Document:

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

 

 

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.

 

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

 

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

 

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

 

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.

 

[SIGNATURES BEGIN NEXT PAGE]

 

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 TrusteeExhibit 10.4

THE
SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. ANY
TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT
UNDER THE ACT AND AS REQUIRED BY BLUE SKY LAWS IS IN EFFECT AS TO SUCH TRANSFER
OR IN THE OPINION OF COUNSEL SATISFACTORY TO THE BORROWER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND BLUE SKY
LAWS.

DynTek, Inc.

Junior Secured Convertible Promissory Note

Note No. __________

$1,000,000.00                                                                                                                                                  June 15,
2006

FOR VALUE RECEIVED,
subject to the terms and conditions of this Junior Secured Convertible
Promissory Note (the “Note”), DynTek, Inc., a Delaware corporation
with its principal offices located at 19700 Fairchild Road, Suite 230,
Irvine, California (the “Borrower”), hereby promises to pay to the order
of Trust A-4 - Lloyd I. Miller (“Trust A-4”), located at 4550 Gordon
Drive, Naples, Florida 34102 (the “Holder”), the principal sum of One
Million Dollars ($1,000,000.00), in lawful money of the United States and in
immediately available funds on March 1, 2011 or, if such day is not a
regular business day, on the next business day thereafter, with all accrued but
unpaid interest (as provided below) to such date (the “Maturity Date”). Subject
to the terms and conditions of this Note (including without limitation Section 7(f)),
the Borrower also promises to pay to the Holder interest accrued on the
outstanding unpaid principal amount hereof until such principal amount is paid
(or converted as provided herein) at the rate of ten percent (10%) per annum,
compounding quarterly, from the date hereof. The said interest shall become due
quarterly in arrears and shall be payable on the last day of each fiscal
quarter (each, an “Interest Payment Date”) in respect of the immediately
preceding completed fiscal quarter. The first Interest Payment Date will be June 30,
2006. At the Borrower’s sole option, all interest payments due and payable
before June 30, 2009 may be paid in kind at the rate of fourteen percent
(14%) per annum, compounding quarterly, in which case the accrued interest will
be added to the principal amount of the Note on the applicable Interest Payment
Date, and interest will accrue on the aggregate principal amount. All interest
payments due and payable on and after June 30, 2009 must be paid in cash.

This Note is being issued
pursuant to (1) that certain First Amendment to Note Purchase Agreement,
dated as of the date hereof, by and between the Borrower and the Holder (the “First
Amendment”), and (2) that certain Note Purchase Agreement, dated as of
March 8, 2006, by and between the Borrower and the purchasers named

 

 

thereunder, including the
Holder, (the “Note Purchase Agreement”), and shall be entitled to all of
the rights and benefits thereof. This Note is guaranteed by DynTek Services, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Borrower (“DSI”)
and secured by a security interest in all of the assets of Borrower and DSI, as
described more fully in that certain Security and Pledge Agreement, dated as of
March 8, 2006, executed by and between the Borrower, DSI and Trust A-4 (as
amended, supplemented or otherwise modified from time to time) (the “Security
Agreement”).

Until June 1, 2010,
the Borrower may not prepay the Note in whole or in part without the prior
written consent of the Holder, which may be given or withheld in Holder’s sole
discretion. At anytime after June 1, 2010 until the Maturity Date, the
Borrower may prepay this Note in whole or in part at any time without penalty. 

1.             Definitions. Unless the context otherwise
requires, the following terms shall have the following respective meanings:

“Act” means the
Securities Act of 1933, as amended.

“Blue Sky Laws”
means applicable state securities laws.

“Base Share Price”
shall have the meaning ascribed to such term in Section 4(f)(i) hereof.

“Board” shall mean
the Borrower’s Board of Directors.

“Borrower” shall
have the meaning ascribed to such term in the first paragraph of this Note.

“Common Stock”
shall mean shares of the Borrower’s Common Stock, par value $0.0001 per share.

“Conversion Date”
shall be the date upon which the Holder exercises its right to convert the
outstanding amounts under this Note into shares of Borrower’s Common Stock in
accordance with Section 3(a) of this Note, or the date such amounts
are automatically converted in accordance with the terms hereof.

“Conversion Option”
shall have the meaning ascribed to such term in Section 3(a) hereof. 

“Conversion Price”
shall have the meaning ascribed to such term in Section 3(a) of this
Note.

“Event of Default”
shall have the meaning ascribed to such term in Section 5(a) of this
Note.

 2
 

 

 

“Fair Market Value”
shall mean the fair market value of a share of the Common Stock as mutually
determined in good faith by the Holder and the Board.

“First Amendment”
shall have the meaning ascribed to such term in the second paragraph of this
Note.

“Holder” shall
have the meaning ascribed to such term in the first paragraph of this Note.

“Interest Payment Date”
shall have the meaning ascribed to such term in the first paragraph of this
Note.

“Maturity Date”
shall have the meaning ascribed to such term in the first paragraph of this
Note.

“Newly Issued Shares”
shall have the meaning ascribed to such term in Section 4(f)(i) hereof.

“Note” shall have
the meaning ascribed to such term in the first paragraph of this instrument.

“Note Purchase
Agreement” shall have the meaning ascribed to such term in the second
paragraph of this Note.

“Security Agreement”
shall have the meaning ascribed to such term in the second paragraph of this
Note.

2.             Accounting Terms. All accounting terms not
specifically defined in this Note shall be construed in accordance with United
States generally accepted accounting principles and, if applicable, consistent
with those applied in the preparation of the financial statements of the
Borrower.

3.             Conversion.

(a)           Voluntary Conversion. At any
time until the Note has been paid in full, the Holder has the right, at its
option, to convert all or any part of the outstanding principal amount
(including any accrued but unpaid interest on such principal amount) (the “Conversion
Principal Amount”) of this Note into shares of Common Stock (in accordance
with the procedures described under Section 3(b) of this Note) (the “Conversion
Option”). The number of shares of Common Stock into which the Conversion
Principal Amount is convertible is equal to (i) the Conversion Principal
Amount divided by (ii) the Conversion Price (as defined below) in effect
at the time of conversion. The “Conversion Price” shall initially be
$0.20, subject to adjustment pursuant to Sections 3 and 4. 

 3
 

 

 

(b)           Conversion Mechanics. The
Holder shall exercise its right to convert by surrender of this Note, duly
endorsed, at the office of the Borrower, accompanied by written notice of
conversion. The Borrower shall forthwith issue and deliver to the Holder
certificates for the number of shares of Common Stock to which Holder is
entitled (bearing such legends as may be required by applicable state and
federal securities laws). If on any conversion of this Note a fraction of a
share results, then the Borrower will pay the Holder the cash value of that
fractional share (based upon the Fair Market Value). All Common Stock issued
upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. Any conversion shall be deemed to have occurred as of the
Conversion Date, and the Holder shall be treated for all purposes as the record
holder of such Common Stock as of that date. Upon conversion of this Note into
Common Stock, Holder shall surrender this Note, duly endorsed, at the principal
offices of Borrower. Borrower will, as soon as practicable thereafter, issue
and deliver to Holder a certificate for the number of shares of Common Stock to
which Holder is entitled upon such conversion, plus a check payable to Holder
for any cash amounts payable for fractional shares and accrued but unpaid
interest. If the Holder converts less than all of the indebtedness evidenced by
this Note upon such conversion, then the Borrower shall also issue a
convertible promissory note of like tenor for the amount of indebtedness not so
converted.

(c)           Conversion Covenants. Subject
to the terms herein, the Borrower covenants that it will at all times promptly
do any and all lawful things necessary (i) to effect the conversion of
this Note, or any part thereof, as provided in this Note and, including,
without limitation, by proper corporate action taking all steps necessary to
have available at all times during which this Note remains outstanding all
Common Stock issuable upon the conversion of this Note and (ii) to ensure
that the shares of Common Stock issuable upon conversion of this Note are
registered under the Act and are freely transferable in the hands of the
Holder, subject to the terms and conditions of the registration provisions
contained in the Note Purchase Agreement. 

4.             Dilution. The number of shares of Common Stock
issuable under Section 3(a) of this Note shall be subject to
adjustment from time to time upon the happening of certain events as follows:

(a)           Adjustment for Stock Splits and
Combinations. If the Borrower at any time or from time to time after the
date of this Note effects a subdivision of shares of its Common Stock, the
number of shares of Common Stock issuable to Holder immediately before that
subdivision shall be proportionately increased, and conversely, if the Borrower
at any time or from time to time after the date of this Note combines shares of
Common Stock into a smaller number of shares, the number of shares of Common
Stock issuable to Holder immediately before the combination shall be
proportionately decreased. In either case, the Conversion Price will be
proportionately adjusted as well. Any adjustment under this clause (a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

 4
 

 

 

(b)           Adjustment for Certain Dividends
and Distributions. If the Borrower at any time or from time to time after
the date of this Note makes, or fixes a record date for the determination of
holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock, then and in each
such event, the number of shares of Common Stock issuable to Holder shall be
increased as of the time of such issuance, or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying the
maximum number of shares of Common Stock issuable to Holder by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution plus the number of shares
of Common Stock issuable upon the conversion or exercise of the Borrower’s
outstanding convertible securities, warrants and options, and (ii) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, plus the number of shares of Common Stock
issuable upon the conversion or exercise of the Borrower’s outstanding
convertible securities, warrants and options.

(c)           Adjustments for Other Dividends
and Distributions. In the event the Borrower at any time or from time to
time after the date of this Note makes, or fixes a record date for the determination
of holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Borrower other than the shares of
Common Stock, then and in each such event, provision shall be made so that the
Holder, upon conversion of this Note, shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Borrower which the Holder would have received had
Holder been a holder of Common Stock on the date of such event and had
thereafter, during the period from the date of such event to and including the
Conversion Date, retained such securities receivable as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 4 with respect to the rights of the Holder.

(d)           Adjustment for Reorganization,
Consolidation, Merger. In the event of any reorganization of the Borrower
(or any other corporation, the stock or other securities of which are at the
time receivable upon the conversion of this Note) after the date hereof, or if,
after such date, the Borrower (or any such other corporation) shall consolidate
with or merge into another corporation or convey all or substantially all its
assets to another corporation, and to the extent any such transaction does not
result in the automatic conversion of this Note in accordance with the terms
hereof, then and in each such case Holder, upon the conversion hereof as
provided herein, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the stock receivable upon the conversion of this Note prior to such
consummation, the stock or other securities or property to which such Holder would
have been entitled upon such consummation if such Holder had converted this

 5
 

 

 

 Note
immediately prior thereto. In the event of such a reorganization, consolidation
or merger, the corporation whose stock or other securities or property to which
Holder would be entitled shall execute and deliver to Holder no later than the
closing of such transaction an instrument or other writing, reasonably
satisfactory to Holder, acknowledging its obligation to issue such stock or
other securities or other property upon the conversion of this Note.

(e)           Adjustment for Reclassification,
Exchange and Substitution. In the event that at any time or from time to
time after the date of this Note, the shares of Common Stock are changed into
the same or a different number of shares of any class of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets, provided for elsewhere in this Section 4),
then and in any such event the kind and amount of stock and other securities
and property receivable upon such recapitalization, reclassification or other
change shall be used for calculation of the number of shares of Common Stock
issuable to the Holder, all subject to further adjustment as provided in this
Note.

(f)            Sale
of Shares Below Conversion Price. 

(i)       In case at any time on or after the date
first written above, the Borrower shall issue or sell shares of its Common
Stock or instruments convertible into or exercisable for Common Stock
(collectively, the “Newly Issued Shares”), at a price below the
Conversion Price in effect at the time of such issuance (the “Base Share
Price”), then the Conversion Price shall be reduced to equal the Base Share
Price. In each such case, the Conversion Price shall be reduced as of the
opening of business on the date immediately following such issue or sale of
Newly Issued Shares. In no instance shall an adjustment be made under this Section 4(f)(i) if
it would cause the Conversion Price to be increased. 

(ii)           Notwithstanding the foregoing, no
adjustment shall be made under this Section 4(f) by reason of:

(1)           the issuance, sale, and transfer to
any person of any shares of Common Stock of the Company in connection with (i) the
Private Placement (as defined in the Note Purchase Agreement), (ii) execution
and consummation of the terms of the Conversion and Settlement Agreements (as
defined in the Note Purchase Agreement), or (iii) settlement of unsecured
trade debt pursuant to those certain Settlement and Release Agreements (as
defined in the Note Purchase Agreement) dated as of the date hereof;

(2)           the issuance by the Borrower of the
Warrants (as defined in that certain Note Purchase Agreement dated as of the
date hereof, by and between the Borrower and the purchasers named therein (the “Note
Purchase

 6
 

 

 

Agreement”)) or the issuance by the
Borrower of shares of Common Stock upon the exercise of the Warrants in
accordance with the terms of the Note Purchase Agreement;

(3)           the issuance by the Borrower of
shares of Common Stock upon the exercise or conversion of securities of the
Borrower outstanding as of the date of this Agreement; and

(4)           the issuance by the Borrower of
shares of Common Stock or options or other rights to purchase Common Stock
pursuant to any equity incentive plan in effect on the date hereof. 

(g)           Certificate as to Adjustment. In
each case of an adjustment of the Conversion Price or the number of shares of
Common Stock issuable upon conversion of the Notes, upon the request of the
Holder, the Borrower shall compute such adjustment in accordance with the
provisions of this Note and prepare a letter or certificate setting forth such
adjustment, and showing in detail the facts upon which such adjustment is based.
Notwithstanding the delivery of such letter or certificate, Holder shall have
the right to dispute the calculation of such adjustment by written notice to
Borrower setting forth Holder’s alternative calculation of such adjustment.

5.             Events
of Default. 

(a)           Events Constituting An Event of
Default. Any of the events set forth in Section 1.15 of the Note
Purchase Agreement, which section is incorporated herein by reference, shall
constitute an “Event of Default” under this Note.

(b)           Consequences of an Event of
Default. Upon the occurrence of an Event of Default or at any time
thereafter, the registered holder of the Note may, by notice to the Borrower,
declare the entire unpaid principal amount of the Note, all interest accrued
and unpaid thereon and all other amounts payable under this Note to be
forthwith due and payable, whereupon the Note, all such accrued interest and
all such amounts will become and be forthwith due and payable (unless there
will have occurred an Event of Default under subsection 1.15(e) of the
Note Purchase Agreement,  in which case
all such amounts will automatically become due and payable) without offset or
counterclaim of any kind and without presentment, demand, protest or further
notice of any kind, and without regard to the running of the statute of
limitations, all of which are by this Note expressly waived by the Borrower.

6.             Registration. Pursuant to the terms and
conditions of the Note Purchase Agreement, the Common Stock to be issued to the
Holder upon conversion will be registered with the Securities and Exchange
Commission under a registration statement on Form S-1 or any other form then available to the
Company under applicable SEC rules and regulations and will not be
subject to any restrictions on transfer. 

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7.             General
Matters.

(a)           Applicable Law. This Note
shall be governed by the internal laws (and not the law of conflicts) of the
State of California. 

(b)           Fees and Expenses. In the
event that any suit or action is instituted to enforce any provision under
this  Note, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals. Notwithstanding the foregoing, the
Borrower agrees to pay and hold Holder harmless against liability for the
payment of the reasonable fees and expenses of Holder (including, without
limitation, attorneys’ fees and expenses and out of pocket expenses of Holder
and its representatives, including, without limitation, fees and expenses for
travel, background investigations and outside consultants) arising in
connection with any refinancing or restructuring of the credit arrangements
provided under this Note in the nature of a “work-out” or pursuant to any
insolvency or bankruptcy proceedings.

(c)           Amendment or Waiver. Any term
of this Note may be amended, and the observance of any term of this Note may be
waived (either generally or in a particular instance and either retroactively
or prospectively) only by the written consent of the Holder.

(d)           Headings. The headings in this
Note are for purposes of convenience of reference only, and shall not be deemed
to constitute a part of this Note.

(e)           Notices. All notices,
requests, consents and other communications required or permitted hereunder
shall be in writing (including telecopy or similar writing) and shall be sent
to the address of the party set forth in the Note Purchase Agreement. Any
notice, request, consent or other communication hereunder shall be deemed to
have been given and received on the day on which it is delivered (by any means including
personal delivery, overnight air courier, United States mail) or telecopied
(or, if such day is not a business day or if the notice, request, consent or
communication is not telecopied during business hours of the intended
recipient, at the place of receipt, on the next following business day). Any of
the parties hereto may, by notice given hereunder, designate any further or
different address and/or number to which subsequent notices or other
communications shall be sent. Unless and until such written notice is received,
the addresses and numbers as provided herein shall be deemed to continue in
effect for all purposes hereunder.

(f)            Usury Limitation. In no event
shall the amount paid or agreed to be paid to the Holder for the use or
forbearance of money to be advanced hereunder exceed the highest lawful rate
permissible under the then applicable usury laws. If it is hereafter determined
by a court of competent jurisdiction that the interest

 8
 

 

 

payable hereunder is in excess of the amount which the
Holder may legally collect under the then applicable usury laws, such amount
which would be excessive interest shall be applied to the payment of the unpaid
principal balance due hereunder and not to the payment of interest or, if all
principal shall previously have been paid, promptly repaid by the Holder to the
Borrower.

(g)           Severability. Every provision
of this Note is intended to be severable. If any term or provision hereof is
declared by a court of competent jurisdiction to be illegal or invalid, such
illegal or invalid term or provision shall not affect the balance of the terms
and provisions hereof, which terms and provisions shall remain binding and
enforceable.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the
Borrower has caused this Note to be executed as of the day and year first above
written.

 

	
  

  	
  DYNTEK, INC., a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Casper
  Zublin, Jr.

  
	
   

  	
  Name:

  	
  Casper Zublin,
  Jr.

  
	
   

  	
  Title:

  	
  Chief Executive
  Officer

  

 

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