Exhibit 99.5
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THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT
(i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME
EFFECTIVE AND IS CURRENT WITH RESPECT TO THE SECURITIES, OR (ii) PURSUANT TO A
SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON THE HOLDER
HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE,
"BLUE SKY" OR SIMILAR SECURITIES LAW.
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October 15, 2004
WARRANT
DYNTEK, INC.
For good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged by DynTek, Inc., a Delaware corporation, with its
principal office at 00000 Xxx Xxxxxx Xxx., Xxxxxx, XX 00000 (the "Company"), DC
Asset Management LLC (the "Holder"), of 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000,
subject to the terms and conditions of this Warrant, is hereby granted the right
to purchase, at the initial exercise price (the "Initial Exercise Price") of
$0.50 per share of common stock, $0.0001 par value, of the Company (the "Common
Stock"), at any one or more times after the date hereof until 5:00 p.m. on
September 30, 2009, in the aggregate, 1,150,000 shares of Common Stock (the
"Shares") subject to adjustment as provided in Section 5 hereof.
This Warrant initially is exercisable at the Initial Exercise Price
payable in cash (except as provided below), by wire transfer of immediately
available funds or other form of payment satisfactory to the Company, subject to
adjustment as provided in Section 5 hereof.
1. Exercise of Warrant. The purchase rights represented by this Warrant
are exercisable at the option of the Holder hereof, in whole or in part, at one
or more times during any period in which this Warrant may be exercised as set
forth above. The Holder shall not be deemed to have exercised its purchase
rights hereunder until the Company receives written notice of the Holder's
intent to exercise its purchase rights hereunder. The written notice shall be in
the form of the Subscription Form attached hereto and made a part hereof. Less
than all of the Shares may be purchased under this Warrant. In lieu of
exercising this Warrant by the payment of cash, the Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election, in which event the Company shall issue to the holder
hereof a number of shares of Common Stock computed using the following formula:
Y (A - B)
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X = A
Where
X -- The number of shares of Common Stock to be issued to the
Holder pursuant to this net exercise;
Y -- The number of shares of Common Stock in respect of which the
exercise election is made;
A -- The Market Price of one share of the Company's Common Stock at
the time the exercise election is made;
B -- The Exercise Price (as adjusted to the date of net exercise).
In addition to issuing to the Holder the number of shares represented by
"X" in the forgoing formula pursuant to such exercise, the Company shall also
reduce the number of Shares covered by this Warrant by the number of shares
represented by "Y" in the foregoing formula.
As used herein, the term "Market Price" shall mean the average of the
closing price of the Company's Common Stock on any national securities exchange,
on the Nasdaq National Market or the Nasdaq SmallCap Market, or, if the
Company's Common Stock is not so listed on any national securities exchange, on
the Nasdaq National Market or the Nasdaq SmallCap Market, then on the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, for the ten (10) trading
days prior to the date the Holder exercises this Warrant.
2. Issuance of Certificates. Upon the exercise of this Warrant, the
issuance of certificates for Shares underlying this Warrant shall be made
forthwith (and in any event within three days) after the Company's receipt of
(i) written notice hereunder as specified in Section 1 above) and/or (ii) funds
in respect of the Purchase Price (as defined in Section 4(b) hereof) pursuant to
Section 4 hereof for the shares so exercised and such certificates shall be
issued in the name of the Holder hereof.
3. Restriction on Transfer; Investment Representations; Registration
Rights.
(a) Restriction on Transfer. The Holder acknowledges that neither
this Warrant nor any Shares issuable upon exercise hereof have been registered
under the Securities Act of 1933, as amended (the "Act"), and neither may be
sold or transferred in whole or in part unless the Holder shall have first given
prior written notice to the Company describing such sale or transfer and
furnished to the Company an opinion of counsel reasonably satisfactory to the
Company, to the effect that the proposed sale or transfer may be made without
registration under the Act; provided, however, that the foregoing shall not
apply if there is in effect a registration statement with respect to this
Warrant or the Shares issuable upon exercise hereof, as the case may be, at the
time of the proposed sale or transfer. If that is not the case, then upon
exercise, in part or in
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whole, of this Warrant, each certificate issued representing the Shares
underlying this Warrant shall bear a legend to the foregoing effect.
(b) Investment Representations. The Holder represents that: (i) it
is an accredited investor within the meaning of Regulation D under the Act; (ii)
it is acquiring this Warrant and upon exercise hereof, the Shares, for its own
account for investment only, and not with a view towards, or for resale in
connection with, their distribution; (iii) it has had an opportunity to discuss
the Company's business and affairs with management of the Company and is
satisfied with the results thereof; (iv) it has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of its investment; and (v) it has received a copy of
the Company's Annual Report on Form 10-K relating to fiscal year ended June 30,
2004.
(c) Registration Rights. The Holder shall have such rights to
request the Company to register all or any of the Shares issuable upon exercise
of this Warrant as set forth in the Registration Rights Agreement, dated the
date hereof, by and among the Company, Holder and other purchasers named in
Schedule 1 thereto.
4. Price.
(a) Initial and Adjusted Purchase Price. The initial Purchase Price
shall be equal to the Initial Exercise Price. The adjusted Purchase Price shall
be the price that shall result from time to time from any and all adjustments of
the initial purchase price in accordance with the provisions of Section 5
hereof.
(b) Purchase Price. The term "Purchase Price" herein shall mean the
initial Purchase Price or the adjusted Purchase Price, as the case may be.
5. Adjustments of Purchase Price and Number of Shares. The Shares subject
to this Warrant and the Purchase Price thereof shall be appropriately adjusted
by the Company in accordance herewith.
(a) Adjustment to Purchase Price and Number of Shares. In case,
prior to the expiration of this Warrant by exercise or by its terms, the Company
shall issue any shares of its Common Stock as a stock dividend or subdivide the
number of outstanding shares of its Common Stock into a greater number of
shares, then in either of such cases, the then applicable purchase price per
share of the shares of Common Stock purchasable pursuant to this Warrant in
effect at the time of such action shall be proportionately reduced and the
number of shares at that time purchasable pursuant to this Warrant shall be
proportionately increased; and conversely, in the event the Company shall
contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the then applicable
purchase price per share of the shares of Common Stock purchasable pursuant to
this Warrant in effect at the time of such action shall be proportionately
increased and the number or shares of Common Stock purchasable pursuant to this
Warrant shall be proportionately decreased. If the Company shall, at any time
during the term of this Warrant, declare a dividend payable in cash on its
Common Stock and shall, at substantially the same time, offer to its
stockholders a right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially
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equal to the dividend, all Common Stock so issued shall, for the purpose of this
Warrant, be deemed to have been issued as a stock dividend. Any dividend paid or
distributed upon the Common Stock shall be treated as a dividend paid in Common
Stock to the extent that shares of Common Stock are issuable upon conversion
thereof.
(b) Purchase Price Reset Provision. In the event that prior to the
expiration of this Warrant the Company sells publicly or privately (i) shares of
its Common Stock, (ii) securities convertible into shares of its Common Stock,
or (iii) options or warrants to purchase shares of its Common Stock or
securities convertible into shares of its Common Stock at a sale, conversion or
exercise price per share (the "Issue Price"), as the case may be, less than the
Purchase Price then in effect, the Purchase Price shall be reset to the Issue
Price and the number of shares purchasable pursuant to this Warrant shall be
increased pro rata to the percentage reduction in the Purchase Price, provided,
however, that the reset provision shall not apply to (x) any shares issued upon
exercise or conversion of any currently outstanding options, warrants or
convertible securities, or (y) any Common Stock options or warrants issuable
pursuant to an existing employee stock option plan or other existing
compensation arrangement or any underlying Common Stock issued on the exercise
thereof, but not pursuant to any amendment relating thereto to the extent such
amendment increases the number of shares issuable under such plan or
arrangement. The Issue Price shall be calculated taking into account the amount
paid for the issuance of such Common Stock, option or warrant or convertible
security and the amount, if any, payable upon the exercise or conversion
thereof. Notwithstanding the foregoing, no adjustment shall be made to the
exercise price of the Warrants to the extent such adjustment would cause the
number of shares purchasable pursuant to this Warrant, when aggregated with
other issuances of securities of the Company required to be aggregated in
accordance with the Nasdaq Marketplace Rules and interpretations thereunder, to
exceed nineteen and nine-tenths percent (19.9%) of the Common Stock of the
Company outstanding on the date hereof or the date of the initial issuance under
a prior offering, if such prior offering would be aggregated pursuant to such
Rules and interpretations with the shares purchasable pursuant to this Warrant.
(c) Recapitalization. In case, prior to the expiration of this
Warrant by exercise or by its terms, the Company shall be recapitalized by
reclassifying its outstanding Common Stock, (other than a change in par value to
no par value), or the Company or a successor corporation shall consolidate or
merge with or convey all or substantially all of its or of any successor
corporation's property and assets to any other corporation or corporations (any
such other corporations being included within the meaning of the term "successor
corporation" hereinbefore used in the event of any consolidation or merger of
any such other corporation with, or the sale of all or substantially all of the
property of any such other corporation to, another corporation or corporations),
then, as a condition of such recapitalization, consolidation, merger or
conveyance, lawful and adequate provision shall be made whereby the Holder of
this Warrant shall thereafter have the right to purchase, upon the basis and on
the terms and conditions specified in this Warrant, in lieu of the shares of
Common Stock of the Company theretofore purchasable upon the exercise of this
Warrant, such shares of stock, securities or assets of the other corporation as
to which the Holder of this Warrant would have been entitled had this Warrant
been exercised immediately prior to such recapitalization, consolidation, merger
or conveyance; and in any such event, the rights of the Warrant Holder to any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, as hereinbefore provided, shall continue and be preserved in
respect of any stock which the Holder becomes entitled to purchase.
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(d) Dissolution. In case the Company at any time while this Warrant
shall remain unexpired and unexercised shall sell all or substantially all of
its property or dissolve, liquidate or wind up its affairs, lawful provision
shall be made as part of the terms of any such sale, dissolution, liquidation or
winding up, so that the Holder of this Warrant may thereafter receive upon
exercise hereof in lieu of each share of Common Stock of the Company which it
would have been entitled to receive, the same kind and amount of any securities
or assets as may be issuable, distributable or payable upon any such sale,
dissolution, liquidation or winding up with respect to each share of Common
Stock of the Company; provided, however, that in any case of any such sale or of
dissolution, liquidation or winding up, the right to exercise this Warrant shall
terminate on a date fixed by the Company. Such date so fixed shall be no earlier
than 3 P.M. New York City Time, on the thirtieth (30th) day next succeeding the
date on which notice of such termination of the right to exercise this Warrant
has been given by mail to the registered Holder of this Warrant at its address
as it appears on the books of the Company.
(e) No Fractional Shares. Upon any exercise of this Warrant by the
Holder, the Company shall not be required to deliver fractions of one share, but
adjustment in the purchase price payable by the Holder shall be made in respect
of any such fraction of one share on the basis of the purchase price per share
then applicable upon exercise of this Warrant.
(f) Notices. In the event that, prior to the expiration of this
Warrant by exercise or by its terms, the Company shall determine to take a
record of its stockholders for the purpose of determining stockholders entitled
to receive any dividend, stock dividend, distribution or other right whether or
not it may cause any change or adjustment in the number, amount, price or nature
of the securities or assets deliverable upon the exercise of this Warrant
pursuant to the foregoing provisions, the Company shall give at least ten days'
prior written notice to the effect that it intends to take such record to the
registered Holder of this Warrant at its address as it appears on the books of
the Company, said notice to specify the date as of which such record is to be
taken, the purpose for which such record is to be taken, and the effect which
the action which may be taken will have upon this Warrant.
(g) Registered Owner. The Company may deem and treat the registered
Holder of the Warrant at any time as the absolute owner hereof for all purposes,
and shall not be affected by any notice to the contrary.
(h) Status. This Warrant shall not entitle any Holder thereof to any
of the rights of a stockholder, and shall not entitle any Holder thereof to any
dividend declared upon the Common Stock unless the Holder shall have exercised
the within Warrant and purchased the shares of Common Stock prior to the record
date fixed by the Board of Directors for the determination of holders of Common
Stock entitled to exercise any such rights or receive said dividend.
6. Replacement of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in case of such loss, theft, destruction or mutilation, of
indemnity or security reasonably satisfactory to it in its sole discretion, and
reimbursement to the Company of all expenses incidental or relating thereto, and
upon surrender and cancellation of this Warrant (unless lost, stolen or
destroyed), the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
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7. Notices to Warrant Holder. Except as set forth in Section 5(f) hereto,
nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of this Warrant, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth on the first page of
this Warrant or to such other address as the Company may designate by notice to
the Holder.
9. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, permitted successors
and permitted assigns. This Warrant may not be transferred without the prior
written consent of the Company. Any attempted assignment in violation of the
preceding sentence shall be void and of no effect.
10. Holdings. The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
11. Law Governing. This Warrant is delivered in the State of New York and
shall be construed and enforced in accordance with, and governed by, the laws of
the State of New York, without giving effect to conflicts of law principles.
Each of the parties agrees to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Warrant and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its corporate name by, and such signature to be attested to by, a duly
authorized officer as of the date first above written.
DYNTEK, INC.
By: _____________________________
Name: Xxxxxx X. Xxxx
Title: Chief Executive Officer
ACCEPTED AND AGREED:
DC ASSET MANAGEMENT LLC
By: _______________________________
Name:
Title:
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ASSIGNMENT
(To Be Executed By the Registered Holder
to Effect a Transfer of the Within Warrant)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
the right to purchase Common Stock evidenced by the within Warrant, to the
extent ___________ of shares of Common Stock, and does hereby irrevocably
constitute and appoint _________________________________________________________
to transfer the said right on the books of the Company, with full power of
substitution.
Dated: ________________________, 20__.
__________________________________
(Signature)
________________________________________________________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the case of the within Warrant in every particular,
without alteration or enlargement, or any change whatsoever and must
be guaranteed by a bank, other than a savings bank or trust company,
having an office or correspondent in New York, or by a firm having
membership on a registered national securities exchange and an
office in New York, New York.
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To DynTek, Inc.
The undersigned hereby elects to [check applicable subsection]:
(a) Purchase _________________ (1) shares of Common Stock of DynTek,
Inc. pursuant to the terms of the attached Warrant and tenders
herewith payment in full for the purchase price of the shares being
purchased, together with all applicable transfer taxes, if any;
OR
(b) Exercise the attached Warrant for ____________ shares of Common
Stock purchasable under the Warrant pursuant to the net exercise
provisions of Section 1 of such Warrant.
The undersigned hereby represents that:
(a) it is an accredited investor within the meaning of Regulation D
under the Act; and
(b) it is acquiring the Shares for its own account for investment only,
and not with a view towards, or for resale in connection with, their
distribution.
Dated:
__________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrants)
__________________________________
(Address)
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(1) Insert here the maximum number of shares or, in the case of a
partial exercise, the portion thereof as to which the Warrant is
being exercised.
