Lender to the payment of expenses in connection with the
Collateral, including, without limitation, legal expenses and

 

39

 

reasonable attorneys’ fees, and
any balance of such Proceeds may be applied by Lender toward the payment of
such of the Liabilities, and in such order of application, as Lender may from
time to time elect.

 

17.           CONDITIONS PRECEDENT.

 

The obligation
of Lender to fund the initial Revolving Loan, and to issue or cause to be
issued the initial Letter of Credit, is subject to the satisfaction or waiver
on or before the date hereof of the following conditions precedent:

 

(a)           Lender shall have
received each of the agreements, opinions, reports, approvals, consents,
certificates and other documents set forth on the closing document list
attached hereto as Schedule 17(a) (the “Closing Document List”) in
each case in form and substance satisfactory to Lender;

 

(b)           Since March 31, 2003,
no event shall have occurred which has had or could reasonably be expected to
have a Material Adverse Effect on any Obligor, as determined by Lender in its
sole discretion;

 

(c)           Lender shall have
received payment in full of all fees and expenses payable to it by Borrowers or
any other Person in connection herewith, on or before disbursement of the
initial Loans hereunder;

 

(d)           Lender shall have
determined that immediately after giving effect to (A) the making of the
initial Loans, including without limitation the Revolving Loans, if any,
requested to be made on the date hereof, (B) the issuance of the initial Letter
of Credit, if any, requested to be made on such date, (C) the payment of all
fees due upon such date and (D) the payment or reimbursement by Borrowers of
Lender for all closing costs and expenses incurred in connection with the
transactions contemplated hereby, Borrowers have Excess Availability of not
less than One Million and No/100 Dollars ($1,000,000); and

 

(e)           The Obligors shall have
executed and delivered to Lender all such other documents, instruments and
agreements which Lender determines are reasonably necessary to consummate the
transactions contemplated hereby.

 

18.           JOINT AND SEVERAL LIABILITY.

 

(a)           Notwithstanding
anything to the contrary contained herein, all Liabilities of each Borrower
hereunder shall be joint and several obligations of Borrowers.

 

(b)           Notwithstanding any
provisions of this Agreement to the contrary, it is intended that the joint and
several nature of the Liabilities of Borrowers and the liens and security
interests granted by Borrowers to secure the Liabilities, not constitute a
“Fraudulent Conveyance” (as defined below). 
Consequently, Lender and Borrowers agree that if the Liabilities of a
Borrower, or any liens or security interests granted by such Borrower securing
the Liabilities would, but for the application of this sentence, constitute a
Fraudulent Conveyance, the Liabilities of such Borrower and the liens and
security interests securing such Liabilities shall be valid and enforceable
only to the maximum extent that would not cause such Liabilities or

 

40

 

such lien or security interest
to constitute a Fraudulent Conveyance, and the Liabilities of such Borrower and
this Agreement shall automatically be deemed to have been amended
accordingly.  For purposes hereof,
“Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of
Chapter 11 of Title II of the United States Code (11 U.S.C. § 101, et
seq.), as amended (the “Bankruptcy Code”) or a fraudulent conveyance or
fraudulent transfer under the applicable provisions of any fraudulent
conveyance or fraudulent transfer law or similar law of any state, nation or
other governmental unit, as in effect from time to time.

 

(c)           Each Borrower assumes
responsibility for keeping itself informed of the financial condition of the
each other Borrower, and any and all endorsers and/or guarantors of any
instrument or document evidencing all or any part of such other Borrower’s
Liabilities and of all other circumstances bearing upon the risk of nonpayment
by such other Borrowers of their Liabilities and each Borrower agrees that
Lender shall not have any duty to advise such Borrower of information known to
Lender regarding such condition or any such circumstances or to undertake any
investigation not a part of its regular business routine.  If Lender, in its sole discretion,
undertakes at any time or from time to time to provide any such information to
a Borrower, Lender shall not be under any obligation to update any such
information or to provide any such information to such Borrower on any
subsequent occasion.

 

(d)           Lender is hereby
authorized, without notice or demand and without affecting the liability of a
Borrower hereunder, to, at any time and from time to time, (i) except as
otherwise expressly provided herein, renew, extend, accelerate or otherwise
change the time for payment of, or other terms relating to a Borrower’s
Liabilities or otherwise modify, amend or change the terms of any promissory
note or other agreement, document or instrument now or hereafter executed by a
Borrower and delivered to Lender; (ii) accept partial payments on a
Borrower’s Liabilities; (iii) take and hold security or collateral for the
payment of a Borrower’s Liabilities hereunder or for the payment of any
guaranties of a Borrower’s Liabilities or other liabilities of a Borrower and
exchange, enforce, waive and release any such security or collateral;
(iv) apply such security or collateral and direct the order or manner of
sale thereof as Lender, in its sole discretion, may determine; and
(v) settle, release, compromise, collect or otherwise liquidate a Borrower’s
Liabilities and any security or collateral therefor in any manner, without
affecting or impairing the obligations of the other Borrowers.  Lender shall have the exclusive right to
determine the time and manner of application of any payments or credits,
whether received from a Borrower or any other source, and such determination
shall be binding on such Borrower.  All
such payments and credits may be applied, reversed and reapplied, in whole or
in part, to any of a Borrower’s Liabilities as Lender shall determine in its
sole discretion without affecting the validity or enforceability of the
Liabilities of the other Borrowers.

 

(e)           Each Borrower hereby
agrees that, except as hereinafter provided, its obligations hereunder shall be
unconditional, irrespective of (i) the absence of any attempt to collect a
Borrower’s Liabilities from any Borrower or any guarantor or other action to
enforce the same; (ii) the waiver or consent by Lender with respect to any
provision of any instrument evidencing Borrowers’ Liabilities, or any part
thereof, or any other agreement heretofore, now or hereafter executed by a
Borrower and delivered to Lender; (iii) failure by Lender to take any
steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for Borrowers’ Liabilities; (iv) the
institution of any proceeding under the Bankruptcy Code, or any similar
proceeding, by or against a Borrower or Lender’s election in any such

 

41

 

proceeding of the application
of Section 1111(b)(2) of the Bankruptcy Code; (v) any borrowing or grant
of a security interest by any Borrower as debtor-in-possession, under Section
364 of the Bankruptcy Code; (vi) the disallowance, under Section 502 of
the Bankruptcy Code, of all or any portion of Lender’s claim(s) for repayment
of any of Borrowers’ Liabilities; or (vii) any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor.

 

(f)            No payment made by or
for the account of a Borrower including, without limitations, (i) a
payment made by such Borrower on behalf of another Borrower’s Liabilities or
(ii) a payment made by any other person under any guaranty, shall entitle
such Borrower, by subrogation or otherwise, to any payment from such other
Borrower or from or out of such other Borrower’s property and such Borrower
shall not exercise any right or remedy against such other Borrower or any
property of such other Borrower by reason of any performance of such Borrower
of its joint and several obligations hereunder.

 

19.           INDEMNIFICATION.

 

Each Borrower
agrees to defend (with counsel satisfactory to Lender), protect, indemnify and
hold harmless Lender, each affiliate or subsidiary of Lender, and each of their
respective officers, directors, employees, attorneys and agents (each an “Indemnified Party”) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any
investigative, administrative or judicial proceeding, whether or not the
Indemnified Party shall be designated a party thereto), which may be imposed
on, incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations, including, without limitation, securities laws and regulations,
Environmental Laws and commercial laws and regulations, under common law or in
equity, or based on contract or otherwise) in any manner relating to or arising
out of this Agreement or any Other Agreement, or any act, event or transaction
related or attendant thereto, the making or issuance and the management of the
Loans or any Letters of Credit or the use or intended use of the proceeds of
the Loans or any Letters of Credit; provided, however, that no Borrower shall
have any obligation hereunder to any Indemnified Party with respect to matters
caused by or resulting from the willful misconduct or gross negligence of such
Indemnified Party.  To the extent that
the undertaking to indemnify set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, each Borrower shall
satisfy such undertaking to the maximum extent permitted by applicable
law.  Any liability, obligation, loss,
damage, penalty, cost or expense covered by this indemnity shall be paid to
each Indemnified Party on demand, and, failing prompt payment, shall, together
with interest thereon at the highest rate then applicable to Loans hereunder
from the date incurred by each Indemnified Party until paid by Borrowers, be
added to the Liabilities of Borrowers and be secured by the Collateral.  The provisions of this Section 18
shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.

 

42

 

20.           NOTICE.

 

All written
notices and other written communications with respect to this Agreement shall
be sent by ordinary, certified or overnight mail, by telecopy or delivered in
person, and in the case of Lender shall be sent to it at 135 South LaSalle Street, Chicago, Illinois
60603-4105, attention: Anne Eharoshe, facsimile number: (312) 904-9293,
and in the case of Borrowers shall be sent to them at their respective
principal places of business set forth on Exhibit A hereto or as
otherwise directed by Borrowers in writing. 
All notices shall be deemed received upon actual receipt thereof or
refusal of delivery.

 

21.           CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.

 

This Agreement
and the Other Agreements are submitted by Borrowers to Lender for Lender’s
acceptance or rejection at Lender’s principal place of business as an offer by
Borrowers to borrow monies from Lender now and from time to time hereafter, and
shall not be binding upon Lender or become effective until accepted by Lender,
in writing, at said place of business. 
If so accepted by Lender, this Agreement and the Other Agreements shall
be deemed to have been made at said place of business.  THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE
GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL
LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS
LOCATED.  If any provision of
this Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or
remaining provisions of this Agreement.

 

To induce
Lender to accept this Agreement, each Borrower irrevocably agrees that, subject
to Lender’s sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER
AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
THE CITY OF CHICAGO, STATE OF ILLINOIS. 
EACH BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE.  EACH BORROWER AGREES THAT ALL
SERVICE OF PROCESS WITH RESPECT TO PROCEEDINGS INITIATED BY LENDER WITH RESPECT
TO ITS ENFORCEMENT OF ITS RIGHTS HEREUNDER MAY BE MADE UPON SUCH BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH
BORROWER, AT THE ADDRESS SET FORTH FOR NOTICE IN THIS AGREEMENT AND SERVICE SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.  EACH BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST SUCH BORROWER BY LENDER IN ACCORDANCE WITH THIS
SECTION.

 

43

 

22.           MODIFICATION AND BENEFIT OF AGREEMENT.

 

This Agreement
and the Other Agreements may not be modified, altered or amended except by an
agreement in writing signed by each Borrower or such other Person who is a
party to such Other Agreement and Lender. 
No Borrower may sell, assign or transfer this Agreement, or the Other
Agreements or any portion thereof, including, without limitation, such Borrower’s
rights, titles, interest, remedies, powers or duties hereunder and
thereunder.  Each Borrower hereby
consents to Lender’s sale, assignment, transfer or other disposition, at any
time and from time to time hereafter, of this Agreement, or the Other Agreements,
or of any portion thereof, or participations therein, including, without
limitation, Lender’s rights, titles, interest, remedies, powers and/or duties
and agrees that it shall execute and deliver such documents as Lender may
request in connection with any such sale, assignment, transfer or other
disposition.

 

23.           HEADINGS OF SUBDIVISIONS.

 

The headings
of subdivisions in this Agreement are for convenience of reference only, and
shall not govern the interpretation of any of the provisions of this Agreement.

 

24.           POWER OF ATTORNEY.

 

Each Borrower
acknowledges and agrees that its appointment of Lender as its attorney and
agent-in-fact for the purposes specified in this Agreement is an appointment
coupled with an interest and shall be irrevocable until all of the Liabilities
are satisfied and paid in full and this Agreement is terminated.

 

25.           CONFIDENTIALITY.

 

Lender hereby
agrees to use commercially reasonable efforts to assure that any and all
information relating to such Borrower which is (i) furnished by such
Borrower to Lender (or to any affiliate of Lender); and (ii) non-public,
confidential or proprietary in nature, shall be kept confidential by Lender or
such affiliate in accordance with applicable law; provided, however,
that such information and other credit information relating to such Borrower
may be distributed by Lender or such affiliate to Lender’s or such affiliate’s
directors, officers, employees, attorneys, affiliates, assignees, participants,
auditors, agents and regulators, and upon the order of a court or other
governmental agency having jurisdiction over Lender or such affiliate, to any
other party.  Each Borrower and Lender
further agree that this provision shall survive the termination of this
Agreement.  Notwithstanding the
foregoing, each Borrower hereby consents to Lender publishing a tombstone or
similar advertising material relating to the financing transaction contemplated
by this Agreement.

 

26.           COUNTERPARTS.

 

This
Agreement, any of the Other Agreements and any amendments, waivers, consents or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all of which counterparts together
shall constitute but one agreement.

 

44

 

27.           ELECTRONIC SUBMISSIONS.

 

Upon not less
than thirty (30) days’ prior written notice (the “Approved Electronic Form Notice”),
Lender may permit or require that any of the documents, certificates, forms,
deliveries or other communications, authorized, required or contemplated by
this Agreement or the Other Agreements, be submitted to Lender in “Approved
Electronic Form” (as hereafter defined), subject to any reasonable
terms, conditions and requirements in the applicable Approved Electronic Forms
Notice.  For purposes hereof “Electronic
Form” means e-mail, e-mail attachments, data submitted on web-based
forms or any other communication method that delivers machine readable data or
information to Lender, and “Approved Electronic Form” means an
Electronic Form that has been approved in writing by Lender (which approval has
not been revoked or modified by Lender) and sent to Borrowers in an Approved
Electronic Form Notice.  Except as
otherwise specifically provided in the applicable Approved Electronic Form
Notice, any submissions made in an applicable Approved Electronic Form shall
have the same force and effect that the same submissions would have had if they
had been submitted in any other applicable form authorized, required or
contemplated by this Agreement or the Other Agreements.

 

28.           WAIVER OF JURY TRIAL; OTHER WAIVERS.

 

(a)           EACH
BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED
TORTIOUS CONDUCT BY A BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN A BORROWER AND
LENDER.  IN NO EVENT SHALL LENDER BE
LIABLE FOR LOST PROFITS OR OTHER SPECIAL, EXEMPLARY, PUNATIVE OR CONSEQUENTIAL
DAMAGES.

 

(b)           Each Borrower hereby
waives demand, presentment, protest and notice of nonpayment, and further
waives the benefit of all valuation, appraisal and exemption laws.

 

(c)           Each Borrower hereby
waives the benefit of any law that would otherwise restrict or limit Lender or
any affiliate of Lender in the exercise of its right, which is hereby
acknowledged and agreed to, to set-off against the Liabilities, without notice
at any time hereafter, any indebtedness, matured or unmatured, owing by Lender
or such affiliate of Lender to such Borrower, including, without limitation any
deposit account at Lender or such affiliate.

 

(d)           EACH
BORROWER, TO THE FULL EXTENT SUCH WAIVER IS ENFORCEABLE AT LAW AND TO THE
EXTENT NO NOTICE OR HEARING IS OTHERWISE PROVIDED FOR IN THIS AGREEMENT, HEREBY
WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY
LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF SUCH BORROWER WITHOUT
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL.

 

(e)           Lender’s failure, at
any time or times hereafter, to require strict performance by a Borrower of any
provision of this Agreement or any of the Other Agreements

 

45

 

shall not waive, affect or
diminish any right of Lender thereafter to demand strict compliance and
performance therewith.  Any suspension
or waiver by Lender of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. 
No delay on the part of Lender in the exercise of any right or remedy
under this Agreement or any Other Agreement shall preclude other or further
exercise thereof or the exercise of any right or remedy.  None of the undertakings, agreements,
warranties, covenants and representations of Borrowers contained in this
Agreement or any of the Other Agreements and no Event of Default under this
Agreement or default under any of the Other Agreements shall be deemed to have
been suspended or waived by Lender unless such suspension or waiver is in
writing, signed by a duly authorized officer of Lender and directed to
Borrowers specifying such suspension or waiver.

 

IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement as of the date
first written above.

 

 

	
  WELLS-GARDNER
  ELECTRONICS

  CORPORATION

  	
   

  	
  LASALLE BANK
  NATIONAL

  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  GEORGE B. TOMA

  	
   

  	
   

  	
  By:

  	
  /s/
  ANNE EHAROSHE 

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: VP
  Finance & CFO

  	
   

  	
  Title:
  Commercial Banking Officer

  
							

 

 

	
  AMERICAN GAMING
  & ELECTRONICS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  GEORGE B. TOMA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title: VP
  Finance & CFO

  	
   

  	
   

  

 

46Exhibit 10.1

 

INVESTMENT TECHNOLOGY
GROUP, INC.

FOURTH AMENDED AND RESTATED

1998 STOCK UNIT AWARD PROGRAM

 

 

1.                                       Purpose

 

This Fourth
Amended and Restated 1998 Stock Unit Award Program (the “Program”) is
implemented under the 1994 Stock Option and Long-Term Incentive Plan, as
amended and restated (the “Plan”), of Investment Technology Group, Inc. (the
“Company”) in order to provide an additional incentive to selected members of
senior management and key employees to increase the success of the Company, by
substituting stock units for a portion of the cash compensation payable to such
persons on a mandatory basis, which stock units represent an equity interest in
the Company to be acquired and held under the Program on a long-term,
tax-deferred basis, and otherwise to promote the purposes of the Plan.  The Program is amended and restated herein,
effective for deferrals made after June 30, 2003.  Deferrals made on or prior to June 30, 2003 shall be governed by
the Program as in effect prior to this fourth amendment and restatement.

 

2.                                       Definitions

 

Capitalized
terms used in the Program but not defined herein shall have the same meanings
as defined in the Plan.  In addition to
such terms and the terms defined in Section 1, the following terms used in the
Program shall have the meanings set forth below:

 

2.1                                 “Account”
means the account established for each Participant pursuant to Section 7(g) hereof.

 

2.2                                 “Actual Reduction
Amount” means the amount by which a given quarterly or year-end bonus payment
to a Participant is in fact reduced under Section 6.

 

2.3                                 “Administrator” shall
be the person or committee appointed by the Committee to perform ministerial
functions under the Program and to exercise other authority delegated by the
Committee.

 

2.4                                 “Assigned Reduction
Amount” means an amount determined by the Administrator in accordance with
Section 6(b), in the case of an individual Participant, which shall be used
under Section 7(a) to determine the number of Stock Units to be credited to the
Participant’s Account in respect of a given calendar quarter.  The Assigned Reduction Amount does not accumulate
from one quarter to the next.

 

2.5                                 “Basic Stock Unit”
means a Stock Unit granted pursuant to the first sentence of Section 7(a).

 

 

2.6                                 “Cause” shall be
deemed to exist where a Participant: (i) commits any act of fraud, willful
misconduct or dishonesty in connection with their employment; (ii) fails,
refuses or neglects to timely perform any material duty or job responsibility
and such failure, refusal or neglect is not cured after appropriate warning;
(iii) commits a material violation of any law, rule, regulation or by-law of
any governmental authority (state, federal or foreign), any securities exchange
or association or other regulatory or self-regulatory body or agency applicable
to Company or any of its subsidiaries or affiliates or any general written
policy or directive of Company or any of its subsidiaries or affiliates;
(v) commits a crime involving dishonesty, fraud or unethical business
conduct, or a felony; or (vii) is expelled or suspended, or is subject to an
order temporarily or permanently enjoining Participant from an area of activity
which constitutes a significant portion of Participant’s activities by the
Securities and Exchange Commission, the National Association of Securities
Dealers Regulation, Inc., any national securities exchange or any
self-regulatory agency or governmental authority, state, foreign or federal.

 

2.7                                 “Change of Control”
means and shall be deemed to have occurred if:

 

(a)                                  any person (within
the meaning of the Exchange Act), other than the Company or a Related Party, is
or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of Voting Securities representing 30% percent or
more of the total voting power of all the then-outstanding Voting Securities;
or

 

(b)                                 the individuals who,
as of the Effective Date, constitute the Board, together with those who first
become directors subsequent to such date and whose recommendation, election or
nomination for election to the Board was approved by a vote of at least a majority
of the directors then still in office who either were directors as of the
Effective Date or whose recommendation, election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
members of the Board; or

 

(c)                                  the stockholders of
the Company approve a merger, consolidation, recapitalization or reorganization
of the Company or one of its subsidiaries, reverse split of any class of Voting
Securities, or an acquisition of securities or assets by the Company or one of
its subsidiaries, or consummation of any such transaction if stockholder
approval is not obtained, other than (I) any such transaction in which the
holders of outstanding Voting Securities immediately prior to the transaction
receive (or retain), with respect to such Voting Securities, voting securities
of the surviving or transferee entity representing more than 50 percent of the
total voting power outstanding immediately after such transaction, with the
voting power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction, or (II) any such
transaction which would result in a Related Party beneficially owning more than
50 percent of the voting securities of the surviving or transferee entity
outstanding immediately after such transaction; or

 

(d)                                 the stockholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or sub-stantially
all of the Company’s assets other than any such transaction which would result
in a Related Party owning or acquiring more than 50 percent of the assets owned
by the Company immediately prior to the transaction.

 

2.8                                  “Current Participant”
means a Participant who, during the current year, is subject to mandatory
payment of a portion of compensation by grant of Stock Units under the Program.

 

2

 

2.9                                 “Matching Stock Unit”
means a Stock Unit granted pursuant to the second sentence of Section 7(a).

 

2.10                           “Participant” means an
eligible person who is granted Stock Units under the Program, which Stock Units
have not yet been settled.

 

2.11                           “Related Party” means (a) a
majority-owned subsidiary of the Company; (b) an employee or group of employees
of the Company or any majority-owned subsidiary of the Company; (c) a trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or any majority-owned subsidiary of the Company; or (d) a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of Voting Securities.

 

2.12                           “Retirement” means
Termination of Employment (other than a termination for Cause) after the
Participant has reached age 65 or after the Participant has reached age 55 and
has at least 10 years of service with the Company and its subsidiaries.

 

2.13                           “Stock Unit” means an award,
granted pursuant to Section 6.5 and 6.6 of the Plan, representing a generally
nontransferable right to receive one share of Common Stock at a specified
future date together with a right to Dividend Equivalents as specified in
Section 7(d) hereof and subject to the terms and conditions of the Plan and the
Program.  Notwithstanding anything to
the contrary, in the case of Stock Units granted to employees of ITG Canada
Corp. and KTG Technologies Corp., the Committee may, in its discretion, settle
such Stock Units by delivery of cash equal to the Fair Market Value on the
settlement date of the number of shares of Common Stock equal to the number of
such Stock Units.  Stock Units are
bookkeeping units, and do not represent ownership of Common Stock or any other
equity security.

 

2.14                           “Termination of Employment”
means termination of a Participant’s employment by the Company or a subsidiary
for any reason, including due to death or disability, immediately after which
event the Participant is not employed by the Company or any subsidiary.

 

2.15                           “Voting Securities or
Security” means any securities of the Company which carry the right to vote
generally in the election of directors.

 

3.                                       Administration

 

(a)                                  Authority.  The Program shall be established and
administered by the Committee, which shall have all authority under the Program
as it has under the Plan; provided, however, that terms of the
grant of Stock Units hereunder may not be inconsistent with the express terms
set forth in the Program.  Ministerial
functions under the Program and other authority specifically delegated by the
Committee shall be performed or exercised by and at the direction of the Administrator.

 

(b)                                 Manner of Exercise
of Authority.  Any action of the
Committee or its delegatee with respect to the Program shall be final,
conclusive, and binding on all persons, including the Company, subsidiaries,
participants granted Stock Units which have not yet been settled, and any
person claiming any rights under the Program from or through any Participant,
except that the Committee may take action within a reasonable time after any
such action superseding or overruling a prior action.

 

3

 

(c)                                  Limitation of
Liability.  Each member of the
Committee or delegatee shall be entitled to, in good faith, rely or act upon
any report or other information furnished to him by any officer or other
employee of the Company or any subsidiary or any agent or professional
assisting in the administration of the Plan, such member or person shall not be
personally liable for any action, determination, or interpretation taken or
made in good faith with respect to the Program, and such member or person
shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action, determination, or interpretation.

 

(d)                                 Status as Subplan
Under the Plan.  The Program
constitutes a subplan implemented under the Plan, to be administered in
accordance with the terms of the Plan. 
Accordingly, all of the terms and conditions of the Plan are hereby
incorporated by reference, and, if any provision of the Program or a statement
or document relating to Stock Units granted hereunder conflicts with a
provision of the Plan, the provision of the Plan shall govern.

 

4.                                       Stock
Subject to the Program

 

Shares of
Common Stock delivered upon settlement of Stock Units under the Program shall
be shares reserved and available under the Plan.  Accordingly, Stock Units may be granted under the Program if
sufficient shares are then reserved and available under the Plan, and the
number of shares delivered in settlement of Stock Units hereunder shall be
counted against the shares reserved and available under the Plan.  Awards may be granted under the Plan even
though the effect of such grants will be to reduce the number of shares
remaining available for grants hereunder. 
Stock Units granted under the Program in place of compensation under the
Plan resulting from a 162(m) Award (as defined in the Plan) or in place of
compensation under the Company’s Pay-for-Performance Incentive Plan shall be
subject to annual per-person limitations applicable to such compensation under
such plan.

 

5.                                       Eligibility
and Selection

 

The Committee
may select any person who is eligible to be granted an Award under the Plan to
be granted Stock Units under the Program as a mandatory portion of compensation
otherwise payable to the Participant.  A
Participant who is selected to be a Current Participant in one year will not
necessarily be selected to be a Current Participant in a subsequent year.

 

6.                                       Mandatory
Reduction of Bonus Compensation

 

(a)                                  (i)  Amount
of Mandatory Reduction.  A Current
Participant’s cash compensation shall be automatically reduced by an amount
determined in accordance with the following schedule:

 

0% of the
first $200,000 of annual compensation;

15% of the next $100,000 of annual compensation; and

20% of annual compensation in excess of $300,000.

 

4

 

The foregoing notwithstanding,
the Committee may adjust the schedule applicable to an individual Current
Participant and in no event will the amount by which cash compensation is
reduced exceed the amount of bonus payable to the Participant.  For purposes of the Program, the amount by
which cash compensation is reduced hereunder shall be calculated without regard
to any reductions in compensation resulting from Participant’s contributions
under any Section 401(k), Section 125, pension plan, or other plan of the
Company or a subsidiary, and such amount shall not be deemed a reduction in the
Participant’s compensation for purposes of any such Section 401(k), Section
125, pension plan, or other plan of the Company or a subsidiary.

 

(ii)    In lieu of the schedule
set forth in Section 6(a)(i) above, each Current Participant who
participated in the Program for the portion of calendar year 2003 prior to June
30 may make a one-time written, irrevocable election (in the form specified by
the Committee) on or prior to June 30, 2003 to have any and all mandatory
reductions under this Second Amended and Restated Program based on the
following schedule:

 

5% of the first $100,000 of annual compensation;

10% of the next $100,000 of annual compensation;

15% of the next $100,000 of annual compensation; and

20% of annual compensation in excess of  $300,000.

 

(b)                                 Manner of Reduction
of Compensation.  Amounts by which
compensation is reduced under Section 6(a) will be subtracted from bonus
amounts in respect of services during the year otherwise payable to the Current
Participant at or following the end of the first three calendar quarters of
such year and at or following the end of the year.  The amount by which each bonus amount payable following the end
of the first three calendar quarters will be reduced will be calculated based
on a reasonable estimate of total compensation for the year, taking into
account the amount by which compensation previously has been reduced for the
year (i.e., in the case of a Participant employed since the beginning of
the year and for whom estimated annual compensation has not varied during the
year, by calculating an estimated aggregate amount by which compensation will
be reduced for the year and reducing the quarterly bonus payment by one-fourth
of such amount), and will be calculated at the time the year-end bonus amount
otherwise becomes payable based on actual compensation for the year, taking
into account the amount by which compensation previously has been reduced for
the year (i.e., by calculating the actual amount by which compensation
will be reduced for the year and reducing the year-end bonus payment by that
amount less the amount by which compensation was reduced in previous
quarters).  The foregoing
notwithstanding, the Administrator may determine in the case of any individual
Participant, including a Participant who is not paid a bonus on a quarterly
basis, the extent (if any) to which any bonus amounts other than the
Participant’s year-end bonus amount shall be reduced taking into account the
terms of the Participant’s compensation arrangement and the Participant’s
individual circumstances.  In such
cases, the Administrator may assign to the Participant an Assigned Reduction
Amount for each calendar quarter, so that Stock Units will be automatically
granted to such Participant under Section 7(a) at times and in amounts
comparable to grants to other Participants, such that, on a full-year basis,
the aggregate of the Participant’s Assigned Reduction Amounts and any Actual
Reduction Amounts used to determine the number of Stock Units credited to the Participant’s
Account under Section 7(a) for such year will equal the aggregate amount by
which the Participant’s full-year’s compensation is to be reduced (after giving
effect to adjustments under Section 7(b)).

 

5

 

7.                                       Grant
of Stock Units

 

(a)                                  Automatic Grant of
Stock Units.  Each Participant shall
be automatically granted Basic Stock Units, as of fifteen days after the last
day of each calendar quarter, in a number equal to the Participant’s Actual
Reduction Amount or Assigned Reduction Amount (as applicable) divided by the
Fair Market Value of a share of Common Stock on the last day of such calendar
quarter. In addition, each Participant shall be automatically granted Matching
Stock Units, as of fifteen days after the last day of each calendar quarter, in
a number equal to 30% of the number of Basic Stock Units granted under this
Section 7(a) at that date. Stock Units shall be initially credited to the
Participant’s Account as of the date of grant (it being recognized, however,
that the determination of the number of Stock Units granted and the posting of
such transactions to the Account may occur after date of grant under this
Section 7(a), based on the time at which quarterly bonus amounts are determined
and the Actual Reduction Amount or Assigned Reduction Amount determined in
accordance with Section 6 hereof).  Other provisions of the Program notwithstanding,
no grant of Stock Units shall be effective until the date of grant specified in
this Section 7(a), and, at any time prior to such date of grant, the Committee
shall retain full discretion to adjust a Participant’s Actual Reduction Amount
or Assigned Reduction Amount downward or otherwise reduce or cancel the
automatic grant of Stock Units, provided that any such adjustment or reduction
in the number of Stock Units to be issued shall result in a reversal of any
corresponding reduction in compensation under Section 6(b).

 

(b)                                 Risk of Forfeiture;
Cancellation of Certain Stock Units. 
The Basic Stock Units, together with any Dividend Equivalents credited
thereon, shall at all times be fully vested and non-forfeitable.  Matching Stock Units, together with any
Dividend Equivalents credited thereon, will vest 50% on the third anniversary
of the date of grant and the remaining 50% on the sixth anniversary of the date
of grant, provided the Participant remains continuously employed by the Company
through such vesting dates; provided, however, that all Matching
Stock Units (together with Dividend Equivalents credited thereon) will vest in
full at the time of Retirement of the Participant or at the time of closing of
a transaction which constitutes a Change of Control, but in either such event
the Matching Stock Units shall continue to be settled on the schedule set forth
in Section 8(a) below; provided further, however, that all
Matching Stock Units (together with Dividend Equivalents credited thereon) will
vest in full at the time a Participant’s employment terminates due to his or
her death or disability, and all stock units held by such Participant shall be
settled as soon as practicable thereafter. 
If the Participant’s employment by the Company terminates for any reason
other than Retirement, death or disability prior to a vesting date, unless the
Committee provides otherwise, all unvested Matching Stock Units, together with
any Dividend Equivalents credited thereon, shall be forfeited to the
Company.  The foregoing notwithstanding,
if, at the end of a given year (upon calculation of year-end bonuses), the
aggregate of the Participant’s Actual Reduction Amounts and any Assigned
Reduction Amounts used to determine the number of Stock Units credited under
Section 7(a) for such year exceeds the amount by which the full-year’s
compensation should have been reduced under Section 6(a) (the “corrected
full-year amount”), the Participant shall be paid in cash, without interest,
the amount (if any) by which such Actual Reduction Amounts and Assigned
Reduction Amounts exceeded such corrected full-year amount, and any Stock Units
(including Basic Stock Units and Matching

 

6

 

Stock Units relating thereto) credited to the Participant under Section
7 as a result of such excess Actual Reduction Amounts and Assigned Reduction
Amounts shall be cancelled.  Unless otherwise
determined by the Administrator, the Stock Units to be cancelled shall be
cancelled from each of the four quarterly grants in the proportion the Actual
Reduction Amounts and Assigned Reduction Amounts used in determining such
quarterly grant bore to the aggregate of the Actual Reduction Amounts and
Assigned Reduction Amounts used in determining all grants of Stock Units over
the full year.

 

(c)                                  Nontransferability.  Stock Units and all rights relating thereto
shall not be transferable or assignable by a Participant, other than by will or
the laws of descent and distribution, and shall not be pledged, hypothecated,
or otherwise encumbered in any way or subject to execution, attachment, or
similar process.

 

(d)                                 Dividend Equivalents
on Stock Units.  Dividend
Equivalents shall be credited on Stock Units as follows:

 

(i)                   Cash and Non-Common Stock Dividends.  If the Company declares and pays a dividend
or distribution on Common Stock in the form of cash or property other than shares
of Common Stock, then a number of additional Stock Units shall be credited to a
Participant’s Account as of the payment date for such dividend or distribution
equal to (i) the number of Stock Units credited to the Account as of the record date for such dividend or
distribution multiplied by (ii) the amount of cash plus the fair market value
of any property other than shares actually paid as a dividend or distribution
on each outstanding share of Common Stock at such payment date, divided by
(iii) the Fair Market Value of a share of Common Stock at such payment date.

 

(ii)                Common Stock
Dividends and Splits.  If the
Company declares and pays a dividend or distribution on Common Stock in the
form of additional shares of Common Stock, or there occurs a forward split of
Common Stock, then a number of additional Stock Units shall be credited to the
Participant’s Account as of the payment date for such dividend or distribution
or forward split equal to (i) the number of Stock Units credited to the Account
as of the record date for such dividend or distribution or split multiplied by
(ii) the number of additional shares of Common Stock actually paid as a
dividend or distribution or issued in such split in respect of each outstanding
share of Common Stock.

 

(e)                                  Adjustments to
Stock Units.  The number of Stock
Units credited to each Participant’s Account shall be appropriately adjusted,
in order to prevent dilution or enlargement of Participants’ rights with
respect to such Stock Units, to reflect any changes in the number of
outstanding shares of Common Stock resulting from any event referred to in
Section 5.5 of the Plan, taking into account any Stock Units credited to the
Participant in connection with such event under Section 7(d).

 

7

 

(f)                                    Fractional
Shares.  The number of Stock Units
credited to a Participant’s Account shall include fractional shares calculated
to at least three decimal places, unless otherwise determined by the Committee.

 

(g)                                 Accounts and Statements.
The Administrator shall establish, or cause to be established, an Account for
each Participant.  An individual
statement of each Participant’s Account will be issued to each Participant not
less frequently than annually.  Such
statements shall reflect the Stock Units credited to the Participant’s Account,
transactions therein during the period covered by the statement, and other
information deemed relevant by the Administrator.  Such statement may include information regarding other plans and
compensatory arrangements for Directors.

 

(h)                                 Consideration for
Stock Units.  Stock Units shall be
granted for the general purposes set forth in Section 1 of the Program. Except
as specified in Section 6 and 7 of the Program, a Participant shall not be
required to pay any cash consideration or other tangible or definable
consideration for Stock Units, nor may a Participant choose to receive Stock
Units in lieu of other compensation or other compensation in lieu of Stock
Units.  No negotiation shall take place
between the Company and any Participant as to the amount, timing, or other
terms of an award of Stock Units.

 

8.                                       Settlement

 

(a)                                  Issuance and
Delivery of Shares in Settlement. 
Stock Units, together with any Dividend Equivalents credited thereon,
shall be settled by issuance and delivery to the Participant or, following his
death, to the Participant’s designated beneficiary, of a number of shares of
Common Stock equal to the number of such Stock Units as follows:  50% promptly following the third anniversary
of the date of grant of the Stock Units and the remaining 50% promptly
following the sixth anniversary of the date of grant of the Stock Units; provided,
however, that the Committee may, in its discretion, accelerate the
settlement date of any or all Stock Units. 
The Committee may, in its discretion, make delivery of shares hereunder
by depositing such shares into an account maintained for the Participant (or of
which the Participant is a joint owner, with the consent of the Participant)
established in connection with the Company’s Employee Stock Purchase Plan or
another plan or arrangement providing for investment in Common Stock and under
which the Participant’s rights are similar in nature to those under a stock
brokerage account.  If the Committee
determines to settle Stock Units by making a deposit of shares into such an
account, the Company may settle any fractional share by means of such
deposit.  In other circumstances or if
so determined by the Committee, the Company shall instead pay cash in lieu of fractional
shares, on such basis as the Committee may determine.  In no event will the Company in fact issue fractional
shares.  Notwithstanding anything to the
contrary, in the case of Stock Units granted to employees of ITG Canada Corp.
and KTG Technologies Corp., the Committee may, in its discretion, settle such
Stock Units by delivery of cash equal to the Fair Market Value on the
settlement date of the number of shares of Common Stock equal to the number of
such Stock Units.  Upon settlement of
Stock Units, all obligations of the Company in respect of such Stock Units
shall be terminated, and the shares so distributed shall no longer be subject
to any restriction or other provision of the Program.

 

8

 

(b)                                 Tax Withholding.  The Company and any subsidiary may deduct
from any payment to be made to a Participant any amount that federal, state,
local, or foreign tax law requires to be withheld with respect to the
settlement of Stock Units.  At the
election of the Committee, the Company may withhold from the shares of Common
Stock to be distributed in settlement of Stock Units that number of shares
having a Fair Market Value, at the settlement date, equal to the amount of such
withholding taxes.

 

(c)                                  No Elective Deferral.  Participant’s may not elect to further defer
settlement of Stock Units or otherwise to change the applicable settlement date
under the Program.

 

9.                                       General
Provisions

 

(a)                                  No Right to
Continued Employment.  Neither the
Program nor any action taken hereunder, including the grant of Stock Units,
will be construed as giving any employee the right to be retained in the employ
of the Company or any of its subsidiaries, nor will it interfere in any way
with the right of the Company or any of its subsidiaries to terminate such
employee’s employment at any time.

 

(b)                                 No Rights to
Participate; No Stockholder Rights. 
No Participant or employee will have any claim to participate in the
Program, and the Company will have no obligation to continue the Program.  A grant of Stock Units will confer on the
Participant none of the rights of a stockholder of the Company (including no
rights to vote or receive dividends or distributions) until settlement by
delivery of Common Stock, and then only to the extent that such Stock Unit has
not otherwise been forfeited by the Participant.

 

(c)                                  Changes to the
Program.  The Committee may amend,
alter, suspend, discontinue, or terminate the Program without the consent of
Participants; provided, however, that, without the consent of an
affected Participant, no such action shall materially and adversely affect the
rights of such Participant with respect to outstanding Stock Units, except
insofar as the Committee’s action results in accelerated settlement of the
Stock Units.

 

10.                                 Effective
Date and Termination of Program.  This
fourth amended and restated Program shall become effective as of June 30, 2003
(the “Effective Date”), and shall apply to deferrals made after such date.  Unless earlier terminated under Section
9(c), the Program shall terminate at such time after 2003 as no Stock Units
previously granted under the Program remain outstanding.

 

	
  Adopted by
  the Committee:

  	
   

  	
  June 4, 1998

  
	
  Amended and
  restated by the Committee:

  	
   

  	
  February 25,
  1999

  
	
  Amended and
  restated by the Committee:

  	
   

  	
  March 20,
  2002

  
	
  Amended and
  restated by the Committee:

  	
   

  	
  September 3,
  2002

  
	
  Amended and
  restated by the Committee:

  	
   

  	
  June 30,
  2003

  

 

9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00054-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00054-of-00352.parquet"}]]