Exhibit 10.3

 

FIRST AMENDMENT

TO

NOTE PURCHASE AGREEMENT

dated as of

June 15, 2006

among

DYNTEK, INC.,

DYNTEK SERVICES, INC.

and

THE PURCHASERS NAMED HEREIN

 

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FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT

THIS FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT (this “First Amendment”) dated
as of June 15, 2006, is among DYNTEK, INC., a Delaware corporation (the
“Company”), DYNTEK SERVICES, INC., a Delaware corporation (the “Subsidiary” and,
together with the Company, the “Debtors”), and the undersigned purchasers hereto
(each individually a “Purchaser” and collectively the “Purchasers”).

R E C I T A L S

A.            WHEREAS, the Company and the Purchasers are parties to that
certain Note Purchase Agreement dated as of March 8, 2006 (the “Purchase
Agreement”), pursuant to which the Company issued and sold (x) to the Purchasers
an initial aggregate principal amount of $6,700,000 of its senior secured
promissory notes (the “Senior Notes”) and (y) to Trust A-4 - Lloyd I. Miller
(“Trust A-4”) an initial aggregate principal amount of $3,000,000 of a junior
secured convertible promissory note (the “Original Junior Note”).

B.            WHEREAS, as a condition to the Purchasers’ obligations to enter
into the Purchase Agreement and to extend credit to the Company thereunder, the
Debtors executed and delivered certain Security and Pledge Agreements (the
“Security Agreements” and, collectively referred to herein with the Purchase
Agreement as the “Note Documents”), each dated as of March 8, 2006, by and
between the Debtors and the Purchasers (in respect of the Senior Notes) and by
and between the Debtors and Trust A-4 (in respect of the Original Junior Note)
(the “Junior Security Agreement”), as security for the payment and performance
of all obligations of the Debtors to the Purchasers and to guarantee all of the
obligations of the Debtors under the Purchase Agreement.

C.            WHEREAS, the Company wishes to issue and sell to Trust A-4 an
additional junior secured convertible promissory note in the initial principal
amount of $1,000,000 (the “Additional Junior Note”) pursuant to the same terms
and conditions as provided for the Original Junior Note in the Purchase
Agreement.

D.            WHEREAS, the Company and the Purchasers have agreed that to
satisfy the purchase and sale of the Additional Junior Note, Trust A-4 shall
deliver to the Company an agreed upon amount by wire transfer of immediately
available funds along with the Original Junior Note and the Company (upon
receipt of same) shall issue in exchange thereof a new junior secured
convertible promissory note in the initial principal amount of $1,000,000.

E.             WHEREAS, the Company and Lloyd I. Miller, III (“Miller”) have
agreed that upon a subsequent request of Miller or an affiliate of Miller, the
Company shall issue additional junior secured convertible promissory notes up to
an aggregate initial principal amount of $3,000,000 pursuant to the same terms
and conditions as provided for the Original Junior Note in the Purchase
Agreement.

F.             WHEREAS, in order to satisfy the foregoing, both the Debtors and
the Purchasers have agreed to amend certain provisions of the Purchase Agreement
and the Debtors have also agreed to ratify and affirm all of their respective
obligations under the Note Documents.

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NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

Section 1.               Defined Terms. Each capitalized term used herein but
not otherwise defined herein has the meaning given such term in the Purchase
Agreement. Unless otherwise indicated, all references to Sections in this First
Amendment refer to Sections of the Purchase Agreement.

Section 2.               Amendments to Purchase Agreement.

2.1           Amendments to Introductory Recital

 

(a)           The definition of “Agreement” is hereby amended in its entirety to
read as follows:

“Agreement” means this Note Purchase Agreement, dated as of March 8, 2006,
between the Company and the Purchasers, as amended by the First Amendment, and
as the same may be amended, modified, supplemented or restated from time to time
in accordance herewith.

(b)           The definition of “First Amendment” is hereby inserted to read as
follows:

“First Amendment” means the First Amendment to Note Purchase Agreement, dated as
of June 15, 2006 by and among the Debtors and the Purchasers.

2.2           Further Amendments to Purchase Agreement

 

(a)           Section 1.02 is hereby amended in its entirety to read as follows:

“The Company has authorized the issuance and sale to Miller or an affiliate of
Miller’s, the Company’s Junior Secured Convertible Promissory Notes, due
March 1, 2011 (the “Junior Note Maturity Date”), in the original aggregate
principal amount of up to $7,000,000. The Company shall issue to Trust A-4,
dated as of March 8, 2006, a Junior Secured Convertible Promissory Note, in the
original principal amount of $3,000,000 (the “Original Junior Note”), due on the
Junior Note Maturity Date. The Original Junior Note will be substantially in the
form set forth in Exhibit F hereto. The Company shall issue to Trust A-4, a
subsequent Junior Secured Convertible Promissory Note, dated as of the date of
this First Amendment, a Junior Secured Convertible Promissory Note, in the
original principal amount of $1,000,000 (the “Additional Junior Note”), due on
the Junior Note Maturity Date. The Additional Junior Note will be substantially
in the form set forth in Exhibit G hereto. The Original Junior Note and the
Additional Junior Note shall each be referred to herein as a “Junior Note” and,
collectively with the Senior Notes, referred to as the “Notes,” which term will
also include any notes delivered in exchange or replacement therefor. All
references to a Junior Note in the Note Documents shall be deemed to be

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references to both the Original Junior Note and the Additional Junior Note.

(b)           The second sentence of Section 1.03 is hereby amended in its
entirety to read as follows:

“The consideration to be paid for the Notes will consist of $10,700,000 cash.”

(c)           The column in Schedule I which states the Principal Amount of
Junior Notes to be Purchased is hereby amended to state “$4,000,000” instead of
“$3,000,000.”

Section 3.               Conditions Precedent. This First Amendment shall not
become effective until the date on which each of the following conditions are
satisfied (the “Effective Date”):

(a)           no Event of Defaults nor a breach of any representations and
warranties by the Debtors shall have occurred and be continuing as of the
Effective Date under the Note Documents (including after giving effect to the
terms of this First Amendment);

(b)           the representations and warranties in this First Amendment shall
be true and correct in all material respects;

(c)           the parties shall have received this First Amendment duly and
validly delivered and executed on behalf of the Debtors and the Purchasers;

(d)           Purchasers will have received an opinion of the Company’s counsel,
dated the Effective Date, with respect to legal matters customary for
transactions of this type, in a form reasonably acceptable to Purchasers and
counsel for Purchasers;

(e)           the Company’s representations and warranties contained herein will
be true, complete and correct on and as of the Effective Date, and the President
and Chief Financial Officer of the Company will have certified to such effect to
Purchasers in writing;

(f)            the Company will have performed and complied in all material
respects with all covenants and agreements contained herein required to be
performed or complied with by it prior to or at the Effective Date and the
President and Chief Financial Officer of the Company will have certified to the
Purchasers in writing to such effect and to the further effect that all of the
conditions set forth in this Section 3 have been satisfied;

(g)           all corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all documents incident
thereto will be satisfactory in form and substance to Purchasers and their
counsel, and Purchasers and their counsel will have received all such
counterpart originals or certified or other copies of such documents as they
reasonably may request;

(h)           Purchasers and its counsel will have received copies of the
following documents (i) a certificate of the Secretary of State of Delaware
dated as of a recent date as to the due incorporation and good standing of the
Company, the payment of all excise

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taxes by the Company and listing all documents of the Company on file with said
Secretary, (ii) a certificate of the Secretary of the Company dated the date
hereof certifying:  (A) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of this First Amendment, the issuance, sale
and delivery of the Additional Junior Note, and that all such resolutions are in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this First Amendment; and (B) to the incumbency and
specimen signature of each officer of the Company executing any of this First
Amendment, the Additional Junior Note and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of the Company
as to the incumbency and signature of the officer signing the certificate
referred to in this clause; and (iii) such additional supporting documents and
other information with respect to the operations and affairs of the Company as
the Purchasers or their counsel reasonably may request. All such documents will
be satisfactory in form and substance to the Purchasers and their counsel; and

(i)            the Company shall have issued and delivered the Additional Junior
Note, dated the date hereof in the original principal amount of $1,000,000 to
the address and attention as designated by Miller.

Upon satisfaction of the foregoing conditions and receipt of the Additional
Junior Note by Miller, Trust A-4 shall deliver to the Company $1,000,000 less
the Purchaser’s reasonable estimated expenses to be paid by the Company pursuant
to Section 7.01 of the Purchase Agreement.

Section 4.               Further Additional Issuance of Junior Notes. The
Company and the Purchasers hereby agree, that upon the request of Miller or an
affiliate of Miller, the Company shall issue and sell to Miller or an affiliate
of Miller additional junior secured convertible promissory notes up to an
aggregate original principal amount of $3,000,000 pursuant to the same terms and
conditions as provided for the Junior Note in the Purchase Agreement and the
parties shall thereupon further amend the Purchase Agreement to reflect the
issuance of said additional junior secured convertible promissory note.

Section 5.               Miscellaneous.

5.1           Confirmation. The provisions of the Note Documents, as amended by
this First Amendment, shall remain in full force and effect following the
effectiveness of this First Amendment.

 

5.2           Ratification and Affirmation; Representations and Warranties. The
Debtors each hereby (a) acknowledge the terms of this First Amendment;
(b) ratifies and affirms its obligations under, and acknowledges, renews and
extends its continued liability under, each Note Document to which it is a party
and agrees that each Note Document to which it is a party remains in full force
and effect, except as expressly amended hereby, notwithstanding the amendments
contained herein and (c) represents and warrants to the Purchasers that as of
the date hereof, after giving effect to the terms of this First Amendment: 
(i) all of the representations and warranties contained in each Note Document to
which it is a party are true and correct, unless such representations and
warranties are stated to relate to a specific earlier date, in which

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case, such representations and warranties shall continue to be true and correct
as of such earlier date and (ii) no Event of Default under the Purchase
Agreement nor Default under the Security Agreements has occurred and is
continuing. Without limiting the generality of the foregoing, each Debtor hereby
acknowledges and agrees that the Security Interest (as defined in the Junior
Security Agreement) continues to secure the payment and performance of the
Obligations (as defined in the Junior Security Agreement), including, without
limitation, the Additional Junior Note. The Company further represents and
warrants to the Purchasers that from and after the date of the Purchase
Agreement until the date of this First Amendment, no changes have been made to
the Certificate of Incorporation of the Company nor the Bylaws of the Company.

 

5.3           Further Assurances. The parties agree to (i) execute and deliver,
or cause to be executed and delivered, all such other and further agreements,
documents and instruments and (ii) take or cause to be taken all such other and
further actions as any Purchaser may reasonably request to effectuate the intent
and purposes, and carry out the terms, of this First Amendment.

 

5.4           Counterparts. This First Amendment may be executed by one or more
of the parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of this First Amendment by facsimile transmission or
electronic mail shall be effective as delivery of a manually executed
counterpart hereof.

 

5.5           ENTIRE AGREEMENT. THIS FIRST AMENDMENT, THE PURCHASE AGREEMENT AND
THE OTHER NOTE DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT
THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO ORAL AGREEMENTS BETWEEN THE PARTIES.

 

5.6           GOVERNING LAW. THIS FIRST AMENDMENT (INCLUDING, BUT NOT LIMITED
TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.

 

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
duly executed as of the date first written above.

 

DEBTORS:

 

 

 

DYNTEK, INC.

 

 

 

By:

/s/ Casper Zublin, Jr.

 

Name:

Casper Zublin, Jr.

 

Title:

Chief Executive Officer

 

 

 

 

DYNTEK SERVICES, INC.

 

 

 

By:

/s/ Casper Zublin, Jr.

 

Name:

Casper Zublin, Jr.

 

Title:

Chief Executive Officer

 

PURCHASERS:

 

 

 

SACC PARTNERS, L.P

 

 

 

 

By:

/s/ Bryant Riley

 

Name:

Bryant Riley

 

 

Title:

Managing Partner

 

 

 

 

 

 

LLOYD I. MILLER, III

 

 

 

 

 

By:

/s/ Lloyd I. Miller, III

 

Name:

Lloyd I. Miller, III

 

 

 

 

 

 

TRUST A-4-LLOYD I. MILLER

 

 

 

 

 

 

By:

PNC Bank, National Association,

 

 

 

as Trustee

 

 

 

 

 

 

By:

/s/ Lloyd I. Miller, III

 

 

Name:

Lloyd I. Miller, III

 

 

Title:

Investment Advisor to Trustee

 

 

 

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