EXHIBIT 10.7

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March 8,
2006, is made by and among DynTek, Inc., a Delaware corporation, with
headquarters located at 19700 Fairchild Road, Suite 230, Irvine, California
92612 (the “Company”), and the investors named on the signature pages hereto,
together with their permitted transferees (each, an “Investor” and collectively,
the “Investors”).

 

RECITALS:

 

A.            The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.

 

B.            The Investors desire, upon the terms and conditions stated in this
Agreement, to purchase in the aggregate up to 225,000,000 shares of the
Company’s Common Stock (the “Common Shares”) and warrants, in the form of
Exhibit A hereto, to purchase such number of shares of the Company’s Common
Stock (the “Warrant Shares”) equal to twenty percent (20%) of the Common Shares,
rounded down to the nearest whole share (the “Warrants,” and collectively with
the Common Shares, the “Securities”), for an aggregate purchase price of up to
Four Million Five Hundred Thousand Dollars ($4,500,000).  The purchase price per
share for each Common Share and corresponding Warrant is $0.02.

 

C.            Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement under which the Company has agreed to provide certain registration
rights under the Securities Act, the rules and regulations promulgated
thereunder and applicable state securities laws.

 

D.            The capitalized terms used herein and not otherwise defined have
the meanings given them in Article IX hereof.

 

In consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Investors hereby agree as follows:

 

ARTICLE I
PURCHASE AND SALE OF SECURITIES

 

1.1           PURCHASE AND SALE OF SECURITIES.  AT THE CLOSING, SUBJECT TO THE
TERMS OF THIS AGREEMENT AND THE SATISFACTION OR WAIVER OF THE CONDITIONS SET
FORTH IN ARTICLES VI AND VII HEREOF, THE COMPANY WILL ISSUE AND SELL TO EACH
INVESTOR, AND EACH INVESTOR WILL (ON A SEVERAL AND NOT A JOINT BASIS) PURCHASE
FROM THE COMPANY, THE NUMBER OF SECURITIES SET FORTH BENEATH SUCH INVESTOR’S
NAME ON THE SIGNATURE PAGES HEREOF.

 

1.2           CLOSING.

 

(A)           THE SEPARATE PURCHASES AND SALES OF AN AGGREGATE OF UP TO
225,000,000 SHARES, FOR AN AGGREGATE PURCHASE PRICE OF UP TO $4,500,000, SHALL
TAKE PLACE AT THE CLOSING TO BE HELD AT 10:00 A.M. LOCAL TIME AT THE OFFICES OF
STRADLING YOCCA CARLSON & RAUTH, 660 NEWPORT CENTER

 

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Drive, Suite 1600, Newport Beach, CA  92660 on March 8, 2006 (the “First Closing
Date”), or at such other time or place as the parties mutually agree.  At or
prior to the First Closing Date, each Investor will pay the purchase price for
the number of Securities set forth beneath its name on the signature
pages hereof, by wire transfer of immediately available funds in accordance with
the wire instructions set forth on Exhibit B hereto.  The Company shall deliver
to each Investor the deliverables identified in Article VII on the First Closing
Date and certificates representing the Common Shares so purchased by such
Investor within five (5) business days following the First Closing Date against
delivery of the purchase price.

 

(B)           AFTER THE FIRST CLOSING DATE, THE COMPANY MAY SELL, ON THE SAME
TERMS AND CONDITIONS AS THOSE CONTAINED IN THIS AGREEMENT, AN AGGREGATE OF UP TO
225,000,000 SHARES LESS THE NUMBER OF SHARES SOLD ON THE FIRST CLOSING DATE, FOR
AN AGGREGATE PURCHASE PRICE OF UP TO $4,500,000 LESS THE AGGREGATE PURCHASE
PRICE RECEIVED ON THE FIRST CLOSING DATE, TO ONE OR MORE INVESTORS (THE
“ADDITIONAL INVESTORS”), PROVIDED THAT (I) SUCH SUBSEQUENT SALE IS CONSUMMATED
PRIOR TO MARCH 31, 2006, UNLESS EXTENDED BY THE COMPANY FOR A PERIOD OF UP TO
NINETY (90) DAYS FROM SUCH DATE, WITHOUT NOTICE TO ANY INVESTORS (THE “SECOND
CLOSING DATE”), AND (II) EACH INVESTOR BECOMES A PARTY TO THIS AGREEMENT AND THE
REGISTRATION RIGHTS AGREEMENT IN THE FORM ATTACHED HERETO AS EXHIBIT C.  AT OR
PRIOR TO THE SECOND CLOSING DATE, EACH INVESTOR WILL PAY THE PURCHASE PRICE FOR
THE NUMBER OF SECURITIES SET FORTH BENEATH ITS NAME ON THE SIGNATURE
PAGES HEREOF, BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS IN ACCORDANCE WITH
THE WIRE INSTRUCTIONS SET FORTH ON EXHIBIT B HERETO.  THE COMPANY SHALL DELIVER
TO EACH ADDITIONAL INVESTOR THE DELIVERABLES IDENTIFIED IN ARTICLE VII ON THE
SECOND CLOSING DATE AND CERTIFICATES REPRESENTING THE COMMON SHARES SO PURCHASED
BY SUCH ADDITIONAL INVESTOR WITHIN FIVE (5) BUSINESS DAYS FOLLOWING THE SECOND
CLOSING DATE AGAINST DELIVERY OF THE PURCHASE PRICE.

 

ARTICLE II
INVESTOR’S REPRESENTATIONS AND WARRANTIES

 

Each Investor represents and warrants to the Company, severally and solely with
respect to itself and its purchase hereunder and not with respect to any other
Investor, that:

 

2.1           INVESTMENT PURPOSE.  THE INVESTOR IS PURCHASING THE SECURITIES FOR
ITS OWN ACCOUNT AND NOT WITH A PRESENT VIEW TOWARD THE PUBLIC SALE OR
DISTRIBUTION THEREOF, EXCEPT PURSUANT TO SALES REGISTERED OR EXEMPTED FROM
REGISTRATION UNDER THE SECURITIES ACT; PROVIDED, HOWEVER, THAT BY MAKING THE
REPRESENTATION HEREIN, THE INVESTOR DOES NOT AGREE TO HOLD ANY OF THE SECURITIES
FOR ANY MINIMUM OR OTHER SPECIFIC TERM AND RESERVES THE RIGHT TO DISPOSE OF THE
SECURITIES AT ANY TIME IN ACCORDANCE WITH OR PURSUANT TO A REGISTRATION
STATEMENT OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.

 

2.2           ACCREDITED INVESTOR STATUS.  THE INVESTOR IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(A) OF REGULATION D.  THE INVESTOR HAS DELIVERED
AN INVESTOR QUESTIONNAIRE IN THE FORM OF EXHIBIT D TO THE COMPANY.

 

2.3           RELIANCE ON EXEMPTIONS.  THE INVESTOR UNDERSTANDS THAT THE
SECURITIES ARE BEING OFFERED AND SOLD TO IT IN RELIANCE UPON SPECIFIC EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF UNITED STATES FEDERAL AND STATE SECURITIES
LAWS AND THAT THE COMPANY IS RELYING UPON THE TRUTH AND ACCURACY OF, AND THE
INVESTOR’S COMPLIANCE WITH, THE REPRESENTATIONS, WARRANTIES, AGREEMENTS,

 

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ACKNOWLEDGMENTS AND UNDERSTANDINGS OF THE INVESTOR SET FORTH HEREIN IN ORDER TO
DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND THE ELIGIBILITY OF THE
INVESTOR TO ACQUIRE THE SECURITIES.

 

2.4           INFORMATION.  THE INVESTOR AND ITS ADVISORS, IF ANY, HAVE BEEN
FURNISHED WITH ALL MATERIALS RELATING TO THE BUSINESS, FINANCES AND OPERATIONS
OF THE COMPANY, AND MATERIALS RELATING TO THE OFFER AND SALE OF THE SECURITIES,
THAT HAVE BEEN REQUESTED BY THE INVESTOR OR ITS ADVISORS, IF ANY.  THE INVESTOR
AND ITS ADVISORS, IF ANY, HAVE BEEN AFFORDED THE OPPORTUNITY TO ASK QUESTIONS OF
THE COMPANY.  NEITHER SUCH INQUIRIES NOR ANY OTHER DUE DILIGENCE INVESTIGATION
CONDUCTED BY INVESTOR OR ANY OF ITS ADVISORS OR REPRESENTATIVES MODIFY, AMEND OR
AFFECT THE INVESTOR’S RIGHT TO RELY ON THE COMPANY’S REPRESENTATIONS AND
WARRANTIES CONTAINED IN ARTICLE III BELOW.  THE INVESTOR ACKNOWLEDGES AND
UNDERSTANDS THAT ITS INVESTMENT IN THE SECURITIES INVOLVES A SIGNIFICANT DEGREE
OF RISK.

 

2.5           GOVERNMENTAL REVIEW.  THE INVESTOR UNDERSTANDS THAT NO UNITED
STATES FEDERAL OR STATE AGENCY OR ANY OTHER GOVERNMENT OR GOVERNMENTAL AGENCY
HAS PASSED UPON OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE SECURITIES OR
AN INVESTMENT THEREIN.

 

2.6           TRANSFER OR RESALE.  THE INVESTOR UNDERSTANDS THAT:

 

(A)           EXCEPT AS PROVIDED IN THE REGISTRATION RIGHTS AGREEMENT, THE
SECURITIES HAVE NOT BEEN AND ARE NOT BEING REGISTERED UNDER THE SECURITIES ACT
OR ANY APPLICABLE STATE SECURITIES LAWS AND, CONSEQUENTLY, THE INVESTOR MAY HAVE
TO BEAR THE RISK OF OWNING THE SECURITIES FOR AN INDEFINITE PERIOD OF TIME
BECAUSE THE SECURITIES MAY NOT BE TRANSFERRED UNLESS (I) THE RESALE OF THE
SECURITIES IS REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT; (II) THE INVESTOR HAS DELIVERED TO THE COMPANY AN OPINION OF
COUNSEL (IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS) TO THE EFFECT THAT THE SECURITIES TO BE SOLD OR
TRANSFERRED MAY BE SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION; (III) THE SECURITIES ARE SOLD OR TRANSFERRED PURSUANT TO RULE 144;
OR (IV) THE SECURITIES ARE SOLD OR TRANSFERRED TO AN AFFILIATE (AS DEFINED IN
RULE 144) OF THE INVESTOR;

 

(B)           ANY SALE OF THE SECURITIES MADE IN RELIANCE ON RULE 144 MAY BE
MADE ONLY IN ACCORDANCE WITH THE TERMS OF RULE 144 AND, IF RULE 144 IS NOT
APPLICABLE, ANY RESALE OF THE SECURITIES UNDER CIRCUMSTANCES IN WHICH THE SELLER
(OR THE PERSON THROUGH WHOM THE SALE IS MADE) MAY BE DEEMED TO BE AN UNDERWRITER
(AS THAT TERM IS DEFINED IN THE SECURITIES ACT) MAY REQUIRE COMPLIANCE WITH SOME
OTHER EXEMPTION UNDER THE SECURITIES ACT OR THE RULES AND REGULATIONS OF THE SEC
THEREUNDER; AND

 

(C)           EXCEPT AS SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT, NEITHER
THE COMPANY NOR ANY OTHER PERSON IS UNDER ANY OBLIGATION TO REGISTER THE
SECURITIES UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS OR TO COMPLY
WITH THE TERMS AND CONDITIONS OF ANY EXEMPTION THEREUNDER.

 

2.7           LEGENDS.  THE INVESTOR UNDERSTANDS THAT UNTIL (A) THE SECURITIES
MAY BE SOLD BY THE INVESTOR UNDER RULE 144(K) OR (B) SUCH TIME AS THE RESALE OF
THE SECURITIES HAS BEEN REGISTERED UNDER THE SECURITIES ACT AS CONTEMPLATED BY
THE REGISTRATION RIGHTS AGREEMENT, THE CERTIFICATES REPRESENTING THE SECURITIES
WILL BEAR A RESTRICTIVE LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM (AND A
STOP-TRANSFER ORDER MAY BE PLACED AGAINST TRANSFER OF THE CERTIFICATES FOR SUCH
SECURITIES):

 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES.  THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

 

The legend set forth above will be removed and the Company will issue a
certificate without the legend to the holder of any certificate upon which it is
stamped, in accordance with the terms of Article V hereof.

 

2.8           AUTHORIZATION; ENFORCEMENT.  THIS AGREEMENT AND THE REGISTRATION
RIGHTS AGREEMENT HAVE BEEN DULY AND VALIDLY AUTHORIZED, EXECUTED AND DELIVERED
ON BEHALF OF THE INVESTOR AND ARE VALID AND BINDING AGREEMENTS OF THE INVESTOR
ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS, SUBJECT TO THE EFFECT OF ANY
APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR SIMILAR LAWS
AFFECTING THE RIGHTS OF CREDITORS GENERALLY AND THE APPLICATION OF GENERAL
PRINCIPLES OF EQUITY.

 

2.9           RESIDENCY.  THE INVESTOR IS A RESIDENT OF (OR, IF AN ENTITY, HAS
ITS PRINCIPAL PLACE OF BUSINESS IN) THE JURISDICTION SET FORTH IMMEDIATELY BELOW
SUCH INVESTOR’S NAME ON THE SIGNATURE PAGES HERETO.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as otherwise set forth in the Company SEC Filings, or in a schedule of
exceptions delivered by the Company to the Investors simultaneously with the
execution of this Agreement (the “Schedule of Exceptions”), which identifies
exceptions by specific Section references (provided that any information set
forth in any one section of the Schedule of Exceptions shall be deemed to apply
to each other applicable Section or subsection thereof if its relevance to the
information called for in such Section or subsection is reasonably apparent),
the Company hereby represents and warrants to the Investors that:

 

3.1           ORGANIZATION AND QUALIFICATION.  EACH OF THE COMPANY AND ITS
SIGNIFICANT SUBSIDIARY IS DULY INCORPORATED, VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF THE JURISDICTION IN WHICH IT IS INCORPORATED, WITH
FULL POWER AND AUTHORITY (CORPORATE AND OTHER) TO OWN, LEASE, USE AND OPERATE
ITS PROPERTIES AND TO CARRY ON ITS BUSINESS AS AND WHERE NOW OWNED, LEASED,
USED, OPERATED AND CONDUCTED.  EACH OF THE COMPANY AND ITS SIGNIFICANT
SUBSIDIARY IS DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING IN EVERY
JURISDICTION IN WHICH THE NATURE OF THE BUSINESS CONDUCTED BY IT MAKES SUCH
QUALIFICATION NECESSARY, EXCEPT WHERE THE FAILURE TO BE SO QUALIFIED OR IN GOOD
STANDING WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.  EACH OF THE COMPANY AND ITS
SIGNIFICANT SUBSIDIARY HAVE TAKEN ALL NECESSARY ACTION TO QUALIFY TO DO BUSINESS
AND BE IN GOOD STANDING IN EVERY JURISDICTION IN WHICH THE NATURE OF THE
BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION NECESSARY, EXCEPT WHERE THE
FAILURE TO BE SO QUALIFIED OR IN GOOD STANDING WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT.

 

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3.2           AUTHORIZATION; ENFORCEMENT.  (A) THE COMPANY HAS ALL REQUISITE
CORPORATE POWER AND AUTHORITY TO ENTER INTO AND TO PERFORM ITS OBLIGATIONS UNDER
THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANTS, TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND TO ISSUE THE
COMMON SHARES, THE WARRANTS AND THE WARRANT SHARES ISSUABLE UPON EXERCISE OF THE
WARRANTS IN ACCORDANCE WITH THE TERMS HEREOF AND THEREOF; (B) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT
AND THE WARRANTS BY THE COMPANY AND THE CONSUMMATION BY IT OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY (INCLUDING WITHOUT LIMITATION THE ISSUANCE OF
THE COMMON SHARES, THE WARRANTS AND THE WARRANT SHARES ISSUABLE UPON EXERCISE OF
THE WARRANTS) HAVE BEEN DULY AUTHORIZED BY THE COMPANY’S BOARD OF DIRECTORS AND
NO FURTHER CONSENT OR AUTHORIZATION OF THE COMPANY, ITS BOARD OR DIRECTORS, OR
ITS STOCKHOLDERS IS REQUIRED; (C) THIS AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT AND THE WARRANTS HAVE BEEN DULY EXECUTED BY THE COMPANY; AND (D) EACH
OF THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANTS
CONSTITUTES A LEGAL, VALID AND BINDING OBLIGATION OF THE COMPANY ENFORCEABLE
AGAINST THE COMPANY IN ACCORDANCE WITH ITS TERMS, SUBJECT TO THE EFFECT OF ANY
APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, OR MORATORIUM OR SIMILAR LAWS
AFFECTING THE RIGHTS OF CREDITORS GENERALLY AND THE APPLICATION OF GENERAL
PRINCIPLES OF EQUITY.

 

3.3           CAPITALIZATION.  AS OF THE DATE HEREOF, THE AUTHORIZED CAPITAL OF
THE COMPANY CONSISTS OF 450,000,000 SHARES OF COMMON STOCK, $.0001 PAR VALUE PER
SHARE, AND 10,000,000 SHARES OF PREFERRED STOCK, $.0001 PAR VALUE PER SHARE
(“PREFERRED STOCK”).  AS OF FEBRUARY 15, 2006, THERE WERE 81,164,636 SHARES OF
COMMON STOCK ISSUED AND OUTSTANDING AND NO SHARES OF PREFERRED STOCK ISSUED AND
OUTSTANDING.  EXCEPT AS DISCLOSED IN SECTION 3.3 OF THE SCHEDULE OF EXCEPTIONS
OR IN THE COMPANY SEC FILINGS, THERE ARE NO OPTIONS, WARRANTS AND CONVERTIBLE
SECURITIES OF THE COMPANY, AND ANY OTHER RIGHTS TO ACQUIRE SECURITIES OF THE
COMPANY.  ALL OUTSTANDING SECURITIES OF THE COMPANY ARE VALIDLY ISSUED, FULLY
PAID AND NONASSESSABLE.  NO STOCKHOLDER OF THE COMPANY IS ENTITLED TO ANY
PREEMPTIVE RIGHTS WITH RESPECT TO THE PURCHASE OF OR SALE OF ANY SECURITIES BY
THE COMPANY.

 

3.4           ISSUANCE OF SECURITIES.  THE SECURITIES ARE DULY AUTHORIZED AND,
UPON ISSUANCE IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, WILL BE VALIDLY
ISSUED, FULLY PAID AND NON-ASSESSABLE, FREE FROM ALL TAXES, LIENS, CLAIMS,
ENCUMBRANCES AND CHARGES WITH RESPECT TO THE ISSUE THEREOF, WILL NOT BE SUBJECT
TO PREEMPTIVE RIGHTS OR OTHER SIMILAR RIGHTS OF STOCKHOLDERS OF THE COMPANY, AND
WILL NOT IMPOSE PERSONAL LIABILITY ON THE HOLDERS THEREOF.  THE COMPANY HAS
RESERVED A SUFFICIENT NUMBER OF SHARES OF COMMON STOCK FOR ISSUANCE UPON
EXERCISE OF THE WARRANTS, AND UPON PAYMENT OF THE EXERCISE PRICE AND EXERCISE OF
THE WARRANTS IN ACCORDANCE WITH ITS TERMS, THE WARRANT SHARES WILL BE VALIDLY
ISSUED, FULLY PAID AND NON-ASSESSABLE, FREE FROM ALL TAXES, LIENS, CLAIMS,
ENCUMBRANCES AND CHARGES WITH RESPECT TO THE ISSUE THEREOF, WILL NOT BE SUBJECT
TO PREEMPTIVE RIGHTS OR OTHER SIMILAR RIGHTS OF STOCKHOLDERS OF THE COMPANY AND
WILL NOT IMPOSE PERSONAL LIABILITY ON THE HOLDERS THEREOF.

 

3.5           NO CONFLICTS; NO VIOLATION.

 

(A)           THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT AND THE WARRANTS BY THE COMPANY AND THE
CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
(INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF THE COMMON SHARES, THE WARRANTS
AND THE WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS) WILL NOT
(I) CONFLICT WITH OR RESULT IN A VIOLATION OF ANY PROVISION OF ITS SECOND
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (THE “COMPANY CERTIFICATE”) OR
BYLAWS, AS AMENDED (THE “BYLAWS”) OR (II) VIOLATE OR CONFLICT WITH, OR RESULT IN
A BREACH OF ANY PROVISION OF, OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH WITH
NOTICE OR LAPSE OF TIME OR BOTH COULD BECOME A DEFAULT) UNDER, OR GIVE TO OTHERS
ANY RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION OF, ANY
AGREEMENT, INDENTURE, PATENT,

 

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PATENT LICENSE, OR INSTRUMENT TO WHICH THE COMPANY OR ANY SUBSIDIARY IS A PARTY,
(III) RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT OR
DECREE (INCLUDING U.S. FEDERAL AND STATE SECURITIES LAWS AND THE RULES AND
REGULATIONS OF ANY SELF-REGULATORY ORGANIZATIONS TO WHICH THE COMPANY OR ANY
SUBSIDIARY OR ANY OF THE SECURITIES OF THE COMPANY OR ANY SUBSIDIARY ARE
SUBJECT) APPLICABLE TO THE COMPANY OR ANY SUBSIDIARY OR BY WHICH ANY PROPERTY OR
ASSET OF THE COMPANY OR ITS SUBSIDIARIES IS BOUND OR AFFECTED, OR (IV) RESULT IN
THE IMPOSITION OF A LIEN ON ANY ASSETS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, EXCEPT WITH RESPECT TO (II), (III) AND (IV) ABOVE, FOR SUCH
CONFLICTS, BREACHES, DEFAULTS, TERMINATIONS, AMENDMENTS, ACCELERATIONS,
CANCELLATIONS, VIOLATIONS AND IMPOSITIONS AS WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.

 

(B)           THE COMPANY IS NOT IN VIOLATION OF THE COMPANY CERTIFICATE OR
BYLAWS, AND NO SUBSIDIARY OF THE COMPANY IS IN VIOLATION OF ITS ORGANIZATIONAL
DOCUMENTS.  NEITHER THE COMPANY NOR ANY SUBSIDIARY IS IN DEFAULT (AND NO EVENT
HAS OCCURRED WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH COULD PUT THE COMPANY IN
DEFAULT) UNDER ANY AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH THE COMPANY OR
SUBSIDIARY IS A PARTY OR BY WHICH ANY PROPERTY OR ASSETS OF THE COMPANY OR ITS
SUBSIDIARIES ARE BOUND OR AFFECTED, EXCEPT FOR DEFAULTS AS WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.

 

(C)           NEITHER THE COMPANY NOR ANY SUBSIDIARY IS CONDUCTING ITS BUSINESS
IN VIOLATION OF ANY LAW, ORDINANCE OR REGULATION OF ANY GOVERNMENTAL ENTITY, THE
FAILURE TO COMPLY WITH WHICH WOULD, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A
MATERIAL ADVERSE EFFECT.

 

(D)           EXCEPT AS SPECIFICALLY CONTEMPLATED BY THIS AGREEMENT AND AS
REQUIRED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
ANY LISTING AGREEMENT WITH ANY SECURITIES EXCHANGE OR AUTOMATED QUOTATION
SYSTEM, NEITHER THE COMPANY NOR ANY SUBSIDIARY IS REQUIRED TO OBTAIN ANY
CONSENT, AUTHORIZATION OR ORDER OF, OR MAKE ANY FILING OR REGISTRATION WITH, ANY
COURT OR GOVERNMENTAL AGENCY OR ANY REGULATORY OR SELF REGULATORY AGENCY IN
ORDER FOR THE COMPANY TO EXECUTE, DELIVER OR PERFORM ANY OF ITS OBLIGATIONS
UNDER THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR THE WARRANTS, IN EACH
CASE IN ACCORDANCE WITH THE TERMS HEREOF OR THEREOF, OR TO ISSUE AND SELL THE
SECURITIES IN ACCORDANCE WITH THE TERMS HEREOF.  ALL CONSENTS, AUTHORIZATIONS,
ORDERS, FILINGS AND REGISTRATIONS WHICH THE COMPANY IS REQUIRED TO OBTAIN
PURSUANT TO THE PRECEDING SENTENCE HAVE BEEN OBTAINED OR EFFECTED ON OR PRIOR TO
THE DATE HEREOF OR ARE NOT REQUIRED TO BE MADE OR OBTAINED UNTIL AFTER THE DATE
HEREOF.

 

3.6           SEC Filings, Other Filings and Regulatory Compliance.  The Company
has timely filed all registration statements, prospectuses, forms, reports,
definitive proxy statements, schedules and documents required to be filed by it
under the Securities Act or the Exchange Act, as the case may be, since
January 1, 2003 (collectively, the “Company SEC Filings”).  None of the
Company’s Subsidiaries is required to file periodic reports with the SEC
pursuant to the Exchange Act.  Each Company SEC Filing (i) as of the time it was
filed, complied in all material respects with the requirements of the Securities
Act, the Exchange Act and the Sarbanes-Oxley Act of 2002, as the case may be,
and (ii) did not, at the time it was filed (or if subsequently amended or
superseded by a Company SEC Filing made on or prior to the date of this
Agreement, then on the date of such subsequent filing), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.  The
Company has taken, or will have taken prior to the Closing, all necessary
actions to maintain eligibility of its Common Stock for trading on the OTC
Bulletin Board under all currently effective inclusion requirements.  Each
balance sheet included in the Company SEC Filings (including any related notes
and schedules)

 

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fairly presents in all material respects the consolidated financial position of
the Company as of its date, and each of the other financial statements included
in the Company SEC Filings (including any related notes and schedules) fairly
presents in all material respects the consolidated results of operations of the
Company for the periods or as of the dates therein set forth in accordance with
GAAP consistently applied during the periods involved (except as may be
indicated in the notes thereto or, in the case of interim consolidated financial
statements, where information and footnotes contained in such financial
statements are not required to be in compliance with GAAP, and normal year-end
audit adjustments). Such financial statements included in the Company SEC
Filings were, at that time they were filed, consistent with the books and
records of the Company in all material respects and complied as to form in all
material respects with then applicable accounting requirements and with the
rules and regulations of the SEC with respect thereto.  The Company keeps
accounting records in accordance with GAAP, and normal year end audit
adjustments in which all material assets and liabilities, and all material
transactions, including off-balance sheet transactions, of the Company are
recorded in material conformity with applicable accounting principles.

 

3.7           MATERIAL CHANGES.  SINCE JUNE 30, 2005, EXCEPT AS SPECIFICALLY
CONTEMPLATED BY, OR AS OTHERWISE DISCLOSED IN THE COMPANY SEC FILINGS, EACH OF
THE COMPANY AND ITS SUBSIDIARIES HAS CONDUCTED ITS BUSINESS IN, AND HAS NOT
ENGAGED IN ANY MATERIAL TRANSACTION OTHER THAN ACCORDING TO, THE USUAL AND
ORDINARY COURSE CONSISTENT WITH PAST PRACTICE AND, SINCE SUCH DATE, THERE HAS
NOT BEEN ANY MATERIAL ADVERSE EFFECT WITH RESPECT TO THE COMPANY.

 

3.8           LITIGATION.  THERE IS NO ACTION, SUIT, PROCEEDING OR INVESTIGATION
PENDING (EACH A “PROCEEDING” AND COLLECTIVELY, THE “PROCEEDINGS”), OR TO
COMPANY’S KNOWLEDGE, THREATENED PROCEEDINGS AGAINST OR AFFECTING THE COMPANY OR
ANY OF ITS SUBSIDIARIES, THEIR RESPECTIVE ASSETS OR BUSINESSES, THE OUTCOME OF
WHICH IS EXPECTED TO HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE
EFFECT WITH RESPECT TO THE COMPANY.  THERE ARE NO PENDING, OR TO THE COMPANY’S
KNOWLEDGE, THREATENED PROCEEDINGS AGAINST THE COMPANY OR ANY IF ITS SUBSIDIARIES
THAT, AS OF THE DATE HEREOF, CHALLENGES THE VALIDITY OR PROPRIETY, OR SEEKS TO
PREVENT THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

3.9           RIGHTS OF REGISTRATION, VOTING RIGHTS, AND ANTI-DILUTION.  EXCEPT
AS CONTEMPLATED IN THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT,
SECTION 3.9 OF THE SCHEDULE OF EXCEPTIONS AND FOR REGISTRATION RIGHTS FOR WHICH
THE COMPANY HAS FILED ONE OR MORE REGISTRATION STATEMENTS THAT ARE CURRENTLY
EFFECTIVE, THE COMPANY HAS NOT GRANTED OR AGREED TO GRANT ANY REGISTRATION
RIGHTS, INCLUDING PIGGYBACK RIGHTS, TO ANY PERSON AND, TO THE COMPANY’S
KNOWLEDGE, NO STOCKHOLDER OF THE COMPANY HAS ENTERED INTO ANY AGREEMENTS WITH
RESPECT TO THE VOTING OF CAPITAL SHARES OF THE COMPANY.  THE ISSUANCE OF THE
SHARES DOES NOT CONSTITUTE AN ANTI-DILUTION EVENT FOR ANY EXISTING SECURITY
HOLDERS OF THE COMPANY, PURSUANT TO WHICH SUCH SECURITY HOLDERS WOULD BE
ENTITLED TO ADDITIONAL SECURITIES OR A REDUCTION IN THE APPLICABLE CONVERSION
PRICE OR EXERCISE PRICE OF ANY SECURITIES.

 

3.10         INTELLECTUAL PROPERTY RIGHTS.  THE COMPANY OWNS OR POSSESSES THE
LICENSES OR RIGHTS TO USE ALL PATENTS, PATENT APPLICATIONS, PATENT RIGHTS,
INVENTIONS, KNOW-HOW, TRADE SECRETS, TRADEMARKS, TRADEMARK APPLICATIONS, SERVICE
MARKS, SERVICE NAMES, TRADE NAMES AND COPYRIGHTS NECESSARY TO ENABLE IT TO
CONDUCT ITS BUSINESS AS NOW OPERATED (THE “INTELLECTUAL PROPERTY”).  THERE ARE
NO MATERIAL OUTSTANDING OPTIONS, LICENSES OR AGREEMENTS RELATING TO THE
INTELLECTUAL PROPERTY, NOR IS THE COMPANY BOUND BY OR A PARTY TO ANY MATERIAL
OPTIONS, LICENSES OR AGREEMENTS RELATING TO THE PATENTS, PATENT APPLICATIONS,
PATENT RIGHTS, INVENTIONS, KNOW-HOW, TRADE SECRETS, TRADEMARKS, TRADEMARK
APPLICATIONS, SERVICE MARKS, SERVICE NAMES, TRADE NAMES OR COPYRIGHTS OF ANY
OTHER PERSON OR ENTITY.  THERE IS NO

 

 

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CLAIM OR ACTION OR PROCEEDING PENDING OR, TO THE COMPANY’S KNOWLEDGE, THREATENED
THAT CHALLENGES THE RIGHT OF THE COMPANY WITH RESPECT TO ANY INTELLECTUAL
PROPERTY.  TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY’S INTELLECTUAL PROPERTY
DOES NOT INFRINGE ANY INTELLECTUAL PROPERTY RIGHTS OF ANY OTHER PERSON WHICH, IF
THE SUBJECT OF AN UNFAVORABLE DECISION, RULING OR FINDING WOULD HAVE A MATERIAL
ADVERSE EFFECT.

 

3.11         TAX STATUS.  THE COMPANY HAS TIMELY MADE OR FILED ALL FEDERAL,
STATE AND FOREIGN INCOME AND ALL OTHER TAX RETURNS, REPORTS AND DECLARATIONS
REQUIRED BY ANY JURISDICTION TO WHICH IT IS SUBJECT (UNLESS AND ONLY TO THE
EXTENT THAT THE COMPANY HAS SET ASIDE ON ITS BOOKS PROVISIONS REASONABLY
ADEQUATE FOR THE PAYMENT OF ALL UNPAID AND UNREPORTED TAXES) AND HAS TIMELY PAID
ALL TAXES AND OTHER GOVERNMENTAL ASSESSMENTS AND CHARGES, SHOWN OR DETERMINED TO
BE DUE ON SUCH RETURNS, REPORTS AND DECLARATIONS, EXCEPT THOSE BEING CONTESTED
IN GOOD FAITH, AND HAS SET ASIDE ON ITS BOOKS PROVISIONS REASONABLY ADEQUATE FOR
THE PAYMENT OF ALL TAXES FOR PERIODS SUBSEQUENT TO THE PERIODS TO WHICH SUCH
RETURNS, REPORTS OR DECLARATIONS APPLY.  TO THE KNOWLEDGE OF THE COMPANY, THERE
ARE NO UNPAID TAXES CLAIMED TO BE DUE BY THE TAXING AUTHORITY OF ANY
JURISDICTION, AND THE OFFICERS OF THE COMPANY KNOW OF NO BASIS FOR ANY SUCH
CLAIM.  THE COMPANY HAS NOT EXECUTED A WAIVER WITH RESPECT TO THE STATUTE OF
LIMITATIONS RELATING TO THE ASSESSMENT OR COLLECTION OF ANY FOREIGN, FEDERAL,
STATE OR LOCAL TAX.  NONE OF THE COMPANY’S TAX RETURNS IS PRESENTLY BEING
AUDITED BY ANY TAXING AUTHORITY.

 

3.12         ENVIRONMENTAL LAWS.  THE COMPANY (I) IS IN COMPLIANCE WITH ALL
APPLICABLE FOREIGN FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS RELATING TO THE
PROTECTION OF HUMAN HEALTH AND SAFETY, THE ENVIRONMENT OR HAZARDOUS OR TOXIC
SUBSTANCES OR WASTES, POLLUTANTS OR CONTAMINANTS (“ENVIRONMENTAL LAWS”),
(II) HAS RECEIVED ALL PERMITS, LICENSES OR OTHER APPROVALS REQUIRED OF THEM
UNDER APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT ITS BUSINESS AND (III) IS IN
COMPLIANCE WITH ALL TERMS AND CONDITIONS OF ANY SUCH PERMIT, LICENSE OR APPROVAL
WHERE, IN EACH OF THE THREE FOREGOING CLAUSES, THE FAILURE TO SO COMPLY WOULD
HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.

 

3.13         NO BROKERS.  THE COMPANY HAS TAKEN NO ACTION WHICH WOULD GIVE RISE
TO ANY CLAIM BY ANY PERSON FOR BROKERAGE COMMISSIONS, FINDER’S FEES OR SIMILAR
PAYMENTS RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
EXCEPT FOR DEALINGS WITH NETWORK 1 FINANCIAL SERVICES, INC., WHOSE COMMISSIONS
AND FEES WILL BE PAID FOR BY THE COMPANY.

 

3.14         INSURANCE.  THE COMPANY IS INSURED BY INSURERS OF RECOGNIZED
FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS AND IN SUCH AMOUNTS AS
MANAGEMENT OF THE COMPANY REASONABLY BELIEVES TO BE PRUDENT AND CUSTOMARY IN THE
BUSINESSES IN WHICH THE COMPANY IS ENGAGED.

 

3.15         EMPLOYMENT MATTERS.  THE COMPANY IS IN COMPLIANCE WITH ALL FEDERAL,
STATE, LOCAL AND FOREIGN LAWS AND REGULATIONS RESPECTING EMPLOYMENT AND
EMPLOYMENT PRACTICES, TERMS AND CONDITIONS OF EMPLOYMENT AND WAGES AND HOURS,
EXCEPT WHERE FAILURE TO BE IN COMPLIANCE WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT.  THE COMPANY IS NOT BOUND BY OR SUBJECT TO (AND NONE OF ITS ASSETS OR
PROPERTIES IS BOUND BY OR SUBJECT TO) ANY WRITTEN OR ORAL, EXPRESS OR IMPLIED,
CONTRACT, COMMITMENT OR ARRANGEMENT WITH ANY LABOR UNION, AND NO LABOR UNION HAS
REQUESTED OR, TO THE COMPANY’S KNOWLEDGE, HAS SOUGHT TO REPRESENT ANY OF THE
EMPLOYEES, REPRESENTATIVES OR AGENTS OF THE COMPANY.  THERE IS NO STRIKE OR
OTHER LABOR DISPUTE INVOLVING THE COMPANY PENDING, OR TO THE COMPANY’S
KNOWLEDGE, THREATENED NOR IS THE COMPANY AWARE OF ANY LABOR ORGANIZATION
ACTIVITY INVOLVING ITS EMPLOYEES.  THE COMPANY IS NOT AWARE THAT ANY OFFICER OR
KEY EMPLOYEE, OR THAT ANY GROUP OF OFFICERS OR KEY EMPLOYEES, INTENDS TO
TERMINATE THEIR EMPLOYMENT WITH THE COMPANY, NOR DOES THE COMPANY HAVE A PRESENT
INTENTION TO TERMINATE THE EMPLOYMENT OF ANY OF THE FOREGOING.

 

 

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3.16         EMPLOYEE BENEFIT PLANS.  EXCEPT AS SET FORTH IN THE COMPANY SEC
FILINGS, THERE ARE NO EMPLOYEE, PROFIT SHARING, STOCK OPTION, STOCK PURCHASE,
PENSION, RETIREMENT, BONUS, SEVERANCE OR DEFERRED COMPENSATION PLANS OR
ARRANGEMENTS OR ANY OTHER WELFARE OR BENEFIT PLANS OR ANY UNFUNDED LIABILITIES
IN RESPECT OF ANY SUCH PLANS OR ARRANGEMENTS OF THE COMPANY, AS WELL AS ALL
EMPLOYMENT AGREEMENTS, WHETHER WRITTEN OR ORAL, WITH ANY PERSON, AND ANY
CONTRACTS WITH ANY LABOR UNIONS.

 

3.17         INVESTMENT COMPANY STATUS.  THE COMPANY IS NOT AND UPON
CONSUMMATION OF THE SALE OF THE SECURITIES WILL NOT BE AN “INVESTMENT COMPANY,”
A COMPANY CONTROLLED BY AN “INVESTMENT COMPANY” OR AN “AFFILIATED PERSON” OF, OR
“PROMOTER” OR “PRINCIPAL UNDERWRITER” FOR, AN “INVESTMENT COMPANY” AS SUCH TERMS
ARE DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.

 

3.18         SUBSIDIARIES.  EXCEPT AS SET FORTH IN THE COMPANY SEC FILINGS, THE
COMPANY DOES NOT PRESENTLY OWN OR CONTROL, DIRECTLY OR INDIRECTLY, ANY INTEREST
IN ANY OTHER CORPORATION, ASSOCIATION, JOINT VENTURE, PARTNERSHIP OR OTHER
BUSINESS ENTITY AND THE COMPANY IS NOT A DIRECT OR INDIRECT PARTICIPANT IN ANY
JOINT VENTURE OR PARTNERSHIP.  EXCEPT FOR DYNTEK SERVICES, INC., THE COMPANY HAS
NO “SIGNIFICANT SUBSIDIARY,” AS THAT TERM IS DEFINED IN RULE 1-02(W) OF
REGULATION S-X UNDER THE SECURITIES ACT (“SIGNIFICANT SUBSIDIARY”).

 

3.19         NO CONFLICT OF INTEREST.  EXCEPT AS SET FORTH IN THE COMPANY SEC
FILINGS: (I) THE COMPANY IS NOT INDEBTED, DIRECTLY OR INDIRECTLY, TO ANY OF ITS
OFFICERS OR DIRECTORS OR TO THEIR RESPECTIVE SPOUSES OR CHILDREN, IN ANY AMOUNT
WHATSOEVER OTHER THAN IN CONNECTION WITH EXPENSES OR ADVANCES OF EXPENSES
INCURRED IN THE ORDINARY COURSE OF BUSINESS OR RELOCATION EXPENSES OF EMPLOYEES,
AND (II) NONE OF THE COMPANY’S OFFICERS, DIRECTORS OR EMPLOYEES, OR ANY MEMBERS
OF THEIR IMMEDIATE FAMILIES, ARE DIRECTLY, OR INDIRECTLY, INDEBTED TO THE
COMPANY OR, TO THE BEST OF THE COMPANY’S KNOWLEDGE, HAVE ANY DIRECT OR INDIRECT
OWNERSHIP INTEREST IN ANY ENTITY WITH WHICH THE COMPANY IS AFFILIATED OR WITH
WHICH THE COMPANY HAS A BUSINESS RELATIONSHIP, OR ANY ENTITY WHICH COMPETES WITH
THE COMPANY, EXCEPT THAT OFFICERS, DIRECTORS, EMPLOYEES AND/OR STOCKHOLDERS OF
THE COMPANY MAY OWN STOCK IN (BUT NOT EXCEEDING FIVE PERCENT (5%) OF THE
OUTSTANDING CAPITAL STOCK OF) ANY PUBLICLY TRADED COMPANY THAT MAY COMPETE WITH
THE COMPANY.  TO THE BEST OF THE COMPANY’S KNOWLEDGE, NONE OF THE COMPANY’S
OFFICERS, DIRECTORS OR EMPLOYEES OR ANY MEMBERS OF THEIR IMMEDIATE FAMILIES ARE,
DIRECTLY OR INDIRECTLY, INTERESTED IN ANY MATERIAL CONTRACT WITH THE COMPANY. 
THE COMPANY IS NOT A GUARANTOR OR INDEMNITOR OF ANY INDEBTEDNESS OF ANY OTHER
PERSON OR ENTITY.

 

3.20         NO MANIPULATION OF STOCK.  THE COMPANY HAS NOT TAKEN AND WILL NOT,
IN VIOLATION OF APPLICABLE LAW, TAKE, ANY ACTION DESIGNED TO OR THAT MIGHT
REASONABLY BE EXPECTED TO CAUSE OR RESULT IN STABILIZATION OR MANIPULATION OF
THE PRICE OF THE COMMON STOCK TO FACILITATE THE SALE OR RESALE OF THE COMMON
SHARES.

 

3.21         REPRESENTATIONS COMPLETE.  NO REPRESENTATION OR WARRANTY MADE BY
THE COMPANY IN THIS AGREEMENT CONTAINS ANY UNTRUE STATEMENT OF A MATERIAL FACT
OR OMITS TO STATE A MATERIAL FACT THAT IS NECESSARY TO MAKE THE REPRESENTATION
OR WARRANTY MADE, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH IT WAS MADE, NOT
FALSE OR MISLEADING IN ANY MATERIAL RESPECT.

 

ARTICLE IV
COVENANTS

 

4.1           BEST EFFORTS.  EACH PARTY WILL USE ITS BEST EFFORTS TO SATISFY IN
A TIMELY FASHION EACH OF THE CONDITIONS TO BE SATISFIED BY IT UNDER ARTICLES VI
AND VII OF THIS AGREEMENT.

 

 

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4.2           FORM D; BLUE SKY LAWS.  THE COMPANY WILL TIMELY FILE A NOTICE OF
SALE OF SECURITIES ON FORM D WITH RESPECT TO THE SECURITIES, AS REQUIRED UNDER
REGULATION D.  THE COMPANY WILL TAKE SUCH ACTION AS IT REASONABLY DETERMINES TO
BE NECESSARY TO QUALIFY THE SECURITIES FOR SALE TO THE INVESTORS UNDER THIS
AGREEMENT UNDER APPLICABLE SECURITIES (OR “BLUE SKY”) LAWS OF THE STATES OF THE
UNITED STATES (OR TO OBTAIN AN EXEMPTION FROM SUCH QUALIFICATION).

 

4.3           TIMELY SEC FILINGS.  THROUGHOUT THE REGISTRATION PERIOD (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), THE COMPANY WILL TIMELY FILE ALL
REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS REQUIRED TO BE FILED
BY IT WITH THE SEC UNDER THE REPORTING REQUIREMENTS OF THE EXCHANGE ACT, AND THE
COMPANY WILL NOT TERMINATE ITS STATUS AS AN ISSUER REQUIRED TO FILE REPORTS
UNDER THE EXCHANGE ACT EVEN IF THE EXCHANGE ACT OR THE RULES AND REGULATIONS
THEREUNDER WOULD PERMIT SUCH TERMINATION.

 

4.4           EXPENSES.  THE COMPANY IS LIABLE FOR, AND WILL PAY, EXPENSES
INCURRED BY IT AND ONE SPECIAL COUNSEL TO THE INVESTORS IN CONNECTION WITH THE
NEGOTIATION, PREPARATION, EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER
AGREEMENTS TO BE EXECUTED IN CONNECTION HEREWITH, INCLUDING, WITHOUT LIMITATION,
ATTORNEYS’ AND CONSULTANTS’ FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE
COMPANY IS ONLY OBLIGATED TO PAY EXPENSES INCURRED BY SPECIAL COUNSEL TO THE
INVESTORS UPON RECEIPT OF A REASONABLY ITEMIZED INVOICE SETTING FORTH THE
SERVICES PERFORMED BY SUCH SPECIAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

4.5           FINANCIAL INFORMATION.  AS LONG AS AN INVESTOR OWNS ANY OF THE
SECURITIES OR WARRANT SHARES, THE FINANCIAL STATEMENTS OF THE COMPANY WILL BE
PREPARED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES CONSISTENTLY APPLIED THROUGHOUT THE PERIODS INDICATED (EXCEPT AS MAY
BE INDICATED IN THE NOTES THERETO OR, IN THE CASE OF INTERIM CONSOLIDATED
FINANCIAL STATEMENTS, WHERE INFORMATION AND FOOTNOTES CONTAINED IN SUCH
FINANCIAL STATEMENTS ARE NOT REQUIRED TO BE IN COMPLIANCE WITH GAAP), AND WILL
FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE CONSOLIDATED FINANCIAL POSITION OF
THE COMPANY AND RESULTS OF ITS OPERATIONS AND CASH FLOWS AS OF, AND FOR THE
PERIODS COVERED BY, SUCH FINANCIAL STATEMENTS.

 

4.6           NOTIFICATION OF CERTAIN MATTERS.  PRIOR TO THE CLOSING, EACH PARTY
HERETO SHALL GIVE PROMPT NOTICE TO THE OTHER PARTY OF THE OCCURRENCE, OR
NON-OCCURRENCE, OF ANY EVENT WHICH WOULD BE LIKELY TO CAUSE ANY REPRESENTATION
AND WARRANTY HEREIN TO BE UNTRUE OR INACCURATE, OR ANY COVENANT, CONDITION OR
AGREEMENT HEREIN NOT TO BE COMPLIED WITH OR SATISFIED.

 

4.7           COMPLIANCE WITH LAW.  AS LONG AS AN INVESTOR OWNS ANY OF THE
SECURITIES OR WARRANT SHARES, THE COMPANY WILL CONDUCT ITS BUSINESS IN
COMPLIANCE WITH ALL APPLICABLE LAWS, RULES AND REGULATIONS OF THE JURISDICTIONS
IN WHICH IT IS CONDUCTING BUSINESS, INCLUDING, WITHOUT LIMITATION, ALL
APPLICABLE LOCAL, STATE AND FEDERAL ENVIRONMENTAL LAWS AND REGULATIONS, THE
FAILURE TO COMPLY, INDIVIDUALLY OR IN THE AGGREGATE, WITH WHICH WOULD HAVE A
MATERIAL ADVERSE EFFECT.

 

4.8           SALES BY INVESTORS.  EACH INVESTOR WILL SELL ANY SECURITIES SOLD
BY IT IN COMPLIANCE WITH APPLICABLE PROSPECTUS DELIVERY REQUIREMENTS, IF ANY, OR
OTHERWISE IN COMPLIANCE WITH THE REQUIREMENTS FOR AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. 
NO INVESTOR WILL MAKE ANY SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES
IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS.

 

 

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ARTICLE V
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS

 

5.1           ISSUANCE OF CERTIFICATES.  THE COMPANY WILL, OR WILL INSTRUCT ITS
TRANSFER AGENT TO, ISSUE CERTIFICATES, REGISTERED IN THE NAME OF EACH INVESTOR
OR ITS NOMINEE, FOR THE SECURITIES AND, PROMPTLY UPON EXERCISE OF ANY WARRANTS,
THE APPLICABLE WARRANT SHARES.  ALL SUCH CERTIFICATES WILL BEAR THE RESTRICTIVE
LEGEND DESCRIBED IN SECTION 2.7, EXCEPT AS OTHERWISE SPECIFIED IN THIS
ARTICLE V.  THE COMPANY WILL NOT GIVE TO ITS TRANSFER AGENT ANY INSTRUCTION
OTHER THAN AS DESCRIBED IN THIS ARTICLE V AND STOP TRANSFER INSTRUCTIONS TO GIVE
EFFECT TO SECTION 2.7 HEREOF (PRIOR TO REGISTRATION OF THE SECURITIES UNDER THE
SECURITIES ACT).  NOTHING IN THIS SECTION WILL AFFECT IN ANY WAY EACH INVESTOR’S
OBLIGATIONS TO COMPLY WITH ALL APPLICABLE PROSPECTUS DELIVERY REQUIREMENTS, IF
ANY, UPON RESALE OF THE COMMON SHARES AND/OR WARRANT SHARES.

 

5.2           UNRESTRICTED SECURITIES.  IF, UNLESS OTHERWISE REQUIRED BY
APPLICABLE STATE SECURITIES LAWS, (A) THE SECURITIES OR WARRANT SHARES
REPRESENTED BY A CERTIFICATE HAVE BEEN REGISTERED UNDER AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT, (B) A HOLDER OF
SECURITIES OR WARRANT SHARES PROVIDES THE COMPANY AND ITS TRANSFER AGENT WITH AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
COUNSEL IN COMPARABLE TRANSACTIONS, TO THE EFFECT THAT A PUBLIC SALE OR TRANSFER
OF SUCH SECURITIES OR WARRANT SHARES MAY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT AND SUCH SALE EITHER HAS OCCURRED OR MAY OCCUR WITHOUT
RESTRICTION ON THE MANNER OF SUCH SALE OR TRANSFER, (C) SUCH HOLDER PROVIDES THE
COMPANY AND ITS TRANSFER AGENT WITH REASONABLE ASSURANCES THAT SUCH SECURITIES
OR WARRANT SHARES CAN BE SOLD UNDER RULE 144, OR (D) THE SECURITIES OR WARRANT
SHARES REPRESENTED BY A CERTIFICATE CAN BE SOLD WITHOUT RESTRICTION AS TO THE
NUMBER OF SECURITIES SOLD UNDER RULE 144(K), THE COMPANY WILL PERMIT THE
TRANSFER OF THE SECURITIES OR WARRANT SHARES, AND THE COMPANY’S TRANSFER AGENT
WILL ISSUE ONE OR MORE CERTIFICATES, FREE FROM ANY RESTRICTIVE LEGEND, IN SUCH
NAME AND IN SUCH DENOMINATIONS AS SPECIFIED BY SUCH HOLDER.  NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY AND SUBJECT TO APPLICABLE SECURITIES LAWS, THE
SECURITIES OR WARRANT SHARES MAY BE PLEDGED AS COLLATERAL IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LENDING ARRANGEMENT; PROVIDED THAT SUCH PLEDGE
WILL NOT ALTER THE PROVISIONS OF THIS ARTICLE V WITH RESPECT TO THE REMOVAL OF
RESTRICTIVE LEGENDS.

 

ARTICLE VI
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL

 

The obligation of the Company to issue and sell the Securities to each Investor
at the Closing is subject to the satisfaction by such Investor, on or before the
First Closing Date or the Second Closing Date, as the case may be, of each of
the following conditions.  These conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion:

 

6.1           EXECUTION OF DOCUMENTS.  THE INVESTOR WILL HAVE EXECUTED THIS
AGREEMENT, THE INVESTOR QUESTIONNAIRE, THE REGISTRATION RIGHTS AGREEMENT AND THE
INVESTOR’S WARRANT AND WILL HAVE DELIVERED THOSE AGREEMENTS TO THE COMPANY.

 

6.2           PURCHASE PRICE.  THE INVESTOR WILL HAVE DELIVERED THE PURCHASE
PRICE FOR THE SECURITIES TO THE COMPANY IN ACCORDANCE WITH THIS AGREEMENT.

 

6.3           REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND
WARRANTIES OF THE INVESTOR MUST BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS
OF THE FIRST CLOSING DATE AND THE SECOND CLOSING

 

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Date, as applicable, as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties must be correct as of such date), and the Investor will have
performed and complied in all material respects with the covenants and
conditions required by this Agreement to be performed or complied with by the
Investor at or prior to the Closing.

 

6.4           NO PROHIBITION.  NO STATUTE, RULE, REGULATION, EXECUTIVE ORDER,
DECREE, RULING OR INJUNCTION WILL HAVE BEEN ENACTED, ENTERED, PROMULGATED OR
ENDORSED BY OR IN ANY COURT OR GOVERNMENTAL AUTHORITY OF COMPETENT JURISDICTION
OR ANY SELF-REGULATORY ORGANIZATION HAVING AUTHORITY OVER THE MATTERS
CONTEMPLATED HEREBY WHICH PROHIBITS THE CONSUMMATION OF ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE REGISTRATION RIGHTS AGREEMENT OR THE
WARRANTS.

 

ARTICLE VII
CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE

 

The obligation of each Investor hereunder to purchase the Securities from the
Company at the Closing is subject to the satisfaction, on or before the First
Closing Date or the Second Closing Date, as the case may be, of each of the
following conditions.  These conditions are for each Investor’s respective
benefit and may be waived by any Investor at any time in its sole discretion:

 

7.1           EXECUTION OF DOCUMENTS.  THE COMPANY WILL HAVE EXECUTED THIS
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANTS AND WILL HAVE
DELIVERED THOSE AGREEMENTS TO THE INVESTOR.

 

7.2           REPRESENTATIONS AND WARRANTIES.  EACH OF THE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY QUALIFIED BY MATERIALITY MUST BE TRUE AND CORRECT IN
ALL RESPECTS AS OF THE CLOSING AS THOUGH MADE AT THAT TIME (EXCEPT FOR
REPRESENTATIONS AND WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE, WHICH
REPRESENTATIONS AND WARRANTIES MUST BE TRUE AND CORRECT AS OF SUCH DATE) AND
EACH OF THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY NOT QUALIFIED BY
MATERIALITY MUST BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS OF THE CLOSING
AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND WARRANTIES THAT
SPEAK AS OF A SPECIFIC DATE, WHICH REPRESENTATIONS AND WARRANTIES MUST BE TRUE
AND CORRECT AS OF SUCH DATE) AND THE COMPANY MUST HAVE PERFORMED AND COMPLIED IN
ALL MATERIAL RESPECTS WITH THE COVENANTS AND CONDITIONS REQUIRED BY THIS
AGREEMENT TO BE PERFORMED OR COMPLIED WITH BY THE COMPANY AT OR PRIOR TO THE
CLOSING.  THE INVESTOR MUST HAVE RECEIVED A CERTIFICATE OR CERTIFICATES DATED AS
OF THE FIRST CLOSING DATE OR THE SECOND CLOSING DATE, AS APPLICABLE, AND
EXECUTED BY THE CHIEF EXECUTIVE OFFICER OR THE CHIEF FINANCIAL OFFICER OF THE
COMPANY CERTIFYING AS TO THE MATTERS IN CONTAINED IN THIS SECTION 7.2 AND AS TO
SUCH OTHER MATTERS AS MAY BE REASONABLY REQUESTED BY SUCH INVESTOR, INCLUDING,
BUT NOT LIMITED TO, THE COMPANY CERTIFICATE, BYLAWS, BOARD OF DIRECTORS’
RESOLUTIONS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY AND THE INCUMBENCY
AND SIGNATURES OF EACH OF THE OFFICERS OF THE COMPANY WHO MAY EXECUTE ON BEHALF
OF THE COMPANY ANY DOCUMENT DELIVERED AT THE CLOSING.

 

7.3           NO PROHIBITIONS.  NO LITIGATION, STATUTE, RULE, REGULATION,
EXECUTIVE ORDER, DECREE, RULING OR INJUNCTION WILL HAVE BEEN ENACTED, ENTERED,
PROMULGATED OR ENDORSED BY OR IN ANY COURT OR GOVERNMENTAL AUTHORITY OF
COMPETENT JURISDICTION OR ANY SELF-REGULATORY ORGANIZATION HAVING AUTHORITY OVER
THE MATTERS CONTEMPLATED HEREBY WHICH PROHIBITS THE CONSUMMATION OF ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE REGISTRATION RIGHTS AGREEMENT
OR THE WARRANTS AND WHICH COULD, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A
MATERIAL ADVERSE EFFECT.

 

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7.4           IRREVOCABLE INSTRUCTIONS.  IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS, IN FORM AND SUBSTANCE SATISFACTORY TO THE INVESTORS, WILL HAVE
BEEN DELIVERED TO THE COMPANY’S TRANSFER AGENT INSTRUCTING THE TRANSFER AGENT TO
DELIVER CERTIFICATES REPRESENTING THE COMMON SHARES WITHIN FIVE (5) BUSINESS
DAYS FOLLOWING THE FIRST CLOSING DATE OR THE SECOND CLOSING DATE, AS THE CASE
MAY BE.

 

7.5           WARRANT CERTIFICATES.  THE COMPANY SHALL HAVE DELIVERED TO THE
INVESTORS CERTIFICATES REPRESENTING THE WARRANTS PURCHASED BY THE INVESTORS
PURSUANT TO THIS AGREEMENT.

 

ARTICLE VIII
INDEMNIFICATION

 

In consideration of each Investor’s execution and delivery of this Agreement and
its acquisition of the Securities hereunder, and in addition to all of the
Company’s other obligations under this Agreement, the Registration Rights
Agreement and the Warrants, the Company will defend, protect, indemnify and hold
harmless each Investor and each other holder of the Securities and all of their
stockholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person’s agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”) from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(regardless of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”), incurred by an Indemnitee as
a result of, or arising out of, or relating to (a) any breach of any
representation or warranty made by the Company herein or in any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained herein
or in any other certificate, instrument or document contemplated hereby or
thereby or (c) any cause of action, suit or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance, breach or enforcement of this Agreement or the Registration Rights
Agreement or Warrants by the Company.  To the extent that the foregoing
undertaking by the Company is unenforceable for any reason, the Company will
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities that is permissible under applicable law.

 

The Indemnitees shall have the right to employ separate counsel in any such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnitees unless: (i) the
Company has agreed in writing to pay such fees and expenses; (ii) the Company
shall have failed to promptly assume the defense of such proceeding and to
employ counsel reasonably satisfactory to such Indemnitees in any such
proceeding; or (iii) the named parties to any such proceeding (including any
impleaded parties) include both such Indemnitees and the Company, and such
Indemnitees shall have been advised by counsel that a conflict of interest is
likely to exist if the same counsel were to represent such Indemnitees and the
Company (in which case, if such Indemnitees notify the Company in writing that
they elect to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense thereof and such counsel shall be
at the reasonable expense of the Company; provided, however, that in no event
shall the Company be responsible for the fees and expenses of more than one
separate counsel).  The Company shall not be liable for any settlement of any
such proceeding effected without its written consent, which consent shall not be
unreasonably withheld.  The Company shall not, without the prior written consent
of a majority of the Indemnitees, effect any settlement of any pending

 

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proceeding in respect of which Indemnitees are a party, unless such settlement
includes an unconditional release of such Indemnitees from all liabilities that
are the subject matter of such proceeding.  Subject to the foregoing, all fees
and expenses (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend any such proceeding in a
manner inconsistent with this Article VIII) of the Indemnitees shall be paid to
the Indemnitees as incurred, within ten (10) business days of written notice
thereof to the Company, which notice shall be delivered no more frequently than
on a monthly basis; provided, that the Indemnitees shall reimburse the Company
for any and all such fees and expenses to the extent it is finally judicially
determined that such Indemnitees are not entitled to indemnification hereunder.

 

ARTICLE IX
DEFINITIONS

 

9.1           “BYLAWS” HAS THE MEANING SET FORTH IN SECTION 3.5.

 

9.2           “CLOSING” MEANS THE CLOSING OF THE PURCHASE AND SALE OF THE
SECURITIES UNDER THIS AGREEMENT ON THE FIRST CLOSING DATE OR THE SECOND CLOSING
DATE.

 

9.3           “COMMON SHARES” HAS THE MEANING SET FORTH IN THE RECITALS.

 

9.4           “COMMON STOCK” MEANS THE COMMON STOCK, PAR VALUE $.0001 PER SHARE,
OF THE COMPANY.

 

9.5           “COMPANY” MEANS DYNTEK, INC.

 

9.6           “COMPANY CERTIFICATE” HAS THE MEANING SET FORTH IN SECTION 3.5.

 

9.7           “COMPANY SEC FILINGS” HAS THE MEANING SET FORTH IN SECTION 3.6.

 

9.8           “ENVIRONMENTAL LAWS” HAS THE MEANING SET FORTH IN SECTION 3.11.

 

9.9           “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

9.10         “FIRST CLOSING DATE” HAS THE MEANING SET FORTH IN SECTION 1.3.

 

9.11         “INDEMNIFIED LIABILITIES” HAS THE MEANING SET FORTH IN
ARTICLE VIII.

 

9.12         “INDEMNITEES” HAS THE MEANING SET FORTH IN ARTICLE VIII.

 

9.13         “INTELLECTUAL PROPERTY” HAS THE MEANING SET FORTH IN SECTION 3.9.

 

9.14         “INVESTORS” MEANS THE INVESTORS WHOSE NAMES ARE SET FORTH ON THE
SIGNATURE PAGES OF THIS AGREEMENT, AND THEIR PERMITTED TRANSFEREES.

 

9.15         “LIEN” MEANS ANY MORTGAGE, PLEDGE, SECURITY INTEREST, ENCUMBRANCE,
LIEN OR CHARGE OF ANY KIND (INCLUDING ANY CONDITIONAL SALE OR OTHER TITLE
RETENTION AGREEMENT, ANY LEASE IN THE NATURE THEREOF, AND THE FILING OF OR
AGREEMENT TO GIVE ANY FINANCING STATEMENT UNDER THE UNIFORM COMMERCIAL CODE OR
COMPARABLE LAW OF ANY JURISDICTION IN CONNECTION WITH SUCH MORTGAGE, PLEDGE,
SECURITY INTEREST, ENCUMBRANCE, LIEN OR CHARGE).

 

14

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9.16         “MATERIAL ADVERSE EFFECT” MEANS A MATERIAL ADVERSE EFFECT ON
(A) THE BUSINESS, OPERATIONS, ASSETS, LIABILITIES, RIGHTS, OBLIGATIONS OR
FINANCIAL CONDITION OF THE COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, OR
(B) THE ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS PURSUANT TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR UNDER THE AGREEMENTS OR
INSTRUMENTS TO BE ENTERED INTO OR FILED IN CONNECTION HEREWITH, INCLUDING THE
REGISTRATION RIGHTS AGREEMENT AND THE WARRANTS.

 

9.17         “PREFERRED STOCK” HAS THE MEANING SET FORTH IN SECTION 3.3.

 

9.18         “REGISTRATION RIGHTS AGREEMENT” MEANS THE REGISTRATION RIGHTS
AGREEMENT, DATED AS OF THE DATE OF THIS AGREEMENT AND AMONG THE PARTIES TO THIS
AGREEMENT, IN THE FORM ATTACHED HERETO AS EXHIBIT C.

 

9.19         “REGULATION D” MEANS REGULATION D AS PROMULGATED BY THE SEC UNDER
THE SECURITIES ACT.

 

9.20         “RULE 144” AND “RULE 144(K)” MEAN RULE 144 AND RULE 144(K),
RESPECTIVELY, PROMULGATED UNDER THE SECURITIES ACT, OR ANY SUCCESSOR RULE.

 

9.21         “SEC” MEANS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

9.22         “SECOND CLOSING DATE” HAS THE MEANING SET FORTH IN SECTION 1.3.

 

9.23         “SECURITIES” HAS THE MEANING SET FORTH IN THE RECITALS.

 

9.24         “SECURITIES ACT” MEANS THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS THEREUNDER, OR ANY SIMILAR SUCCESSOR STATUTE.

 

9.25         “SIGNIFICANT SUBSIDIARY” HAS THE MEANING SET FORTH IN SECTION 3.18.

 

9.26         “SUBSIDIARY” MEANS A CORPORATION OR OTHER BUSINESS ENTITY IN WHICH
THE COMPANY CONTROLS, EITHER DIRECTLY OR INDIRECTLY, AT LEAST 50% OF THE VOTING
POWER AND WHICH MEETS THE TEST OF A SIGNIFICANT SUBSIDIARY AS DEFINED IN
RULE 1-02(W) OF REGULATION S-X PROMULGATED UNDER THE EXCHANGE ACT.

 

9.27         “WARRANTS” HAS THE MEANING SET FORTH IN THE RECITALS.

 

9.28         “WARRANT SHARES” MEANS THE NUMBER OF SHARES OF COMMON STOCK
PURCHASEABLE BY THE WARRANTS.

 

ARTICLE X
GOVERNING LAW; MISCELLANEOUS

 

10.1         GOVERNING LAW; JURISDICTION; JURY TRIAL WAIVER.  THIS AGREEMENT
WILL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES
HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL
AND STATE COURTS LOCATED IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY HEREBY

 

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IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY.

 

10.2         COUNTERPARTS; SIGNATURES BY FACSIMILE.  THIS AGREEMENT MAY BE
EXECUTED IN TWO OR MORE COUNTERPARTS, ALL OF WHICH ARE CONSIDERED ONE AND THE
SAME AGREEMENT AND WILL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY
EACH PARTY AND DELIVERED TO THE OTHER PARTIES.  THIS AGREEMENT, ONCE EXECUTED BY
A PARTY, MAY BE DELIVERED TO THE OTHER PARTIES HERETO BY FACSIMILE TRANSMISSION
OF A COPY OF THIS AGREEMENT BEARING THE SIGNATURE OF THE PARTY SO DELIVERING
THIS AGREEMENT.

 

10.3         HEADINGS.  THE HEADINGS OF THIS AGREEMENT ARE FOR CONVENIENCE OF
REFERENCE ONLY, ARE NOT PART OF THIS AGREEMENT AND DO NOT AFFECT ITS
INTERPRETATION.

 

10.4         SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS INVALID OR
UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION
WILL BE DEEMED MODIFIED IN ORDER TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. 
ANY PROVISION HEREOF THAT MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW WILL
NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION HEREOF.

 

10.5         ENTIRE AGREEMENT; AMENDMENTS.  THIS AGREEMENT, THE REGISTRATION
RIGHTS AGREEMENT (INCLUDING ALL SCHEDULES AND EXHIBITS THERETO) AND THE WARRANTS
CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND THEREOF.  THERE ARE NO RESTRICTIONS, PROMISES,
WARRANTIES OR UNDERTAKINGS, OTHER THAN THOSE SET FORTH OR REFERRED TO HEREIN OR
THEREIN.  THIS AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF.  NO
PROVISION OF THIS AGREEMENT MAY BE WAIVED OR AMENDED OTHER THAN BY AN INSTRUMENT
IN WRITING SIGNED BY THE PARTY TO BE CHARGED WITH ENFORCEMENT.

 

10.6         NOTICES.  ANY NOTICES REQUIRED OR PERMITTED TO BE GIVEN UNDER THE
TERMS OF THIS AGREEMENT MUST BE SENT BY CERTIFIED OR REGISTERED MAIL (RETURN
RECEIPT REQUESTED) OR DELIVERED PERSONALLY OR BY COURIER (INCLUDING A RECOGNIZED
OVERNIGHT DELIVERY SERVICE) OR BY FACSIMILE AND WILL BE EFFECTIVE FIVE DAYS
AFTER BEING PLACED IN THE MAIL, IF MAILED BY REGULAR U.S. MAIL, OR UPON RECEIPT,
IF DELIVERED PERSONALLY, BY COURIER (INCLUDING A RECOGNIZED OVERNIGHT DELIVERY
SERVICE) OR BY FACSIMILE, IN EACH CASE ADDRESSED TO A PARTY.  THE ADDRESSES FOR
SUCH COMMUNICATIONS ARE:

 

If to the Company:

Chief Financial Officer

 

DynTek, Inc.

 

19700 Fairchild Road, Suite 230

 

Irvine, California 92612

 

Fax: (949) 955-0086

 

 

With copies to:

Christopher Ivey, Esq.

 

Stradling Yocca Carlson & Rauth

 

660 Newport Center Drive, Suite 1600

 

Newport Beach, California 92660

 

Fax: (949) 725-4100

 

If to an Investor:  To the address set forth immediately below such Investor’s
name on the signature pages hereto.

 

16

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With a copy to:

Damon Testaverde

 

Network 1 Financial Securities, Inc.

 

The Galleria, Penthouse

 

2 Bridge Avenue, Building 2

 

Red Bank, New Jersey 07707

 

Each party will provide written notice to the other parties of any change in its
address in accordance with the notice provisions hereof.

 

10.7         SUCCESSORS AND ASSIGNS.  THIS AGREEMENT IS BINDING UPON AND INURES
TO THE BENEFIT OF THE PARTIES AND THEIR SUCCESSORS AND ASSIGNS.  THE COMPANY
WILL NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT
THE PRIOR WRITTEN CONSENT OF THE INVESTORS, AND NO INVESTOR MAY ASSIGN THIS
AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY.  NOTWITHSTANDING THE FOREGOING, AN INVESTOR MAY ASSIGN
ALL OR PART OF ITS RIGHTS AND OBLIGATIONS HEREUNDER TO ANY OF ITS “AFFILIATES,”
AS THAT TERM IS DEFINED UNDER THE SECURITIES ACT, WITHOUT THE CONSENT OF THE
COMPANY SO LONG AS THE AFFILIATE IS AN ACCREDITED INVESTOR (WITHIN THE MEANING
OF REGULATION D UNDER THE SECURITIES ACT) AND AGREES IN WRITING TO BE BOUND BY
THIS AGREEMENT.  THIS PROVISION DOES NOT LIMIT THE INVESTOR’S RIGHT TO TRANSFER
THE SECURITIES PURSUANT TO THE TERMS OF THIS AGREEMENT OR TO ASSIGN THE
INVESTOR’S RIGHTS HEREUNDER TO ANY SUCH TRANSFEREE PURSUANT TO THE TERMS OF THIS
AGREEMENT.

 

10.8         THIRD PARTY BENEFICIARIES.  THIS AGREEMENT IS INTENDED FOR THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE PERMITTED SUCCESSORS AND
ASSIGNS, AND IS NOT FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED
BY, ANY OTHER PERSON.

 

10.9         NO OTHER REPRESENTATIONS.  THE COMPANY MAKES NO REPRESENTATIONS OR
WARRANTIES IN ANY ORAL OR WRITTEN INFORMATION PROVIDED TO INVESTORS, OTHER THAN
THE REPRESENTATIONS AND WARRANTIES INCLUDED HEREIN.

 

10.10       FURTHER ASSURANCES.  EACH PARTY WILL DO AND PERFORM, OR CAUSE TO BE
DONE AND PERFORMED, ALL SUCH FURTHER ACTS AND THINGS, AND WILL EXECUTE AND
DELIVER ALL OTHER AGREEMENTS, CERTIFICATES, INSTRUMENTS AND DOCUMENTS, AS
ANOTHER PARTY MAY REASONABLY REQUEST IN ORDER TO CARRY OUT THE INTENT AND
ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

10.11       NO STRICT CONSTRUCTION.  THE LANGUAGE USED IN THIS AGREEMENT IS
DEEMED TO BE THE LANGUAGE CHOSEN BY THE PARTIES TO EXPRESS THEIR MUTUAL INTENT,
AND NO RULES OF STRICT CONSTRUCTION WILL BE APPLIED AGAINST ANY PARTY.

 

10.12       EQUITABLE RELIEF.  THE COMPANY RECOGNIZES THAT, IF IT FAILS TO
PERFORM OR DISCHARGE ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT, ANY REMEDY AT
LAW MAY PROVE TO BE INADEQUATE RELIEF TO THE INVESTORS.  THE COMPANY THEREFORE
AGREES THAT THE INVESTORS ARE ENTITLED TO SEEK TEMPORARY AND PERMANENT
INJUNCTIVE RELIEF IN ANY SUCH CASE.

 

[SIGNATURE PAGE FOLLOWS]

 

17

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[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first above
written.

 

 

 

COMPANY:

 

 

 

DYNTEK, INC.

 

 

 

 

 

By:

/s/ Casper Zublin, Jr.

 

Name:

Casper Zublin, Jr.

 

Title:

Chief Executive Officer

 

18

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OMNIBUS SIGNATURE PAGE TO

DYNTEK, INC.

SECURITIES PURCHASE AGREEMENT

 

The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Agreement and Signature Pages of the other parties named in said
Agreement, shall constitute one and the same document in accordance with the
terms of the Agreement.

 

 

Date:

 

 

 

 

 

 

Investor Name:

 

 

 

 

 

Sign Name:

 

 

 

 

 

Print Name:

 

 

 

 

 

Title:

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

 

 

 

Telephone:

 

 

 

 

 

Facsimile:

 

 

 

 

 

Number of Securities Purchased:

 

 

 

Common Shares:

 

 

 

 

 

Warrants (Number of Warrant Shares):

 

 

If the name in which the Share Certificates and Warrants are to be issued or the
registered address of the holder thereof is different than the name and address
above, please provide instructions below:

 

 

Name:

 

 

 

 

 

 

 

Registered Address:

 

 

 

 

 

 

 

 

 

 

 

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