Document:

ex_101133.htm

Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is entered into as of November 22, 2017 by and between NORTH MILL CAPITAL LLC, a Delaware limited liability company (Lender), with an office located at 821 Alexander Road, Suite 130, Princeton, New Jersey 08540 and AMERICAN GAMING & ELECTRONICS, INC., a Nevada corporation (Borrower), with its chief executive office located at 223 Pratt Street, Hammonton, New Jersey 08037.

 

The parties hereto, hereby agree as follows:

 

1.     DEFINITIONS AND CONSTRUCTION

 

1.1     Terms. Unless otherwise defined herein, as used in this Agreement, the following terms shall have the following meanings:

 

Accounts means, collectively, in addition to the definition of "Account" in the Code, all presently existing and hereafter arising accounts receivable, contract rights, health-care-insurance receivables and all other forms of obligations owing to Borrower arising out of the sale, lease, license or assignment of goods or other property or the rendition of services by Borrower, whether or not earned by performance, all credit insurance, guaranties and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.

 

Advances means all loans, advances and other financial accommodations by Lender to or on account of the Borrower, including those under this Agreement and the other Loan Documents.

 

Agreement means, collectively, this Loan and Security Agreement, together with any and all exhibits, schedules, addenda or riders hereto, as each may be amended, modified, supplemented, substituted, extended or renewed from time to time.

 

Authorized Officer means any officer or other representative of Borrower authorized in a writing delivered to Lender to transact business with Lender.

 

Borrower's Books means all of Borrower's books and records including all of the following: ledgers; records indicating, summarizing or evidencing Borrower's assets or liabilities, or the Collateral; all information relating to Borrower's business operations or financial condition; and all computer programs, disks or tape files, printouts, runs or other computer prepared information, whether inscribed on tangible medium or stored in an electronic or other medium and which information is retrievable in perceivable form and the goods containing such information.

 

Business Day means any day which is not a Saturday, Sunday, or other day on which banks in the State of New Jersey are authorized or required to close.

 

Chattel Paper has the same meaning ascribed to such term in the Code (whether tangible or electronic).

 

Code means the New Jersey Uniform Commercial Code, as amended or revised from time to time.

 

Collateral means all assets of the Borrower, whether now owned or existing, or hereafter acquired or arising, and wherever located, including, without limitation, all of the following assets, properties, rights and interests in property of Borrower: all Accounts, all Equipment, all Commercial Tort Claims, all General Intangibles, all Chattel Paper, all Inventory, all Negotiable Collateral, all Investment Property, all Financial Assets, all Letter-of-Credit Rights, all Supporting Obligations, all Deposit Accounts, all money or assets of Borrower, which hereafter come into the possession, custody, or control of Lender; all proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing; any and all tangible or intangible property resulting from the sale, lease, license or other disposition of any of the foregoing, or any portion thereof or interest therein, and all proceeds thereof; and any other assets of Borrower or any Guarantor which may be subject to a lien in favor of Lender as security for the Obligations.

 

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Commercial Tort Claims has the meaning ascribed to such term in the Code.

 

Daily Balance means the amount of the Obligations owed at the end of a given day.

 

Deposit Account has the meaning ascribed to such term in the Code.

 

Dilution means, as of any date of determination, a percentage based upon the experience of the immediately prior three (3) months, that is the result of dividing the amount of (a) bad debt write-downs, discounts, advertising allowances, credits or other dilutive items with respect to Borrower's Accounts during such period, by (b) Borrower's billings with respect to Accounts during such period.

 

Documents has the meaning ascribed to such term in the Code.

 

Eligible Accounts means those Accounts created by Borrower in the ordinary course of business, which are, and at all times shall continue to be, acceptable to Lender in all respects, provided that standards of eligibility may be established and revised from time to time by Lender in Lender's exclusive judgment. In determining such acceptability and standards of eligibility, Lender may, but need not, rely on agings, reports and schedules of Accounts furnished to Lender by Borrower, but reliance thereon by Lender from time to time shall not be deemed to limit Lender's right to revise its standards of eligibility and acceptability at any time, as to both Borrower's present and future Accounts. In general, an Account shall not be deemed eligible unless: (a) the Account debtor on such Account is, and at all times continues to be, acceptable to Lender in its Good Faith discretion and up to credit limits in Lender's Good Faith Discretion or standards acceptable to Lender in its Good Faith, and (b) such Account complies in all respects with the representations, covenants and warranties set forth in this Agreement. Except in Lender's sole discretion, Eligible Accounts shall not include any of the following: (i) Accounts with respect to which the Account debtor has failed to pay within sixty (60) days of due date, but not later than ninety (90) days of invoice date, and all Accounts owed by any Account debtor that has failed to pay twenty-five percent (25%) or more of its Accounts owed to Borrower within sixty (60) days of due date, but not later than ninety (90) days of invoice date; (ii) Accounts with respect to which the goods sold are sold on a bill and hold basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis or which contain other terms by reason of which payment by the Account debtor may be conditional; (iii) Accounts with respect to which the Account debtor is not a resident of the United States unless such Accounts are supported by foreign credit insurance or a letter of credit, in both instances satisfactory, in form and substance, to, and assigned to, Lender, or Accounts with respect to which the Account debtor is a casino based on tribal land and operated by the Native American community unless such Accounts are supported by credit insurance satisfactory, in form and substance, to, and assigned to, Lender; (iv) Accounts with respect to which the Account debtor is the United States or any department, agency or instrumentality of the United States, any State of the United States or any city, town, municipality or division thereof unless all filings have been made under the Federal Assignment of Claims Act or comparable state or other statute; (v) Accounts with respect to which the Account debtor is an officer, employee or agent of, or subsidiary of, related to, affiliated with or has common shareholders, officers or directors with Borrower; (vi) Accounts with respect to which Borrower is or may become liable to the Account debtor for goods sold or services rendered by the Account debtor to Borrower or otherwise; (vii) Accounts with respect to an Account debtor whose total obligations to Borrower exceed fifteen percent (15%) of all Accounts or such other percentage as Lender may agree to in writing as to a particular Account debtor (such applicable percentage being, the Concentration Percentage), to the extent such obligations exceed the applicable Concentration Percentage, provided that with respect to the Account debtor, Aristocrat Technologies, Inc., the Concentration Percentage shall not exceed thirty percent (30%) (rather than 15%); (viii) Accounts with respect to which the Account debtor disputes liability or makes any claim with respect thereto, is subject to any insolvency proceeding, becomes insolvent, fails or goes out of business; (ix) Accounts arising out of a contract or purchase order for which a surety bond was issued on behalf of Borrower; (x) Accounts with respect to which Lender does not have a first priority and exclusive perfected security interest; (xi) Accounts with respect to which the Account debtor is in a jurisdiction for which Borrower is required to file a notice of business activities or similar report and Borrower has not filed such report within the time period required by applicable law; (xii) Accounts with respect as to which an invoice has not been issued to the Account debtor; or (xiii) Accounts which represent a progress or "milestone" billing on a contract that has not been fully completed by Borrower.

 

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Equipment means, collectively, in addition to the definition of "Equipment" in the Code, all of Borrower's present and hereafter acquired equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, motor vehicles, rolling stock, processors, tools, pans, dies, jigs, goods (other than consumer goods or farm products), together with any warranties, rights and interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions and improvements to any of the foregoing, wherever located.

 

ERISA means the Employee Retirement Income Security Act of 1974, as amended or revised from time to time, and the regulations promulgated thereunder.

 

ERISA Affiliate means each trade or business (whether or not incorporated and whether or not foreign) which is or may hereafter become a member of a group of which Borrower is a member and which is treated as a single employer under ERISA Section 4001(b)(1) or Section 414 of the IRC.

 

Event of Default means each of the events specified in Section 8. Any specific event shall no longer be an Event of Default, if Lender, in writing, waives the existence of an Event of Default as a consequence of the specific event, or if the specific event is cured within any allowable cure period set forth in Section 8.

 

Financial Assets has the meaning ascribed to such term in the Code.

 

General Intangibles means, collectively, in addition to the definition of "General intangible" in the Code, all of Borrower's present and future general intangibles and other personal property (including choses or things in action, goodwill, patents, trade names, trademarks, service marks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, infringement claims, computer programs, computer discs, computer tapes, Borrower's Books, literature, reports, catalogs, Deposit Accounts, insurance premium rebates, tax refunds and tax refund claims) other than goods and Accounts.

 

Good Faith means honesty in fact and the observance of reasonable commercial standards of fair dealing.

 

Guarantor means each person or entity which guarantees the Obligations, issues a validity guaranty relating to the Collateral or pledges any assets to Lender as additional security for the Obligations.

 

Holdings means AG&E Holdings Inc., an Illinois corporation, the parent corporation of Borrower.

 

Insolvency Proceeding means any proceeding commenced by or against any person or entity under any provision of the federal Bankruptcy Code, as amended or revised from time to time, or under any other state or federal insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions or extensions generally with its creditors.

 

Instruments has the meaning ascribed to such term in the Code.

 

Inventory means, collectively, in addition to the definition of "Inventory" in the Code, all present and future inventory in which Borrower has any interest, including goods held for sale or lease or to be furnished under a contract of service, Borrower's present and future raw materials, work in process, finished goods, tangible property, stock in trade, wares and materials used in or consumed in Borrower's business, goods which have been returned to, repossessed by, or stopped in transit by, Borrower, packing and shipping materials, wherever located, any documents of title representing any of the above, and Borrower's Books relating to any of the foregoing.

 

Investment Property has the meaning ascribed to such term in the Code.

 

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IRC means the Internal Revenue Code of 1986, as amended or revised from time to time, and the regulations promulgated thereunder.

 

Lender Expenses means, collectively, costs and expenses (whether taxes, assessments, insurance premiums or otherwise) required to be paid by Borrower under any of the Loan Documents which are paid or advanced by Lender, including filing, recording, publication, appraisal and search fees paid or incurred by Lender in connection with Lender's transactions with Borrower, costs and expenses incurred by Lender in the disbursement or collection of funds to or from Borrower or its Account debtors, charges resulting from the dishonor of checks, costs and expenses incurred by Lender to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, costs and expenses incurred by Lender in enforcing or defending the Loan Documents or otherwise exercising its rights and remedies upon the existence of an Event of Default, including, but not limited to, costs and expenses incurred in connection with any proceeding, suit, enforcement of judgment, or appeal and Lender's reasonable attorneys' fees and expenses, including allocated fees of in-house counsel, incurred in advising, structuring, drafting, reviewing, administering, amending, modifying, terminating, enforcing, defending, or otherwise representing Lender with respect to the Loan Documents or the Obligations.

 

Letter-of-Credit Rights has the meaning ascribed to such term in the Code.

 

Loan Documents means, collectively, this Agreement, any Note or Notes, any security agreements, pledge agreements, mortgages, deeds of trust or other encumbrances or agreements which secure the Obligations, and any other agreement entered into between Borrower and Lender or by Borrower or a Guarantor in favor of Lender relating to or in connection with this Agreement or the Obligations, as each may be amended, modified, supplemented, substituted, extended or renewed from time to time.

 

Multiemployer Plan means a multiemployer plan as defined in ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f).

 

Negotiable Collateral means all of Borrower's present and future letters of credit, notes, drafts, Instruments, Documents, leases and Chattel Paper.

 

Note means any promissory note made by Borrower to the order of Lender concurrently herewith or at any time hereafter, as the same may be amended, modified, supplemented, substituted, extended or renewed from time to time.

 

Obligations means all Advances, debts, liabilities (including all interest and amounts charged to the Obligations pursuant to any agreement authorizing Lender to charge the Obligations), obligations, lease payments, guaranties, covenants and duties owing by Borrower to Lender of any kind and description (whether pursuant to or evidenced by the Loan Documents or by any other agreement between Lender and Borrower, and irrespective of whether for the payment of money), whether made or incurred prior to, on or after the Termination Date, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, whenever executed, and further including any debt, liability or obligation owing from Borrower to others which Lender may obtain by assignment or otherwise, and all interest thereon (including any interest accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any Insolvency Proceeding relating to Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and all Lender Expenses.

 

Perfection Certificate means the perfection certificate executed by Borrower prior to or concurrently herewith.

 

Plan means any plan described in ERISA Section 3(2) maintained for employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

 

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Prime Rate means that rate designated by Wells Fargo Bank, National Association, or any successor thereof, from time to time as its prime rate, which shall not necessarily constitute its lowest available rate.

 

Revolving Credit Facility means the revolving credit facility defined and provided for in Section 2.1.

 

Supporting Obligation has the same meaning ascribed to such term in the Code.

 

Term means the period from the date of the execution and delivery by Lender of this Agreement through and including the later of (a) the Termination Date and (b) the payment and performance in full of the Obligations.

 

Termination Date means (a) November 22, 2018 (the period through such date, being, the Initial Term), unless such date is extended pursuant to Section 3.1, and if so extended on one or more occasions, the last date of the last such extension, or (b) if earlier terminated by Lender pursuant to Section 9.1, the date of such termination.

 

1.2     Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and to the singular include the plural. The words hereof, herein, hereby, hereunder and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Section, subsection, paragraph, clause, Exhibit or Schedule references used in this Agreement refer to the specific Section, subsection, paragraph or clause of, or Exhibit or Schedule to, this Agreement unless otherwise specified. Words importing a particular gender mean and include every other gender.

 

1.3     Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles (GAAP) as in effect from time to time. When used herein, the term financial statements includes the notes and schedules thereto.

 

1.4     Exhibits, Etc. All of the Exhibits, Schedules, addenda or riders attached to this Agreement are deemed incorporated herein by reference.

 

1.5     Code. Any terms used in this Agreement which are defined in the Code shall be construed and defined as set forth in the Code, unless otherwise defined herein.

 

2.     ADVANCES AND TERMS OF PAYMENT

 

2.1     Revolving Advances; Advance Limit. Upon the request of Borrower made at any time from and after the date hereof until the Termination Date, and so long as no Event of Default has occurred, Lender may, in its sole and absolute discretion, make Advances to Borrower under a revolving credit facility (the Revolving Credit Facility) in an amount up to eighty-five percent (85%) of the aggregate outstanding amount of Eligible Accounts so long as Dilution is less than three percent (3%); provided, however, in no event at any time shall the maximum aggregate principal amount outstanding under the Revolving Credit Facility exceed Three Million Five Hundred Thousand Dollars ($3,500,000) (said dollar limit being, the Advance Limit). Lender may create reserves against, or reduce its advance percentages based on Eligible Accounts without declaring an Event of Default if Lender determines, in its good faith discretion, that such reserves or reduction are necessary, without limitation, to protect Lender's interest in the Collateral and/or against diminution in the value of any Collateral and/or to insure that the prospect of payment or performance by Borrower of its Obligations to Lender are not impaired. 

 

2.2     Overadvances. All Advances shall be added to and be deemed part of the Obligations when made. If, at any time and for any reason, the aggregate amount of the outstanding Advances under the Revolving Credit Facility exceeds the dollar or percentage limitations contained in Section 2.1 (any such excess being, an Overadvance), Borrower shall, upon demand by Lender, immediately pay to Lender in cash, the amount of any such Overadvance. Without affecting Borrower's obligation to immediately repay to Lender the amount of each Overadvance, Borrower shall pay Lender a fee (the Overadvance Fee) in an amount to be agreed upon between Lender and Borrower, but in any event, not less than $500.00 per occurrence of an Overadvance, plus interest on such Overadvance amount at the Default Rate set forth below. Further, without affecting Borrower's obligation to immediately repay to Lender the amount of each Overadvance, all Overadvances are deemed Obligations and are secured by the Collateral and guaranteed by the Guarantor under any guaranty executed in connection herewith.

 

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2.3     Authorization to Make Advances. Lender is hereby authorized to make the Advances based upon telephonic or other instructions received from anyone purporting to be an Authorized Officer, or, at the discretion of Lender, if such Advances are necessary to satisfy any Obligations. All requests for Advances shall specify the date on which such Advance is to be made (which day shall be a Business Day) and the amount of such Advance. Requests received after 12:00 p.m. Eastern time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Advances made under this Agreement shall be conclusively presumed to have been made to, and at the request and for the benefit of, Borrower when deposited or otherwise disbursed in accordance with the instructions of Borrower or in accordance with the terms and conditions of this Agreement. Unless otherwise requested by Borrower, all Advances shall be made by a wire transfer to the Deposit Account of Borrower designated on Schedule 2.3 or to such other account as Borrower shall notify Lender in writing. Borrower shall pay to Lender a funds transfer fee of $35.00 for each Advance, which such fee shall be payable on the first (1st) calendar day of each month of the Term for all Advances made during the preceding month.

 

2.4     Interest.

 

(a)     Except where specified to the contrary in the Loan Documents, interest shall accrue on the Daily Balance at the per annum rate of three-quarters of a percentage point (.75%) above the Prime Rate in effect from time to time, but not less than four and three-quarter percent (4.75%) (the Applicable Rate). At the option of Lender, (i) from and after the occurrence of an Event of Default, and without constituting a waiver of any such Event of Default, and (ii) if the Obligations are not paid in full by the Termination Date, and without waiving the maturity of the Obligations on the Termination Date, the Obligations shall bear interest at the per annum rate of six percentage points (6%) above the Applicable Rate (the Default Rate). All interest payable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed on the Daily Balance. Interest as provided for herein shall continue to accrue until the Obligations are indefeasibly paid in full.

 

(b)     The interest rate payable by Borrower under the terms of this Agreement shall be adjusted in accordance with any change in the Prime Rate, from time to time, on the date of any such change. All interest payable by Borrower shall be due and payable on the first (1st) day of each calendar month during the Term. Lender may, at its option, add such interest, fees and charges payable by Borrower under the Loan Documents and all Lender Expenses to the Obligations, and the Obligations (as so increased by the amount of such interest, fees, charges and Lender Expenses), shall thereafter accrue interest at the rate then applicable under this Agreement. Notwithstanding anything to the contrary contained in the Loan Documents, the minimum monthly interest payable by Borrower on the Advances shall be calculated on a minimum Daily Balance of Five Hundred Thousand Dollars ($500,000).

 

(c)     In no event shall interest on the Obligations exceed the highest lawful rate in effect from time to time. It is not the intention of the parties hereto to make an agreement which violates any applicable state or federal usury laws. In no event shall Borrower pay, nor shall Lender accept or charge, any interest which, together with any other charges on the principal or any portion thereof, exceeds the maximum lawful rate of interest allowable under any applicable state or federal usury laws. Should any provision of this Agreement or any existing or future Notes or Loan Documents between the parties be construed to require the payment of interest or any other fees or charges that could be construed as interest, which, with any other charges upon the principal or any portion thereof and any other fees or charges that could be construed as interest, exceed the maximum lawful rate of interest, then any such excess shall be applied to the remaining principal balance of the Obligations, if any, and any remainder shall be refunded to Borrower.

 

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(d)     Notwithstanding any of the foregoing in this Section 2.4, for purposes of this Agreement, it is the intention of Borrower and Lender that interest shall mean, and be limited to, any payment to Lender which compensates Lender for (i) the extension of credit to Borrower and the availability to Borrower of the Revolving Credit Facility and (ii) any default or breach by Borrower of a condition upon which such credit was extended and such Revolving Credit Facility was made available. Borrower and Lender agree that for the sole purpose of calculating the interest paid by Borrower to Lender, it is the intention of Borrower and Lender that interest shall mean and include, and be expressly limited to, any interest accrued on the aggregate outstanding Daily Balance of the Obligations during the term hereof pursuant to subsections 2.4(a) and 2.4(b), any Overadvance Fee, Facility Fee (as defined below) and late fees charged to Borrower during the term hereof. Borrower and Lender further agree that it is their intention that the following fees shall not constitute interest: any Servicing Fees (as defined below), any Field Examination Fees (as defined below), any attorney fees incurred by Lender, any premiums or commissions attributable to insurance guaranteeing repayment, finders' fees, credit report fees, appraisal fees or fees for document preparation or notarization. To the extent however that New Jersey law excludes from the calculation of interest any fees defined herein as interest or includes as interest any fees or other sums which are intended not to constitute interest, New Jersey law shall supersede and prevail, and all such interest shall be subject to subsection 2.4(c) above.

 

2.5     Collection of Accounts. Lender or Lender's designee may at any time, with or without notice to Borrower, (a) notify customers, Account debtors or other obligors of Borrower that the Accounts and other Collateral have been assigned to Lender and that Lender has a security interest therein and (b) collect the Accounts and other Collateral directly and add the collection costs and expenses thereof to the Obligations; provided, however, unless and until Lender takes such action or gives Borrower other written instructions, Borrower shall notify all Account debtors and other obligors of Borrower to remit payments on the Accounts and other Collateral to a lockbox to be designated by Lender, or in the case of payments to be made by wire transfer, ACH or other electronic means, to an account designated by Lender over which Lender shall have control and with Borrower granting to Lender viewing access rights thereto. All such payments remitted to the lockbox or made by wire transfer, ACH or other electronic means to the account designated by Lender shall then be credited to a deposit account of Lender into which remittances from Account debtors and other obligors of Borrower and obligors of other customers of Lender may be credited. If, notwithstanding any notices that may be sent to Account debtors or other obligors of Borrower, Borrower obtains payment on any Account or other Collateral, including, without limitation, collections under credit card sales, Borrower shall receive any and all such payments on Accounts and other Collateral and other proceeds (including cash) in trust for Lender and shall immediately deliver said payments to Lender in the original form as received, together with any necessary endorsements thereof, and/or at the discretion of Lender, shall deposit said payments into a deposit account designated by, and in the name of and under the exclusive control of, Lender.

 

2.6     Crediting Payments. The receipt of any item of payment by Lender for the sole purpose of determining availability under the Revolving Credit Facility, subject to final payment of such item, shall be provisionally applied to reduce the Obligations on the date of receipt of such item of payment by Lender; provided however, the receipt of such item of payment by Lender for determining the Daily Balance and for all other purposes hereunder, including, without limitation, the calculation of interest on the Obligations and the calculation of the Servicing Fee, shall not be deemed to have been paid to Lender until three (3) Business Days after the date of Lender's actual receipt of such item of payment. Notwithstanding anything to the contrary contained herein, payments received by Lender after 11:00 a.m. Eastern time shall be deemed to have been received by Lender as of the opening of business on the immediately following Business Day.

 

2.7     Facility Fee. In consideration of Lender's entering into this Agreement, Borrower shall pay to Lender an annual facility fee (the Facility Fee) equal to Fifteen Thousand Dollars ($15,000) (that is, one percent (1%) of $1,5000,000 the Advance Limit). One twelfth (1/12) of such Facility Fee shall be paid simultaneously with the execution of this Agreement, and the remaining amount shall be paid in installments of like amount on the first (1st) day of each month thereafter until paid in full. The Facility Fee for the entire Initial Term is deemed to be fully earned upon the execution of this Agreement. The unpaid balance of the Facility Fee for the entire Initial Term shall be payable in full on the earlier of (a) termination of this Agreement and (b) at Lender's option, upon Lender's declaration of an Event of Default.

 

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In addition, if the amount owed under the Revolving Credit Facility during Initial Term (a) exceeds One Million Five Hundred Thousand Dollars ($1,500,000), but is equal to or less than Two Million Dollars ($2,000,000), an additional Facility Fee of Five Thousand Dollars ($5,000) will be charged at the initial occurrence thereof, (b) exceeds Two Million Dollars ($2,000,000), but is less than or equal to Two Million Five Hundred Thousand Dollars ($2,500,000), an additional Facility Fee of Five Thousand Dollars ($5,000) will be charged at the initial occurrence thereof, (c) exceeds Two Million Five Hundred Thousand Dollars ($2,500,000), but is less than or equal to Three Million Dollars ($3,000,000), an additional Facility Fee of Five Thousand Dollars ($5,000) will be charged at the initial occurrence thereof, or (c) exceeds Three Million Dollars ($3,000,000), but is less than or equal to the Advance Limit (that is, Three Million Five Hundred Thousand Dollars ($3,500,000), an additional Facility Fee of Five Thousand Dollars ($5,000) will be charged at the initial occurrence thereof. The highest Daily Balance of the Revolving Credit Facility during the Initial Term (rounded upward to the next $500,000, unless such amount is a multiple of $500,000, in which case, such amount need not be rounded upward), but in no event less than One Million Five Hundred Thousand Dollars ($1,500,000), shall hereinafter be referred to as, the Benchmark Advance Amount.

 

2.8     Servicing Fee. In consideration of Lender's services for the preceding calendar month, Borrower shall pay to Lender a monthly fee (the Servicing Fee) in an amount equal to one third of one percent (1/3%) of the average Daily Balance during each month on or before the first (1st) day of each calendar month during the Term, including each Renewal Term (as defined below), or so long as the Obligations are outstanding, provided that, in the event Borrower breaches its obligations under Section 2.5, and without constituting a waiver of the Event of Default as a consequence of such breach, at the election of Lender, the Servicing Fee shall be doubled. Notwithstanding anything to the contrary contained in the Loan Documents, the Servicing Fee shall be based on a minimum daily average outstanding balance of Advances of Five Hundred Thousand Dollars ($500,000). 

 

2.9     Field Examination Fee. Borrower shall pay Lender a fee (the Field Examination Fee) in an amount equal to Nine Hundred Ninety-Five Dollars ($995) per day, per examiner plus out-of-pocket expenses for each examination of Borrower's Books or the other Collateral performed by Lender or its designee.

 

2.10     Late Reporting Fee. Borrower shall pay to Lender a fee in an amount equal to Fifty Dollars ($50.00) per document, per day for each Business Day any report, financial statement or schedule required by this Agreement to be delivered to Lender is past due.

 

2.11     StuckyNet-Link Fee. Borrower shall pay to Lender a fee in an amount equal to One Hundred Dollars ($100.00) per month in connection with the StuckyNet-Link software program for collateral reporting.

 

2.12     Monthly Statements. Lender may render monthly statements to Borrower of all Obligations, including statements of all principal, interest and Lender Expenses, and Borrower shall have fully and irrevocably waived all objections to such statements and the contents thereof unless, within thirty (30) days after receipt, Borrower shall deliver to Lender, by registered, certified or overnight mail as set forth in Section 12, a written objection to such statement, specifying the error or errors, if any, contained therein.

 

3.     TERM

 

3.1     Term and Renewal Date. This Agreement shall become effective upon execution by Lender and, provided that Borrower shall not have exercised its termination right as hereinafter provided, shall continue in full force and effect through the Initial Term, and from year to year thereafter (each a Renewal Term), if Lender, at its option, in writing agrees to extend the Term for a period of one (1) year from the then Termination Date. Borrower may terminate the Term on the then Termination Date by giving Lender at least sixty (60) days' prior written notice by registered or certified mail, return receipt requested. In addition, Lender shall have the right to terminate this Agreement immediately at any time upon the occurrence of an Event of Default. No such termination by either Borrower or Lender shall relieve or discharge Borrower of its duties, Obligations and covenants hereunder until all Obligations have been indefeasibly paid and performed in full, and Lender's continuing security interest in the Collateral shall remain in effect until the Obligations have been indefeasibly fully and irrevocably paid and satisfied in cash or cash equivalent. On the Termination Date, the Obligations shall be immediately due and payable in full. 

 

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3.2     Termination Fee. If the Term is terminated by Lender upon the occurrence of an Event of Default or is terminated by Borrower, other than in compliance with Section 3.1, in view of the impracticability and extreme difficulty of ascertaining actual damages, and by mutual agreement of the parties as to a reasonable calculation of Lender's lost profits, as a result thereof, in addition to payment of all principal, interest, fees, expenses and other Obligations, Borrower shall pay Lender upon the effective date of such termination a fee in an amount equal to one percent (1%) of the Benchmark Advance Amount plus any Advances by Lender to or on behalf of Borrower other than under the Revolving Credit Facility, if such termination occurs on or prior to the then Termination Date. Such fee shall be presumed to be the amount of damages sustained by Lender as the result of termination, and Borrower acknowledges that such fee is reasonable under the circumstances currently existing. The fee provided for in this Section 3.2 shall be deemed included in the Obligations.

 

4.     CREATION OF CONTINUING SECURITY INTEREST

 

4.1     Grant of Continuing Security Interest. Borrower hereby grants to Lender a continuing security interest in the Collateral in order to secure the prompt repayment of the Obligations and the prompt performance by Borrower of each and all of its covenants and Obligations under the Loan Documents and otherwise. Lender's continuing security interest in the Collateral shall attach to all Collateral without further act on the part of Lender or Borrower.

 

4.2     Negotiable Collateral. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Borrower shall notify Lender and, upon the request of Lender, shall immediately endorse and assign such Negotiable Collateral to Lender and deliver physical possession of such Negotiable Collateral to Lender.

 

4.3     Delivery of Additional Documentation Required. Concurrently with Borrower's execution and delivery of this Agreement and at any time thereafter at the request of Lender, Borrower shall execute and deliver to Lender all security agreements, chattel mortgages, pledges, assignments, endorsements of certificates of title, applications for title, affidavits, reports, notices, schedules of accounts, letters of authority and all other documents that Lender may request, in form satisfactory to Lender, to perfect and maintain perfected Lender's continuing security interests in the Collateral and to fully consummate all of the transactions contemplated under the Loan Documents. Borrower hereby (a) authorizes Lender to file and/or record such financing statements and other documents as Lender deems necessary or desirable to perfect and maintain Lender's continuing security interest in the Collateral, (b) agrees any such financing statement may contain an "all asset" or "all property" description of the Collateral and (c) hereby ratifies any such financing statement or other document heretofore filed by Lender.

 

4.4     Power of Attorney. Borrower hereby irrevocably makes, constitutes and appoints Lender (and any person designated by Lender) as Borrower's true and lawful attorney-in-fact with power to sign the name of Borrower on any of the above described documents in Section 4.3 above or on any other similar documents to be executed, recorded or filed in order to perfect or continue perfected Lender's continuing security interest in the Collateral. In addition, Borrower hereby appoints Lender (and any person designated by Lender) as Borrower's attorney-in-fact with power to: (a) sign Borrower's name on verifications of Accounts and other Collateral and on notices to Account debtors; (b) send requests for verification of Accounts and other Collateral; (c) endorse Borrower's name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into Lender's possession; (d) during the existence of an Event of Default, notify the post office authorities to change the address for delivery of Borrower's mail to an address designated by Lender, to receive and open all mail addressed to Borrower, and to retain all mail relating to the Collateral and forward all other mail to Borrower; and (e) during the existence of an Event of Default, make, settle and adjust all claims under Borrower's policies of insurance, endorse the name of Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and make all determinations and decisions with respect to such policies of insurance. In the event Lender elects to receive and open Borrower's mail as set forth in clause (d) above, Lender shall open and forward to Borrower by a nationally recognized overnight courier all of Borrower's exempted "other mail" within twenty-four hours of Lender's receipt of the exempted "other mail." The appointment of Lender as Borrower's attorney-in-fact and each and every one of Lender's rights and powers, being coupled with an interest, is irrevocable so long as any Accounts in which Lender has a continuing security interest remain unpaid and until all of the Obligations have been fully, indefeasibly repaid and performed.

 

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4.5     Right To Inspect. Lender shall have the right, after using its best efforts to give Borrower twenty-four (24) hours' notice (so long as no Event of Default shall exist and Borrower has not made a request for Advances beyond the lending parameters set forth in Section 2.1, or other requests outside of the ordinary course of business, otherwise no advance notice need be given), at any time or times hereafter during Borrower's usual business hours, or during the usual business hours of any third party having control over Borrower's Books, to inspect Borrower's Books in order to verify the amount or condition of, or any other matter relating to, the Collateral or Borrower's financial condition. 

 

5.     REPRESENTATIONS AND WARRANTIES AND COVENANTS

 

Borrower represents and warrants to Lender, and covenants and acknowledges, the following:

 

5.1     No Prior Encumbrances; Security Interests. Borrower has good and marketable title to the Collateral, free and clear of liens, claims, security interests or encumbrances held by other third parties, except for the security interests to be satisfied from the proceeds of the first Advances hereunder, the continuing security interests granted to Lender by Borrower and those disclosed on Schedule 5.1. Other than those liens, claims, security interests or encumbrances expressly permitted by this Agreement, Borrower will not create, suffer or permit to be created any security interest, lien, pledge, mortgage or encumbrance on any Collateral or any of its other assets.

 

5.2     Bona Fide Accounts. All Accounts represent bona fide sales or leases of goods and/or services for which Borrower has an unconditional right to payment and as to which the goods have been delivered to the customer or Account debtor and/or the services have been rendered, as applicable. None of the Accounts is subject to any right of offset, counterclaim, cancellation or contractual right of return. All Accounts reported to Lender as Eligible Accounts conform to the requirements of Eligible Accounts.

 

5.3     Merchantable Inventory. All Inventory is now and at all times hereafter shall be of good and merchantable quality, free from defects.

 

5.4     Location of Inventory and Equipment. The Inventory and Equipment is not now, and shall not at any time or times hereafter be, stored with a bailee, warehouseman, processor or similar third party. Borrower shall keep the Inventory and Equipment only at its address set forth on the first page hereof and at the locations set forth in the Perfection Certificate. If any of the Inventory and Equipment is located at a premises not owned by Borrower, Borrower shall cause the landlord of such premises, or other third party having an interest in said premises, to execute and deliver to Lender a landlord waiver and subordination, or similar agreement, satisfactory in form and substance to Lender.

 

5.5     Inventory Records. Borrower now keeps, and hereafter at all times shall keep, correct and accurate records itemizing and describing the kind, type, quality and quantity of the Inventory and Borrower's cost of said items. 

 

5.6     Retail Accounts. No Accounts arise from the sale of goods or rendition of services for personal, family or household purposes.

 

5.7     Relocation of Chief Executive Office. The chief executive office of Borrower is at the address indicated on the first page of this Agreement, and Borrower will not, without thirty (30) days' prior written notice to Lender and compliance with Section 4.3, relocate such office. The location of all books and records of Borrower relating to the Collateral is at 556 West Taylor Road, Romeoville, IL 60446.

 

5.8     Due Incorporation and Qualification.  Borrower is, and shall at all times hereafter, be a corporation duly incorporated, organized and existing under the laws of the state of its incorporation as set forth on the first page hereof, and Borrower is, and shall at all times hereafter be, qualified and licensed to do business and is in good standing in any state in which the conduct of its business or its ownership of assets requires that it be so qualified. Borrower's organizational identification number as issued by the state in which it is incorporated is set forth in the Perfection Certificate.

 

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5.9     Actual and Fictitious Name.  Borrower's exact name is set forth on the first page hereof, and except as set forth in the Perfection Certificate, Borrower has not changed its name within the last five (5) years. Borrower is conducting its business under the trade or fictitious name(s) set forth in the Perfection Certificate, and no others. Borrower has complied with the fictitious name laws of all jurisdictions in which compliance is required in connection with its use of such name(s).

 

5.10     Permits and Licenses.  Borrower holds all licenses, permits, franchises, approvals and consents required for the conduct of its business and the ownership and operation of its assets, including, without limitation, any all applicable licenses to operate in the gaming industry, specifically to sell and service gaming parts and equipment.

 

5.11     Due Authorization; Enforceability. Borrower has the right and power and is duly authorized to enter into the Loan Documents to which it is a party; all necessary action to authorize the execution and delivery of the Loan Documents has been properly taken; and Borrower is and will continue to be duly authorized to borrow under this Agreement and to perform all of the other terms and provisions of the Loan Documents throughout the Term. The Loan Documents, when executed and delivered by Borrower, will constitute the legal, valid and binding obligations of Borrower enforceable in accordance with their terms.

 

5.12     Compliance with Organizational Documents, Etc. The execution and delivery by Borrower of the Loan Documents to which it is a party and the performance of the terms thereof do not constitute a breach of any provision contained in Borrower's Articles of Incorporation or its By-Laws, nor does the execution and delivery by Borrower of the Loan Documents to which it is a party or the performance of the terms thereof constitute an event of default under any material agreement to which Borrower is now or may hereafter become a party.

 

5.13     Litigation.  There are no actions, proceedings or claims pending by or against Borrower, whether or not before any court or administrative agency, and Borrower has no knowledge or notice of any pending, threatened or imminent litigation, governmental investigations, or claims, complaints, actions, or prosecutions involving Borrower, except for ongoing collection matters in which Borrower is the plaintiff. If any such actions, proceedings or claims presently exist or arise during the Term, Borrower shall promptly notify Lender in writing and shall, from time to time, notify Lender of all material events relating thereto.

 

5.14     Accuracy of Information and No Material Adverse Change in Financial Statements. All information furnished by Borrower to Lender, and all statements made by Borrower to Lender, including, without limitation, information set forth in any loan application, client profile and in the Perfection Certificate are true, accurate and complete in all respects and do not contain any misstatement of fact or omit to state any facts necessary to make the statements or information contained therein not misleading. All financial statements relating to Borrower which have been or may hereafter be delivered to Lender: (a) have been prepared in accordance with GAAP; (b) fairly present Borrower's financial condition as of the date thereof and Borrower's results of operations for the period then ended; and (c) disclose all contingent obligations of Borrower. No material adverse change in the financial condition of Borrower has occurred since the date of the most recent of such financial statements.

 

5.15     Solvency. Borrower is now, and shall be at all times throughout the Term, solvent and able to pay its debts (including trade debts) as they mature.

 

5.16     ERISA.  Neither Borrower or any ERISA Affiliate, nor any Plan is or has been in violation of any of the provisions of ERISA, any of the qualification requirements of IRC Section 401(a) or any of the published interpretations thereof. No lien upon the assets of Borrower has arisen with respect to any Plan. No prohibited transaction within the meaning of ERISA Section 406 or IRC Section 4975(c) has occurred with respect to any Plan. No reportable event as defined under Section 4043 has occurred with respect to any Plan which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Section 4042 of ERISA. Neither Borrower nor any ERISA Affiliate has incurred any withdrawal liability with respect to any Multiemployer Plan. Borrower and each ERISA Affiliate have made all contributions required to be made by them to any Plan or Multiemployer Plan when due. There is no accumulated funding deficiency in any Plan, whether or not waived.

 

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5.17     Environmental Laws and Hazardous Materials. Borrower has complied, and at all times through the Term will comply, with all Environmental Laws (as defined below). Borrower has not and will not cause or permit any Hazardous Materials (as defined below) to be located, incorporated, generated, stored, manufactured, transported to or from, released, disposed of, or used at, upon, under, or within any premises at which Borrower conducts its business, or in connection with Borrower's business. To the best of Borrower's knowledge, information or belief, without undertaking an independent investigation, no prior owner, occupant or operator of any premises at which Borrower conducts its business has caused or permitted any of the above to occur at, upon, under, or within any of the premises. Borrower will not permit any lien to be filed against the Collateral or any part thereof under any Environmental Law, and will promptly notify Lender of any proceeding, inquiry or claim relating to any alleged violation of any Environmental Law, or any alleged loss, damage or injury resulting from any Hazardous Material. Lender shall have the right to join and participate in, as a party if it so elects, any legal or administrative proceeding initiated with respect to any Hazardous Material or in connection with any Environmental Law. For purposes hereof, Hazardous Material includes without limitation any substance, material, emission, or waste which is or hereafter becomes regulated or classified as a hazardous substance, hazardous material, toxic substance or solid waste under any Environmental Law, asbestos, petroleum products, urea formaldehyde, polychlorinated biphenyls (PCBs), radon, and any other hazardous or toxic substance, material, emission or waste, and substances containing excessive moisture, mildew, mold, microbial contamination, microbial growth or other fungi, or biological agents that can or are known to produce mycotoxins or other bioaerosols, such as antigens, bacteria, amoebae and microbial organic compounds or other similar matter, in each case that poses a risk to human health or the environment. Environmental Laws means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, the Hazardous Materials Transportation Act, the Toxic Substances Control Act, the Clean Water Act and the regulations pertaining to such statutes, and any other safety, health or environmental statutes, laws, regulations or ordinances of the United States or of any state, county or municipality in which Borrower conducts its business or the Collateral is located, and the rules, resolutions, directives, orders, executive orders, consent orders, guidance from regulatory agencies, policy statements, judicial decrees, standards, permits, licenses and ordinances or any judicial or administrative interpretation of any of the foregoing, pertaining to the protection of land, water, air, health, safety or the environment, whether now or in the future enacted, promulgated or issued.

 

5.18     Tax Compliance. Borrower has filed all tax returns required to be filed by it and has paid all taxes due and payable on said returns and on any assessment made against it or its assets.

 

5.19     Reliance by Lender; Cumulative. Each warranty, representation and agreement contained in this Agreement shall be automatically deemed repeated by Borrower with each request for an Advance and shall be conclusively presumed to have been relied on by Lender regardless of any investigation made or information possessed by Lender. The warranties, representations and agreements set forth herein shall be cumulative and in addition to any and all other warranties, representations and agreements which Borrower shall now or hereafter give, or cause to be given, to Lender.

 

5.20     Use of Proceeds. The proceeds of the initial Advance will be used by Borrower for the purposes set forth on Schedule 5.20. Absent Lender's written consent to the contrary, the proceeds of Advances after the initial Advance will be used by Borrower solely for working capital purposes. 

 

5.21     Motor Vehicles and Intellectual Property. The Perfection Certificate identifies all motor vehicles, patents, patent applications, copyrights, trademarks, trade-names and other intellectual property, registered or unregistered, owned by Borrower. Borrower will promptly notify Lender of all motor vehicles or intellectual property hereafter owned by Borrower, and the status of all patent and trademark applications and the issuance of patents and trademarks, and all copyrights registrations, and in accordance with Section 4.3, will cooperate with Lender in taking all actions required by Lender to have a perfected security interest or lien on such motor vehicles and intellectual property.

 

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5.22     Commercial Tort Claims. Borrower does not, as of the date hereof, have any Commercial Tort Claims against any third parties. If Borrower does hereafter have any such Commercial Tort Claims, Borrower shall furnish Lender with prompt written notice thereof, and in accordance with Article 4 hereof, shall execute and deliver such supplemental documents and cooperate with Lender in taking all action as required by Lender to have a perfected security interest or lien on such Commercial Tort Claims.

 

6.     AFFIRMATIVE COVENANTS

 

Borrower covenants and acknowledges that throughout the Term, Borrower shall comply with all of the following:

 

6.1     Collateral and Other Reports. Borrower shall at least once every week and each time it requests an Advance under the Revolving Credit Facility utilize Lender's StuckyNet-Link software for collateral reporting and shall furnish to Lender a borrowing base report and loan request, satisfactory in form and substance to Lender, report to Lender all sales and Accounts arising since its most recent report to Lender and shall execute and deliver to Lender, no later than the fifteenth (15th) day of each month during the Term, a detailed aging of the Accounts, a reconciliation statement and a summary aging, by vendor, of all accounts payable of Borrower and any book overdraft. Borrower and Lender agree that each authorized signer's (on behalf of Borrower) signature on borrowing base reports may be provided via an electronic signature (that is, by each authorized signer's password for such program). Borrower shall provide Lender a listing of each authorized signer. Borrower shall deliver to Lender, as Lender may from time to time require, collection reports, sales journals, invoices, copies of or original delivery receipts, customers' purchase orders, shipping instructions, bills of lading and other documentation respecting shipment arrangements and such other matters requested by Lender. Absent such a request by Lender, copies of all such documentation shall be held by Borrower as custodian for Lender. Borrower shall at all times provide Lender with all current "passwords" or similar access requirements relative to all computer systems available to Borrower with its Account debtors so as to enable Lender to have access to said computer systems so as to verify the status of Accounts owing to Borrower from said Account debtors.

 

6.2     Returns. Returns and allowances, if any, as between Borrower and any Account debtors, shall be permitted on the same basis and in accordance with the usual customary practices of Borrower as they exist as of the date hereof. If at any time prior to the occurrence of an Event of Default any Account debtor returns any Inventory to Borrower, Borrower shall promptly determine the reason for such return and, if Borrower accepts such return, issue a credit memorandum (with a copy to be sent to Lender) in the appropriate amount to such Account debtor. Borrower shall promptly notify Lender of all returns and recoveries and of all disputes and claims.

 

6.3     Designation of Inventory. Borrower shall, from time to time hereafter as requested by Lender, execute and deliver to Lender a designation of Inventory specifying the cost and the wholesale market value of Borrower's raw materials, work in process and finished goods, and further specifying such other information as Lender may reasonably request. Borrower shall also, from time to time hereafter as requested by Lender, promptly, in writing, notify Lender if any of Borrower's Inventory contains any labels, trademarks, trade-names or other identifying characteristics that are the properties of third parties.

 

6.4     Financial Statements, Reports, Certificates. Borrower shall deliver to Lender: (a) as soon as available, but in any event within thirty (30) days after the end of each month during the Term, a balance sheet and profit and loss statement prepared by Borrower covering Borrower's operations during such period; and (b) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of Borrower, consolidated financial statements of Holdings for each such period, audited by independent certified public accountants acceptable to Lender. Such financial statements shall include a balance sheet and profit and loss statement and statements of cash flows, if available, and the accountants' management letter, if any, and shall be prepared in accordance with GAAP. To extent the financial statements of Borrower are prepared on a consolidated basis, such financial statements shall include consolidating/combining schedules, as applicable. Together with the above, Borrower shall also deliver Holding's Form 10-Qs, 10-Ks or 8-Ks, as soon as the same become available, and any other report reasonably requested by Lender relating to the Collateral and the financial condition of Borrower, together with a certificate, substantially in the form of Exhibit 6.4, signed by Borrower's chief financial officer to the effect that (a) all reports, statements or computer prepared information of any kind or nature delivered or caused to be delivered to Lender under this Section 6.4 fairly present Borrower's financial condition and (b) there exists on the date of delivery of such certificate to Lender no condition or event which constitutes an Event of Default, and, among other things, certifying as to compliance with Sections 7.8 and 7.10.

 

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6.5     Tax Returns, Receipts. Borrower shall deliver to Lender copies of each of its federal income tax returns (including all schedules thereto), and any amendments thereto, within thirty (30) days of the filing thereof. Borrower further shall promptly deliver to Lender, upon request, satisfactory evidence of Borrower's payment of all withholding and other taxes required to be paid by Borrower.

 

6.6     Guarantor Reports. Borrower will cause Holdings to deliver to Lender copies of all federal and state income tax returns (including all schedules thereto) as soon as the same are available and in any event no later than thirty (30) days after the same are required to be filed by law.

 

6.7     Title to Equipment. Upon Lender's request, Borrower shall immediately deliver to Lender any and all evidence of ownership of, certificates of title, or applications for title to any items of Equipment, properly endorsed to Lender, as applicable.

 

6.8     Maintenance of Equipment.  Borrower shall keep and maintain the Equipment in good operating condition and repair, and shall make all necessary replacements thereto so that the value and operating efficiency of its Equipment shall at all times be maintained and preserved. Borrower shall not permit any item of Equipment to become a fixture to real estate or an accession to other property. The Equipment is now and shall at all times remain Borrower's personal property.

 

6.9     Taxes. All federal, state and local assessments and taxes, whether real, personal or otherwise, due or payable by, or imposed, levied or assessed against Borrower or any of its assets or in connection with Borrower's business shall hereafter be paid in full, before the same become delinquent or before the expiration of any extension period. Borrower shall make due and timely payment or deposit of all federal, state and local taxes, assessments or contributions required of it by law, and will execute and deliver to Lender, on demand, appropriate certificates attesting to the payment or deposit thereof.

 

6.10     Insurance. Borrower, at its expense, shall keep and maintain insurance to protect the Collateral against all risk of loss covered under a Special property form. If any of the tangible Collateral is located in a flood zone, Borrower must also have flood insurance. The coverage shall be written on a replacement cost basis. The property limit(s) shall be no less than those necessary to satisfy the coinsurance requirement contained in the insurance policy. Borrower, at its expense, shall keep and maintain Business Income Coverage. Business Income Coverage shall insure against loss covered under a Special policy form. The limit must contemplate a benefit period of no less than twelve (12) months and meet the minimum limit needed to satisfy the coinsurance requirement contained in the policy. Business Income coverage can be written on an agreed amount basis, or with a coinsurance percentage from 80% to 100%. All policies of insurance covering business personal property and business income shall contain a Lender's Loss Payable endorsement in a form satisfactory to Lender. All policies insuring real property on which Lender has a mortgage or other lien shall contain a Mortgagee endorsement in form satisfactory to Lender. Either or both form(s) shall contain a waiver of warranties. All proceeds payable under such policies shall be payable to Lender and applied to the Obligations. Borrower shall cause to be delivered to Lender a properly executed Evidence of Property Insurance form along with a copy of the Lender's Loss Payable and/or Mortgagee endorsement(s) as applicable, in advance of the closing date for the credit facilities hereunder and thereafter at least thirty (30) days prior to the expiration date(s) of the policy(ies). All Mortgagee and Lender's Loss Payable endorsements shall contain the following address for notification purposes, or such other address as Lender may, from time to time, notify Borrower:

 

North Mill Capital LLC

821 Alexander Road, Suite 130

Princeton, New Jersey 08540

Attention: Thomas G. Siska, Senior Vice President

 

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Borrower, at its expense, shall keep and maintain Commercial General Liability Coverage insuring against all risks relating to or arising from Borrower's ownership and use of the Collateral and its other assets, products and operations. Lender and its directors, officers and employees shall be named as additional insureds for Commercial General Liability on Borrower's policy. Borrower shall cause to be delivered to Lender a properly executed Certificate of Insurance, containing the required additional insured wording, before the closing date for the credit facilities hereunder and thereafter at least thirty (30) days prior the expiration date of the policy. Along with the Certificate of Insurance, Borrower shall also deliver a copy of the General Liability endorsement whereby Lender and its directors, officers and employees are added to the policy as additional insureds.

 

All required policies shall be in such form, with such companies and in such amounts as may be satisfactory to Lender. All policies shall contain a thirty (30) day notice for cancellation or non-renewal. Lender reserves the right to change insurance specifications at any time.

 

6.11     Lender Expenses. Borrower shall immediately, and without demand, reimburse Lender for all Lender Expenses, and Borrower hereby authorizes the payment of such Lender Expenses.

 

6.12     Compliance With Law. Borrower shall comply, in all material respects, with the requirements of all applicable laws, rules, regulations and orders of governmental authorities relating to Borrower and the conduct of its business.

 

6.13     Accounting System. Borrower shall at all times hereafter maintain a standard and modern system of accounting in accordance with GAAP with ledger and account cards or computer tapes, disks, printouts and records pertaining to the Collateral containing such information as may from time to time be requested by Lender.

 

7.     NEGATIVE COVENANTS

 

Borrower covenants and acknowledges to Lender that throughout the Term, Borrower shall not undertake any of the following:

 

7.1     Extraordinary Transactions and Disposal of Assets. (a) Enter into any transaction not in the ordinary and usual course of its business as conducted on the date hereof, including, but not limited to, the sale, lease, disposal, movement, relocation or transfer, whether by sale or otherwise, of any its assets, other than sales of Inventory in the ordinary and usual course of its business as presently conducted; (b) incur (i) any indebtedness for borrowed money, including, without limitation, merchant advances, or purchase money indebtedness, or (ii) any other indebtedness outside the ordinary and usual course of its business as conducted on the date hereof, except for renewals or extensions of existing indebtedness permitted by Lender; (c) make any advance or loan to any third party; or (d) grant a lien on any of its assets except (i) in favor of Lender or (ii) the continuing liens and security interests, if any, set forth on Schedule 5.1.

 

7.2     Change Name, etc.  Change its name, business structure, jurisdiction of incorporation or formation, as applicable, or identity, or add any new fictitious name.

 

7.3     Merge, Acquire. Merge, acquire, or consolidate with or into any other business organization.

 

7.4     Guaranty.  Guaranty or otherwise become in any way liable with respect to the obligations of any third party, except by endorsement of instruments or items of payment for deposit to the account of Borrower for negotiation and delivery to Lender.

 

7.5     Restructure. Make any change in its financial structure or business operations.

 

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7.6     Prepayments.  Prepay any existing indebtedness owing to any third party other than trade payables.

 

7.7     Change of Ownership. Cause, permit or suffer any change, direct or indirect, in the ownership of the capital stock or other equity interest of Borrower or any entity that directly or indirectly owns the capital stock or equity interest in Borrower or its parent entity(ies), or enter into any agreement with any person or entity that provides for a payment to such person or entity based upon the income of Borrower.

 

7.8     Compensation. Pay total compensation, including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, management fees or other payments, whether direct or indirect, in money or otherwise, during any fiscal year to its executives, officers, shareholders, affiliates and directors in an aggregate amount in excess of one hundred ten percent (110%) of the total compensation paid in the prior fiscal year. Except as otherwise specifically set forth in Section 4(A) of the Debt Subordination Agreement of even date herewith, any pre-existing, fully executed and executory employment, compensation and merger related agreements (collectively, the Compensation Agreements) with any of the individuals identified in the previously sentence in this Section 7.8 shall not be affected by the terms of this Section 7.8 nor shall the sums to be paid under the Compensation Agreements be part of the compensation, limitation cap contained in this Section 7.8.

 

7.9     Loans and Advances. Make any loans, advances or extensions of credit to any officer, director, executive employee or shareholder of Borrower (or any relative of any of the foregoing), or to any entity which is a subsidiary of, related to, affiliated with, or has common shareholders, officers or directors with, Borrower.

 

7.10     Capital Expenditures. Make any plant or fixed capital expenditure, or any commitment therefor, or purchase or lease any real or personal assets or replacement Equipment in excess of Fifty Thousand Dollars ($50,000) for any individual transaction or where the aggregate amount of such transactions in any fiscal year exceeds One Hundred Thousand Dollars ($100,000).

 

7.11     Consignments of Inventory. Consign any Inventory to any third party or obtain any Inventory on a consignment basis from any third party.

 

7.12     Dividends or Distributions. Make any dividends or distribution to Holdings so as to permit Holdings to make payments on the subordinated loan from Anthony R. Tomasello to Holdings in contravention of the debt subordination agreement between Anthony R. Tomasello and Lender.

 

7.13     Accounting Methods. Modify or change its method of accounting, or enter into, modify or terminate any agreement presently existing or at any time hereafter entered into with any third party for the preparation or storage of Borrower's records of Accounts and financial condition without such third party's agreeing to provide Lender with information regarding the Collateral or Borrower's financial condition. Borrower waives the right to assert a confidential relationship, if any, it may have with any such third party in connection with any information requested by Lender hereunder and agrees that Lender may contact any such third party directly in order to obtain such information.

 

7.14     Business Suspension. Suspend or go out of business.

 

8.     EVENTS OF DEFAULT

 

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

 

8.1     Failure to Pay. Borrower's failure to pay when due and payable, or when declared due and payable, any portion of the Obligations (whether principal, interest, taxes, Lender Expenses, or otherwise);

 

8.2     Failure to Perform. Borrower's or any Guarantor's failure to perform, keep or observe any term, provision, condition, representation, warranty, covenant or agreement contained in this Agreement, in any of the Loan Documents or in any other present or future agreement between Borrower and/or any Guarantor and Lender;

 

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8.3     Misrepresentation. Any misstatement or misrepresentation now or hereafter exists in any warranty, representation, statement, aging or report made to Lender by Borrower and/or any Guarantor or any officer, employee, agent or director thereof, or if any such warranty, representation, statement, aging or report is withdrawn by such person;

 

8.4     Material Adverse Change.  There is a material adverse change in Borrower's or any Guarantor's business or financial condition;

 

8.5     Material Impairment. There is a material impairment of the prospect of repayment of the Obligations or a material impairment of Lender's continuing security interests in the Collateral;

 

8.6     Levy or Attachment. Any material portion of Borrower's assets is attached, seized, subjected to a writ or distress warrant or is levied upon, or comes into the possession of any judicial officer or assignee;

 

8.7     Insolvency by Borrower or Guarantor. An Insolvency Proceeding is commenced by Borrower or by any Guarantor;

 

8.8     Insolvency Against Borrower or Guarantor. An Insolvency Proceeding is commenced against Borrower or any Guarantor;

 

8.9     Injunction Against Borrower. Borrower is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business;

 

8.10     Government Lien. A notice of lien, levy or assessment is filed of record with respect to any of Borrower's or any Guarantor's assets by the United States Government or any department, agency or instrumentality thereof, or by any state, county, municipal or other governmental agency, or any taxes or debts owing at any time hereafter to any one or more of such entities becomes a lien, whether inchoate or otherwise, upon Borrower's or any Guarantor's assets and the same is not paid on the payment date thereof, unless Borrower or Guarantor contests any such lien, levy or assessment and thereafter appeals from any determination in good faith and diligently and continuously pursues either to conclusion, in which event these shall not constitute an Event of Default provided that during any such contests no government lien shall exist which would have priority over the lien of Lender on the assets of Borrower, or if any such priority lien exists, the amount owing covered by said lien shall be reserved against the amount otherwise available for Advances under the Revolving Credit Facility;

 

8.11     Judgment. A judgment is entered against Borrower or any Guarantor unless the judgment is appealed in good faith which is diligently and continuously pursued until conclusion in which event shall not constitute an Event of Default, provided that during the time of appeal no judgment lien shall exist which would have priority over the lien of Lender on the assets of Borrower, or if any such priority lien exists, the amount owing covered by said lien shall be reserved against the amount otherwise available for Advances under the Revolving Credit Facility ;

 

8.12     Default to Third Party. There is a default in any material agreement to which Borrower or any Guarantor is a party or which binds Borrower or any Guarantor or any of their respective assets;

 

8.13     Subordinated Debt Payments.  Borrower or any Guarantor makes any payment on account of indebtedness which has now or hereafter been subordinated to the Obligations, except to the extent such payment is allowed under any subordination agreement entered into with Lender;

 

8.14     Death of Guarantor; Termination of Guaranty. Any Guarantor dies or terminates its guaranty; 

 

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8.15     Change in Management. If Anthony R. Tomasello or Renee M. Zimmerman ceases to be actively engaged in the management of Borrower;

 

8.16     ERISA Violation. A prohibited transaction shall occur with respect to a Plan which could have a material adverse effect on the financial condition of Borrower; any lien upon the assets of Borrower in connection with any Plan shall arise; Borrower or any ERISA Affiliate shall completely or partially withdraw from a Multiemployer Plan and such withdrawal could, in the opinion of Lender, have a material adverse effect on the financial condition of Borrower; Borrower or any of its ERISA Affiliates shall fail to make full payment when due of all amounts which Borrower or any of its ERISA Affiliates may be required to pay to any Plan or any Multiemployer Plan as one or more contributions thereto; Borrower or any of its ERISA Affiliates creates or permits the creation of any accumulated funding deficiency, whether or not waived; the voluntary or involuntary termination of any Plan which termination could, in the opinion of Lender, have a material adverse effect on the financial condition of Borrower; or Borrower shall fail to notify Lender promptly, and in any event within ten (10) days, of the occurrence of an event which constitutes an Event of Default under this Section 8.16 or would constitute an Event of Default upon the exercise of Lender's judgment; 

 

8.17     Loss of License, etc. If any license, permit, distributor, franchise or similar agreement necessary for the continued operation of Borrower's business in the ordinary course is revoked, suspended or terminated, including, without limitation, any all applicable licenses to operate in the gaming industry, specifically to sell and service gaming parts and equipment.

 

8.18     Other Agreements with Lender. A default under any other obligation by or of Borrower or any Guarantor in favor of Lender, including any obligation under any instrument securing or evidencing such obligation, whether or not such obligation is otherwise secured, which default is not cured within any applicable grace or cure period.

 

Notwithstanding anything contained in this Agreement to the contrary, Lender shall refrain from exercising its rights and remedies and an Event of Default shall not be deemed to have occurred by reason of the occurrence of any of the events set forth in Sections 8.6 or 8.8 hereof if, within ten (10) days from the date thereof, the same is released, discharged, dismissed, bonded against or satisfied; provided, however, Lender shall not be obligated to make Advances to Borrower during any such period.

 

9.     LENDER'S RIGHTS AND REMEDIES

 

9.1     Rights and Remedies.  Upon the occurrence of an Event of Default, Lender may, at its election, without notice of such election and without demand, do any one or more of the following:

 

(a)     Declare all Obligations, whether evidenced by the Loan Documents or otherwise, immediately due and payable in full;

 

(b)     Cease advancing money or extending credit to or for the benefit of Borrower under the Loan Documents or under any other agreement between Borrower and Lender;

 

(c)     Terminate this Agreement as to any future liability or obligation of Lender, but without affecting Lender's rights and security interest in the Collateral and without affecting the Obligations;

 

(d)     Settle or adjust disputes and claims directly with Account debtors for amounts and upon terms which Lender considers advisable and, in such cases, Lender will credit the Obligations with the net amounts received by Lender in payment of such disputed Accounts, after deducting all Lender Expenses;

 

(e)     Cause Borrower to hold all returned Inventory in trust for Lender, segregate all returned Inventory from all other property of Borrower or in Borrower's possession and conspicuously label said returned Inventory as the property of Lender;

 

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(f)     Without notice to or demand upon Borrower or any Guarantor, make such payments and do such acts as Lender considers necessary, desirable or reasonable to protect its security interest in the Collateral. Borrower shall assemble the Collateral if Lender so requires and deliver or make the Collateral available to Lender at a place designated by Lender. Borrower authorizes Lender to enter any premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest or compromise any encumbrance, charge or lien on the Collateral which in Lender's determination appears to be prior or superior to its security interest or lien, and to pay all expenses incurred in connection therewith;

 

(g)     Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, lease, license or other disposition, advertise for sale, lease, license or other disposition, and sell, lease, license or otherwise dispose (in the manner provided for herein or in the Code) the Collateral. Lender is hereby granted a license or other right to use, without charge, Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any asset of a similar nature, pertaining to the Collateral, in completing the production of, advertising for sale, lease, license or other disposition, and sale, lease, license or other disposition of the Collateral. Borrower's rights under all licenses and all franchise agreements shall inure to Lender's benefit; and/or

 

(h)     Sell, lease, license or otherwise dispose of the Collateral at either a public or private proceeding, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower's premises) as Lender determines is commercially reasonable. It is not necessary that the Collateral be present at any such sale. Lender shall give notice of the disposition of the Collateral as follows:

 

(i)     to Borrower and all other parties entitled to receive a notice of disposition under the Code, a notice in writing of the time and place of the public sale or other disposition, or if the sale or other disposition is a private sale or some other disposition other than a public sale, a notice in writing of the time on or after which the private sale or other disposition is to be made; and

 

(ii)     the notice hereunder shall be personally delivered or mailed, postage prepaid, to Borrower as provided in Section 12, at least ten (10) calendar days before the date fixed for the sale or other disposition, or at least ten (10) calendar days before the date on or after which the private sale or other disposition is to be made, unless the Collateral is perishable or threatens to decline speedily in value. Notice to persons other than Borrower claiming an interest in the Collateral shall be sent to such addresses as is required or authorized under the Code.

 

Lender may credit bid and purchase at any public sale and, if permitted by applicable law, at any private sale, and any deficiency that exists after disposition of the Collateral as provided herein, shall be immediately paid by Borrower. Any excess will be remitted without interest by Lender to the party or parties legally entitled to such excess.

 

In addition to the foregoing, Lender shall have all rights and remedies provided by law (including those set forth in the Code) and at equity, and any rights and remedies contained in any Loan Documents and all such rights and remedies shall be cumulative.

 

9.2     No Waiver. No delay on the part of Lender in exercising any right, power or privilege under any Loan Document shall operate as a waiver of the terms and conditions hereof, nor shall any single or partial exercise of any right, power or privilege under such Loan Documents or otherwise, preclude any other or further exercise of any such right, power or privilege.

 

9.3     Waivers. If Lender seeks to take possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (a) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (b) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (c) any requirement that Lender retain possession of, and not dispose of, any such Collateral until after trial or final judgment.

 

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9.4     Commercially Reasonable Sale. Borrower and Lender agree that a sale or other disposition of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable (but nothing herein implies that other methods or manners of sale are not commercially reasonable): (a) notice of the sale is given to Borrower at least (10) ten days prior to the sale, and, in the case of a public sale, notice of the sale is published at least seven (7) days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (b) notice of the sale describes the Collateral in general, non-specific terms; (c) the sale is conducted at a place designated by Lender, with or without the Collateral being present; (d) the sale commences at any time between 8:00 a.m. and 6:00 p.m.; (e) payment of the purchase price in cash or by cashier's check or wire transfer is required; and (f) with respect to any sale of any of the Collateral, Lender may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the Collateral. Lender shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.

 

10.     TAXES AND EXPENSES REGARDING THE COLLATERAL. If Borrower fails to pay any monies (whether taxes, assessments, insurance premiums or otherwise) due to third persons or entities, fails to make any deposits or furnish any required proof of payment or deposit or fails to perform any of Borrower's other covenants under any of the Loan Documents, then in its discretion and without prior notice to Borrower, Lender may do any or all of the following: (a) make any payment which Borrower has failed to pay or any part thereof; (b) set up such reserves in Borrower's loan account as Lender deems necessary to protect Lender from the exposure created by such failure; (c) obtain and maintain insurance policies of the type described in Section 6.10 and take any action with respect to such policies as Lender deems prudent; or (d) take any other action deemed necessary to preserve and protect its interests and rights under the Loan Documents. Any payments made by Lender shall not constitute: (i) an agreement by Lender to make similar payments in the future or (ii) a waiver by Lender of any Event of Default. Lender need not inquire as to, or contest the validity of, any such expense, tax, security interest, encumbrance or lien, and the receipt of notice for the payment thereof shall be conclusive evidence that the same was validly due and owing.

 

11.     WAIVERS

 

11.1     Demand, Protest. Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, notice of intention to accelerate, notice of acceleration, and notice of nonpayment at maturity and acknowledges that Lender may compromise, settle or release, without notice to Borrower, any Collateral and/or guaranties at any time held by Lender. Borrower hereby consents to any extensions of time of payment or partial payment at, before or after the Termination Date.

 

11.2     No Marshaling. Borrower, on its own behalf and on behalf of its successors and assigns, hereby expressly waives all rights, if any, to require a marshaling of assets by Lender or to require that Lender first resort to some portion(s) of the Collateral before foreclosing upon, selling or otherwise realizing on any other portion thereof.

 

11.3     Lender's Non-Liability for Inventory or Equipment or for Protection of Rights. So long as Lender complies with its obligations, if any, under Section 9-207 of the Code, Lender shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Inventory or Equipment; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency or other person whomsoever. All risk of loss, damage or destruction of the Inventory or Equipment shall be borne by Borrower. Lender shall have no obligation to protect any rights of Borrower against any person obligated on any Collateral.

 

11.4     Limitation of Damages. In any action or other proceeding against Lender under this Agreement or relating to the transactions between Lender and Borrower, Borrower waives the right to seek any consequential or punitive damages.

 

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12.     NOTICES. Unless otherwise provided herein, all consents, waivers, notices or demands by any party relating to the Loan Documents shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be telecopied/sent by facsimile transmission or other electronic transmission .pdf (followed up by a mailing or overnight delivery), personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, or by receipted overnight delivery service to Borrower or to Lender, as the case may be, at their addresses set forth below

 

	
			If to Borrower: 

				
			American Gaming & Electronics, Inc.

			223 Pratt Street

			
			
			
			Hammonton, New Jersey 08037

			

			

			

			
			
			
			
			
			Attn:       Anthony R. Tomasello, President and CEO

			

			

			

			

			

			
			
			
			
			
			
			
			Fax #:      (609) 704-9685

			

			

			

			

			

			

			

			
	 	 
	 	 
	If to Lender:	
			North Mill Capital LLC

			
			821 Alexander Road, Suite 130

			

			
			Princeton, New Jersey 08540

			

			
			Attn:       Thomas G. Siska, Senior Vice President

			

			
			Fax #       (609) 919-0677

			

			

 

Any party may change the address at which it is to receive notices hereunder by notice in writing in the foregoing manner given to the other. All notices or demands sent in accordance with this Section 12 shall be deemed received on the earlier of the date of actual receipt or five (5) calendar days after the deposit thereof in the mail or on the date telecommunicated if telecopied.

 

13.     DESTRUCTION OF BORROWER'S DOCUMENTS. All documents, schedules, invoices, agings or other papers delivered to Lender may be destroyed or otherwise disposed of by Lender four (4) months after they are delivered to or received by Lender, unless Borrower requests in writing the return of the said documents, schedules, invoices or other papers and makes arrangements, at Borrower's expense, for their return.

 

14.     GENERAL PROVISIONS

 

14.1     Effectiveness.  This Agreement shall be binding and deemed effective when executed by Lender.

 

14.2     Successors and Assigns; Assignments and Participations; Third Party Beneficiaries. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, Borrower may not assign this Agreement or any rights hereunder, and any such prohibited assignment shall be absolutely void. No consent to an assignment by Lender shall release Borrower from its Obligations. Without notice to or the consent of Borrower, Lender may assign this Agreement and its rights and duties hereunder, and Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Lender's rights and benefits hereunder. In connection therewith, Lender may disclose all documents and information which Lender now or hereafter may have relating to Borrower or Borrower's business. Borrower and Lender do not intend any of the benefits of the Loan Documents to inure to any third party, and no third party shall be a third party beneficiary hereof or thereof.

 

14.3     Section Headings. Article, Section and Exhibit headings and numbers thereof have been set forth herein for convenience only.

 

14.4     Interpretation.  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Lender or Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each party and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

 

14.5     Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of such provision.

 

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14.6     Amendments in Writing. This Agreement cannot be changed or terminated orally. This Agreement supersedes all prior agreements, understandings and negotiations, if any, all of which are merged into this Agreement. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES REGARDING THE SUBJECT MATTER HEREIN AND THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

14.7     Counterparts and Facsimile Signatures.  This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same Agreement. Any signature to a Loan Document delivered by a party via telecopy/facsimile transmission or other electronic means shall be deemed to be an original signature.

 

14.8     Indemnification. Borrower hereby indemnifies, protects, defends and saves harmless Lender and any member, officer, director, investor, bank group member, official, agent, employee and attorney of Lender, and their respective heirs, successors and assigns (collectively, the Indemnified Parties), from and against any and all losses, damages, expenses or liabilities of any kind or nature and from any suits, claims or demands, including reasonable counsel fees incurred in investigating or defending such claim, suffered by any of them and caused by, relating to, arising out of, resulting from, or in any way connected with the Loan Documents and the transactions contemplated therein or the Collateral (unless caused by the gross negligence or willful misconduct of the Indemnified Parties) including, without limitation: (a) losses, damages, expenses or liabilities sustained by Lender in connection with any environmental cleanup or other remedy required or mandated by any Environmental Law; (b) any known, untrue statement of a material fact contained in information submitted to Lender by Borrower or any Guarantor or any known omission of any material fact necessary to be stated therein in order to make such statement not misleading or incomplete; (c) the willful failure of Borrower or any Guarantor to perform any obligations required to be performed by Borrower or any Guarantor under the Loan Documents; and (d) the ownership, construction, occupancy, operations, use and maintenance of any of Borrower's or any Guarantor's assets. The provisions of this Section 14.8 shall survive termination of this Agreement and the other Loan Documents.

 

14.9.     Joint and Several Obligations; Dealings with Multiple Borrowers. If more than one person or entity is named as Borrower hereunder, all Obligations, representations, warranties, covenants and indemnities set forth in the Loan Documents to which such person or entity is a party shall be joint and several. Lender shall have the right to deal with any Authorized Officer of any Borrower with regard to all matters concerning the rights and obligations of Lender and Borrower hereunder and pursuant to applicable law with regard to the transactions contemplated under the Loan Documents. All actions or inactions of the officers, managers, members and/or agents of any Borrower with regard to the transactions contemplated under the Loan Documents shall be deemed with full authority and binding upon all Borrowers hereunder. Each Borrower hereby appoints each other Borrower as its true and lawful attorney-in-fact, with full right and power, for purposes of exercising all rights of such person hereunder and under applicable law with regard to the transactions contemplated under the Loan Documents. The foregoing is a material inducement to the agreement of Lender to enter into this Agreement and to consummate the transactions contemplated hereby. Each Borrower represents that it and each other Borrower, together, are operated as part of one consolidated business entity and are directly dependent upon each other for and in connection with each of their respective business activities and financial resources. Each Borrower will receive a direct economic and financial benefit from the Obligations incurred under this Agreement and the incurrence of such Obligations is in the best interests of each Borrower.

 

14.10.     Setoff.  Borrower hereby grants to Lender a lien, security interest and right of setoff as security for all Obligations to Lender upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Lender, or any entity under the control of Lender, or its parent entity(ies), or in transit to any of them. At any time, without demand or notice, Lender may set off the same or any part thereof and apply the same to the Obligations of Borrower, even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHTS OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 

 

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15.     CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. THE VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION, INTERPRETATION AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE COUNTY OF MERCER, STATE OF NEW JERSEY, THE FEDERAL COURTS WHOSE VENUE INCLUDES THE STATE OF NEW JERSEY, OR AT THE SOLE OPTION OF Lender, IN ANY OTHER COURT IN WHICH Lender SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER AND Lender EACH WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING UNDER THE LOAN DOCUMENTS OR RELATING TO THE DEALINGS OF BORROWER AND Lender AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 15.

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

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Borrower and Lender have executed this Agreement and delivered this Agreement to Lender at Lender's place of business in Princeton, New Jersey as of the date first above written.

 

AMERICAN GAMING & ELECTRONICS, INC., a Nevada corporation 

 

 

 

By:    /s/ Anthony R. Tomasello                               

Name:   Anthony R. Tomasello

Title:     President and CEO

 

 

NORTH MILL CAPITAL LLC,

a Delaware limited liability company

 

 

 

By:    /s/ Beatriz Hernandez                                      

Name:   Beatriz Hernandez

Title:     Executive Vice President

 

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- 24 -ex_101134.htm

Exhibit 10.2

 

CORPORATE GUARANTY

 

THIS CORPORATE GUARANTY (this "Guaranty"), dated as of November 22, 2017, is made by AG&E HOLDINGS INC., an Illinois corporation ("Guarantor"), with an office at 223 Pratt Street, Hammonton, New Jersey 08037 in favor of NORTH MILL CAPITAL LLC, a Delaware limited liability company ("Lender"), with an office at 821 Alexander Road, Suite 130, Princeton, New Jersey 08540.

 

WHEREAS, AMERICAN GAMING & ELECTRONICS, INC., a Nevada corporation ("Borrower"), is now and may in the future be indebted to Lender for loans and advances and other financial accommodations made or to be made by Lender to or on behalf of Borrower, and

 

WHEREAS, to induce Lender to make and/or to continue to make loans and other financial accommodations to or on behalf of Borrower, Guarantor has agreed to execute and deliver a guaranty of all present and future liabilities of Borrower to Lender.

 

NOW, THEREFORE, in consideration of the foregoing premises to induce Lender to make loans, advances and other financial accommodations to or on behalf of Borrower, and with full knowledge that said loans, advances and other financial accommodations would not be issued without this Guaranty, Guarantor agrees as follows:

 

1.     The term "Liability of Borrower" shall include all obligations and liabilities, direct or indirect, absolute or contingent, joint and several, now or hereafter existing, due or to become due of Borrower to, or held or to be held by Lender for its own account or as agent for others, whether created directly or acquired by assignment or otherwise, including, without limitation, all principal of and interest (including without limitation any post-petition interest on all obligations at the rate set forth in the appropriate loan documents, accruing whether or not granted or permitted in any bankruptcy or similar insolvency proceeding) and fees and all costs and expenses, including attorney's fees, on all present and future liabilities and indebtedness of Borrower to Lender, and further including without limitation the obligation and liabilities arising under that certain Loan and Security Agreement dated as of even date hereof, between Borrower and Lender (as amended, modified, supplemented, substituted, extended or renewed from time to time, the "Loan Agreement"), whether or not the same involve modifications to interest rates or other payment terms of such indebtedness, obligations or liabilities.

 

2.     Guarantor hereby guarantees the full, prompt and unconditional payment when due of each and every Liability of Borrower to Lender, now existing or hereafter incurred, whether matured or unmatured, and the full, prompt, and unconditional performance of every term and condition of any transaction to be kept and performed by Borrower to Lender. This Guaranty is a primary obligation of Guarantor and shall be a continuing inexhaustible Guaranty without limitation as to the amount or duration and may not be revoked except by notice (the "Notice") in writing to Lender received at least thirty (30) days prior to the date set for such revocation; provided, however, no Notice shall affect the liability under this Guaranty for any such Liability of Borrower arising prior to the date set for revocation whether made before or after the Notice.

 

3.     Guarantor hereby represents and warrants the following:

 

(A)     Guarantor is a corporation duly incorporated, organized, validly existing and in good standing] under the laws of the State of Illinois.

 

(B)     Guarantor has the power to execute, deliver and carry out the terms and provisions of this Guaranty. This Guaranty has been duly executed and delivered by Guarantor and constitutes Guarantor's binding, valid and enforceable obligation, enforceable in accordance with its terms, except as enforcement thereof may be limited, modified or prevented by any law relating to bankruptcy, insolvency or the like.

 

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(C)     Guarantor is not in default under any indenture, mortgage, deed of trust or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets may be bound. The execution and delivery of this Guaranty, the consummation of the transactions herein contemplated and the compliance with the provisions hereof will not violate any law or regulation, or any order or decree of any court or governmental instrumentality, will not conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, agreement or other instrument to which Guarantor is a party or by which Guarantor may be bound, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property of Guarantor thereunder.

 

(D)     Guarantor's most recent financial statements furnished to Lender accurately represent Guarantor's financial condition as of the date thereof, and there has been no material adverse change in such condition from the date of said financial statements to the date hereof.

 

(E)     Guarantor has relied upon Guarantor's own due diligence in making Guarantor's own independent evaluation and appraisal of Borrower, Borrower's business affairs and financial condition including the Liability of Borrower to Lender; Guarantor will continue to be responsible for making Guarantor's own independent appraisal of such matters; and Guarantor has not relied upon and will not hereafter rely upon Lender for information regarding Borrower, any Collateral (as defined in the Loan Agreement) or the Liability of Borrower to Lender.

 

4.     Without incurring responsibility to Guarantor and without impairing or releasing Guarantor's obligation hereunder, Lender may at any time and from time to time, without the consent of or notice to Guarantor, upon any terms or conditions:

 

(A)     Change the manner, place or terms of payment (including changes to interest rates, fees and charges) and/or change or extend from time to time the time for payment or renew or alter the Liability of Borrower or any security therefor, and this Guaranty shall apply to the Liability of Borrower as so changed, extended, renewed or altered;

 

(B)     Sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged, mortgaged or in which a lien is given to secure the Liability of Borrower or the indebtedness of any of the Obligors, as such term is defined below, to Lender;

 

(C)     Exercise or refrain from exercising any rights against Borrower or any surety, endorser or guarantor (including the Guarantor) (collectively, the "Obligors") or against any security, or otherwise act or refrain from acting;

 

(D)     Release, settle or compromise any Liability of Borrower or any obligation of any Obligor, dispose of any security therefor, with or without consideration, or any liability incurred directly or indirectly in respect thereof or hereof;

 

(E)     Apply any sums by whomsoever paid or howsoever realized to any Liability of Borrower; and

 

(F)     Take or refrain from taking any or all actions against Borrower, any Obligor, or any of the security, whether similar or dissimilar to the foregoing.

 

5.     (A)     No invalidity, irregularity or unenforceability of all or any part of the Liability of Borrower, failure to perfect on or the impairment or loss of any security therefor, whether caused by any actions or inactions of Lender, or otherwise, shall affect, impair or be a defense to this Guaranty.

 

(B)     Guarantor hereby waives any right of subrogation to any security.

 

(C)     Guarantor hereby waives any claim, right or remedy Guarantor may now have or hereafter acquire against Borrower that arises hereunder and/or as a result of Guarantor's performance hereunder including, without limitation, any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Borrower or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.

 

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6.     Upon an Event of Default, as defined in the Loan Agreement, under the Liability of Borrower, Lender may, without notice to Borrower declare the Liability of Borrower immediately due and payable by Guarantor. If Lender refers this Guaranty to an attorney for collection, Guarantor shall pay Lender any and all reasonable attorneys' fees and other costs and expenses incurred by Lender in enforcing Lender's rights hereunder.

 

7.     (A)     In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Lender by law, Lender shall have, with respect to Guarantor's indebtedness to Lender under this Guaranty and to the extent permitted by law, a contractual possessory security interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges and transfers to Lender all of Guarantor's right, title and interest in and to, all deposits, moneys, securities, and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding however all IRA, Keogh and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor. No security interest or right of setoff shall be deemed to have been waived by any act or condition on the part of Lender or by any neglect to exercise such right of setoff or to enforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lender.

 

(B)     In the event that for any reason whatsoever Borrower is now or shall hereafter become indebted to Guarantor, Guarantor agrees that the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to lien, time of payment and in all respects to all sums, including principal and interest and other amounts, at any time owing on the Liability of Borrower to Lender, and Guarantor shall not be entitled to enforce or receive payment thereof until the Liability of Borrower to Lender is paid in full, whether or not Borrower becomes insolvent. In the event of insolvency and consequent liquidation of the assets of Borrower through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be applied first by Lender to the Liability of Borrower to Lender. Guarantor does hereby assign to Lender all claims which Guarantor may have or acquire against Borrower or against any assignees or trustee in bankruptcy of Borrower, provided, however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Liability of Borrower to Lender. 

 

(C)     If a claim is ever made upon Lender for repayment or recovery of any amount or amounts received by Lender in payment or on account of any of the Liability of Borrower and Lender repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over Lender or any of its property, or (b) any settlement or compromise of any such claim effected by Lender with any such claimant (including Borrower), then, and in such event, Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon it, notwithstanding any revocation hereof or the cancellation of any instrument evidencing any Liability of Borrower, and Guarantor shall be liable to Lender under this Guaranty for the amount so repaid or recovered to the same extent as if such amount had never originally been received by Lender.

 

(D)     This Guaranty shall remain in full force and effect, and shall be automatically reinstated, without any further action on the part of the Lender, if Lender is required, in any bankruptcy, insolvency or other proceeding involving Borrower, to return or rescind any payment made to, or value received by, Lender from or for the account of Borrower. This paragraph shall remain in full force and effect notwithstanding any revocation or termination of this Guaranty or release by Lender of Guarantor.

 

(E)     Settlement of any claim by Lender against Borrower or any other Obligor, whether in any proceedings or not, and whether voluntary or involuntary, shall not reduce the amount due under this Guaranty except to the extent of any amount actually received by Lender under any such settlement that is applied to the Liability of Borrower.

 

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(F)     All rights, powers and remedies of Lender hereunder and under any agreement(s) between Borrower or any other Obligor and Lender, now, or at any time hereafter in force, shall be cumulative and not alternative, and shall be in addition to all rights, powers and remedies given to Lender by law or at equity.

 

(G)     No delay on the part of Lender in exercising any of its options, powers or rights or partial or single exercise thereof shall constitute a waiver thereof. No waiver of any of Lender's rights hereunder and no modification or amendment of this Guaranty shall be deemed to be made by Lender unless the same shall be in writing, executed on behalf of Lender by a duly authorized officer, and each such waiver, if any, shall apply only with respect to the specific instance involved, and shall in no way impair the rights of Lender or the obligations of Guarantor to Lender in any other respect at any other time.

 

(H)     Guarantor hereby authorizes Lender, in its sole discretion, to disclose any financial or other information about Guarantor to any present, future or prospective participant or successor in interest in any loan, Advance or other financial accommodation to Borrower from the Lender, or any regulatory body or agency having jurisdiction over Lender.

 

(I)     Guarantor shall indemnify, defend and hold Lender and any member, officer, director, investor, bank group member, official, agent, employee and attorney of Lender, and their respective heirs, successors and assigns (collectively, the "Indemnified Parties"), harmless from any claim, cause of action, demand, or other matter that is brought or threatened against any Indemnified Party by Borrower, or by any third party including, without limitation, any receiver, trustee, or other person appointed in any bankruptcy, insolvency, or other proceeding involving Borrower, and from all costs and expenses (including, without limitation, attorney's fees and expenses) relating to or arising out of Lender's relationship with Borrower (each of which may be defended, compromised, settled, or pursued with counsel of Lender's selection) but at Guarantor's risk and expense. This paragraph shall remain in full force and effect notwithstanding any termination of this Guaranty or release by Lender of Guarantor.

 

(J)     Guarantor's obligation to pay and perform in accordance with the terms of this Guaranty, any remedy for the enforcement thereof and/or the amount of the Liability of Borrower shall not be impaired, modified, changed, stayed, released or limited in any manner whatsoever by any impairment, modification, change, discharge, release, limitation or stay of the Liability of Borrower or the obligations of any of the Obligors or any Obligor's estate in bankruptcy or any remedy for the enforcement thereof, resulting from the operation of any present or future provision of the federal Bankruptcy Code or other statute, state or federal, or from the decision of any court interpreting any of the same, and Guarantor shall be obligated under this Guaranty and the amount of the Liability of Borrower shall for the purposes of this Guaranty be determined as if no such impairment, stay, modification, change, discharge, release or limitation had occurred.

 

(K)     Guarantor waives notice of acceptance of this Guaranty and notice of any Liability of Borrower to which notice may apply and waives notice of default, non-payment, partial payment, presentment, demand, protest, notice of protest or dishonor and all other notices to which Guarantor might otherwise be entitled or which might be required by law to be given to Guarantor by Lender.

 

(L)     This Guaranty shall be binding upon Guarantor and its successors and shall inure to the benefit of Lender, its successors and assigns. This Guaranty shall be construed in accordance with the laws of the State of New Jersey, without regard to principles of conflicts of law.

 

(M)     Guarantor hereby irrevocably consents to the non-exclusive jurisdiction of the courts of the State of New Jersey or any federal court in such State in connection with any action or proceeding arising out of or related to this Guaranty. Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any right Guarantor may have to assert the doctrine of "forum non conveniens" or to object to venue to the extent any proceeding is brought in accordance with this paragraph. In any such litigation, Guarantor waives personal service of any summons, complaint or other process and agrees that service may be made by certified or registered mail to Guarantor, at the address provided herein. Guarantor agrees that any action brought by Guarantor against Lender shall be commenced and maintained only in a court in the federal judicial district or county in which Lender has its principal place of business in New Jersey. Nothing in this Guaranty restricts the right of Lender to bring legal actions or other proceedings in any other competent jurisdiction.

 

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(N)     Nothing herein shall in any way be deemed to limit the ability of Lender to serve any such writs, process or summonses in any other manner permitted by applicable law or to obtain jurisdiction over Guarantor in such other jurisdictions, and in such manner as may be permitted by applicable law. 

 

(O)     Guarantor agrees to furnish to Lender within ninety (90) days of the end of each year a consolidated financial statement in form satisfactory to Lender and a copy of Guarantor's federal and state income tax returns (including all schedules thereto) within thirty (30) days of filing same.

 

(P)     If Guarantor consists of more than one person, the liabilities and obligations of each such person shall be joint and several and the word "Guarantor" means each of them, any of them and/or all of them.

 

(Q)     As used herein, the singular shall include the plural, the plural shall include the singular and the use of the masculine, feminine or neuter gender shall include all genders.

 

(R)     GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION UNDER OR RELATING TO THIS GUARANTY AND TO THE LIABILITY OF BORROWER TO Lender.

 

	
			 

				
			AG&E HOLDINGS, INC.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	 	 	 	 
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			 /s/ Anthony R. Tomasello 

				
			 

			
	
			 

				
			 

				
			 Name         Anthony R. Tomasello 

				
			 

			
	
			 

				
			 

				
			 Title:          President and CEO

				
			 

			

 

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