Document:

Exhibit 10.10

 

AMENDMENT
NO. 1 TO

REGISTRATION
RIGHTS AGREEMENT

 

This AMENDMENT NO. 1 TO REGISTRATION RIGHTS
AGREEMENT (the “Amendment”) is entered into as of November       ,
2005 (the “Amendment Date”), by and among DynTek, Inc., a Delaware
corporation (the “Company”) and the investors set forth on Schedule 1 hereto
(the “Amending Purchasers”).  Capitalized
terms used herein but not otherwise defined herein shall have the meaning
ascribed to such terms in the Registration Rights Agreement (as defined in the
Recitals below).

 

RECITALS

 

A.            WHEREAS,
the Company entered into that certain Registration Rights Agreement dated as of
October 15, 2004, by and among the Company and the purchasers set forth on
Schedule 1 thereto (the “Original Purchasers”) (the “Agreement”);

 

B.            WHEREAS,
Section 10 of the Registration Rights Agreement permits the amendment of
such Agreement upon the consent in writing by the Company and each Original Purchaser;

 

C.            WHEREAS,
to induce the Amending Purchasers to amend their certain 9% Senior Subordinated
Convertible Notes, each dated as of October 15, 2004, sold and issued to
the respective Amending Purchasers thereof (each an “Original Note” and
collectively, the “Original Notes”), the Company has agreed, contemporaneously
with the issuance to each such Amending Purchaser of that certain Amended and
Restated 9% Senior Subordinated Convertible Note, each dated as of an even date
herewith (each an “Amended Note” and collectively, the “Amended Notes”), to
provide to the Amending Purchasers certain registration rights, with respect to
the Additional Note Shares (as defined in the Amended Notes), under the
Securities Act of 1933, as amended (the “Securities Act”), and applicable state
securities laws;

 

D.            WHEREAS,
to further induce the Amending Purchasers to enter into the Amended Notes, the
Company has agreed to amend and restate those certain Warrants, each dated as
of October 15, 2004, sold and issued to each respective Amending Purchaser
thereof (each an “Original Warrant” and collectively, the “Original Warrants”)
to reduce the exercise price and increase the number of shares exercisable
thereunder (each an “Amended Warrant” and collectively, the “Amended Warrants”);

 

E.             WHEREAS,
in connection with the issuance of the Amended Warrants, the Company has agreed
to provide to the Amending Purchasers certain registration rights, with respect
to the Additional Warrant Shares (as defined in the Amended Warrants), under
the Securities Act, and applicable state securities laws;

 

F.             WHEREAS,
the Amending Purchasers and the Company desire to further amend the
Registration Rights Agreement as more particularly set forth in this Amendment
to provide for the rights of registration with respect to the Additional Note
Shares and Additional Warrant Shares, respectively.

 

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the
mutual covenants hereinafter set forth and for good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereby agree as follows:

 

1.              Definitions.

 

(a)          “Additional
Registrable Securities” means (i) the Additional Note Shares and
Additional Warrant Shares; (ii) securities issued or issuable upon any
stock split, stock dividend, recapitalization or similar event with respect to
such shares; and (iii) any other security issued as a dividend or other
distribution with respect to, in exchange for, or in replacement of, the
securities referred to in the preceding clauses (i) and (ii).

 

(b)          “Holder
or Holders” means a holder or holders of Registrable Securities and/or Additional
Registrable Securities.

 

(c)          “Additional
Registration Statement” means a registration statement or registration
statements of the Company filed under the Securities Act covering Additional
Registrable Securities.

 

(c)          The
definitions of Registration Statement, Registrable Securities, Purchaser and
Notes in the Agreement are, for purposes of Sections 4 through 12 of the
Agreement, hereby amended to include the Additional Registration Statement, Additional
Registrable Securities, the Amending Purchasers and the Amended Notes,
respectively.

 

2.              Piggyback Registration.

 

(a)            If the Company proposes to register
(including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its stock under the Securities Act
in connection with the public offering of such securities solely for cash
(other than a registration relating solely to the sale of securities to participants
in a Company stock plan, a transaction covered by Rule 145 under the
Securities Act or a registration relating solely to employee benefit plans),
the Company shall, at such time, promptly give each Holder written notice of
such registration.  Upon the written
request of each Holder given within ten (10) business days after mailing
of such notice by the Company in accordance with Section 12 of the
Agreement, the Company shall, subject to the provisions of Section 2(b) herein,
use its best efforts to cause to be registered under the Securities Act all of
the Additional Registrable Securities that each such Holder has requested to be
registered.

 

(b)            For purposes of this Section 2,
if the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise the
Holder as a part of the written notice given pursuant to Section 2(a) above.  In such event, the right of the Holder to
registration pursuant to this Section 2 shall be conditioned upon such
Holder’s participation in such underwriting and the inclusion of Holder’s
Additional Registrable Securities in such underwriting to the extent provided
herein.  The Holder proposing to
distribute its securities through such underwriting shall (together with the Company
and the other Holders of securities of

 

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the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company.   Notwithstanding any other provision
of this Section 2, if the representative of the underwriters advises the Company
in writing that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the limitations set
forth below) exclude all Additional Registrable Securities from, or limit the
number of Additional Registrable Securities to be included in, the registration
and underwriting.  The Company shall so
advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting shall be allocated first to the Company for securities being sold
for its own account and thereafter to the Holders of Additional Registrable
Securities, pro rata in accordance with the number of Additional Registrable
Securities beneficially owned by each such Holder.  If any Holder does not agree to the terms of
any such underwriting, such Holder shall be excluded therefrom by written
notice from the Company or the underwriter. 
Any Additional Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.

 

3.              Mandatory
Registration.

 

(a)           If at anytime on or
after December 15, 2005, any Additional Registrable Securities shall not
have been registered by the Company pursuant to Section 2 hereof, then the
Holders of at least a majority of the Additional Registrable Securities
(assuming conversion of the Amended Notes and exercise of the Amended Warrants)
shall have the right by delivery of notice to the Company, to request that the
Company effect a registration on Form S-3 covering the resale of all of
the Additional Registrable Securities, in an amount sufficient to cover the
resale of all the Additional Registrable Securities, issuable upon conversion
of the Amended Notes and exercise of the Amended Warrants.  The date on which the Company receives such
notice is referred to herein as the “Demand Date.”  In the event that Form S-3 is
unavailable and/or inappropriate for such a registration of all the Additional Registrable
Securities, the Company shall use such other form or forms as are available and
appropriate for such a registration.  The
Company shall use its commercially reasonable efforts to cause such Additional Registration
Statement to be filed under the Securities Act as promptly as practicable after
receipt of notice of such demand, but in any event prior to 30 days following
the Demand Date and to cause such Additional Registration Statement to be
declared effective under the Securities Act as promptly as practicable, but in
any event prior to 90 days following the Demand Date (the “Demand Effective
Date”); provided that, if (1) the Additional Registration Statement
is not declared effective by the Demand Effective Date, (2) the Additional
Registration Statement required to be filed by the Company pursuant to this Section 3
shall cease to be available for use by any Holder of the Amended Note which is
named therein as a selling stockholder for any reason (including, without
limitation, by reason of a stop order, a material misstatement or omission in
such Additional Registration Statement or the information contained in such Additional
Registration Statement having become outdated), or (3) the Company fails,
refuses or is otherwise unable timely to issue, the Note Shares and/or Warrant
Shares upon conversion of the Amended Notes or upon exercise of the Amended
Warrants in accordance with the terms of thereof, respectively, or stock certificates
therefor, then the Company shall pay to each Purchaser an amount equal to one
percent (1%) per 30-day period of the purchase price paid for the Amended Notes
purchased by such Amending Purchaser.  Thereafter,
for every 30 days that pass during which any of the events described in clauses
(1), (2) and (3) above occurs and is continuing (the “Blackout Period”),
the Company shall pay to each Amending Purchaser an additional amount equal to
one percent (1%) of the purchase price paid for the Amended Notes purchased by
such Amending Purchaser.  Each such
payment shall be due within five days of the end of each calendar month of the

 

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Blackout
Period until the termination of the Blackout Period and within five (5) days
after such termination.  Such payments
shall be in partial compensation to the Amending Purchaser, and shall not
constitute the Purchaser’s exclusive remedy for such events. The Blackout
Period shall terminate upon (x) the effectiveness of the Additional Registration
Statement in the case of clauses (1) and (2) above, and (z) delivery
of such shares or certificates in the case of clause (3) above.

 

(b)           The Company shall
use its best efforts to keep each Additional Registration Statement effective
(pursuant to Rule 415, if available) at all times until such date as is
the earlier of (i) the date on which all of the Additional Registrable
Securities have been sold and (ii) the date on which the Additional Registrable
Securities (in the opinion of counsel to each Purchaser and reasonably
acceptable to legal counsel for the Company) may be immediately sold without
restriction (including without limitation as to volume restrictions by each
holder thereof) without registration under the Securities Act (the “New
Registration Period”).

 

(c)           If the Additional
Registrable Securities are registered for sale under the Securities Act, the
Amending Purchasers shall cease any distribution of such shares under the Additional
Registration Statement not more than once in any 12-month period, for up to 30
days, upon the request of the Company if: (x) such distribution would require
the public disclosure of material non-public information concerning any
transaction or negotiations involving the Company or any of its affiliates
that, in the good faith judgment of the Company’s Board of Directors, would
materially interfere with such transaction or negotiations, (y) such
distribution would otherwise require premature disclosure of information that,
in the good faith judgment of the Company’s Board of Directors, would adversely
affect or otherwise be detrimental to the Company or (z) the Company proposes
to file a registration statement under the Securities Act for the offering and
sale of securities for its own account in an underwritten offering and the
managing underwriter therefor shall advise the Company in writing that in its
opinion the continued distribution of the Additional Registrable Securities
would adversely affect the offering of the securities proposed to be registered
for the account of the Company.  The
Company shall promptly notify each Amending Purchaser at such time as (i) such
transactions or negotiations have been otherwise publicly disclosed or
terminated, or (ii) such non-public information has been publicly
disclosed or counsel to the Company has determined that such disclosure is not
required due to subsequent events.

 

(d)           The Company shall
permit a single firm of counsel designated by the Amending Purchasers to review
such Additional Registration Statement with respect to the Additional
Registrable Securities only, and all amendments and supplements thereto
(collectively, the “Registration Documents”) a reasonable period of time prior
to their filing with the SEC, and not file (or send) any Registration Documents
in a form to which such counsel reasonably and promptly objects.  The sections of such Additional Registration
Statement covering information with respect to the Amending Purchasers, the
Amending Purchaser’s beneficial ownership of securities of the Company or the
Amending Purchasers intended method of disposition of Additional Registrable
Securities shall conform to the information provided to the Company by each of
the Amending Purchasers.

 

4.              Obligations of
the Company.  In connection with the
registration of the Additional Registrable Securities, the Company shall do
each of the following:

 

(a)            Prepare and file
with the SEC the Additional Registration Statement required by Sections 3 of
this Amendment, as applicable, and such amendments (including post-effective
amendments) and supplements to the Additional Registration Statement and the
prospectus used in

 

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connection
with the Additional Registration Statement, as may be necessary to keep the Additional
Registration Statement effective at all times during the New Registration
Period, and, during the New Registration Period, to comply with the provisions
of the Securities Act with respect to the disposition of all of the Additional Registrable
Securities until such time as all of such Additional Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Additional Registration Statement;

 

(b)            The Company shall
promptly furnish, after such Additional Registration Statement required by
Sections 3 of this Amendment are prepared, filed with the SEC, publicly
disseminated and distributed and received by the Company, to each Amending
Purchaser and its legal counsel, a copy, by facsimile or email or otherwise, of
any such Additional Registration Statement, each preliminary prospectus, each
final prospectus, and all amendments and supplements thereto and such other
documents as each Amending Purchaser may reasonably request in order to
facilitate the disposition of its Additional Registrable Securities;

 

(c)            Use commercially
reasonable efforts to (i) register and qualify the Additional Registrable
Securities covered by the Additional Registration Statement under such other
securities or blue sky laws, if applicable, of such jurisdictions as the
Purchaser may reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the New Registration
Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the New
Registration Period and (iv) take all other actions necessary or advisable
to qualify the Additional Registrable Securities for sale in such
jurisdictions, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subsection (d) be
obligated to be so qualified, or to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction;

 

(d)            List such
securities on The Nasdaq National Market, or, if the Company’s securities are
not then listed on such market, then on the OTC Electronic Bulletin Board (the “OTC
BB”), and all the other national securities exchanges on which any securities
of the Company are then listed, and file any filings required by The Nasdaq
National Market or OTC BB, as applicable, or such other securities exchanges;

 

(e)            Notify by facsimile
or email each Amending Purchaser (i) when or if the prospectus or any
prospectus supplement or post-effective amendment has been filed with the SEC,
and, with respect to any Additional Registration Statement or any
post-effective amendment, when the same has been declared effective by the SEC,
(ii) of any request by the SEC for amendments or supplements to the Additional
Registration Statement or the prospectus or for additional information, (iii) of
the issuance by the SEC of any stop order suspending the effectiveness of such Additional
Registration Statement or the initiation of any proceedings for that purpose, (iv) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of the Additional Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (v) of the happening of any event as a result of which the
prospectus included in such Additional Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;

 

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(f)             If any fact
contemplated by clause (v) of paragraph (e), above, shall exist, promptly
prepare a supplement or post-effective amendment to such Additional Registration
Statement or the related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchaser of the Additional Registrable Securities, the prospectus will
not contain an untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading;

 

(g)            If the Company has
consented to an underwritten offering and such offering is underwritten, at the
request of any Amending Purchaser, to furnish on the effective date of the
applicable Additional Registration Statement and on the date that Additional
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) an opinion dated such date of counsel representing
the Company for the purposes of such registration, addressed to the underwriters
and to such Amending Purchaser, stating that such Additional Registration Statement
has become effective under the Securities Act and that (A) to the best
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act and (B) the Additional Registration
Statement, the related prospectus and each amendment or supplement thereof
comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial data contained therein) and (ii) a
letter dated such date from the Company’s independent public accountants
addressed to the underwriters and to such Amending Purchaser, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the Company
included in the Additional Registration Statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act, and such
letter shall additionally cover such other financial matters (including
information as to the period ending no more than five business days prior to
the date of such letter) with respect to such registration as such underwriters
may reasonably request;

 

(h)            Cooperate with the
Amending Purchasers to facilitate the timely preparation and delivery of
certificates for the Additional Registrable Securities to be offered pursuant
to the Additional Registration Statement and to enable such certificates for
the Additional Registrable Securities to be in such denominations or amounts,
as the case may be, as the Amending Purchaser may reasonably request, and
registered in such names as the Amending Purchasers may request; and, within
three business days after a Additional Registration Statement which includes
Additional Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Additional Registrable Securities (with
copies to each Amending Purchaser) an appropriate instruction and opinion of
such counsel, satisfactory to the Company, and the Amending Purchaser and its
legal counsel;

 

(i)             Enter into
customary agreements (including, in the case of an underwritten offering,
underwriting agreements in customary form, and including provisions with
respect to indemnification and contribution in customary form and consistent
with the provisions relating to indemnification and contribution contained
herein) and take all other customary and appropriate actions in order to
expedite or facilitate the disposition of such Additional Registrable
Securities and in connection therewith:

 

6

 

(i) make such representations and warranties to each Amending Purchaser
and the underwriters, if any, in form, substance and scope as are customarily
made by issuers to underwriters in similar underwritten offerings;

 

(ii) to the extent requested and customary for the relevant
transaction, enter into a securities sales agreement with any Amending
Purchaser and such representative of such Amending Purchaser as such Amending
Purchaser shall select relating to the registration and providing for, among
other things, the appointment of such representative as agent for such Amending
Purchaser for the purpose of soliciting purchases of Additional Registrable
Securities, which agreement shall be customary in form, substance and scope and
shall contain customary representations, warranties and covenants; and

 

(iii) deliver such customary documents and certificates as may be
reasonably requested by any Amending Purchaser whose Additional Registrable
Securities are being sold or by the managing underwriters, if any.

 

(j)             The Company shall
hold in confidence and not make any disclosure of information concerning any Amending
Purchaser provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws and/or
the requests of any self-regulatory organizations, (ii) the disclosure of
such information is necessary to avoid or correct a misstatement or omission in
any Additional Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement.  The Company agrees that it shall, upon
learning that disclosure of such information concerning any Amending Purchaser
is sought in or by a court or governmental body of competent jurisdiction, give
prompt notice to such Purchaser prior to making such disclosure, and allow such
Amending Purchaser, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

 

5.              The terms and
provisions of this Amendment are binding only on the Amending Purchasers, and,
except as specifically amended pursuant to the terms hereof, the terms and
provisions of the Registration Rights Agreement shall remain in full force and
effect.

 

6.              This Amendment may
be executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts together shall constitute
one instrument.

 

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IN WITNESS
WHEREOF, the undersigned have executed this Amendment No. 1 to Registration
Rights Agreement as of the date first written above.

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  DynTek, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMENDING PURCHASERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [                      ]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:Exhibit 10.1

 

WAIVER AND FIFTH
AMENDMENT

TO LOAN AND SECURITY AGREEMENT

 

THIS WAIVER AND FIFTH AMENDMENT (this “Amendment”) is made as of the
10th day of November, 2005 to the Loan and Security Agreement dated as of June
30, 2003 (as amended or otherwise modified from time to time, the “Loan Agreement”; unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to them in the Loan Agreement) by and among Wells-Gardner Electronics
Corporation, an Illinois corporation (“WGE”), American Gaming &
Electronics, Inc., a Nevada corporation (“AGE”) and LaSalle Bank National
Association, a national banking association (“Lender”).

 

WHEREAS, Borrowers have breached the EBITDA Covenant set forth in
Section 14(e) of the Loan Agreement for the period ending
September 30, 2005, which breach has caused an Event of Default under subsection 15(b)
of the Loan Agreement (the “Existing Default”);

 

WHEREAS, Borrowers have requested that Lender waive the Existing
Default and amend the Loan Agreement in certain respects;

 

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

 

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

 

1.             Waiver.  Subject to the conditions set forth in Section
4 below, Lender hereby waives the Existing Default.  Lender’s agreement to waive the Existing
Default is a limited waiver and shall not constitute a waiver of any other
Events of Default now existing or hereafter arising, or any future breach of,
other deviation from or (other than the amendment set forth herein)
modification of the Loan Agreement or any of the Other Agreements.

 

2.             Amendment.  Borrower and Lender agree to amend the Loan
Agreement as follows:

 

(a)           Section 1 of
the Loan Agreement is hereby amended to add the following definitions in
alphabetical order:

 

“Fifth Amendment” shall mean that certain Waiver and Fifth
Amendment to Loan and Security Agreement, dated as of November 10, 2005, among
Borrowers and Lender.

 

“Fifth Amendment Effective Date” shall mean November 10,
2005.

 

“Hedging Agreement” shall mean any interest rate, currency or
commodity swap agreement, cap agreement or collar agreement, and any other
agreement or

 

 

arrangement
designed to protect a Person against fluctuations in interest rate, currency
exchange rates or commodity prices.

 

“Hedging Obligation” shall mean, with respect to any Person,
any liability of such person under any Hedging Agreement.  The amount of any Person’s obligations in
respect of any Hedging Obligation shall be deemed to be the incremental
obligations that would be reflected in the financial statements of such Person
in accordance with generally accepted accounting principles.

 

(b)           The definition of “EBITDA” set forth in Section 1 of the Loan Agreement
is hereby amended and restated in its entirety, as follows:

 

“EBITDA”
shall mean, with respect to any period, Borrowers’ and their Subsidiaries’ net
income after taxes for such period (excluding any after-tax gains or losses on
the sale of assets (other than the sale of Inventory in the ordinary course of
business) and excluding other after-tax extraordinary gains or losses) plus
interest expense, income tax expense, depreciation and amortization for such
period, plus or minus any other non-cash charges or gains which
have been subtracted or added in calculating net income after taxes for such period,
plus to the extent arising during the period of calculation, a charge
not to exceed $50,000 for the amendment fee paid on the Fifth Amendment
Effective Date, plus a charge equal to legal fees paid in connection
with the execution of the Fifth Amendment, plus a charge equal to fees
incurred in connection with any audit in excess of one audit undertaken during
the period from July 1, 2005 through June 30, 2006 under Section 12(d), plus
a charge equal to consulting fees incurred prior to June 30, 2006, all on a
consolidated basis.

 

(c)           The definition of “Liabilities” in Section 1 of the Loan Agreement is
hereby amended and restated in its entirety, as follows:

 

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

 

(d)           Subsection 4(a)
of the Loan Agreement is hereby amended and restated in its entirety as
follows:

 

2

 

(a)           Interest Rate.

 

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

 

(i)            One percent (1.00%) per annum in
excess of the Prime Rate in effect from time to time, payable on the first
Business Day of each month in arrears. 
Said rate of interest shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate effective on the effective date of
each such change in the Prime Rate.

 

(ii)           Three and one-half percent (3.50%) in
excess of the LIBOR Rate for the applicable Interest Period, such rate to
remain fixed for such Interest Period.  “Interest Period” shall mean any continuous period of thirty
(30), sixty (60) or ninety (90) days, as selected from time to time by the
Borrower requesting such LIBOR Rate Loan by irrevocable notice (in writing, by
telecopy, telex, electronic mail, or cable) given to Lender not less than three
(3) Business Days prior to the first day of each respective Interest Period;
provided, that:  (A) each such period occurring
after such initial period shall commence on the day on which the immediately
preceding period expires; (B) the final Interest Period shall be such that its
expiration occurs on or before the end of the Original Term or any Renewal
Term; and (C) if for any reason a Borrower shall fail to timely select a
period, then such Loans shall continue as, or revert to, Prime Rate Loans.  Interest shall be payable on the last
Business Day of such Interest Period.

 

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

 

(e)           Subsection 9(a)
of the Loan Agreement is hereby amended and restated in its entirety, as
follows:

 

9(a)         Daily Reports.

 

Borrowers shall
deliver to Lender consolidated and consolidating executed loan reports and
certificates in Lender’s then current form on each day that a Borrower requests
Loans hereunder, but not less often than weekly (on Monday of each week), such
reports to be accompanied by copies of each Borrower’s sales journal, cash
receipts journal and credit memo journal for the relevant period.  Such reports shall reflect the activity of
each Borrower with respect to Accounts for the immediately preceding days or
week, as applicable, and shall be in a form and with such specificity as is
reasonably satisfactory to Lender and shall contain such additional information
concerning Accounts and

 

3

 

Inventory as may
be reasonably requested by Lender including, without limitation, but only if
specifically requested by Lender, copies of all invoices prepared in connection
with such Accounts.

 

(f)            Section 12
of the Loan Agreement is hereby amended to add a new subsection 12(k), as
follows:

 

(k)                                  Interest Rate Protection.

 

Borrower shall maintain
at all times an interest rate protection mechanism on an ISDA standard form
with Lender or Affiliates thereof to hedge the interest rates with respect to
not less than $4,000,000 of the outstanding principal amount of the LIBOR Rate
Loans, in form and substance reasonably satisfactory to Lender.

 

(g)           Subsection 14(c)
of the Loan Agreement is hereby amended and restated in its entirety to read as
follows:

 

(c)           Interest Coverage

 

Borrowers shall not
permit the ratio of (i) EBITDA to (ii) schedule payments of interest and fees,
to the extent carried as interest expense on Borrowers’ financial statements,
with respect to indebtedness for borrowed money (including the interest
component payments with respect to capitalized leases) to be less than
1.0:1.0  as of September 30, 2006 and (y)
2.50:1.00 as of the last day of each quarter thereafter, in each case for the
twelve (12) month period ending on such date.

 

(h)           Subsection 14(e)
of the Loan Agreement is hereby amended and restated in its entirety as
follows:

 

(e)           EBITDA

 

Borrower shall not permit
EBITDA to be less than the amounts set forth below for the 3 month periods
ending on the corresponding dates:

 

	
  Date

  	
   

  	
  Amount

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  (260,000

  	
  )

  
	
  March 31, 2006

  	
   

  	
  $

  	
  125,000

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  270,000

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  490,000

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  580,000

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  820,000

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  780,000

  	
   

  

 

4

 

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

 

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

 

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

 

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

 

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

 

(e)           No Event of Default
exists under the Loan Agreement other than the Existing Default.

 

4.             Conditions to
Effectiveness of this Amendment.  The
effectiveness of the terms and provisions of this Amendment shall be subject to
(i) the execution and delivery by Borrowers and Lender of this Amendment and
(ii) payment by Borrowers of a $50,000 waiver and amendment fee to be
automatically deducted by Lender.

 

5.             Additional Event
of Default.  An Event of Default
shall exist if either Borrower fails to deliver to Lender an executed account
assignment agreement and blocked account agreement, each in form and substance
satisfactory to Lender, by 5:00 p.m. Central Standard Time on November 14,
2005.

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

	
   

  	
   

  	
  WELLS-GARDNER
  ELECTRONICS CORPORATION, 

  as a Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMERICAN
  GAMING & ELECTRONICS, INC.,

  as a Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LASALLE
  BANK NATIONAL ASSOICATION,

  as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  	
   

  

 

7

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