EXHIBIT 10.2
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
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Note No. J-3
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$3,000,000.00
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September 26, 2006
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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 Three Million Dollars
($3,000,000.00), 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
September 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 Second Amendment to Note Purchase Agreement,
dated as of September 26, 2006, by and between the Borrower, DynTek
Services, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Borrower (“ DSI ”), and the
purchasers named therein, including the Holder (the
“ Second 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 ”), as amended by that certain First Amendment
to Note Purchase Agreement, dated as of June 15, 2006, by and
between the same parties (the “ First Amendment
”), and as further amended by the Second Amendment
(collectively, and as amended, the “ Amended Note Purchase
Agreement ”) and shall be entitled to all of the rights
and benefits thereof. This Note is guaranteed by 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.
“ Amended Note Purchase
Agreement ” shall have the meaning ascribed to such term
in the second paragraph of this Note.
“ 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.
2
“ 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.
“ 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.
“ Second Amendment
” 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
3
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.
(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 avail