AMENDMENT #6 TO SCHEDULE 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HliTFrwn2N7qCSwl0Rjl+p871SgFE4zy+BBu0MaeiBNK3ek2uKGjvZv44jXdOhBx XfnNNUoEIa4t2XG1r8fegA== 0000950123-08-000681.txt : 20080123 0000950123-08-000681.hdr.sgml : 20080123 20080123164010 ACCESSION NUMBER: 0000950123-08-000681 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20080123 DATE AS OF CHANGE: 20080123 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DYNTEK INC CENTRAL INDEX KEY: 0000879465 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 954228470 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-51733 FILM NUMBER: 08545149 BUSINESS ADDRESS: STREET 1: 19700 FAIRCHILD STREET 2: SUITE 230 CITY: IRVINE STATE: CA ZIP: 92612 BUSINESS PHONE: 949-271-6704 MAIL ADDRESS: STREET 1: 19700 FAIRCHILD STREET 2: SUITE 230 CITY: IRVINE STATE: CA ZIP: 92612 FORMER COMPANY: FORMER CONFORMED NAME: TEKINSIGHT COM INC DATE OF NAME CHANGE: 20000103 FORMER COMPANY: FORMER CONFORMED NAME: TADEO HOLDINGS INC DATE OF NAME CHANGE: 19980212 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL SELF CARE INC DATE OF NAME CHANGE: 19950808 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MILLER LLOYD I III CENTRAL INDEX KEY: 0000949119 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 4650 GORDON DRIVE CITY: NAPLES STATE: FL ZIP: 33940 BUSINESS PHONE: 9412628577 SC 13D/A 1 y47162a6sc13dza.htm AMENDMENT #6 TO SCHEDULE 13D AMENDMENT #6 TO SCHEDULE 13D

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)

(Amendment No. 6)¹

Dyntek, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

268180304

(CUSIP Number)

Lloyd I. Miller, III, 4550 Gordon Drive, Naples, Florida, 34102 (Tel.) (239) 262-8577

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

January 10, 2008

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box o.

Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

(Continued on following pages)

Page 1 of 7 pages

¹ The remainder of this cover page shall be filled out for a reporting person=s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be Afiled@ for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		268180304	13D	Page		2		of		7

NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

Lloyd I. Miller, III ###-##-####

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS*

PF-OO-AF

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

United States

SOLE VOTING POWER

NUMBER OF

61,076,783

SHARES

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

199,699,096

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

61,076,783

WITH

SHARED DISPOSITIVE POWER

199,699,096

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

260,775,879 ** The beneficially owned shares reported herein consist of: (i) 7,188,285 shares of common stock; (ii) warrants to purchase 54,351,546 shares of common stock; and (iii) 199,236,048 shares of common stock convertible under certain Junior Secured Convertible Promissory Notes in the current aggregate amount of $15,938,883.97 (at a conversion rate of $0.08).

CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

83.6%

TYPE OF REPORTING PERSON*

IN-IA-OO

*SEE INSTRUCTIONS BEFORE FILLING OUT!

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Introduction

This constitutes Amendment No. 6 to the statement on Schedule 13D, filed on behalf of Lloyd I. Miller, III (“Miller” or the “Reporting Person”), dated March 17, 2006, as amended (the “Statement”), relating to the common stock, par value $0.0001 per share (the “Shares”) of Dyntek, Inc. (the “Company”). Unless specifically amended or modified hereby, the disclosure set forth in the Statement shall remain unchanged and capitalized terms used herein but not otherwise defined herein shall have the meaning as set forth in the Statement.

Item 3. Source and Amount of Funds or Other Consideration

Item 3 of the Statement is hereby amended by adding at the end thereof the following:

On January 10, 2008, Trust A-4 used $1,800,000 in cash consideration to acquire from the Company a Junior Secured Convertible Promissory Note dated January 10, 2008 with a maturity date of April 13, 2012 in the original principal amount of $1,800,000.00 (the “January 2008 Convertible Note”). A copy of the January 2008 Convertible Note is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

Item 4. Purpose of the Transaction

Item 4 of the Statement is hereby amended by adding at the end thereof the following:

The purpose of this Amendment No. 6 is to report that since the filing of Amendment No. 5 to the Statement, dated October 2, 2007, a material change occurred in the percentage of Shares beneficially owned by Miller in connection with Trust A-4’s purchase from the Company of the January 2008 Convertible Note. On January 10, 2008, Trust A-4, the Company and DynTek Services, Inc. entered into the First Amendment to Junior Secured Convertible Note Purchase Agreement and Security and Pledge Agreement (the “Amendment”) pursuant to which the Company issued and sold to Trust A-4 the January 2008 Convertible Note. The January 2008 Convertible Note may be converted into shares of the Company’s common stock at any time at the election of Trust A-4 at a conversion price of $0.08 per share. The Company has the option of paying interest on the January 2008 Convertible Note in either cash at 9% or in kind at 13% on each quarterly interest payment. In connection with certain anti-dilution protections, the conversion price on the pre-existing Convertible Notes was reduced from $0.175 to $0.08 upon the sale and issuance of the January 2008 Convertible Note. A copy of the Amendment is attached hereto as Exhibit 99.2.

In connection with the Amendment, Trust A-4 and certain other investors set forth therein entered into a Registration Rights Agreement which provided certain rights of the investors thereto to cause the Company to register for resale certain securities set forth therein pursuant to the terms thereof (the “Registration Rights Agreement”). Such Registration Rights Agreement replaced any and all registration rights that the investors thereto previously had in being able to require the Company to register for resale certain securities previously issued by the Company to the investors thereto. A copy of the Registration Rights Agreement is attached hereto as Exhibit 99.3.

In connection with the Amendment, the Company and Miller also agreed to change the terms of a previously issued Warrant issued by the Company to Miller (the “Warrant Amendment”). The Company had previously issued to Miller on March 8, 2006, a warrant to acquire up to 15.81% of the shares of capital stock of the Company on a fully diluted basis. In

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connection with the Warrant Amendment, the previously issued Warrant was modified to provide that the number of shares of common stock issuable upon exercise of such Warrant shall be fixed at an amount of 54,205,392 (subject to further adjustment as set forth therein). A copy of the Warrant Amendment is attached hereto as Exhibit 99.4.

At the same time as entering into the Amendment, the Company, DynTek Services, Inc. and the purchasers set forth therein, entered into that certain Third Amendment to Note Purchase Agreement, Security and Pledge Agreements and Outstanding Notes, dated as of January 10, 2008 (the “Third Amendment”). In connection with the Third Amendment, the terms of (i) the Senior Notes (as defined therein) were modified to provide that the Company may pay interest in kind until March 31, 2010 as opposed to March 31, 2009 and the maturity date of such Senior Notes was extended from March 1, 2010 to March 1, 2011 and (ii) the Junior Notes (as defined therein) were modified to provide that the Company may pay interest in kind on all such Junior Notes through June 30, 2010 as opposed to June 30, 2009. A copy of the Third Amendment is attached hereto as Exhibit 99.5.

The aforementioned description of the January 2008 Convertible Note, the Amendment, the Registration Rights Agreement, the Warrant Amendment, and the Third Amendment does not purport to be complete and is qualified in its entirety by reference to such documents filed as exhibits hereto.

Except as described above in this Item 4 and herein, the Reporting Person does not have any specific plans or proposals that relate to or would result in any of the actions or events specified in clauses (a) through (j) of Item 4 of Schedule 13D. The Reporting Person reserves the right to change plans and take any and all actions that Miller may deem appropriate to maximize the value of his investments, including, among other things, purchasing or otherwise acquiring additional securities of the Company, selling or otherwise disposing of any securities of the Company beneficially owned by him, in each case in the open market or in privately negotiated transactions or formulating other plans or proposals regarding the Company or its securities to the extent deemed advisable by Miller in light of his general investment policies, market conditions, subsequent developments affecting the Company and the general business and future prospects of the Company. Miller may take any other action with respect to the Company or any of the Company’s debt or equity securities in any manner permitted by applicable law.

Item 5. Interest in Securities of the Issuer

Item 5 of the Statement is hereby amended and restated in its entirety as follows:

(a) Miller may be deemed to beneficially own 260,775,879 Shares of the Company (83.6% of the Shares on the date hereof based on: (i) 58,234,989 Shares outstanding per the Company’s Quarterly Report on Form 10-Q filed on November 19, 2007; (ii) warrants to purchase 54,351,546 Shares beneficially held by Miller; and (iii) 199,236,048 Shares (assuming a full conversion of the outstanding principal amount of $15,938,883.97 owed under the Convertible Notes ant the January 2008 Convertible Note into Shares at the conversion rate of $0.08).

As of the date hereof, 199,699,096 of such beneficially owned Shares are owned of record by Trust A-4 (total includes a warrant to purchase 48,077 Shares and 199,236,048 Shares

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that can be acquired upon the conversion of the Convertible Notes and the January 2008 Convertible Note); 298,104 of such beneficially owned Shares are owned of record by Milfam II L.P. (total includes a warrant to purchase 48,077 Shares); and 60,778,679 Shares are beneficially owned of record by Miller directly (total includes warrants to purchase 54,255,392 shares).

(b) Miller may be deemed to have shared voting and dispositive power for all such shares held of record by Trust A-4. Miller may be deemed to have sole voting and dispositive power for all such shares held of record by Milfam II L.P. and Miller directly.

(c) The following details the transactions effected by Miller in the past 60 days: On January 10, 2008, Trust A-4 purchased from the Company the January 2008 Convertible Note for $1,800,000.

(d) Other than Shares held directly by Mr. Miller, persons other than Mr. Miller have the right to receive and the power to direct the receipt of dividends from, or the proceeds from, the sale of the reported securities.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

On January 10, 2008, Trust A-4, the Company and DynTek Services, Inc. entered into the Amendment pursuant to which the Company issued and sold to Trust A-4 the January 2008 Convertible Note. The January 2008 Convertible Note may be converted into shares of the Company’s common stock at any time at the election of Trust A-4 at a conversion price of $0.08 per share. The Company has the option of paying interest on the January 2008 Convertible Note in either cash at 9% or in kind at 13% on each quarterly interest payment. In connection with certain anti-dilution protections, the conversion price on the pre-existing Convertible Notes was reduced from $0.175 to $0.08 upon the sale and issuance of the January 2008 Convertible Note.

In connection with the Amendment, Trust A-4 and certain other investors set forth therein entered into a Registration Rights Agreement which provided certain rights of the investors thereto to cause the Company to register for resale certain securities issued by the Company to the investors thereto pursuant to the terms thereof. Such Registration Rights Agreement replaced any and all registration rights that the investors thereto previously had in requiring the Company to register for resale certain securities of the Company.

In connection with the Amendment, the Company and Miller also agreed to the terms of the Warrant Amendment. The Company had previously issued to Miller on March 8, 2006, a warrant to acquire up to 15.81% of the shares of capital stock of the Company on a fully diluted basis. In connection with the Warrant Amendment, the previously issued Warrant was modified to provide that the number of shares of common stock issuable upon exercise of such Warrant would equal a fixed number of 54,205,392 (subject to further adjustment as set forth therein).

At the same time as entering into the Amendment, the Company, DynTek Services, Inc. and the purchasers set forth therein, entered into a Third Amendment. In connection with the Third Amendment, the terms of (i) the Senior Notes (as defined therein) were modified to

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provide that the Company may pay interest in kind until March 31, 2010 instead of March 31, 2009 and the maturity date of such Senior Notes was extended until March 1, 2011 and (ii) the Junior Notes (as defined therein) were modified to provide that the Company may pay interest in kind on all such Junior Notes through June 30, 2010.

Item 7. Materials To Be Filed As Exhibits:

	99.1		Junior Secured Convertible Note, dated January 10, 2008, in the initial principal amount of $1,800,000 issued by DynTek, Inc. to Trust A-4 — Lloyd I. Miller.

	99.2		First Amendment to Junior Secured Convertible Note Purchase Agreement and Security and Pledge Agreement, dated as of January 10, 2008, among DynTek, Inc., DynTek Services, Inc. and Trust A-4 — Lloyd I. Miller.

	99.3		Registration Rights Agreement, made as of January 10, 2008, by and among DynTek, Inc. and each of the investors thereto.

	99.4		DynTek, Inc. Warrant Amendment Agreement, entered into as of January 10, 2008, by and among DynTek, Inc., and Lloyd I. Miller, III.

	99.5		Third Amendment to Note Purchase Agreement, Security and Pledge Agreements and Outstanding Notes, dated as of January 10, 2008, among DynTek, Inc., DynTek Services, Inc. and the purchasers named therein.

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After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: January 23, 2008



	/s/ Lloyd I. Miller, III
	Lloyd I. Miller, III

EX-99.1 2 y47162a6exv99w1.htm EX-99.1: JUNIOR SECURED CONVERTIBLE PROMISSORY NOTE EX-99.1

EXHIBIT 99.1

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. 0002
$1,800,000.00		January 10, 2008

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, located at 4550 Gordon Drive, Naples, Florida 34102 (the “Holder”), the principal sum of One Million Eight Hundred Thousand Dollars ($1,800,000.00), in lawful money of the United States and in immediately available funds on April 13, 2012 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 nine percent (9.00%) per annum 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 March 31, 2008. At the Borrower’s sole option, all interest payments due and payable before June 30, 2010 may be paid in kind at the rate of thirteen percent (13.00%) 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. The Note shall be due and payable in full at the Maturity Date unless earlier converted in accordance with Section 3 of the Note. All interest payments due and payable on and after June 30, 2010 must be paid in cash. All payments due under this Note shall rank pari passu with the Junior Secured Convertible Promissory Notes issued to Trust A-4 — Lloyd I. Miller on March 8, June 15, September 26, 2006, and April 13, 2007, respectively.

This Note is being issued pursuant to that certain Junior Secured Convertible Note Purchase Agreement, dated as of April 13, 2007, by and between the Borrower and the Holder, as amended by that certain First Amendment to Junior Secured Convertible Note Purchase Agreement and Security and Pledge Agreement, dated as of January 10, 2008, by and among the Borrower, DynTek Services, Inc., a Delaware corporation and a wholly-owned subsidiary of the Borrower (“DSI”), and the Holder (collectively and as so amended, the “Amended Note Purchase Agreement”), and shall be entitled to all of the rights and benefits thereof. This Note is 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 (as amended, supplemented or otherwise modified from time to time) (the “Security Agreement”) executed by Borrower, DSI and the Holder and originally dated as of April 13, 2007, as amended.

Subject to the terms and conditions of the Amended Note Purchase Agreement, the Borrower may prepay the Note in whole or in part without the prior written consent of the Holder.

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.

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“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.

“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.

“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 $0.08, subject to adjustment pursuant to Sections 3 and 4 hereof.

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(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 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.

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.

(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

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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 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 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

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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 of shares of Common Stock upon the exercise or conversion of securities exercisable or convertible into shares of the Company’s Common Stock that are outstanding as of the date hereof; and

(2) the issuance of options or rights to purchase Common Stock under the Company’s equity incentive plans, as amended, in effect as of the date hereof, or the issuance of shares of Common Stock upon the exercise thereof.

(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 Note, 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

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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 1.10 of the Amended 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 1.10(e) of the Amended 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. The Holder shall be entitled to certain rights to cause the Company to register for resale the shares of Common Stock issuable upon conversion of this Note, as more particularly set forth in that certain Registration Rights Agreement, dated as of an even date herewith, by and among the Borrower, DSI, Lloyd I. Miller, III, SACC Partners, L.P., and the Holder.

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

-7-

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 Amended 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 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]

-8-

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


	DYNTEK, INC., a Delaware corporation
	By:
		Casper W. Zublin, Jr.
		Chief Executive Officer

-9-

EX-99.2 3 y47162a6exv99w2.htm EX-99.2: FIRST AMENDMENT TO JUNIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT AND SECURITY AND PLEDGE AGREEMENT EX-99.2

EXHIBIT 99.2

FIRST AMENDMENT

JUNIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT

AND

SECURITY AND PLEDGE AGREEMENT

dated as of

January 10, 2008

among

DYNTEK, INC.,

DYNTEK SERVICES, INC.

and

TRUST A-4 – LLOYD I. MILLER

FIRST AMENDMENT TO JUNIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT AND TO SECURITY AND PLEDGE AGREEMENT

THIS FIRST AMENDMENT TO JUNIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT AND TO SECURITY AND PLEDGE AGREEMENT (this “First Amendment”) dated as of January 10, 2008, is entered into among DYNTEK, INC., a Delaware corporation (the “Company”), DYNTEK SERVICES, INC., a Delaware corporation (the “Subsidiary” and, together with the Company, the “Debtors”), and Trust A-4 – Lloyd I. Miller (the “Purchaser”).

R E C I T A L S

A. WHEREAS, the Company and the Purchaser are parties to that certain Junior Secured Convertible Note Purchase Agreement dated as of April 13, 2007 (the “Purchase Agreement”), pursuant to which, among other things, the Company has issued and sold to the Purchaser a Junior Secured Convertible Promissory Note in the aggregate principal amount of $5,000,000 (the “First Note”);

B. WHEREAS, as a condition to the Purchaser’s obligations to enter into the Purchase Agreement and to extend credit to the Company thereunder, the Debtors executed and delivered that certain Security and Pledge Agreement (the “Security Agreement” and, collectively referred to herein with the Purchase Agreement and the Notes as the “Note Documents”), dated as of April 13, 2007, by and among the Debtors and the Purchaser as security for the payment and performance of all obligations of the Debtors to the Purchaser and to guarantee all of the obligations of the Debtors under the Purchase Agreement;

C. WHEREAS, the Company wishes to issue and sell to the Purchaser an additional junior secured convertible promissory note in the initial principal amount of $1,800,000 (the “Second Note”), pursuant to the same terms and conditions as provided for the First Note in the Purchase Agreement, as amended herein;

D. WHEREAS, the Company and the Purchaser have agreed that to satisfy the purchase and sale of the Second Note, the Purchaser shall deliver to the Company $1,800,000 less the Purchaser’s reasonable estimated expenses to be paid by the Company pursuant to Section 7.01 of the Purchase Agreement, and the Company (upon receipt of same) shall issue in consideration thereof the Second Note; and

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

A G R E E M E N T

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.

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 Junior Secured Convertible Note Purchase Agreement, dated as of April 13, 2007, between the Company and the Purchaser, 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 Junior Secured Convertible Note Purchase Agreement, dated as of January 10, 2008, by and among the Debtors and the Purchaser.

2.2 Further Amendments to Purchase Agreement

(a) Section 1.01 of the Purchase Agreement is hereby amended in its entirety to read as follows:

“The Company agrees to issue and sell to the Purchaser, and, subject to and in reliance upon the representations, warranties, terms and conditions of this Agreement, the Purchaser agrees to purchase, as of April 13, 2007, the Company’s Junior Secured Convertible Promissory Note (the “First Note”), due April 13, 2012 (the “Note Maturity Date”), in the initial aggregate principal amount of $5,000,000.00. The First Note will be substantially in the form set forth in Exhibit A hereto. The Company shall issue to the Purchaser a subsequent Junior Secured Convertible Promissory Note, dated as of the date of the First Amendment, in the initial aggregate principal amount of $1,800,000 (the “Second Note”), due on the Note Maturity Date. The Second Note will be substantially in the form set forth in Exhibit B hereto. The First Note and the Second Note shall each be referred to herein as a “Note” and collectively referred to as the “Notes,” which term will also include any notes delivered in exchange or replacement therefor. All references to a Note in the Note Documents shall be deemed to be references to the respective First Note and the Second Note. The closing of the purchase and sale of the First Note (the “First Closing”) will be held at the office of Stradling Yocca Carlson & Rauth, P.C., 660 Newport Center Drive, Newport Beach, Suite 1600, CA 92660, on April 13, 2007 (the “First Closing Date”) at 10:00 A.M., Pacific Time, or at such other time and place as the Company and the Purchaser mutually agree upon, and the closing of the purchase and sale of the Second Note (the “Second Closing”) will be held at the office of Stradling Yocca Carlson & Rauth, P.C., 660 Newport Center Drive, Newport Beach, Suite 1600,

CA 92660, on January 10, 2008 (the “Second Closing Date”) at 10:00 A.M., Pacific Time, or at such other time and place as the Company and the Purchaser mutually agree upon. The term “Closing” shall apply to the First Closing and the Second Closing, unless otherwise specified, and the term Closing Date shall apply to the First Closing Date and the Second Closing Date, unless otherwise specified. At the First Closing, the Company will issue and deliver to the Purchaser one Note payable to the order of the Purchaser, in the principal amount of $5,000,000.00, against delivery to the Company of cash in the aggregate amount of $5,000,000, less the Purchaser’s reasonable estimated expenses to be paid by the Company pursuant to Section 7.01, which shall be payable to the Company by check, wire transfer, or delivery or transference of such sum to the Company by any combination of such methods of payment. At the Second Closing, the Company will issue and deliver to the Purchaser one Note payable to the order of the Purchaser, in the initial aggregate principal amount of $1,800,000.00, against delivery to the Company of cash in the aggregate amount of $1,800,000, less the Purchaser’s reasonable estimated expenses to be paid by the Company pursuant to Section 7.01, which shall be payable to the Company by check, wire transfer, or delivery or transference of such sum to the Company by any combination of such methods of payment.”

(b) The column in Schedule I which states the Principal Amount of Junior Notes to be Purchased is hereby amended to state “$6,800,000” instead of “$5,000,000.”

“The first Interest Payment Date with respect to the First Note will be June 30, 2007, and the first Interest Payment Date with respect to the Second Note will be March 31, 2008.”

(d) Section 1.05 of the Purchase Agreement is hereby amended in its entirety as follows:

“All or any part of the principal plus accrued but unpaid interest on the First Note and the Second Note may be converted at any time into a number of fully paid and nonassessable shares of Common Stock of the Company, at the sole option of the Holder, pursuant to the terms and conditions of conversion set forth in the First Note and the Second Note. The conversion price of each of the First Note and Second Note shall be $0.08, subject to adjustment pursuant to the terms thereof. The Company acknowledges and agrees that the conversion price of each of those certain Junior Secured Convertible Promissory Notes, issued on March 8, June 15 and September 26, 2006, and April 13, 2007, respectively, shall be reduced from $0.175 to $0.08 in accordance with their terms.”

(e) Article VI (Registration Rights) of the Purchase Agreement is deleted in its entirety and replaced with “Intentionally left blank.”

Section 3. Amendments to Security Agreement.

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

The term “Junior Note” shall apply to that certain Junior Secured Convertible Promissory Note in the initial principal amount of $5,000,000, dated as of April 13, 2007, issued by the Company to the Purchaser, and to that certain Junior Secured Convertible Promissory Note in the initial principal amount of $1,800,000, dated as of January 10, 2008, issued by the Company to the Purchaser.”

Section 4. Updated Disclosure Schedules. The Disclosure Schedules to the Note Documents are updated where necessary as set forth in Exhibit A to this First Amendment (the “Updated Disclosure Schedules”). Such modifications are not intended and do not remove any information that had previously been disclosed by the Debtors pursuant to the Disclosure Schedules furnished on April 13, 2007. The Debtors hereby represent and warrant to the Purchaser that all of the information set forth in the Disclosure Schedules as modified and supplemented by the Updated Disclosure Schedules is true, correct and complete in its entirety.

Section 5. Registration Rights Agreement. Concurrently with the execution of this First Amendment, the parties hereto, Lloyd I. Miller, III (“Miller”), Milfam II L.P., Riley Investment Partners Master Fund, L.P. (“Riley”), and B. Riley & Co., Inc. are entering into a Registration Rights Agreement (the “Registration Rights Agreement”) which shall govern the rights of the parties thereto to cause the Company to register for resale the shares of Common Stock of the Company issuable upon the exercise of the First and Second Notes and other certain shares of Common Stock issued or issuable by the Company to the parties thereto, including without limitation, the shares issuable by the Company to Miller and Riley upon exercise of those certain 19.9% warrants, dated March 8, 2006, as amended, as more particularly described in the Registration Rights Agreement. The Company will use its commercially reasonable best efforts to comply at all times with all of the terms and conditions of the Registration Rights Agreement.

Section 6. 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 parties shall have received this First Amendment duly and validly delivered and executed on behalf of the Debtors and the Purchaser;

(c) Purchaser 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 Purchaser and counsel for Purchaser;

(d) Purchaser shall have received the Registration Rights Agreement duly and validly delivered and executed on behalf of the Company;

(e) the Company’s representations and warranties contained herein will be true, complete and correct in all respects on and as of the Effective Date, and the Chief Financial Officer of the Company will have certified to such effect to Purchaser 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 Chief Financial Officer of the Company will have certified to the Purchaser in writing to such effect and to the further effect that all of the conditions set forth in this Section 6 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 Purchaser and their counsel, and Purchaser and their counsel will have received all such counterpart originals or certified or other copies of such documents as they reasonably may request;

(h) Purchaser 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 Second 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 Second 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 Purchaser or their counsel reasonably may request. All such documents will be satisfactory in form and substance to the Purchaser and their counsel; and

(i) the Company shall have issued and delivered the Second Note, dated the date hereof, in the initial aggregate principal amount of $1,800,000 to the address and attention as designated by the Purchaser.

Upon satisfaction of the foregoing conditions and receipt of the Second Note, the Purchaser shall deliver to the Company $1,800,000 less the Purchaser’s reasonable estimated expenses to be paid by the Company pursuant to Section 7.01 of the Purchase Agreement.

Section 7. Miscellaneous.

7.1 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.

7.2 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 Purchaser that as of the date hereof, after giving effect to the terms of this First Amendment: (i) 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, all of the representations and warranties contained in each Note Document to which it is a party are true and correct, including without limitation, the information contained in the updated Disclosure Schedules of the Note Documents attached hereto as Exhibit A, and (ii) no Event of Default under the Purchase Agreement nor Default under the Security Agreement 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 Security Agreement) continues to secure the payment and performance of the Obligations (as defined in the Security Agreement), including, without limitation, the Second Note. The Company further represents and warrants to the Purchaser 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.

7.3 Reference to Note Documents. Upon the effectiveness of this First Amendment, each reference in the Purchase Agreement or the Security Agreement, as applicable, to “this Agreement,” “hereunder,” or words of like import shall mean and be a reference to the Purchase Agreement or the Security Agreement, as applicable, as amended by this First Amendment.

7.4 Breach of First Amendment. This First Amendment shall be part of the Purchase Agreement and the Security Agreement and a breach in any material respect of any representation, warranty or covenant herein shall constitute an Event of Default or a Default, as applicable.

7.5 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 the Purchaser may reasonably request to effectuate the intent and purposes, and carry out the terms, of this First Amendment.

7.6 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.

7.7 ENTIRE AGREEMENT. THIS FIRST AMENDMENT, THE PURCHASE AGREEMENT, THE RELATED SCHEDULES AND EXHIBITS THERETO, THE REGISTRATION RIGHTS AGREEMENT, THE NOTES, THE 19.9% WARRANTS 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.

7.8 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:
		Casper W. Zublin, Jr.
		Chief Executive Officer

	DYNTEK SERVICES, INC.
	By:
		Casper W. Zublin, Jr.
		Chief Executive Officer

PURCHASER:

TRUST A-4 — LLOYD I. MILLER

By: PNC Bank, National Association,
as Trustee



By:

Name: Lloyd I. Miller, III
Title: Investment Advisor to Trustee

EXHIBIT A

UPDATED DISCLOSURE SCHEDULES TO EACH OF THE NOTE DOCUMENTS

UPDATED DISCLOSURE SCHEDULES TO AMENDED JUNIOR SECURED
CONVERTIBLE NOTE PURCHASE AGREEMENT

These Updated Disclosure Schedules are being furnished pursuant to that certain Junior Secured Convertible Note Purchase Agreement, dated as of April 13, 2007, by and among the Company and Trust A-4 – Lloyd I. Miller (the “Purchaser”) named therein (the “Purchase Agreement”), as amended by that certain First Amendment to Junior Secured Convertible Note Purchase Agreement and Security and Pledge Agreement, dated as of January 10, 2008, by and among the Company, DSI and the Purchaser (the “First Amendment” and collectively with the Purchase Agreement, referred to herein as the “Amended Purchase Agreement”). The Updated Disclosure Schedules only update the Disclosure Schedules furnished to the Purchasers on April 13, 2007 and do not restate the Disclosure Schedules in their entirety.

Each Section below qualifies the correspondingly numbered section or subsection thereof in Article IV of the Amended Purchase Agreement, as applicable. Terms of documents summarized herein are qualified in their entirety by the documents themselves, provided that nothing is misleading in such summaries. The titles and headings used herein are for reference purposes only and shall not in any manner limit the construction of these Schedules, and any disclosure made under any subheading hereunder is deemed made for all provisions of that corresponding section in the Amended Purchase Agreement.

Section 2.08

Material Changes

(iii) (a) On July 1, 2007, the Company entered into an asset purchase agreement for substantially all of the assets of Coast Business Solutions, Inc. In consideration of the purchased assets, the Company paid approximately $200,000 to the sellers at closing.

Section 2.09

Litigation

(1) On or about July 19, 2006, Pangaea Education Systems, LLC (“Pangaea”) filed a lawsuit in District Court for the Middle District of Florida against DSI alleging unfair competition, reverse passing off, misappropriation of trade secrets, copyright infringement and breach of contract arising out of services performed in 2003. On September 11, 2007 the Company entered into a settlement agreement with Pangaea and in exchange for a complete release from any further liability, the Company agreed to pay $47,500 to Pangaea.

(2) On March 6, 2007, the Company was served with a subpoena to produce certain enumerated business records regarding the Company’s contractual relationship with the New York City Department of Education. The Company has complied with this subpoena and produced responsive documents on April 2, 2007. The New York City Department of Education is conducting an investigation of the computer consulting services provided by the Company to determine whether such services were provided in conformity with the contractual prohibition against the Company contracting with a subcontractor to perform such consulting work for the New York City Department of Education. Based on its contract with the New York City Department of Education and the parties’ custom and practice, the Company believes it has acted in accordance with its contract with the New York City Department of Education. However, an ambiguity exists as to the meaning of the term “subcontractor,” which may result in a finding that there has been work contracted with the Company that was performed by a “subcontractor.” In light of the ambiguity of the term “subcontractor” and the parties’ custom and practice, such a finding does not necessarily mean that the Company has breached its contract with the New York City Department of Education. To date, no suit has arisen from the New York City Department of Education’s investigation and no monetary demands have yet been made.

UPDATED DISCLOSURE SCHEDULES TO SECURITY AND PLEDGE AGREEMENT

These Updated Disclosure Schedules are being furnished pursuant to that certain Security and Pledge Agreement, dated as of April 13, 2007, by and among the Company, DSI and Trust A-4 – Lloyd I. Miller (the “Purchaser”) named therein (the “Security Agreement”), as amended by that certain First Amendment to Junior Secured Convertible Note Purchase Agreement and Security and Pledge Agreement, dated as of January 10, 2008, by and among the same parties (the “First Amendment” and collectively with the Security Agreement, referred to herein as the “Amended Security Agreement”). The Updated Disclosure Schedules only update the Disclosure Schedules furnished to the Purchaser on April 13, 2007 and do not restate the Disclosure Schedules in their entirety.

Schedule B

Commercial Tort Claims

EX-99.3 4 y47162a6exv99w3.htm EX-99.3: REGISTRATION RIGHTS AGREEMENT EX-99.3

EXHIBIT 99.3

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (“Agreement”) is made as of January 10, 2008, by and among DynTek, Inc., a Delaware corporation (the “Company”), and each of the investors named on the signature pages hereto, together with their permitted transferees (each, an “Investor” and collectively, the “Investors”).

RECITALS

WHEREAS, the Company and certain of the Investors are parties to (i) that certain Registration Rights Agreement, dated as of February 10, 2005 (the “2005 Agreement”), (ii) that certain Note Purchase Agreement, dated as of March 8, 2006, as amended (as so amended, the “2006 Agreement”), and (iii) that certain Junior Secured Convertible Note Purchase Agreement, dated as of April 13, 2007, as amended (as so amended, the “2007 Agreement,” and together with the 2005 Agreement and the 2006 Agreement, the “Existing Agreements”);

WHEREAS, pursuant to the Existing Agreements, the Company is under an obligation to register for resale certain shares of Common Stock issued or issuable by the Company to the Investors, as more particularly set forth on Schedule I attached hereto (such shares identified on Schedule I being referred to herein as the “Registrable Securities”);

WHEREAS, the Company and the Investors wish to terminate the Existing Agreements only as, and to the extent that, they pertain to the rights of the Investors to require the Company to register the Registrable Securities for resale; and

WHEREAS, in lieu of the Existing Agreements, the Company and the Investors agree that this Agreement shall govern the rights of the Investors to cause the Company to register the Registrable Securities for resale.

AGREEMENT

NOW, THEREFORE, the parties hereby agree as follows:

1. Definitions. In addition to the terms defined above and elsewhere in this Agreement, the following terms used in this Agreement shall be construed to have the meanings set forth below:

1.1 “Affiliate” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including without limitation any general partner, officer, director or manager of such Person and any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

1.2 “Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.

1.3 “Damages” means any loss, damage, claim, expense or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof)

arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

1.4 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

1.5 “Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; or (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities.

1.6 “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

1.7 “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

1.8 “Holder” means an Investor or any transferee or assignee thereof to whom an Investor assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 3.9 hereof and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 3.9 hereof.

1.9 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.

1.10 “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

1.11 “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

1.12 “Registrable Securities then outstanding” means the number of shares determined by adding the number of outstanding shares of Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities held by the Investors as set forth on Schedule I attached hereto.

1.13 “Registration Period” means the period between the date of this Agreement and the earlier of (i) the date on which all of the Registrable Securities have been sold by the Investors pursuant to the Registration Statement, and (ii) the date on which all of the Registrable Securities may be sold without registration and without restriction as to the number of Registrable Securities that may be sold under SEC Rule 144 or otherwise.

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

1.15 “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined above) in compliance with the Securities Act and pursuant to Rule 415 and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

1.16 “SEC” means the United States Securities and Exchange Commission.

1.17 “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

1.18 “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

1.19 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

1.20 “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 3.6.

2. Partial Termination. The Company and each of the Investors hereby acknowledge and agree that effective as of the date hereof, each provision set forth in the Existing Agreements (including any schedules or exhibits attached thereto or referenced therein) regarding the Company’s obligation to (i) register the Registrable Securities for resale under the Securities Act, (ii) maintain the effectiveness of any filed Registration Statement covering the Registrable Securities, or (iii) make timely filings of material required to be filed pursuant to Sections 13, 14 or 15(d) under the Exchange Act, are terminated and shall be of no further force or effect. Except as expressly amended by this Agreement, the Existing Agreements shall otherwise remain in full force and effect in accordance with their terms.

3. Registration Rights. The Company covenants and agrees as follows:

3.1 Demand Registration.

(a) Form S-1 Demand. If, at any time following the date of this Agreement and after the Company re-registers its shares of Common Stock pursuant to Section 12(b) or 12(g) under the Exchange Act, the Company receives a request from either Lloyd I. Miller, III (“Miller”) or Riley Investment Partners Master Fund, L.P. (“Riley”) that the Company file a

Registration Statement on Form S-1, then the Company shall (i) within ten days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within 60 days after the date such request is given by the Initiating Holders, file a Registration Statement on Form S-1 under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 3.1(c) and Section 3.3.

(b) Form S-3 Demand. If, at any time when it is eligible to use a Form S-3 Registration Statement, the Company receives a request from any Holder or Holders that the Company file a Form S-3 Registration Statement for a public offering of all or a part of the Registrable Securities owned by such Holder or Holders, then the Company shall (i) within ten days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within 45 days after the date such request is given by the Initiating Holders, file a Form S-3 Registration Statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 3.1(c) and Section 3.3.

(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 3.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; provided further, that the Company shall not register any securities for its own account or that of any other stockholder during such one hundred twenty (120) day period other than an Excluded Registration.

(d) The Company shall not be obligated to effect, or to take any action to effect, any subsequent registration pursuant to Section 3.1(a) (i) once the Company has effected two (2) registrations pursuant to Section 3.1(a) at Miller’s request, (ii) once the Company has effected one (1) registration pursuant to Section 3.1(a) at Riley’s request, or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 3.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 3.1(b) if the Company has effected two registrations pursuant to Section 3.1(b) within the 12 month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of

this Section 3.1(d) until such time as the applicable Registration Statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 3.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 3.1(d).

3.2 Company Registration. 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 Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within 20 days after such notice is given by the Company, the Company shall, subject to the provisions of Section 3.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 3.6.

3.3 Underwriting Requirements.

(a) If, pursuant to Section 3.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 3.1, and the Company shall include such information in the Demand Notice. The underwriter(s) in any registration pursuant to Section 3.1 will be selected by the Initiating Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 3.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 3.3, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 3.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms

of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering. For purposes of the provision in this Section 3.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

3.4 Obligations of the Company. Whenever required under this Section 3 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such Registration Statement effective for a period of up to 120 days or, if earlier, until the distribution contemplated in the Registration Statement has been completed; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such 120-day period shall be extended for up to 30 days, if necessary, to keep the Registration Statement effective until all such Registrable Securities are sold;

(b) prepare and file with the SEC such amendments and supplements to such Registration Statement, and the prospectus used in connection with such Registration Statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such Registration Statement;

(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

(d) use its commercially reasonable efforts to register and qualify the securities covered by such Registration Statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(h) promptly make available for inspection by the selling Holders, any managing underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such Registration Statement has been declared effective or a supplement to any prospectus forming a part of such Registration Statement has been filed; and

(j) after such Registration Statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such Registration Statement or prospectus.

3.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 3 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

3.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 3, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 3.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 3.1(a) or Section 3.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 3.1(a) or Section 3.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 3 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

3.7 Indemnification. If any Registrable Securities are included in a registration statement under this Section 3:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the agents, employees, partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 3.7(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the Registration Statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such Registration Statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay

to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 3.7(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall any indemnity under this Section 3.7(b) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

(c) Promptly after receipt by an indemnified party under this Section 3.7 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 3.7, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. Notwithstanding the foregoing, in the event that the indemnifying party elects not to participate in such action, then the indemnifying party shall promptly notify the indemnified party in writing of that fact and the indemnified party shall have the right to participate in such action by retaining one separate counsel, mutually satisfactory to the parties, with the fees and expenses to be paid by the indemnifying party. The failure of the indemnified party to give notice to the indemnifying party within a reasonable time of the commencement of any action covered by this Section 3.7 shall relieve such indemnifying party of any liability to the indemnified party hereunder, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 3.7.

(d) Notwithstanding anything else contained herein to the contrary, the foregoing indemnity agreements of the Company and the selling Holders are subject to the condition that, insofar as they relate to any Damages arising from any untrue statement or alleged untrue statement of a material fact contained in, or omission or alleged omission of a material fact from, a preliminary prospectus (or necessary to make the statements therein not misleading) that has been corrected in the form of prospectus included in the registration statement at the time it becomes effective, or any amendment or supplement thereto filed with the SEC pursuant to Rule 424(b) under the Securities Act (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any Person if a copy of the Final Prospectus was furnished to the indemnified party and such indemnified party failed to deliver, at or before the confirmation of the sale of the shares registered in such offering, a copy of the Final Prospectus to the Person asserting the loss, liability, claim, or damage in any case in which such delivery was required by the Securities Act.

(e) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification

hereunder makes a claim for indemnification pursuant to this Section 3.7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 3.7 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 3.7, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 3.7(e), when combined with the amounts paid or payable by such Holder pursuant to Section 3.7(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

(f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(g) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 3.7 shall survive the completion of any offering of Registrable Securities in a registration under this Section 3, and otherwise shall survive the termination of this Agreement.

3.8 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (i) to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included or (ii) to demand registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Section 3.9

3.9 Transfer. The rights of the Holders hereunder, including the right to have the Company register Registrable Securities pursuant to this Agreement, may be assigned by the Holders to transferees or assignees of all or any portion of the Registrable Securities, but only if (a) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (b) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being transferred or assigned, (c) after such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (d) at or before the time the Company received the written notice contemplated by clause (b) of this sentence, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein, (e) such transfer is made in accordance with the applicable requirements of this Agreement, and (f) the transferee is an “accredited investor” as that term is defined in Rule 501 of Regulation D.

3.10 Termination of Registration Rights. The obligations of the Company under this Section 3 expire upon expiration of the Registration Period.

4. Miscellaneous.

4.1 Governing Law. This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles that would result in the application of any law other than the law of the State of California.

4.2 Furnishing of Information. As long as any Holder owns Registrable Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof, if any, pursuant to the Exchange Act. Upon the request of any such Holder of Registrable Securities, the Company shall deliver to such holder a written certification of a duly authorized officer as to whether it has complied with the preceding sentence. As long as any Holder owns Registrable Securities, if the Company is not required to file reports pursuant to such laws, it will use reasonable best efforts to prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) such information as is required for the Holders to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell such Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.

4.3 Counterparts; Facsimile. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

4.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

4.5 Notices. All notices, requests, and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given, delivered and received (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one business day after the business day of deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on the signature pages hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such e-mail address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 4.5. If notice is given to the Company, a copy shall also be sent to Stradling Yocca Carlson & Rauth, 660 Newport Center Drive, Newport Beach, California 92660, attention: Christopher D. Ivey.

4.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 3 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction). For the sake of clarity, the demand registration provisions referenced in Section 3.1 with respect to Riley shall not be amended, terminated or waived without the written consent of Riley. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 4.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

4.7 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

4.8 Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

4.9 Entire Agreement. This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

4.10 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

[Signature page follows]

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.


	DYNTEK, INC.
	By:
		Casper W. Zublin, Jr.
		Chief Executive Officer


INVESTORS:

RILEY INVESTMENT PARTNERS MASTER FUND, L.P.

By:

Name:

Title:


B. RILEY & CO., LLC

By:

Name:

Title:


LLOYD I. MILLER, III

By:

		Lloyd I. Miller, III

TRUST A-4 - LLOYD I. MILLER

By: PNC Bank, National Association,
Its: Trustee

By:

		Lloyd I. Miller, III
		Investment Advisor to Trustee

MILFAM II L.P.

By:

Name:

Title:

SCHEDULE I

REGISTRABLE SECURITIES

1. 199,699,095 shares beneficially owned of record by Lloyd I. Miller-Trust A-4, comprised of:

a. 414,971 shares of common stock held outright;

b. a warrant to purchase 48,077 shares dated February 10, 2005; and

c. 199,236,047 shares issuable upon conversion of the five Junior Secured Convertible Promissory Notes dated as of March 8, June 15 and September, 2006, April 13, 2007 and January 10, 2008, respectively, at a current conversion rate of $0.08 per share.

2. 60,778,679 shares beneficially owned of record by Lloyd I. Miller, comprised of:

a. a warrant to purchase 50,000 shares dated October 26, 2005;

b. a warrant to purchase 54,205,392 shares dated March 8, 2006, as amended on January 10, 2008; and

c. 6,523,287 shares of common stock issued pursuant to the terms of that certain Conversion and Settlement Agreement dated March 8, 2006 converting a promissory note at a conversion rate of $0.20).

3. 298,104 shares beneficially owned of record by Milfam II L.P., comprised of:

a. 250,027 shares of common stock held outright; and

b. a warrant to purchase 48,077 shares dated February 10, 2005.

4. 20,776,357 shares beneficially owned by Riley Investment Partners Master Fund, L.P. (formerly SACC Partners, L.P.), comprised of:

a. 6,667,527 shares of common stock held outright, including 6,523,287 shares of common stock issued pursuant to the terms of that certain Conversion and Settlement Agreement dated March 8, 2006 converting a promissory note at a conversion rate of $0.20;

b. a warrant to purchase 36,057 shares dated February 11, 2005;

c. a warrant to purchase 50,000 shares dated October 26, 2005; and

d. a warrant to purchase 14,022,773 shares dated March 8, 2006, as amended on January 10, 2008.

5. 60,095 shares beneficially owned of record by B. Riley & Co., LLC, comprised of:

a. 48,076 shares of common stock held outright; and

b. a warrant to purchase 12,019 shares dated February 11, 2005.

EX-99.4 5 y47162a6exv99w4.htm EX-99.4: WARRANT AMENDMENT AGREEMENT EX-99.4

EXHIBIT 99.4

DYNTEK, INC.

WARRANT AMENDMENT AGREEMENT

This Warrant Amendment Agreement (this “Warrant Amendment”) is entered into as of January 10, 2008, by and among DynTek, Inc., a Delaware corporation (the “Company”), and Lloyd I. Miller, III (the “Holder”).

RECITALS

WHEREAS, pursuant to the terms of that certain Note Purchase Agreement, dated as of March 8, 2006, as amended (as so amended, the “Purchase Agreement”), the Company issued to the Holder a warrant for the purchase of up to that number of shares of Common Stock of the Company equal to 15.81% of the shares of capital stock of the Company outstanding at the time of exercise, calculated on a fully diluted basis, with an exercise price of $0.001 per share (the “Warrant”);

WHEREAS, concurrently with the execution of this Warrant Amendment, the Company is entering into a First Amendment to Junior Secured Convertible Note Purchase Agreement and Security and Pledge Agreement with Trust A-4 – Lloyd I. Miller pursuant to which the Company shall issue and sell to Trust A-4 an additional junior secured convertible promissory note in the initial principal amount of $1,800,000 (the “New Debt Financing”);

WHEREAS, the Company and the Holder desire to amend the Warrant by amending the number of shares issuable upon exercise thereof, such that the number of shares of Common Stock of the Company issuable upon exercise of the Warrant shall be equal to 15.81% of the shares of capital stock of the Company outstanding immediately following the consummation of the New Debt Financing, calculated on a fully diluted basis;

WHEREAS, the number of shares of capital stock of the Company outstanding immediately following the consummation of the New Debt Financing, calculated on a fully diluted basis, equals 342,705,100; and

WHEREAS, the number of shares of Common Stock of the Company issuable upon exercise of the Warrant shall equal 54,205,392, subject to further adjustment as set forth in the Warrant.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual promises of the parties, the parties agree as follows:

1. Amendment.

1.1 The first paragraph of the Warrant is hereby amended in its entirety to read as follows:

“This is to certify that, in exchange for the Warrantholder’s commitment to purchase one or more of the Company’s Senior Secured Promissory Notes, due March 1, 2010, in the original aggregate principal amount of $5,300,000, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the

terms and conditions set forth below, the Warrantholder is entitled to purchase, and the Company promises and agrees to sell and issue to the Warrantholder, at any time on or after March 8, 2006 (the “Effective Date”), pursuant to Section 2 hereof, up to 54,205,392 shares of Common Stock of the Company, subject to further adjustment as set forth herein.”

1.2 Section 3(a) of the Warrant is hereby amended in its entirety to read as follows:

“(a) If the Company at any time or from time to time after the date of this Warrant effects a subdivision of shares of its Common Stock, the number of shares of Common Stock issuable to Warrantholder immediately before that subdivision shall be proportionately increased, and conversely, if the Company at any time or from time to time after the date of this Warrant combines shares of Common Stock into a smaller number of shares, the number of shares of Common Stock issuable to Warrantholder immediately before the combination shall be proportionately decreased. Any adjustment under this clause (a) shall become effective at the close of business on the date the subdivision or combination becomes effective. The number of shares of Common Stock issuable to Warrantholder, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a). Notwithstanding the fact that the Company may divide its Common Stock into a greater number of shares or combine its Common Stock into a small number of shares, in no event shall the Exercise Price be increased as a result of such action with respect to the Common Stock of the Company.”

1.3 Section 4 of the Warrant is hereby amended in its entirety to read as follows:

“4. Registration. Warrantholder shall have the registration rights as set forth in that certain Registration Rights Agreement, dated as of the date of the Warrant Amendment, by and among, the Company and the investors named on the signature pages thereto.”

2. Effect of Amendment. Except as herein amended, the Warrant shall in all other respects remain unchanged and shall remain in full force and effect following the effectiveness of this Warrant Amendment.

3. Representations. The Company hereby represents and warrants as of the date hereof that (i) it has full power and authority to enter into this Warrant Amendment; (ii) this Warrant Amendment has been duly authorized, is valid and enforceable against it, and is not in contravention of any law, order or agreement by which it is bound; and (iii) the authorized capital stock of the Company consists of 450,000,000 shares of Common Stock, of which 58,234,989 shares are issued and outstanding, and 10,000,000 shares of Preferred Stock, none of which are issued and outstanding. The number of shares of Common Stock outstanding immediately following the consummation of the New Debt Financing, calculated on a fully diluted basis, equals 342,705,100.

4. Counterparts. This Warrant Amendment may be executed in two or more counterparts, each of which will be considered an original, but all of which together will constitute the same instrument.

5. Entire Agreement. This Warrant Amendment, the Warrant, the exhibits and schedules thereto and the Registration Rights Agreement 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.

6. Governing Law. This Warrant Amendment will be governed and construed in accordance with the laws of the State of Delaware without regard to principles of conflict of laws.

7. Survivial. All representations, warranties, covenants and agreements made herein shall survive the execution and delivery of this Warrant Amendment.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the undersigned have caused this Warrant Amendment to be duly executed and delivered as of the date first set forth above.


	THE COMPANY: DYNTEK, INC.
	By:
		Casper W. Zublin, Jr.
		Chief Executive Officer


HOLDER:

LLOYD I. MILLER, III

By:		Lloyd I. Miller, III

EX-99.5 6 y47162a6exv99w5.htm EX-99.5: THIRD AMENDMENT TO NOTE PURCHASE AGREEMENT, SECURITY AND PLEDGE AGREEMENTS AND OUTSTANDING NOTES EX-99.5

EXHIBIT 99.5

THIRD AMENDMENT

NOTE PURCHASE AGREEMENT,

SECURITY AND PLEDGE AGREEMENTS

AND

OUTSTANDING NOTES

dated as of

January 10, 2008

among

DYNTEK, INC.,

DYNTEK SERVICES, INC.

and

THE PURCHASERS NAMED HEREIN

THIRD AMENDMENT TO NOTE PURCHASE AGREEMENT, SECURITY AND
PLEDGE AGREEMENTS AND OUTSTANDING NOTES

THIS THIRD AMENDMENT TO NOTE PURCHASE AGREEMENT, SECURITY AND PLEDGE AGREEMENTS AND OUTSTANDING NOTES (this “Third Amendment”) dated as of January 10, 2008, is entered into 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”), as amended by that certain First Amendment to Note Purchase Agreement dated as of June 15, 2006 (the “First Amendment”), and as further amended by that certain Second Amendment to Note Purchase Agreement and to Security and Pledge Agreements dated as of September 26, 2006 (the “Second Amendment,” and together with the Purchase Agreement and the First Amendment, the “Amended Purchase Agreement”), pursuant to which, among other things, (i) the Company has issued and sold to the Purchasers an initial aggregate principal amount of $6,700,000 of its senior secured promissory notes (the “Senior Notes”), and (ii) the Company has issued and sold to Trust A-4 — Lloyd I. Miller (“Trust A-4”) junior secured convertible promissory notes in the initial aggregate principal amounts of $3,000,000 (the “First Junior Note”), $1,000,000 (the “Second Junior Note”) and $3,000,000 (the “Third Junior Note,” and together with the Senior Notes, the First Junior Note and the Second Junior Note, the “Outstanding Notes”), respectively;

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 (as amended) (the “Security Agreements” and, collectively referred to herein with the Outstanding Notes and the Amended Purchase Agreement as the “Note Documents”), each dated as of March 8, 2006, and amended as of June 15 and September 26, 2006, respectively, by and among the Debtors and the Purchasers (in respect of the Senior Notes) (the “Senior Security Agreement”) and by and between the Debtors and Trust A-4 (in respect of the Outstanding 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 aggregate principal amount of $1,800,000 (the “Additional Junior Note”), pursuant to the terms and conditions of that certain Junior Secured Convertible Note Purchase Agreement dated as of April 13, 2007, as amended by that certain First Amendment to Junior Secured Convertible Note Purchase Agreement and to Security and Pledge Agreement dated as of an even date herewith;

D. WHEREAS, as a condition to the purchase and sale of the Additional Junior Note, the Company and the Purchasers have agreed to amend certain provisions of the Amended

Purchase Agreement, amend certain provisions of the Outstanding Notes, update the Disclosure Schedules to the Note Documents and the Debtors have also agreed to ratify and affirm all of their respective obligations under the Note Documents.

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

Section 2. Amendments to Amended 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 each of the First Amendment, Second Amendment and Third Amendment, respectively, and as the same may be amended, modified, supplemented or restated from time to time in accordance herewith.

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

“Third Amendment” means the Third Amendment to Note Purchase Agreement, dated as of January 10, 2008, by and among the Debtors and the Purchasers.

2.2 Further Amendments to Amended Purchase Agreement

(a) Section 1.01 is hereby amended in its entirety to read as follows:

“The Company has authorized the issuance and sale to the Purchasers, in the respective amounts set forth in the Schedule of Purchasers attached hereto in Schedule I, of the Company’s Senior Secured Promissory Notes, due March 1, 2011 (the “Senior Note Maturity Date”), in the original aggregate principal amount of up to $6,700,000. The Senior Notes will be substantially in the form set forth in Exhibit A hereto and are herein referred to individually as a “Senior Note” and collectively as the “Senior Notes,” which terms will also include any notes delivered in exchange or replacement therefor.”

(b) Section 1.05 is hereby amended in its entirety to read as follows:

“The Senior Notes will accrue interest at the rate of 8% per annum if paid in cash or 11% per annum if paid in kind. The Company in its sole discretion may elect to pay in cash or in kind until March 31, 2010, after which interest will be paid in cash. Interest will be due and payable quarterly in arrears on the last day of each fiscal quarter (each, a “Senior Note Interest Payment Date”), with the first interest payment due June 30, 2006. If the Company chooses to make interest payments in kind, the amount of accrued interest to be so paid will be added to the principal amount of the Senior Notes on the applicable Senior Note Interest Payment Date. Principal will be amortized over four years and payable in equal monthly installments on the last day of each month beginning on March 31, 2010. The Senior Notes and all accrued but unpaid interest thereon shall be due and payable in full at the Senior Note Maturity Date unless earlier redeemed pursuant to the terms and conditions set forth in Section 1.06 herein.”

“The Junior Notes will accrue interest at the rate of ten percent (10%) per annum, compounding quarterly. 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 Company’s sole option, all interest payments due and payable through June 30, 2010 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 applicable Junior Note on the applicable Interest Payment Date, and interest will accrue on the aggregate principal amount. All interest payments due and payable after June 30, 2010 must be paid in cash. The Junior Notes shall be due and payable in full at the Junior Note Maturity Date unless earlier converted in accordance with Section 3 of the Junior Notes.”

(d) Article VI (Registration Rights) of the Purchase Agreement is deleted in its entirety and replaced with “Intentionally left blank.”

Section 3. Updated Disclosure Schedules. The Disclosure Schedules to the Note Documents are updated where necessary as set forth in Exhibit A to this Third Amendment (the “Updated Disclosure Schedules”). Such modifications are not intended and do not remove any information that had previously been disclosed by the Debtors pursuant to the Disclosure Schedules furnished on March 8, 2006, as updated and furnished on June 15 and September 26, 2006. The Debtors hereby represent and warrant to the Purchasers that all of the information set forth in the Disclosure Schedules as modified and supplemented by the Updated Disclosure Schedules is true, correct and complete in its entirety.

Section 4. Registration Rights. Concurrently with the execution of this Third Amendment, the parties hereto, Milfam II L.P., and B. Riley & Co., LLC are entering into a Registration Rights Agreement (the “Registration Rights Agreement”) which shall govern the rights of the parties thereto to cause the Company to register for resale the

shares of Common Stock of the Company issuable upon the exercise of the First Junior Note, the Second Junior Note, the Third Junior Note and other certain shares of Common Stock issued or issuable by the Company to the parties thereto, including without limitation, the shares issuable by the Company upon exercise of those certain 19.9% warrants, dated March 8, 2006, as amended, as more particularly described in the Registration Rights Agreement. The Company will use its commercially reasonable best efforts to comply at all times with all of the terms and conditions of the Registration Rights Agreement.

Section 5. Amendments to Original Junior Notes.

5.1 Amendment to Senior Notes.

(a) The first paragraph of the Senior Note issued to Lloyd I. Miller, III is hereby amended in its entirety to read as follows:

“FOR VALUE RECEIVED, subject to the terms and conditions of this 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 Lloyd I. Miller, III (the “Holder”) with his principal office located at 4550 Gordon Drive, Naples, Florida, 34102, the principal sum of Five Million Three Hundred Thousand Dollars ($5,300,000), 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 5(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 at the rate of eight percent (8%) 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 through March 31, 2010 may be paid in kind at the rate of eleven percent (11%) 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. Principal will be amortized over four years and payable, as set forth on Schedule A, in equal monthly installments on the last day of each month beginning on March 31, 2010, with the balance to be paid in full on the Maturity Date. All interest payments due and payable after March 31, 2010 must be paid in cash.”

(b) The first paragraph of the Senior Note issued to Riley Investment Partners Master Fund, L.P. is hereby amended in its entirety to read as follows:

“FOR VALUE RECEIVED, subject to the terms and conditions of this 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 Riley Investment Partners Master Fund, L.P. (the “Holder”) with its principal office located at c/o Appleby Corporate Services (Cayman) Limited, PO Box 1350 GT, Clifton House, 75 Fort Street, George Town, Grand Cayman, Cayman Islands, the principal sum of One Million Four Hundred Thousand Dollars ($1,400,000), 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 5(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 at the rate of eight percent (8%) 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 through March 31, 2010 may be paid in kind at the rate of eleven percent (11%) 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. Principal will be amortized over four years and payable, as set forth on Schedule A, in equal monthly installments on the last day of each month beginning on March 31, 2010, with the balance to be paid in full on the Maturity Date. All interest payments due and payable after March 31, 2010 must be paid in cash.”

5.2 Amendment to First Junior Note. The last two sentences of the first paragraph of the First Junior Note is hereby amended in its entirety to read as follows:

“At the Borrower’s sole option, all interest payments due and payable before June 30, 2010 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, 2010 must be paid in cash.”

5.3 Amendment to Second Junior Note. The last two sentences of the first paragraph of the Second Junior Note is hereby amended in its entirety to read as follows:

5.4 Amendment to Third Junior Note. The last two sentences of the first paragraph of the Third Junior Note is hereby amended in its entirety to read as follows:

Section 6. Conditions Precedent. This Third Amendment shall not become effective until the date on which each of the following conditions are satisfied (the “Effective Date”):

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

(c) the parties shall have received this Third 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 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 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 6 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; and

(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 Third Amendment, 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 Third Amendment; and (B) to the incumbency and specimen signature of each officer of the Company executing this Third Amendment, 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.

Section 7. Miscellaneous.

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

7.2 Ratification and Affirmation; Representations and Warranties. The Debtors each hereby (a) acknowledge the terms of this Third 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 Third Amendment: (i) 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, all of the representations and warranties contained in each Note Document to which it is a party are true and correct, including without limitation, the information contained in the updated Disclosure Schedules of the Note Documents attached hereto as Exhibit A, and (ii) no Event of Default under the Amended Purchase Agreement nor Default under the Security Agreements has occurred and is continuing. The Company further represents and warrants to the Purchasers that from and after the date of the Amended Purchase Agreement until the date of this Third Amendment, no changes have been made to the Certificate of Incorporation of the Company nor the Bylaws of the Company.

7.3 Reference to Note Documents. Upon the effectiveness of this Third Amendment, each reference in the Purchase Agreement or the Security Agreements, as applicable, to “this Agreement,” “hereunder,” or words of like import shall mean and be a reference to the Purchase Agreement or the Security Agreements, as applicable, as amended by this Third Amendment.

7.4 Breach of Third Amendment. This Third Amendment shall be part of the Purchase Agreement and the Security Agreements and a breach in any material respect of any representation, warranty or covenant herein shall constitute an Event of Default or a Default, as applicable.

7.5 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 Third Amendment.

7.6 Counterparts. This Third Amendment may be executed by two 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 Third Amendment by facsimile transmission or electronic mail shall be effective as delivery of a manually executed counterpart hereof.

7.7 ENTIRE AGREEMENT. THIS THIRD AMENDMENT, THE AMENDED PURCHASE AGREEMENT, THE OUTSTANDING NOTES 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.

7.8 GOVERNING LAW. THIS THIRD 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 Third Amendment to be duly executed as of the date first written above.


	DEBTORS: DYNTEK, INC.
	By:
		Casper W. Zublin, Jr.
		Chief Executive Officer

	DYNTEK SERVICES, INC.
	By:
		Casper W. Zublin, Jr.
		Chief Executive Officer


PURCHASERS:

RILEY INVESTMENT PARTNERS MASTER FUND, L.P.

By:
Name:
Title:


LLOYD I. MILLER, III

By:
Name:		Lloyd I. Miller, III

TRUST A-4 - LLOYD I. MILLER

By: PNC Bank, National Association, as Trustee

By:
Name:		Lloyd I. Miller, III
Title:		Investment Advisor to Trustee

EXHIBIT A

UPDATED DISCLOSURE SCHEDULES TO EACH OF THE NOTE DOCUMENTS

UPDATED DISCLOSURE SCHEDULES TO AMENDED NOTE PURCHASE AGREEMENT

These Updated Disclosure Schedules are being furnished pursuant to that certain Note Purchase Agreement, dated as of March 8, 2006, by and among the Company and the purchasers (the “Purchasers”) named therein (the “Note Purchase Agreement”), as amended by that certain First Amendment to Note Purchase Agreement, dated as of June 15, 2006, by and among the Company, DynTek Services, Inc. (“DSI”) and the Purchasers (the “First Amendment”), that certain Second Amendment to Note Purchase Agreement, dated as of September 26, 2006, by and among the same parties (the “Second Amendment”) and that certain Third Amendment to Note Purchase Agreement, dated as of January [___], 2008, by and among the same parties (the “Third Amendment” and collectively with the Note Purchase Agreement, the First Amendment and the Second Amendment, referred to herein as the “Amended Note Purchase Agreement”). The Updated Disclosure Schedules only update the Disclosure Schedules furnished to the Purchasers on March 8, 2006 as updated on September 26, 2006, and do not restate the disclosures set forth therein in their entirety.

Each Section below qualifies the correspondingly numbered section or subsection thereof in Article IV of the Amended Note Purchase Agreement, as applicable. Terms of documents summarized herein are qualified in their entirety by the documents themselves, provided that nothing is misleading in such summaries. The titles and headings used herein are for reference purposes only and shall not in any manner limit the construction of these Schedules, and any disclosure made under any subheading hereunder is deemed made for all provisions of that corresponding section in the Amended Note Purchase Agreement.

Section 2.02

Authorization of Agreements, Etc.

(a) Section 2.2 of that certain Security and Pledge Agreement, dated March 8, 2006, as amended, by and among the Company, DSI, Lloyd I. Miller, III, and SACC Partners, L.P. (the “Senior Security Agreement”), as well as Section 2.2 of that certain Security and Pledge Agreement, dated March 8, 2006, as amended, by and among the Company, DSI, and Trust A-4 — Lloyd I. Miller (the “Junior Security Agreement”), provides that the Company and DSI are, and as to Collateral (as defined therein) acquired by it from time to time after the date hereof will be, the owner of all Collateral pledged by it hereunder free from any lien, security interest, encumbrance or other right, title or interest of any person or entity. None of the terms and conditions of the Senior Security Agreement or the Junior Security Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each of the Company, DSI and the holders of at least a majority of the outstanding principal amount of the Senior Notes with respect to the Senior Security Agreement, and the Company, DSI and the holders of at least a majority of the outstanding principal amount of the Junior Notes with respect to the Junior Security Agreement.

Section 2.04

Authorized Capital Stock

As of the date hereof, there are 58,234,989 shares of Common Stock and no shares of Preferred Stock validly issued and outstanding.

Section 2.05

SEC Filings, Other Filings and Regulatory Compliance

As of the date hereof, the Company has timely made all filings required to be made by it under the Exchange Act. However, on December 19, 2007, the Company filed a Form 15 to deregister its Common Stock with the SEC and terminate or suspend, as applicable, its obligation to file periodic reports pursuant to Sections 13(a) and 15(d) of the Exchange Act.

Section 2.08

Material Changes

(iii) (1) On October 6, 2006, the Company entered into an Asset Purchase Agreement for substantially all of the assets of TekConnect, Inc. In consideration for the purchased assets, the Company paid to sellers $400,000 at closing, incurred $63,000 of direct acquisition costs and assumed $540,000 pre-existing contract obligations.

(2) On October 27, 2006, the Company, DynTek Canada, an Ontario corporation and wholly-owned subsidiary of the Company, Sensible Security Solutions, Inc., an Ontario corporation (“SSS”), and Paul Saucier, an individual and 100% owner of SSS, entered into an asset purchase agreement for the acquisition by DynTek Canada of substantially all of the assets of SSS. In consideration of the purchased assets, we paid SSS at closing a cash payment of $1.1 million, and also issued 1,485,148 shares of our Common Stock to SSS with an aggregate fair value of $300,000. The Company is obligated to make additional payments of up to $4.7 million over a three-year period based upon the achievement of certain EBITDA performance targets.

(3) On September 26, 2006, the Company entered into a Second Amendment to Note Purchase Agreement (the “Second Amendment”), pursuant to which the Company issued to Trust A-4 — Lloyd I. Miller a Junior Secured Convertible Note in the aggregate principal amount of $3,000,000 (the “Third Junior Note”). In January of 2007, the Company received a comment letter on a Registration Statement on Form S-1 indicating that the Company may have violated Section 5 of the Securities Act in connection with its issuance of the Third Junior Note. An investor’s remedy for violations of Section 5 of the Securities Act could include making a demand for a rescission of the investment. While the Company believes that its issuance of these securities was in compliance with Section 5 and any other applicable regulations, it nonetheless requested and received from each of Lloyd I. Miller, III, SACC Partners, L.P. and Trust A-4 — Lloyd I. Miller waivers and releases of any rescission rights in connection with any such potential Section 5 violation. The Company obtained such waivers on February 2, 2007.

(4) On March 28, 2007, the Company entered into a Business Lease Agreement with Hewlett-Packard Financial Services Company, pursuant to which the Company has agreed to lease certain equipment set forth on Annex I thereto. The monthly lease payment is $951.76 and the term of the lease is 36 months.

(5) On July 1, 2007, the Company entered into an asset purchase agreement for substantially all of the assets of Coast Business Solutions, Inc. In consideration of the purchased assets, the Company paid approximately $200,000 to the sellers at closing.

(iv) (1) In connection with the transactions contemplated by the Amended Note Purchase Agreement, DynTek has agreed to pledge 66.0% of the stock of DynTek Canada, Inc., a wholly-owned subsidiary of DynTek.

Section 2.09

Litigation

Section 2.10

Ownership of Property; Liens

None.

UPDATED DISCLOSURE SCHEDULES TO SENIOR SECURITY AND PLEDGE AGREEMENT

These Updated Disclosure Schedules are being furnished pursuant to that certain Security and Pledge Agreement dated March 8, 2006, by and between the Company, DSI and the Purchasers named therein (the “Senior Security Agreement”), as amended by that certain Waiver and First Amendment to Security and Pledge Agreement, dated as of June 15, 2006 (the “First Security Amendment”) and that certain Second Amendment to Note Purchase Agreement and Security Pledge Agreements, dated as of September 26, 2006 (the “Second Security Amendment”) and that certain Third Amendment to Note Purchase Agreement, Security and Pledge Agreements and Outstanding Notes (the “Third Security Amendment” and collectively with the Senior Security Agreement, the First Security Amendment and the Second Security Amendment, referred to herein as the “Senior Security and Pledge Agreement”). The Updated Disclosure Schedules update the Disclosure Schedules furnished to the Purchasers on March 8, 2006, as amended by the First Security Amendment, and as further updated by the Second Security Amendment. The Updated Disclosure Schedules only update the Disclosure Schedules furnished to the Purchasers on March 8, 2006, as amended and updated, and do not restate the disclosures set forth therein in their entirety.

Terms of documents summarized herein are qualified in their entirety by the documents themselves, provided that nothing is misleading in such summaries. The titles and headings used herein are for reference purposes only and shall not in any manner limit the construction of these Schedules, and any disclosure made under any subheading hereunder is deemed made for all provisions of that corresponding section in the Senior Security and Pledge Agreement.

Schedule B

Commercial Tort Claims

UPDATED DISCLOSURE SCHEDULES TO JUNIOR SECURITY AND PLEDGE AGREEMENT

These Updated Disclosure Schedules are being furnished pursuant to that certain Security and Pledge Agreement dated March 8, 2006, by and between the Company, DSI and the Purchasers named therein (the “Junior Security Agreement”), as amended by that certain Waiver and First Amendment to Security and Pledge Agreement, dated as of June 15, 2006 (the “First Security Amendment”) and that certain Second Amendment to Note Purchase Agreement and Security Pledge Agreements, dated as of September 26, 2006 (the “Second Security Amendment”) and that certain Third Amendment to Note Purchase Agreement, Security and Pledge Agreements and Outstanding Notes (the “Third Security Amendment” and collectively with the Junior Security Agreement, the First Security Amendment and the Second Security Amendment, referred to herein as the “Junior Security and Pledge Agreement”). The Updated Disclosure Schedules update the Disclosure Schedules furnished to the Purchasers on March 8, 2006, as amended by the First Security Amendment, and as further updated by the Second Security Amendment. The Updated Disclosure Schedules only update the Disclosure Schedules furnished to the Purchasers on March 8, 2006, as amended and updated, and do not restate the disclosures set forth therein in their entirety.

Schedule B

Commercial Tort Claims

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