THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE
IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND
INTERCREDITOR AGREEMENT (THE "SUBORDINATION AGREEMENT") DATED AS OF MARCH 12],
2018 BY AND AMONG MICHAEL HERNANDEZ (THE "SUBORDINATED CREDITOR"), CYNERGISTEK,
INC., A DELAWARE CORPORATION (THE "COMPANY"), CTEK SECURITY, INC., A TEXAS
CORPORATION ("CTEK SECURITY"), CTEK SOLUTIONS, INC., A CALIFORNIA CORPORATION
("CTEK SOLUTIONS"), DELPHIIS, INC., A CALIFORNIA CORPORATION ("DELPHIIS"), EACH
OTHER GUARANTOR PARTY THERETO FROM TIME TO TIME (TOGETHER WITH THE COMPANY, CTEK
SECURITY, CTEK SOLUTIONS, DELPHIIS, AND EACH OTHER OBLIGOR OF THE SENIOR DEBT,
THE "DEBTORS"), AND BMO HARRIS BANK N.A., A NATIONAL BANKING ASSOCIATION (THE
"SENIOR LENDER"), TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE COMPANY
PURSUANT TO THAT CERTAIN CREDIT AGREEMENT DATED AS OF MARCH 12, 2018 AMONG THE
COMPANY, CTEK SECURITY, CTEK SOLUTIONS, DELPHIIS, EACH OTHER GUARANTOR PARTY
THERETO FROM TIME TO TIME AND THE SENIOR LENDER, AS SUCH CREDIT AGREEMENT MAY BE
AMENDED, SUPPLEMENTED, RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME AND TO
INDEBTEDNESS REFINANCING THE INDEBTEDNESS UNDER SUCH AGREEMENT AS PERMITTED BY
THE SUBORDINATION AGREEMENT; AND EACH HOLDER OF THIS INSTRUMENT, BY ITS
ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE
SUBORDINATION AGREEMENT.
PROMISSORY NOTE
$3,750,000Effective January 1, 2018
FOR VALUE RECEIVED, CynergisTek, Inc., a Delaware corporation ("Maker"),
promises to pay to the order of Michael Hernandez, an individual ("Payee"), in
lawful money of the United States of America, the principal sum of Three Million
Seven Hundred Fifty Thousand Dollars ($3,750,000.00), together with simple
interest payable on the unpaid balance at a rate equal to five percent (5.00%)
per annum, which begins to accrue as of January 1, 2018 and which will compound
initially on March 12, 2018 and then annually on the last day of December each
year during the term of this Note, subject to the terms and conditions set forth
herein. Interest shall be calculated on the basis of a year of 365 days, and
charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance with the
terms and conditions of the Mutual Release and Settlement Agreement, dated
effective March 12, 2018, by and among Maker, Payee, and CTEK Security, Inc.
(the "Mutual Release"), and is the "Earn-out Note" referenced therein.
Capitalized terms used in this Note without definition shall have the respective
meanings set forth in the Mutual Release.
10917507v.6
4819-0284-7835
1. PAYMENTS
1.1Principal and Interest.
Maker shall pay all principal and accrued interest on or before March 12, 2023
(the "Maturity Date").
Maker does hereby agree that upon the occurrence of an Event of Default,
including Maker's failure to pay interest or principal in full on the Maturity
Date, Payee shall be entitled to receive, and Maker shall pay, interest on the
entire outstanding principal balance and any other amounts due at the rate equal
to the lesser of (a) the Maximum Rate, and (b) the