Exhibit 10.1
 
EMTEC, INC.
11 Diamond Road 
Springfield, NJ 07081
 
August 2, 2010
 
DARR Westwood LLC
c/o Dinesh R. Desai
11 Diamond Road 
Springfield, NJ 07081
 
Ladies and Gentlemen:
 
This letter agreement sets forth the terms under which Emtec, Inc., a Delaware
corporation (“Emtec”), is to issue to DARR Westwood LLC, a Delaware limited
liability company (“DARR”), a warrant to purchase up to an aggregate of
1,401,733 shares of common stock, par value $.01 per share, of Emtec (“Common
Stock”).
 
1.           Delivery and Cancellation of Expiring Warrant. On the date of this
letter agreement and as a condition precedent to the obligations of Emtec set
forth in Section 2 of this letter agreement, DARR shall (a) transfer to Emtec
all of its right, title and interest in and to the Common Stock Purchase Warrant
dated August 5, 2005, issued by Emtec in favor of DARR (the “Expiring Warrant”),
and (b) deliver to Emtec (1) warrant certificate no. 1 representing the Expiring
Warrant and (2) a duly executed warrant transfer power duly endorsed to Emtec
and in a form reasonably acceptable to Emtec. Upon Emtec’s receipt of the
Expiring Warrant, the Expiring Warrant shall be deemed cancelled and be marked
as such.
 
2.           Issuance and Delivery of New Warrant. On the date of this letter
agreement and subject to, and effective upon, Emtec’s receipt of the Expiring
Warrant in accordance with the terms of this letter agreement, Emtec shall issue
and deliver to DARR a warrant in the form attached hereto as Exhibit A (the “New
Warrant”) to purchase up to an aggregate of 1,401,733 shares of Common Stock
(the “New Warrant Shares”) and shall, upon such issuance and delivery, register
the New Warrant in the name of DARR in Emtec’s records.
 
3.           Lock-Up Covenant.
 
(a)           During the Restricted Period (as defined below), DARR shall not,
unless the disinterested members of the Board of Directors of Emtec shall
otherwise unanimously consent in writing, directly or indirectly, (1) effect any
Transfer of (A) all or any portion of the New Warrant or DARR’s rights under the
New Warrant or (B) any shares of Common Stock (including without limitation the
New Warrant Shares) currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) by DARR or (2) publicly announce any
intention to do any of the foregoing; provided, however, that the restrictions
set forth in this Section 3(a) shall not apply to any Transfer of shares of
Common Stock pursuant to which both (x) the transferee is an independent third
party and (y) the price paid by such transferee is equal to or greater than
$5.00 per share in cash. Any purported Transfer in violation of this letter
agreement shall be null and void and of no force and effect, and the purported
transferee shall have no rights or privileges in or with respect to such shares
of Common Stock.
 
 
 

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(b)           For purposes of this letter agreement, “Affiliate” means, with
respect to any person, any other person directly or indirectly controlling,
controlled by or under common control with such person.
 
(c)           For purposes of this letter agreement, “Restricted Period” means
the period commencing on the date of this letter agreement and terminating at
5:00 p.m., New York City time on the earlier to occur of (1) August 2, 2015 and
(2) the date on which both (A) the average of the daily Volume Weighted Average
Price (as defined below) per share of Common Stock over the immediately
preceding 45 Trading Days that at least one share of Common Stock was traded is
equal to or greater than $5.00, and (B) the average daily trading volume of
shares of Common Stock on the OTC Bulletin Board, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded, over the 45 consecutive Trading Days (regardless of whether any shares
of Common Stock were traded on any such Trading Day) immediately preceding such
date is equal to or greater than 10,000.
 
(d)           For purposes of this letter agreement, “Trading Day” means any day
on which the Common Stock may be traded on the OTC Bulletin Board, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.
 
(e)           For purposes of this letter agreement, “Transfer” means, with
respect to any security, directly or indirectly, (1) the making of any sale,
exchange, assignment, distribution, hypothecation, gift, security interest,
pledge or other encumbrance, or any contract therefor, any voting trust or other
agreement or arrangement with respect to the transfer of voting rights or any
other beneficial interest in such security, options to acquire such security, or
securities exchangeable or exercisable for or convertible into such security,
(2) the granting of any option to sell (including without limitation any short
sale), establishment of any open “put equivalent position” or liquidation or
decrease of any “call equivalent position” within the meaning of Rule 16a-1(h)
under the Exchange Act with respect thereto, (3) the creation of any other claim
thereto or (4) any other transfer or disposition whatsoever, whether voluntary
or involuntary, affecting the right, title, interest or possession therein or
thereto.
 
(f)           For purposes of this letter agreement, “Volume Weighted Average
Price” means, for any date, the price determined by the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board or the principal securities exchange or other securities
market on which the Common Stock is then being traded.
 
4.           Legends; Notation; Stop Transfer Instruction.
 
(a)           Securities Act Legend. DARR acknowledges and agrees that the
certificate representing the New Warrant  and all of the certificates or book
entries, as the case may be, representing the New Warrant Shares shall bear
substantially the following legend reflecting the transfer restrictions under
the federal and state securities laws:
 
 
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM.
 
(b)           Restrictive Transfer Legend. DARR acknowledges and agrees that the
certificate representing the New Warrant and all of the certificates or book
entries, as the case may be, representing shares of Common Stock (including
without limitation the New Warrant Shares) currently or hereafter owned either
of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by
DARR shall bear substantially the following legend reflecting the transfer
restrictions contained in this letter agreement:
 
THESE SECURITIES ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS OF A LETTER
AGREEMENT DATED AUGUST 2, 2010, BETWEEN THE COMPANY AND DARR WESTWOOD LLC, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE
SALE, TRANSFER OR OTHER DISPOSITION OF THESE SECURITIES IS SUBJECT TO THE TERMS
OF SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF
COMPLIANCE THEREWITH.
 
(c)           Termination of Legends. The requirement imposed by Section 4(a) of
this letter agreement shall cease and terminate as to the New Warrant (1) when,
in the opinion of counsel reasonably acceptable to Emtec, such legend is no
longer required in order to assure compliance by Emtec with the Securities Act,
or (2) when the New Warrant has been effectively registered under the Securities
Act or transferred pursuant to Rule 144. Whenever such requirement shall cease
and terminate as to the New Warrant, DARR shall be entitled to receive from
Emtec, without expense, a new certificate representing the New Warrant which
does not bear the legend set forth in Section 4(a) hereof.
 
(d)           Notation; Stop Transfer Instruction. A notation will be made in
the appropriate transfer records of Emtec with respect to the transfer
restrictions referred to in this letter agreement. Emtec may instruct any
transfer agent not to register the Transfer of the New Warrant or any shares of
Common Stock (including without limitation the New Warrant Shares) currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3 under
the Exchange Act) by DARR, until the conditions specified in this letter
agreement are satisfied.
 
5.           Listing Rights. In the event that Emtec causes its Common Stock to
become listed on a national securities exchange, Emtec shall also list and
maintain the listing of the New Warrant Shares on such national securities
exchange.
 
6.           Notice of Corporate Action. If at any time prior to the date on
which the New Warrant has been exercised in full:
 
(a)           Emtec shall take a record of the holders of Common Stock for the
purpose of entitling them to receive a dividend or other distribution; or
 
 
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(b)           there shall be any capital reorganization of Emtec, any
reclassification or recapitalization of the capital stock of Emtec or any
consolidation or merger of Emtec with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of
Emtec to, another corporation; or
 
(c)           there shall be a voluntary or involuntary dissolution, liquidation
or winding up of Emtec;
 
then, in each such case, Emtec shall give to DARR: (i) at least 10 days’ prior
notice of the date on which a record date shall be selected for such dividend or
distribution, or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, liquidation or winding up; and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 10 days’ prior
notice of the date. Such notice in accordance with the foregoing clause also
shall specify (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution, the date on which the holders of
Common Stock shall be entitled to any such dividend or distribution, and the
amount and character thereof, and (B) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which DARR shall be entitled to exchange the New
Warrant Shares for securities or other property deliverable upon such
disposition, dissolution, liquidation or winding up. Failure to provide any
notice required by this Section 6 or any defect in such notice shall not affect
the validity of the subject dividend, distribution, reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation or winding up. DARR acknowledges and agrees that Emtec shall not be
required to comply with its notice obligations under this Section 6 unless and
until, if requested by Emtec, DARR executes and delivers a confidentiality
agreement with Emtec in form and substance reasonably acceptable to Emtec.
 
7.           Representations and Warranties of Emtec. Emtec hereby represents
and warrants to DARR as of the date of this letter agreement as follows:
 
(a)           Organization and Authority. Emtec has been duly organized and is
validly existing and in good standing under the laws of the State of Delaware,
with the requisite power and authority to own, lease and operate its properties
and assets and conduct its business as currently conducted.
 
(b)           Authorization and Enforceability. Emtec has the requisite power
and authority to enter into this letter agreement and the New Warrant and to
carry out its obligations hereunder and thereunder. The execution, delivery and
performance of this letter agreement and the New Warrant by Emtec and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of Emtec, and no other actions or
proceedings on the part of Emtec are necessary to authorize the consummation of
the transactions contemplated hereby and thereby. This letter agreement and the
New Warrant have been duly and validly executed and delivered by Emtec and
constitute legal, valid and binding obligations of Emtec, enforceable against
Emtec in accordance with its terms.
 
 
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(c)           Validity of Issuance. Emtec has duly and validly authorized and
reserved a sufficient number of shares of Common Stock for issuance upon
exercise of the New Warrant, and the New Warrant Shares, when issued in
accordance with the terms of the New Warrant (assuming payment of the exercise
price is made in accordance with the terms of the New Warrant) will, upon such
exercise and issuance, be validly issued, fully paid and non-assessable.
 
8.           Representations and Warranties of DARR. DARR hereby represents and
warrants to Emtec as of the date of this letter agreement as follows:
 
(a)           Organization and Authority. DARR has been duly formed and is
validly existing and in good standing under the laws of the State of Delaware,
with the requisite power and authority to own, lease and operate its properties
and assets and conduct its business as currently conducted.
 
(b)           Authorization and Enforceability. DARR has the requisite power and
authority to enter into this letter agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this letter agreement by
DARR and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of DARR, and no other actions or
proceedings on the part of DARR are necessary to authorize the consummation of
the transactions contemplated hereby. This letter agreement has been duly and
validly executed and delivered by DARR and constitutes a legal, valid and
binding obligation of DARR, enforceable against DARR in accordance with its
terms.
 
(c)           Ownership of Expiring Warrant. DARR has good and valid title to
the Expiring Warrant, free and clear of all liens, restrictions, charges or
other encumbrances. When the Expiring Warrant is accepted for exchange pursuant
to this letter agreement, Emtec will acquire good and valid title thereto, free
and clear of all liens, restrictions, charges or other encumbrances.
 
(d)           Ownership of Common Stock. DARR is the owner of 7,022,488 shares
of Common Stock, all of which are subject to Section 3 of this letter agreement.
 
(e)           Purchase for Investment. DARR acknowledges that neither the New
Warrant nor any of the New Warrant Shares have been registered under the
Securities Act, or under any state securities laws. DARR (1) further
acknowledges that it is acquiring the New Warrant and the New Warrant Shares
pursuant to an exemption from registration under the Securities Act solely for
investment with no present intention or view to distribute the New Warrant or
any of the New Warrant Shares to any person in violation of the Securities Act,
(2) will not sell or otherwise dispose of the New Warrant or any of the New
Warrant Shares, except in compliance with the registration requirements or
exemption provisions of the Securities Act and any other applicable securities
laws and in accordance with the provisions of this letter agreement, (3) has
such knowledge and experience in financial and business matters and in
investments of this type that it is capable of evaluating the merits and risks
of its investment in the New Warrant and the New Warrant Shares and of making an
informed investment decision, and has conducted an independent review and
analysis of the business and affairs of Emtec that it considers sufficient and
reasonable for purposes of its making its investment in the New Warrant and the
New Warrant Shares, and (4) is an “accredited investor” (as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act).
 
 
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9.           Miscellaneous.
 
(a)           Further Assurances. Each party hereto agrees to cooperate
reasonably with the other party hereto at all times from and after the date of
this letter agreement with respect to all of the matters described herein, and
to execute and deliver such instruments and other documents and to take such
other actions, as may be reasonably requested by the other party hereto for the
purpose of carrying out or evidencing any of the transactions contemplated by
this letter agreement.
 
(b)           Tax Matters. The parties hereto affirm and agree that the issuance
and delivery of the New Warrant is not intended to be compensatory in any manner
whatsoever. The exchange of the New Warrant for the Expiring Warrant is intended
to be treated under Section 368(a)(1)(E) of the Internal Revenue Code of 1986,
as amended, as a recapitalization.
 
(c)           Complete Agreement. This letter agreement constitutes the sole
understanding of the parties hereto and supersedes all prior agreements and
understandings among the parties hereto, with respect to the subject matter of
this letter agreement.
 
(d)           Severability. If any court of competent jurisdiction holds any
provision of this letter agreement to be invalid or unenforceable, the other
provisions of this letter agreement will remain in full force and effect. Any
provision of this letter agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
 
(e)           Successors and Assigns. This letter agreement will apply to, be
binding in all respects upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto, except that neither
party may assign any of its rights or delegate any of its obligations under this
letter agreement without the prior written consent of the other party hereto.
 
(f)           No Third Party Rights. Nothing referred to in this letter
agreement is to be construed to give any person other than the parties hereto
any legal or equitable right, remedy or claim under or with respect to this
letter agreement or any provision of this letter agreement, except such rights
as will inure to a successor or permitted assign pursuant to Section 9(e) of
this letter agreement.
 
(g)           Modification and Waiver. This letter agreement may not be amended,
supplemented or otherwise modified except by a written agreement signed by each
party hereto; provided, however, that any provision of this letter agreement may
be waived in writing at any time by the party hereto entitled to the benefits of
such waived provision. No waiver of any provision of this letter agreement will
constitute a waiver of any other provision of this letter agreement (whether or
not similar), and no delay on the part of any party hereto in exercising any
right, power or privilege under this letter agreement will operate as a waiver
of such right, power or privilege.
 
 
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(h)           Applicable Law. This letter agreement is governed by, and to be
construed in accordance with, the laws of the State of Delaware, without regard
to the conflicts of law principles thereof.
 
(i)           Waiver of Jury Trial. EACH PARTY TO THIS LETTER AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING
OUT OF OR RELATING TO THIS LETTER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
 
(j)           Headings. The headings contained in this letter agreement are for
convenience only and are not to be deemed to constitute part of this letter
agreement or to affect the construction or interpretation of any provision of
this letter agreement.
 
(k)           Counterparts. The parties hereto may execute this letter agreement
in counterparts, all of which are to be considered one and the same agreement
and will become effective when each party hereto has signed a counterpart and
delivered such counterpart to the other party hereto, with it being understood
that all parties hereto need not sign the same counterpart. For purposes of this
letter agreement, facsimile signatures are to be deemed originals, and the
parties hereto agree to exchange original signatures as promptly as possible.
 
[SIGNATURE PAGE FOLLOWS]
 
 
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If this letter agreement correctly reflects the terms agreed by Emtec and DARR,
please sign a copy of this letter agreement in the space provided below.
 
Sincerely,
 
EMTEC, INC.
 
By:         /s/ Gregory P.
Chandler                                                    
Name:    Gregory P. Chandler
Title:      Chief Financial Officer
 
Agreed to as of August 2, 2010:
 
DARR WESTWOOD LLC
 
By:       /s/ Dinesh R.
Desai                                                    
Name:    Dinesh R. Desai
Title:      Sole Member
 
 
 

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Exhibit A
 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM.
 
THESE SECURITIES ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS OF A LETTER
AGREEMENT DATED AUGUST 2, 2010, BETWEEN THE COMPANY AND DARR WESTWOOD LLC, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE
SALE, TRANSFER OR OTHER DISPOSITION OF THESE SECURITIES IS SUBJECT TO THE TERMS
OF SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF
COMPLIANCE THEREWITH.
 
COMMON STOCK PURCHASE WARRANT
OF
 
EMTEC, INC.
 
No. 3

 
1.           Grant; Exercise.

1.1.           Grant. Emtec, Inc., a Delaware corporation (the “Company”), for
value received, hereby grants to DARR Westwood LLC (“Holder”) under the terms
herein the right to purchase an aggregate of 1,401,733 fully paid and
non-assessable shares of the Company’s common stock (“Common Stock”), par value
$.01 per share, as such number may be adjusted as provided herein (such shares
purchased upon exercise of this Warrant being the “Warrant Shares”), at a per
share exercise price equal to the Exercise Price (as defined below).  The
aggregate number of Warrant Shares which may be purchased pursuant to this
Warrant is referred to herein as the “Aggregate Number.”
 
1.2.           Exercise Period. This Warrant shall terminate and become void as
of 5:00 p.m., New York City time, on August 2, 2015 (the “Expiration Date”).
This Warrant may be exercised by the Holder at any time and from time to time,
commencing on the date of the original issuance of this Warrant up to and
including the Expiration Date.
 
1.3.           Exercise Price. The per share exercise price of this Warrant is
$2.11, as such price may be adjusted as provided herein (the “Exercise Price”).
 
1.4.           Exercise Procedure. To exercise this Warrant, the Holder hereof
must surrender this Warrant at the office of the Company, at 11 Diamond
Road, Springfield, NJ 07081, Attention: Secretary, or such other address as the
Company may specify by written notice to the Holder hereof, together with a
completed exercise subscription form in the form attached hereto as Exhibit A
duly executed by the Holder hereof and with any required payment in full of the
Exercise Price then in effect for the Warrant Shares, as to which this Warrant
is submitted for exercise, all subject to the terms and conditions hereof. Any
such payment of the Exercise Price shall be in cash (except as provided in
Section 1.5 hereof), payable to the order of the Company, by bank check or wire
transfer of an amount equal to the applicable Exercise Price.
 
 
 

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1.5.           Net Issue Exercise.
 
(a)           In lieu of paying the Exercise Price in cash, the Holder may elect
to pay the Exercise Price with Warrant Shares by surrender of this Warrant at
the office of the Company, at 11 Diamond Road, Springfield, NJ 07081, Attention:
Secretary, or such other address as the Company may specify by written notice to
the Holder hereof, together with a completed form of net issue exercise in the
form attached hereto as Exhibit B duly executed by the Holder hereof, in which
event the Company shall issue to the Holder that number of Warrant Shares
computed using the following formula:
 
X = 
Y (A – B)
  
 
A
  
 

 
Where:
 

 
X
is the number of Warrant Shares to be issued to Holder pursuant to this Section
1.5;

 

 
Y
is the number of Warrant Shares as to which Holder is exercising this Warrant;

 

 
A
is the Fair Market Value Price (as hereinafter defined) of the Company’s Common
Stock in effect under this Warrant as of the date of exercise of this Warrant;
and

 

 
B
is the Exercise Price in effect under this Warrant as of the date of exercise of
this Warrant.

 
(b)           As used herein, the “Fair Market Value Price” of the Company’s
Common Stock shall be the average of the closing prices per share of the
Company’s Common Stock as reported by the average of the closing bid and asked
prices quoted on the OTC Bulletin Board or on the principal securities exchange
or other securities market on which the Company’s Common Stock is then traded
for the ten (10) trading days immediately prior to the date of determination of
such price. If the Company’s Common Stock is not traded on the OTC Bulletin
Board (or on such an exchange or market), the “Fair Market Value Price” of the
Company’s Common Stock shall be the price per share as determined in good faith
by the Company’s Board of Directors.
 
1.6.           Partial Exercise. This Warrant may be exercised for less than the
aggregate number of Warrant Shares, in which case the number of Warrant Shares
receivable upon the exercise of this Warrant as a whole, and the sum payable
upon the exercise of this Warrant as a whole, shall be proportionately reduced.
Upon any such partial exercise, the Company, at its expense shall forthwith
issue to the Holder hereof a new Warrant or Warrants of like tenor calling for
the number of remaining Warrant Shares as to which rights have not been
exercised, such Warrant or Warrants to be issued in the name of the holder
hereof or its nominee (upon payment by such holder of any applicable transfer
taxes).
 
 
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1.7.           Expenses in Connection with Exercise. The Company shall pay all
taxes and other governmental charges that may be imposed on the Company or on
the Warrant or on the Warrant Shares or any other securities deliverable upon
exercise of the Warrant. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for shares of the Company’s Common Stock or other
securities underlying the Warrant or payment of cash to any person other than
the Holder of the Warrant surrendered upon the exercise of a Warrant, and in
case of such transfer or payment, the Company shall not be required to issue any
stock certificate or pay any cash until such tax or other charge has been paid
or it has been established to the Company’s satisfaction that no such tax or
other charge is due.
 
2.           Issuance; Adjustments.
 
2.1.           Stock Fully Paid; Reservation of Shares. All of the Company’s
Common Stock issuable upon the exercise of the rights represented by this
Warrant shall, upon issuance and receipt of the applicable Exercise Price
therefor, be fully paid and nonassessable, and free from all preemptive rights,
rights of first refusal or first offer, taxes, liens and charges of whatever
nature. During the period within which the rights represented by this Warrant
may be exercised, the Company shall at all times have authorized and reserved
for issuance a sufficient number of shares of its Common Stock to provide for
the full exercise of the Warrant Shares represented by this Warrant. The Company
hereby agrees that its issuance of this Warrant shall constitute full authority
to its officers who are charged with the duty of executing stock certificates to
execute and issue the proper certificates for the Company’s Common Stock upon
the full or each partial exercise of this Warrant.
 
2.2.           Fractional Interest. The Company may, but shall not be required
to, issue fractional shares of the Company’s Common Stock on the exercise of
Warrants. If more than one Warrant shall be presented for exercise in full at
the same time by the same Holder, the number of full shares of the Company’s
Common Stock which shall be issuable upon such exercise thereof shall be
computed on the basis of the aggregate number of shares of the Company’s Common
Stock acquirable on exercise of the Warrants so presented. If any fraction of a
share of the Company’s Common Stock would be issuable on the exercise of any
Warrant (or specified portion thereof), the Company may, in lieu thereof, pay an
amount in cash calculated by it to be equal to the then current market value per
share of the Company’s Common Stock (as determined by the Board of Directors)
multiplied by such fraction computed to the nearest whole cent; provided,
however, that in the event the Company is unable or is not permitted under
applicable law or under any applicable financing agreements to pay such amount
in cash, the Company shall issue fractional shares rounded to the nearest one
one-hundredth (1/100) of a share.
 
2.3           Recapitalization or Reclassification. If the Company shall at any
time effect a stock split, payment of stock dividend, recapitalization,
reclassification or other similar transaction of such character that the shares
of the Company’s Common Stock shall be changed into or become exchangeable for a
larger or smaller number of shares, then upon the effective date thereof, the
number of Warrant Shares which Holder shall be entitled to purchase upon
exercise of this Warrant shall be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of shares of the
Company’s Common Stock by reason of such stock split, payment of stock dividend,
recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of shares,
proportionally increased. The Company shall give the Holder the same notice it
provides to holders of the Company’s Common Stock of any transaction described
in this Section 2.3. 
 
 
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2.4           Adjustments to Exercise Price and Aggregate Number for Diluting
Issuances.  Under certain conditions, the Exercise Price and Aggregate Number
are subject to adjustment as set forth in this Section 2.4.
 
(a)           Adjustment upon Issuance of Additional Shares of Common Stock.  In
the event the Company shall at any time after the date hereof issue Additional
Shares of Common Stock (as defined below) (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 2.4(c)) without consideration or
for a consideration per share less than the Exercise Price in effect immediately
prior to such issuance, then the Exercise Price shall be reduced, concurrently
with such issuance, to a price (calculated to the nearest one-hundredth of a
cent) determined in accordance with the following formula:
 
EP2 = EP1 x (A + B) ÷ (A + C).
 
For purposes of the foregoing formula, the following definitions shall apply:
 
(i)           “EP2” shall mean the Exercise Price in effect immediately after
such issuance of Additional Shares of Common Stock;
 
(ii)           “EP1” shall mean the Exercise Price in effect immediately prior
to such issuance of Additional Shares of Common Stock;
 
(iii)           “A” shall mean the number of shares of Common Stock outstanding
immediately prior to such issuance of Additional Shares of Common Stock
(treating for this purpose as outstanding all shares of Common Stock issuable
upon exercise of Options outstanding immediately prior to such issuance or upon
conversion or exchange of Convertible Securities outstanding (assuming exercise
of any outstanding Options therefore) immediately prior to such issuance);
 
(iv)           “B” shall mean the number of shares of Common Stock that would
have been issued if such Additional Shares of Common Stock had been issued at a
price per share equal to EP1 (determined by dividing the aggregate consideration
received by the Company in respect of such issuance by EP1); and
 
(v)           “C” shall mean the number of such Additional Shares of Common
Stock issued in such transaction.
 
(b)           Definitions.
 
(i)           For purposes of this Section 2.4, “Additional Shares of Common
Stock” shall mean all shares of Common Stock issued (or, pursuant to Section
2.4(c), deemed to be issued) by the Company after the date hereof, other than
the following shares of Common Stock (collectively, “Exempted Securities”):
 
 
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(A)             Shares of Common Stock, Options or Convertible Securities issued
by reason of a dividend, stock split, split-up or other distribution with
respect to the Common Stock.
 
(B)             Shares of Common Stock or Options issued pursuant to the
Company’s 2006 Stock-Based Incentive Compensation Plan, as amended; or
 
(C)             Shares of Common Stock or Convertible Securities actually issued
upon the exercise of Options outstanding as of the date hereof or permitted
hereby without adjustment to the Exercise Price or Common Stock actually issued
upon the exercise, conversion or exchange of all or any portion of this Warrant
or of any Convertible Securities outstanding as of the date hereof or permitted
hereby without adjustment to the Exercise Price, in each case provided such
issuance is pursuant to the terms of such Option, Warrant or Convertible
Security.
 
(ii)           For purposes of this Section 2.4, “Convertible Securities” shall
mean any evidence of indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common Stock, excluding Options.
 
(iii)           For purposes of this Section 2.4, “Option” shall mean any
rights, options or warrants to subscribe for, purchase or otherwise acquire
Common Stock or Convertible Securities.
 
(c)           Deemed Issue of Additional Shares of Common Stock.
 
(i)           If the Company at any time or from time to time after the date
hereof shall issue any Options or Convertible Securities (excluding Options or
Convertible Securities which are themselves Exempted Securities) or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto,
assuming the satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall subject to Section 2.4(b) be
deemed to be Additional Shares of Common Stock issued as of the time of such
issuance or, in case such a record date shall have been fixed, as of the close
of business on such record date.
 
(ii)           If the terms of any Option or Convertible Security, the issuance
of which resulted in an adjustment to the Exercise Price pursuant to the terms
of Section 2.4(a), are revised as a result of an amendment to such terms or any
other adjustment pursuant to the provisions of such Option or Convertible
Security (but excluding automatic adjustments to such terms pursuant to
anti-dilution or similar provisions of such Option or Convertible Security) to
provide for either (A) any increase or decrease in the number of shares of
Common Stock issuable upon the exercise, conversion and/or exchange of any such
Option or Convertible Security or (B) any increase or decrease in the
consideration payable to the Company upon such exercise, conversion and/or
exchange, then, effective upon such increase or decrease becoming effective, the
Exercise Price computed upon the original issuance of such Option or Convertible
Security (or upon the occurrence of a record date with respect thereto) shall be
readjusted to such Exercise Price as would have been obtained had such revised
terms been in effect upon the original date of issuance of such Option or
Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to
this clause (ii) shall have the effect of increasing the Exercise Price to an
amount which exceeds the lower of (x) the Exercise Price in effect immediately
prior to the original adjustment made as a result of the issuance of such Option
or Convertible Security, or (y) the Exercise Price that would have resulted from
any issuances of Additional Shares of Common Stock (other than deemed issuances
of Additional Shares of Common Stock as a result of the issuance of such Option
or Convertible Security) between the original adjustment date and such
readjustment date.
 
 
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(iii)           If the terms of any Option or Convertible Security (excluding
Options or Convertible Securities which are themselves Exempted Securities), the
issuance of which did not result in an adjustment to the Exercise Price pursuant
to the terms of Section 2.4(a) (either because the consideration per share
(determined pursuant to Section 2.4(d)) of the Additional Shares of Common Stock
subject thereto was equal to or greater than the Exercise Price then in effect,
or because such Option or Convertible Security was issued before the date
hereof), are revised after the date hereof as a result of an amendment to such
terms or any other adjustment pursuant to the provisions of such Option or
Convertible Security (but excluding automatic adjustments to such terms pursuant
to anti-dilution or similar provisions of such Option or Convertible Security)
to provide for either (1) any increase in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such Option or
Convertible Security or (2) any decrease in the consideration payable to the
Company upon such exercise, conversion or exchange, then such Option or
Convertible Security, as so amended or adjusted, and the Additional Shares of
Common Stock subject thereto shall be deemed to have been issued effective upon
such increase or decrease becoming effective.
 
(iv)           Upon the expiration or termination of any unexercised,
unconverted or unexchanged Option or Convertible Security (or portion thereof)
which resulted (either upon its original issuance or upon a revision of its
terms) in an adjustment to the Exercise Price pursuant to the terms of Section
2.4(a), the Exercise Price shall be readjusted to such Exercise Price as would
have obtained had such Option or Convertible Security (or portion thereof) never
been issued.
 
(v)           If the number of shares of Common Stock issuable upon the
exercise, conversion and/or exchange of any Option or Convertible Security, or
the consideration payable to the Company upon such exercise, conversion and/or
exchange, is calculable at the time such Option or Convertible Security is
issued or amended but is subject to adjustment based upon subsequent events, any
adjustment to the Exercise Price provided for in this Section 2.4(c) shall be
effected at the time of such issuance or amendment based on such number of
shares or amount of consideration without regard to any provisions for
subsequent adjustments (and any subsequent adjustments shall be treated as
provided in clauses (ii) and (iii) of this Section 2.4(c)). If the number of
shares of Common Stock issuable upon the exercise, conversion and/or exchange of
any Option or Convertible Security, or the consideration payable to the Company
upon such exercise, conversion and/or exchange, cannot be calculated at all at
the time such Option or Convertible Security is issued or amended, any
adjustment to the Exercise Price that would result under the terms of this
Section 2.4(c) at the time of such issuance or amendment shall instead be
effected at the time such number of shares and/or amount of consideration is
first calculable (even if subject to subsequent adjustments), assuming for
purposes of calculating such adjustment to the Exercise Price that such issuance
or amendment took place at the time such calculation can first be made.
 
 
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(d)           Determination of Consideration.  For purposes of this Section 2.4,
the consideration received by the Company for the issue of any Additional Shares
of Common Stock shall be computed as follows:
 
(i)           Cash and Property: Such consideration shall:
 
(A)           insofar as it consists of cash, be computed at the aggregate
amount of cash received by the Company, excluding amounts paid or payable for
accrued interest;
 
(B)           insofar as it consists of property other than cash, be computed at
the fair market value thereof at the time of such issue, as determined in good
faith by the Board of Directors of the Company; and
 
(C)           in the event Additional Shares of Common Stock are issued together
with other shares or securities or other assets of the Company for consideration
which covers both, be the proportion of such consideration so received, computed
as provided in clauses (A) and (B) above, as determined in good faith by the
Board of Directors of the Company.
 
(ii)           Options and Convertible Securities.  The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 2.4(c) relating to Options and Convertible
Securities shall be determined by dividing:
 
(A)           the total amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Company upon
the exercise, conversion or exchange of such Options or Convertible Securities,
or in the case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the exercise, conversion or exchange of
such Convertible Securities, by
 
(B)           the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise,
conversion or exchange of such of Options or Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the exercise, conversion or exchange of such
Convertible Securities.
 
 
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(iii)           Services Rendered.  For the avoidance of doubt, Additional
Shares of Common Stock issued solely in exchange for past or future services to
the Company shall be considered to have been issued without consideration for
purposes of this Section 2.4.
 
(e)           No Adjustment of Exercise Price.  Notwithstanding anything
contained herein, no adjustment in the Exercise Price shall be made as the
result of the issuance or deemed issuance of Additional Shares of Common Stock
if the Company receives written notice from Holder that no such adjustment shall
be made as the result of the issuance or deemed issuance of such Additional
Shares of Common Stock.
 
(f)           Adjustment of Aggregate Number.  Upon each adjustment of the
Exercise Price pursuant to this Section 2.4, the Holder of this Warrant shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares equal to an Aggregate Number obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the Aggregate Number purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Exercise Price resulting
from such adjustment.
 
(g)           Notice of Proposed Actions.  In case the Company shall propose to
effect any action which would require an adjustment under this Section 2.4, then
in each such case the Company shall give to the Holder written notice of such
proposed action, which shall specify the date on which such transaction or other
action is expected to take place, and shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action on the Exercise Price and on the Aggregate Number after giving effect to
any adjustment which will be required as a result of such action. Such notice
shall be so given at least ten (10) days prior to the earlier of the date of the
taking of such proposed action.
 
3.           Other Provisions Relating to the Rights of the Holder of this
Warrant.
 
3.1.           No Voting Rights. Prior to the exercise of the Warrant, no Holder
of this Warrant, as such, shall be entitled to any rights of a stockholder of
the Company, including, without limitation, the right to vote, to consent, to
exercise any preemptive right, to receive any notice of meetings of stockholders
for the election of directors of the Company or any other matter or to receive
any notice of any proceedings of the Company, except as may be specifically
provided for herein.
 
3.2.           Right of Action and Remedies. All rights of action in respect of
this Warrant are vested in the Holder of the Warrant, and any Holder of the
Warrant or the Holder of any other Warrant, may, in such Holder’s own behalf and
for such Holder’s own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company suitable to enforce, or otherwise in
respect of, such Holder’s right to exercise, exchange or tender for purchase
such Holder’s Warrant in the manner provided herein. The Company stipulates that
the remedies at law of the holder of this Warrant in the event of any default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that the same may be specifically
enforced.
 
 
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3.3.           Surrender of Warrant. A Warrant surrendered for exercise or
redemption shall, if surrendered to the Company shall be promptly canceled by
the Company and shall not be reissued by the Company. The Company shall destroy
such each canceled Warrant.
 
3.4.           Mutilated, Destroyed, Lost and Stolen Warrants.
 
(a)           If (i) a mutilated Warrant is surrendered to the Company or (ii)
the Company receives evidence to its reasonable satisfaction of the destruction,
loss or theft of the Warrant, and there is delivered to the Company such
security or indemnity as may be required by it to save it harmless, then, in the
absence of notice to the Company that such Warrant has been acquired by a bona
fide purchaser, the Company shall execute and deliver, in exchange for any such
mutilated Warrant or in lieu of any such destroyed, lost or stolen Warrant, a
new Warrant of like tenor and for a like aggregate number of Warrant Shares.
 
(b)           Upon the issuance of any new Warrant under this Section 3.4, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and other expenses
(including the reasonable fees and expenses of the Company and of counsel to the
Company) in connection therewith.
 
(c)           A new Warrant executed and delivered pursuant to this Section 3.4
in lieu of any destroyed, lost or stolen Warrant shall constitute an original
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Warrant shall be at any time enforceable by anyone, and shall be entitled
to the benefits of this Warrant equally and proportionately with any and all
other Warrants duly executed and delivered hereunder.
 
(d)           The provisions of this Section 3.4 are exclusive and shall
preclude (to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, destroyed, lost or stolen Warrants.
 
4.           Miscellaneous.
 
4.1.           Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given, and
shall be effective upon receipt, if delivered personally, telecopied (which is
confirmed), sent by registered or certified mail (return receipt requested), or
sent by overnight courier (providing proof of delivery) to the Holder at such
Holder’s address or facsimile number listed on the register of the Company and
to the Company as follows (or at such other address for a party as shall be
specified by like notice):
 
Emtec, Inc.
11 Diamond Road 
Springfield, NJ 07081
Attn: Secretary
Facsimile: (973) 376-8846
 
4.2.           Persons Benefiting. This Warrant shall be binding upon and inure
to the benefit of the Company, and its respective successors and assigns, and
the Holder, from time to time, of the Warrant. Nothing in this Warrant is
intended or shall be construed to confer upon any Person, other than the
Company, and the Holder of the Warrant any right, remedy or claim under or by
reason of this Warrant or any part hereof.
 
 
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 4.3.           Counterparts. This Warrant may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
 
 4.4.           Headings. The descriptive headings of the several Sections of
this Warrant are inserted for convenience and shall not control or affect the
meaning or construction of any of the provisions hereof.
 
 4.5.           Amendments. The Company shall not, without the prior written
consent of the Holder of the Warrant, by supplemental agreement or otherwise,
make any changes, modifications or amendments to this Warrant.
 
 4.6.           Applicable Law. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
AND INSTRUMENTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE.
 
 4.7.           Waiver of Jury Trial. EACH PARTY TO THIS WARRANT, AND EACH
HOLDER BY ACCEPTANCE OF THE WARRANT, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
[Signature Page Follows]
 
 
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This Warrant shall not be valid for any purpose until it shall have been signed
by the Company.
 
Dated: August 2, 2010
 
EMTEC, INC.
 
By:      _________________________  
Name:     Gregory P. Chandler
Title:       Chief Financial Officer
 
ACCEPTED AS OF THE DATE HEREOF:
 
HOLDER
 
DARR WESTWOOD LLC
 
By:      _________________________  
Name:     Dinesh R. Desai
Title:       Sole Member 
 
 
 

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Exhibit A
 
[To be signed only upon exercise of Warrant]
 
EXERCISE SUBSCRIPTION FORM
 
To: 
Emtec, Inc.

11 Diamond Road 
Springfield, NJ 07081
Attn: Secretary

The undersigned, the holder of the enclosed Warrant, hereby irrevocably elects
to exercise the purchase right represented by such Warrant for, and to purchase
thereunder,                      shares of common stock, par value $.01 per
share, of Emtec, Inc. (“Common Stock”), and herewith makes payment of
$                     therefor, and requests that the certificates for such
shares be issued in the name of, and be delivered to                     , whose
address is                     .
 
Dated: _____________________
________________________________

 
By:______________________________
 
Address:
 
________________________________
 
________________________________
 
 
 
 

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Exhibit B
 
[To be signed only upon exercise of Warrant]
 
FORM OF NET ISSUE EXERCISE
 
To: 
Emtec, Inc.

11 Diamond Road 
Springfield, NJ 07081
Attn: Secretary
 
The undersigned, the holder of the enclosed Warrant number             , hereby
irrevocably elects to exercise, pursuant to Section 1.5 (Net Issue Exercise)
thereof, the purchase right represented by such Warrant for, and to purchase
thereunder,                      shares of common stock, par value $.01 per
share, of Emtec, Inc. (“Common Stock”), and requests that the certificates for
such shares be issued in the name of, and be delivered to                     ,
whose address is                     .
 
 
Dated: _____________________
________________________________

 
By:______________________________
 
Address:
 
________________________________
 
________________________________