Document:

Exhibit
10.2

 

ASSET
PURCHASE AGREEMENT

 

This ASSET
PURCHASE AGREEMENT, dated as of                   ,
2005 (this “Agreement”), from Dyntek, Inc., a Delaware corporation, and
Dyntek Services, Inc., a Delaware corporation (collectively, the “Sellers”),
to New England Technology Finance, LLC, a Delaware limited liability company,
as purchaser (“Purchaser”).  Capitalized
terms shall have the meanings set forth in Section 9 hereto.

 

1.             Agreement.

 

(a)           Purchase on Initial Purchase Date.  For good and valuable consideration
consisting of the Purchase Price, the receipt and sufficiency of which are
hereby acknowledged, each of the Sellers, by these presents, does irrevocably
agree to GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER and DELIVER
unto Purchaser, and unto Purchaser’s successors and assigns (without recourse,
except as set forth below) forever, as of the date hereof (the “Initial
Purchase Date”), all right, title and interest in and to the Purchased Assets,
and Purchaser agrees to purchase and acquire all such Purchased Assets on the
date hereof, subject to the conditions precedent set forth in Section 3(a)
below.  Each Purchased Account shall have
a unique sequence number mutually agreed to by Seller and Purchaser as set
forth in the Lockbox Agreement.

 

(b)           Purchase on any Date Subsequent to
the Initial Purchase Date.  Any
Seller may, from time to time after the Initial Purchase Date, offer to sell to
Purchaser additional Purchased Assets by providing Purchaser a duly executed
Purchase Supplement, and Purchaser may, from time to time, at its sole
discretion, agree to purchase such additional Purchased Assets subject to the
conditions precedent set forth in Section 3(b) below.

 

2.             Effectiveness; True Sale; Disclaimer of Liability.  The Sellers and Purchaser agree that the sale
and assignment of each Purchased Asset pursuant hereto shall be effected
immediately and automatically without any further act or acknowledgement on the
part of any Seller, Purchaser or any other Person, but subject to Section 3
below.  The Sellers and Purchaser further
agree that the sale and assignment of the Purchased Assets pursuant hereto is a
sale and assignment of the Purchased Assets for valuable consideration and
shall in no event be construed as a sale and assignment of the Purchased Assets
for security.  Purchaser shall have no
obligation or liability with respect to any contracts or underlying obligations
relating to the Purchased Assets, and Purchaser shall have no obligation or
liability to any obligor thereon or customer or other client of any Seller
(including any obligations to perform any of the obligations of any Seller
under or in respect of contracts or other underlying obligations relating to
the Purchased Assets).  The assumption of
any such obligation or liability by Purchaser is expressly disclaimed.

 

 

3.             Conditions Precedent.

 

(a)           The effectiveness of this Agreement
and the obligation of Purchaser to purchase the Purchased Assets, as of the
date hereof, is subject to the satisfaction of all of the conditions set forth
below:

 

(1)           Purchaser
shall have received, in form and substance satisfactory to Purchaser, the duly
executed Transaction Documents and all other documents, instruments,
information, agreements, notes, guarantees, certificates, orders, authorizations,
financing statements, mortgages, and other documents which Purchaser may
reasonably request.

 

(2)           Purchaser
shall have received the results of lien searches for each Seller in all
jurisdictions as Purchaser shall reasonably request.

 

(3)           Except
as set forth in the Schedule of Exceptions, there shall not be pending or, to the
best knowledge of the Sellers, threatened, any litigation, action, charge,
claim, demand, suit, proceeding, petition, governmental investigation, or
arbitration by, against, or affecting any Seller or any of its subsidiaries or
any property of Seller or any of its subsidiaries that has not been disclosed
by the Sellers in writing, and there shall have occurred no development in any
such action, charge, claim, demand, suit, proceeding, petition, governmental
investigation, or arbitration that, in Purchaser’s opinion, would reasonably be
expected to have a Material Adverse Effect.

 

(4)           The
Sellers shall have received all requisite governmental and third party approvals
and consents, all satisfactory in form and substance to Purchaser.

 

(5)           The
Sellers shall have received a release of security interest or waiver and
consent from Textron Financial Corporation, Laurus Master Fund, Ltd. and Ingram
Micro, Inc., each in form and substance reasonably satisfactory to Purchaser.

 

(b)           The obligation, if Purchaser elects,
in its sole discretion, to purchase additional Purchased Assets on any date
after the Initial Purchase Date, shall, in each case, be subject to the
satisfaction of all of the conditions set forth below:

 

(1)           Purchaser
shall have received a duly authenticated Purchase Supplement.

 

(2)           The
representations and warranties contained herein and in the other Transaction
Documents shall be true, correct and complete in all material respects on and
as of the applicable Purchase Date (except to the extent such representations
and warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete in
all material respects on and as of such earlier date).

 

2

 

(3)           Each
Seller shall have performed in all material respects all agreements required of
such Seller under this Agreement and the other Transaction Documents.

 

(4)           Except
as set forth in the Schedule of Exceptions, there shall not be pending or, to the
best knowledge of the Sellers, threatened, any litigation, action, charge,
claim, demand, suit, proceeding, petition, governmental investigation, or
arbitration by, against, or affecting any Seller or any of its subsidiaries or
any property of Seller or any of its subsidiaries that has not been disclosed
by the Sellers in writing, and there shall have occurred no development in any
such action, charge, claim, demand, suit, proceeding, petition, governmental
investigation, or arbitration that, in Purchaser’s commercially reasonable
judgment, would reasonably be expected to have a Material Adverse Effect.

 

(5)           The
Sellers shall have received all requisite governmental and third party approvals
and consents, all reasonably satisfactory in form and substance to Purchaser.

 

4.             Representations, Warranties and Covenants of the Sellers.  Except as set forth in the Schedule of
Exceptions, each Seller hereby represents, warrants and covenants to Purchaser
as set forth below:

 

(a)           Corporate Existence and Power.  Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state of its organization
and has all organizational power and all material governmental licenses,
authorizations, consents and approvals required to carry on its business in
each jurisdiction in which its business is now conducted and each Seller is
duly qualified to do business in, and is in good standing in, every other
jurisdiction in which the nature of its business requires it to be so
qualified, except where the failure to have such items or to be so qualified or
in good standing would not have a Material Adverse Effect.

 

(b)           Authorization and Contravention.  The execution, delivery and performance by each
Seller of this Agreement and the other Transaction Documents to which it is a
party is within its organizational powers, have been duly authorized by all
necessary organizational action, require no action by or in respect of, or
filing with, any governmental entity or official thereof (except for UCC
financing statements), and do not contravene, or constitute a default under,
any provision of applicable law, rule or regulation or of the certificate of
incorporation of such Seller or of any agreement, judgment, injunction, order,
writ, decree or other instrument binding upon Seller or result in the creation
or imposition of any adverse lien or encumbrance on the assets of such Seller.

 

(c)           Legal Proceedings.  There are no judgments outstanding, against,
or affecting any of the property of any Seller nor is there any action, charge,
claim, demand, suit, proceeding, petition, governmental investigation, or
arbitration now pending or, to the best of any Seller’s knowledge after due
inquiry, threatened against or affecting any Seller or any of its property
which could reasonably be expected to result in a Material Adverse Effect.  No Seller has received any opinion or
memorandum or legal advice from legal counsel to the effect that 

 

3

 

any Seller is exposed to any liability or disadvantage
which could reasonably be expected to result in a Material Adverse Effect.  No Seller is in violation of any material
order of any court, arbitrator or governmental entity.

 

(d)           Enforceability.  Each of this Agreement and the other
Transaction Documents has been duly executed and delivered and constitutes the
legal, valid and binding obligation of each Seller, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally.

 

(e)           Purchased Account.  At the time of its sale and assignment to
Purchaser, each Purchased Account is a valid, bona fide Account, representing
an undisputed indebtedness incurred by the named customer for goods actually
sold and delivered or for services completely rendered and such Purchased
Account: (i) arises out of the sale of goods or vendor-provided services in the
ordinary course of business; (ii) does not arise out of a sale made to an
Affiliate of Seller for operational use by that Affiliate and not for
subsequent sale to a customer of such Affiliate; (iii) has no set-off, offset,
counterclaim, or defense, genuine or otherwise, to the payment or collection of
such Purchased Account; (iv) is payable in U.S. dollars and the equipment
related thereto is located inside the continental United States, Canada or on a
foreign military base (excluding the province of New Foundland, the Northwest
Territories and the Territory of Nunavit); (v) does not represent a guaranteed
sale, a bill and hold transaction, a sale-and-return, a sale on approval, a
cash on delivery sale or a consignment sale or is not made pursuant to any
other written agreement providing for repurchase or return; (vi) complies with
all applicable laws; (vii) is not subject to any adverse security interest,
lien or encumbrance (including tax liens) other than those in favor of
Purchaser; (viii) is eligible for Credit Insurance (as defined in the MSA) or
otherwise approved in writing by Purchaser; (ix) does not contain terms
providing for payment in more than thirty (30) days from the date of invoice;
and (x) would qualify as an “Eligible Account” (as defined in and under the APLA).

 

(f)            Good Title.  Seller has good and marketable title to the
Purchased Assets, free and clear of all liens, security interests or
restrictions on transfer.  Seller shall
not grant or suffer to exist in favor of any other party, other than Purchaser,
any lien upon or security interest in any Purchased Asset (except to the extent
purchased by Seller pursuant to Section 5 or 6 hereof).  Upon each sale, Purchaser shall acquire a
valid ownership interest in each Purchased Asset free and clear of all liens,
security interests or restrictions on transfer (except as created by
Purchaser).

 

(g)           Location of Books and Records.  All books and records pertaining to the
Purchased Assets owned by Seller shall be maintained solely and exclusively at
the addresses set forth on Schedule I hereof and no such books and
records shall be moved or transferred without giving Purchaser thirty (30) days’
prior written notice.

 

(h)           No Default.  Seller is not in default in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any of Seller’s obligations under any Contract or Purchased Asset,
except for any such default that could not reasonably be expected to have a
Material Adverse Effect, and no condition exists that, with the 

 

4

 

giving of notice or the lapse of time or both, would
constitute such a default under any Contract or Purchased Asset.

 

(i)            No Violation of Laws.  Seller is not in violation of any law,
ordinance, rule, regulation, order, policy, guideline, or other requirement of
any domestic or foreign government or any instrumentality or agency thereof,
having jurisdiction over the conduct of Seller’s business or the ownership of
Seller’s properties, including, without limitation, any violation relating to
any use, release, storage, transport, or disposal of any hazardous material,
which violation would subject Seller or any of its officers to criminal
liability or have a Material Adverse Effect on Seller’s business or operations
and no such violation has been alleged.

 

(j)            Disclosure; Accuracy of
Information.  All information
furnished to Purchaser by or on behalf of Seller concerning the Purchased
Assets or the transactions contemplated by the Transaction Documents, the
proceeds thereof, Seller’s financial condition or otherwise, is and will be
complete, accurate, and correct in all material respects at the time the same
is furnished.  The representations and
warranties of Seller contained in the Transaction Documents and the information
contained in the other documents, certificates and written statements furnished
to Purchaser by or on behalf of Seller for use in connection with the
transactions contemplated by this Agreement or any other Transaction Document,
when taken together, do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained herein or therein not materially misleading in light of the
circumstances in which the same were made. 
There is no fact known to Seller (other than matters of a general
economic nature) that has had, or could reasonably be expected to result in, a
Material Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to Purchaser for use in
connection with the transactions contemplated this Agreement or any other
Transaction Document.  Any projections
furnished to Purchaser by or on behalf of Seller are based upon good faith
estimates and assumptions believed by Seller to be reasonable at the time made,
it being recognized by Purchaser that such projections as to future events are
not to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results.

 

(k)           No Bulk Sales.  No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.

 

(l)            Preference; Voidability.  Purchaser has given reasonably equivalent
value to Seller in consideration for the sale to Purchaser of the Purchased
Assets by Seller, and each such sale has not been made for or on account of an
antecedent debt owed by Seller to Purchaser.

 

(m)          Margin Stock.  No proceeds of any sale hereunder or under any
other Transaction Document shall be used by Seller to acquire any security in
any transaction which is subject to Section 12 of the Securities Exchange Act
of 1934, as amended or for any purpose that violates any applicable law, rule
or regulation, including Regulation U of the Federal Reserve Board.

 

(n)           Use of Proceeds.  The Sellers shall use the proceeds of the
Purchase Price  (i) for general working
capital purposes and (ii) to pay off all indebtedness owing to Textron 

 

5

 

Financial Corporation by the Sellers, as of the
Closing Date, and upon such repayment (which may occur after the Closing Date),
all indebtedness and liability owing to Textron Financial Corporation by Seller
shall be fully discharged and terminated.

 

(o)           APLA Covenants.  The covenants
and obligations of each Seller under the APLA shall be incorporated herein by
this reference mutatis mutandis and shall, for
the avoidance of doubt, apply to the Purchased Accounts.

 

(p)           Continuing Representations, etc.  All covenants, representations, and
warranties contained in this Agreement shall be true and correct as of the date
hereof and shall be deemed continuing.

 

5.             Breach of Representation, Warranty or Covenant;
Remedy.  If any Seller breaches any
representation, warranty or covenant set forth in Section 4 hereof in
respect of any Purchased Account, the Sellers shall promptly upon Purchaser’s
written request (and, in any event, within five (5) Business Days after receipt
thereof) purchase from Purchaser such Purchased Account at a repurchase price
equal to the outstanding face amount of such Purchased Account.

 

6.             Repurchase Obligation.  If, on the 150th day after the date of the
applicable invoice with respect to a Purchased Account, such Purchased Account
remains partially or fully unpaid, the Sellers shall promptly upon Purchaser’s
written request (and, in any event, within five (5) Business Days after receipt
thereof) purchase from Purchaser such Purchased Account at a repurchase price
equal to the outstanding face amount of such Purchased Account; provided,
however, that the total of all purchases by the Sellers under this Section
6 shall not exceed, in the aggregate, fifteen percent (15%) of the total
Purchase Price for all Purchased Accounts paid by Purchaser under this
Agreement.

 

7.             Grant of Security Interest.  Notwithstanding the express intent of the
parties hereto, if the purchase and sale of the Purchased Assets under this
Agreement is held or deemed not to be a sale under applicable law or is held or
deemed to be a pledge of security for a loan, in such event, (a) each Seller
shall be deemed to have granted and does hereby grant to Purchaser a first
priority security interest in the entire right, title and interest of such Seller
in, to and under all Purchased Assets and all proceeds thereof as collateral security
for all obligations of Seller under this Agreement and (b) this Agreement shall
constitute a security agreement under applicable law.  Each Seller agrees to execute and deliver to
Purchaser such further instruments of assignment, financing statements, and
instruments of further assurance as Purchaser may reasonably require.  Each Seller authorizes Purchaser to file such
UCC financing statements as Purchaser may deem necessary or desirable in order
to perfect and maintain the interests of Purchaser in the Purchased
Assets.  Each Seller further agrees that
Purchaser may file this Agreement or a copy hereof as such UCC financing
statement.

 

8.                                       Administration.

 

(a)           The Sellers shall, from time to time,
execute and deliver to Purchaser confirmatory schedules of the Purchased
Accounts, together with one (1) copy of each invoice, acceptable evidence of
shipment or performance of services and such other documentation and 

 

6

 

proofs of delivery as Purchaser may reasonably
require.  The Sellers agree to prepare
and mail all invoices relating to all Purchased Accounts, but Purchaser may do
so at Purchaser’s option.

 

(b)           The Sellers shall instruct all
Account debtors, or cause all Account debtors to be instructed, to cause all
Collections and all other payments or other collections in respect of
receivables originated by any Seller that are not Purchased Accounts to be
deposited directly to the Lockbox Account.

 

(c)           If any remittances in respect of a
Purchased Asset are made directly to any Seller or employees or agents of any Seller
in their individual capacity and not as agent for Purchaser, then such party
shall act as trustee of an express trust for Purchaser’s benefit, hold the same
as Purchaser’s property, and deliver the same to Purchaser forthwith in
kind.  Purchaser and/or such designee as
Purchaser may from time to time appoint are hereby appointed each Seller’s
attorney-in-fact to endorse such Seller’s name on any and all checks or other
forms of remittances received by Purchaser where such endorsement is required
to effect collection and transmit notices to customers, in such Seller’s or
Purchaser’s name, that amounts owing by them have been assigned and are payable
directly to Purchaser; this power, being coupled with an interest, is
irrevocable.

 

(d)           The Sellers will supply customers, in
the format required by customers, with all forms, documents, certificates, etc.
that customers require to process the Purchased Accounts for payment.

 

(e)           On the effective date of this
Agreement and each subsequent Purchase Date, in coordination with Purchaser’s
daily cash application review and approval as set forth in the Lockbox
Agreement, and from time to time, upon Purchaser’s request, the Sellers will
deliver to Purchaser an aged trial balance of all then existing Purchased
Accounts.  All such reports shall be in
form and substance satisfactory to Purchaser. 
If Purchaser requests, the Sellers agree to provide Purchaser with
copies of all of the Sellers’ bills of lading or proofs of delivery and
supplier invoices and receiving evidence and of the Sellers’ sales registry,
sales journal, or other information regarding sales, including customer open
order reports.

 

9.             Definitions. 
As used herein, the following terms shall have the following
corresponding meanings:

 

“APLA”
shall mean that certain Asset Purchase and Liability Assumption Agreement,
dated as of the date hereof, among Purchaser and the Sellers, as such agreement
may be amended, supplemented, restated, amended and restated, or otherwise
modified from time to time pursuant to the terms thereof.

 

“Initial
Purchase Date” shall have the meaning assigned to such term in Section
1(a).

 

“Purchased Accounts”
shall mean receivables listed on Annex A attached hereto, which may be
amended from time to time pursuant to a Purchase Supplement.  Upon the effectiveness of a Purchase
Supplement, the receivables set forth in such Purchase Supplement shall also constitute
“Purchased Accounts” hereunder, and Annex A shall automatically be
amended and restated to include the new receivables.

 

7

 

“Purchased
Assets” shall mean the Purchased Accounts, the Related Security and the
Collections.

 

“Purchase Price”
shall mean 80% of the gross book value of all Purchased Accounts less
the amount of any liability to a third party assumed by Purchaser with respect
to such Purchased Accounts.

 

“Purchase
Supplement” shall mean a supplement to this Agreement that (i) is duly
authenticated (within the meaning of the UCC) by a Seller, (ii) may be in
physical or electronic form, including substantially in the form of Exhibit
A attached hereto, (iii) includes a list by invoice sequences of
receivables offered for purchase thereby, which invoice sequences shall have
the unique sequence identifier (as set forth in Section 1(a) above) identifying
such Account as being sold to Purchaser, (iv) includes evidence satisfactory to
Purchaser that each Account offered for purchase thereby is an Account eligible
for sale under this Agreement, including Section 4(e) above, and (v) is
otherwise acceptable in form and substance to Purchaser in its sole discretion.

 

“Schedule of
Exceptions” shall mean Schedule II attached hereto.

 

“Transaction
Documents” shall mean collectively this Agreement, the Lockbox Agreement,
the MSA, the APLA, any Purchase Supplement and all other instruments, documents
and agreements executed by or on behalf of Seller and delivered concurrently
herewith or at any time hereafter to Purchaser in connection with the Purchased
Accounts and other transactions contemplated by this Agreement, all as amended,
supplemented, restated, amended and restated, or otherwise modified from time
to time pursuant to the terms thereof.

 

Capitalized terms
used in this Agreement but not defined in this Section 9 shall have the
respective meanings given such terms in the APLA.  Terms used in this Agreement that are defined
in the UCC but not defined in this Section 9 shall have the meanings
given such terms in the UCC.  The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise or as
otherwise expressly provided in this Agreement (i) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from time
to time amended, restated, amended and restated, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein); (ii) any reference herein to any Person shall
be construed to include such Person’s successors and assigns; (iii) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof; (iv) all references herein to Sections, Annexes and Schedules shall be
construed to refer to Sections of, and Annexes and Schedules to, this Agreement
(unless expressly referring to another agreement); (v) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in conformity
with GAAP; and (vi) all calculations and other information required to be made
or 

 

8

 

delivered
pursuant to this Agreement shall be prepared in accordance with GAAP as in
effect at the time of such preparation.

 

10.           Indemnification.  Without limiting any other rights that any
such person may have hereunder or under applicable law, Seller hereby indemnifies
and holds harmless Purchaser and its successors, transferees and assigns and
all officers, directors, shareholders, controlling persons, employees and
agents of any of the foregoing (each, an “Indemnified Party”), forthwith
on demand, from and against any and all damages, losses, claims, liabilities
and related costs and expenses, including reasonable attorneys’ fees and
disbursements (collectively, the “Indemnified Amounts”), arising out of
or relating to this Agreement, the other Transaction Documents or the ownership
of any Purchased Asset, excluding, however, (x) Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of
such Indemnified Party (it being the intent of Seller to indemnify the
Indemnified Parties for their negligence) and (y) the Account debtor’s failure
to pay when due the unpaid balance of any Purchased Account as a result of the
financial inability of such Account debtor to pay or the insolvency thereof
(except as otherwise specifically provided in this agreement including, without
limitation, Sections 5 and 6 hereof).  Without limiting the foregoing, Seller hereby
indemnifies and holds harmless each Indemnified Party for Indemnified Amounts
arising out of or relating to:

 

(a)           the breach of any representation or
warranty made by Seller pursuant to or in connection with this Agreement or any
other Transaction Document;

 

(b)           any failure of Seller to perform any
of its duties or obligations hereunder; or the nonconformity of any Purchased
Account or the related Contract or underlying obligations with any applicable
law, rule or regulation;

 

(c)           any claim resulting from the sale of
the merchandise or services related to any Purchased Account or the furnishing
of or failure to furnish such merchandise or services; or any products
liability claim arising out of or in connection with merchandise or services
that are the subject of any Purchased Account;

 

(d)           any tax (other than income tax of
Purchaser) or governmental fee or charge, all interest and penalties thereon or
with respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same, which
may arise by reason of the purchase or ownership of any Purchased Account;

 

(e)           any commingling of collections of the
Purchased Accounts with funds of Seller or any of its affiliates; and

 

(f)            any investigation, litigation or
proceeding related to this Agreement or the use of proceeds of purchases
hereunder or the ownership of, or in respect of, any Purchased Account or
related Contract.

 

11.                                 Miscellaneous.

 

(a)           Amendment.  The terms of this Agreement shall not be
altered, modified, amended or supplemented in any manner whatsoever except by
written instrument signed by all parties hereto and delivered by each party to
the other.

 

9

 

(b)           No Waiver; Cumulative Remedies.  No failure to exercise and no delay in
exercising, on the part of Purchaser, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege.  The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privilege provided by law.

 

(c)           Notices.  Any written notice to be given under this
Agreement shall be in writing addressed to the respective party as follows (or
such other address as may have been designated in a written notice to the other
parties):

 

If to Purchaser:

 

New England Technology Finance, LLC

c/o Global Technology Finance LLC

1301 Dove Street, Suite 750

Newport Beach, CA 92660

Attention:  Mr. Paul Stemler

Telephone No.:  (949) 955-1866

Facsimile No.:  (949) 955-1907

Email address:  pstemler@4gtf.com

 

With a copy to:

 

Latham & Watkins LLP

633 West Fifth Street, Suite 4000

Los Angeles, CA 90071-2007

Attention:  Dominic Yoong

Telephone No.:  (213) 891-8704

Facsimile No.:  (213) 891-8763

Email address:  dominic.yoong@lw.com

 

If to any Seller:

 

c/o Dyntek, Inc.

19700 Fairchild Road, Suite 350

Irvine, CA 92612

Attention:  Chief Financial
Officer

Telephone No.:  (949) 955-0078

Facsimile No.:  (949) 955-0086

Email address: 
Robert.Webber@dyntek.com

 

with a copy to:

 

Stradling Yocca Carlson & Rauth

660 Newport Center Drive, Suite 1600

 

10

 

Newport Beach, California 92660

Attention:  Christopher D. Ivey

Telephone No.:  (949) 725-4000

Facsimile No.:  (949) 823-5121

Email address:  civey@SYCR.com

 

All written
notices will be personally served, telecopied, emailed or sent by overnight
courier service or United States mail and will be deemed to have been
given:  (i) if delivered in person, when
delivered; (ii) if delivered by telecopy, on the date of transmission if
transmitted on a business day before 4:00 p.m. (New York, New York time) or, if
not, on the next succeeding business day; (iii) if delivered by overnight
courier, when delivered; (iv) if emailed, when received; or (v) if by United
States mail, four (4) business days after depositing the same in the United
States mail, postage prepaid and properly addressed.

 

(d)           Assignment.  This Agreement may not be assigned by any Seller
without Purchaser’s prior written consent. 
Each Seller acknowledges and agrees that Purchaser may assign as
collateral its right, title and interest in this Agreement and the other
Transaction Documents to its lenders or factors, including the Purchaser Senior
Creditor.

 

(e)           Binding Effect.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns.  The Purchaser Senior
Creditor is intended by the parties hereto to be a third-party beneficiary of
this Agreement.

 

(f)            Entire Agreement.  This Agreement, together with any and all
other Transaction Documents, constitute the final and entire agreement among
the parties hereto and supersedes any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto.

 

(g)           Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW
OF THE STATE OF NEW YORK.

 

(h)           Dispute Resolution.  Except where injunctive relief is sought, in
the event of a dispute between the parties for which the parties are unable to
reach a mutually agreeable resolution in a reasonable matter of time, the
dispute shall be submitted to arbitration under the commercial arbitration
rules of the American Arbitration Association then in effect.  There shall be a panel of three arbitrators
mutually agreed to by the parties (each party selecting one arbitrator and the
two arbitrators then selecting a third arbitrator); each arbitrator shall have
experience in and understanding of the subject matter of the controversy.  The hearing shall be held at a mutually
acceptable geographic location and shall be no more than five (5) days in
duration.  After the hearing, the panel
shall decide the controversy and render a written decision 

 

11

 

setting forth the issues
adjudicated, the resolution thereof and the reasons for the award.  Such decision shall be binding on all
parties.  Payment of the expenses of
arbitration, including the fee of the arbitrators, shall be assessed by the
panel based on the extent to which each party prevails.

 

(i)            SUBMISSION TO JURISDICTION.  SUBJECT TO SECTION 11(h), EACH SELLER
HEREBY CONSENTS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF NEW YORK, THE STATE OF NEW YORK.  IF ANY SELLER PRESENTLY IS, OR IN THE FUTURE
BECOMES, A NONRESIDENT OF THE STATE OF NEW YORK, SUCH SELLER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON SUCH SELLER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO SUCH SELLER, AT THE ADDRESS OF SUCH SELLER IN
PURCHASER’S RECORDS AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER
THE SAME HAS BEEN POSTED AS AFORESAID.

 

(j)            WAIVER OF JURY TRIAL.  SUBJECT TO SECTION 11(h), THE SELLERS
AND PURCHASER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY
DEALINGS BETWEEN ANY SELLER AND PURCHASER RELATING TO THE SUBJECT MATTER OF
THIS TRANSACTION AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED.  THE SELLERS AND PURCHASER EACH ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH OF THE SELLERS AND PURCHASER HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH OF THE SELLERS AND
PURCHASER WILL CONTINUE TO RELY ON THIS WAIVER IN ANY RELATED FUTURE DEALINGS
BETWEEN ANY SELLER AND PURCHASER.  THE SELLERS
AND PURCHASER FURTHER WARRANT AND REPRESENT THAT THEY EACH KNOWINGLY AND
VOLUNTARILY WAIVE THEIR RESPECTIVE JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

 

(k)           Headings.  Section headings herein are included herein
for convenience of reference only and shall not constitute a part hereof for
any other purpose or be given any substantive effect.

 

(l)            Severability of Provisions.  In the event that any provision of this
Agreement is deemed to be invalid by reason of the operation of any law or by
reason of the interpretation placed thereon by any court, this Agreement shall
be construed as not containing such provision, the invalidity of such provision
will not affect the validity of any other provision of this Agreement and all
other provisions of this Agreement which are otherwise lawful and valid shall
remain in full force and effect.

 

(m)          Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.  Delivery of an executed counterpart of this
Agreement by facsimile or 

 

12

 

email shall be equally as effective as delivery of an
original executed counterpart of this Agreement.

 

(n)           Setoff.  Each Seller hereby agrees that Purchaser is
authorized at any time or from time to time, upon ten (10) business days
written notice to Seller (or one (1) business day notice if the APLA has been
terminated), to setoff and to appropriate and apply any and all amounts held by
Purchaser for the account of Seller (including, without limitation, any
Purchase Price) against and on account of any amounts due and owing to
Purchaser by any Seller at any time, including, without limitation, amounts due
and owing to Purchaser under the other Transaction Documents.

 

(Signature Page
Follows)

 

13

 

IN WITNESS
WHEREOF, each of the Sellers and Purchaser has caused this Asset Purchase
Agreement to be executed by their respective duly authorized officers as of the
day first written above.

 

	
   

  	
  THE SELLERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  DYNTEK, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DYNTEK SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NEW ENGLAND TECHNOLOGY
  FINANCE, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

ANNEX A

 

Purchased
Accounts

 

(see attached)

 

 

SCHEDULE
I

 

Addresse(s)

 

19700 Fairchild Road, Suite 350

Irvine, CA 92612

 

24401 Halstead Road

Farmington Hills, Michigan 48335

 

 

SCHEDULE
II

 

Schedule
of Exceptions

 

 

EXHIBIT
A

 

FORM OF

PURCHASE
SUPPLEMENT

 

This Purchase Supplement, dated as of [  ], 200[  ]
(this “Purchase Supplement”), is delivered pursuant to that certain
Asset Purchase Agreement, dated as of               ,
2005 (as amended, restated, supplemented or otherwise modified from time to
time, the “Agreement”) from Dyntek, Inc., a Delaware corporation, and
Dyntek Services, Inc., a Delaware corporation (collectively, the “Sellers”),
to New York Technology Finance, LLC, a Delaware limited liability company, as
purchaser (“Purchaser”). 
Capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed thereto in the Agreement.

 

Pursuant to Section 1(b) of the Agreement, the Sellers
hereby delivers this Purchase Supplement and offers the receivables set forth
on Annex A hereto and the related Collections and Related Security
(determined as if such receivables were “Purchased Accounts”) for sale to
Purchaser subject to the terms of the Agreement.  The Purchase Price for such assets is $[  ](1).

 

Purchaser may elect, in its sole discretion, to
purchase such assets by signing the acknowledgment below.  Upon the satisfaction of the conditions
precedent set forth in Section 3(b) of the Agreement, Purchaser shall deliver,
by wire or otherwise, the Purchase Price for such receivables, and such receivables
shall automatically constitute “Purchased Accounts” under the Agreement, and
Annex A to the Agreement shall automatically be amended and restated to include
such new receivables.  For the avoidance
of doubt, upon purchase by Purchaser, each such Purchased Account shall have
the unique sequence identifier identifying such Account as being sold to
Purchaser, as set forth in the Lockbox Agreement.

 

For the avoidance of doubt, each of the parties hereto
acknowledge and agree that Purchaser shall be entitled to all rights under the
Agreement with respect to the “Purchased Assets” purchased pursuant to this
Purchase Supplement, and that the representations and warranties contained in
the Agreement and in the other Transaction Documents shall be true, correct and
complete in all material respects on and as of the date hereof (except to the
extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall have been true,
correct and complete in all material respects on and as of such earlier date).

 

IN
WITNESS WHEREOF, the Sellers have caused this Purchase
Supplement to be duly executed and delivered by its duly authorized officer as
of the date set forth above.

 

	
   

  	
  DYNTEK, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  

 

(1)                                  With
respect to additional Purchased Accounts, 80% of the gross book value of such
receivables less the amount of any liability to any third party assumed
by Purchaser with respect to such receivables.

 

 

	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DYNTEK SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

ACKNOWLEDGED AND ACCEPTED:

 

NEW ENGLAND TECHNOLOGY FINANCE, LLC

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:Exhibit 10.3

 

NOTE PURCHASE AGREEMENT

 

between

 

DYNTEK, INC.

 

and

 

THE PURCHASERS NAMED IN SCHEDULE I

 

Dated as of October 26, 2005

 

 

	
  INDEX TO SCHEDULES

  
	
   

  
	
  SCHEDULE I

  	
   

  	
  Schedule of Purchasers

  
	
  SCHEDULE II

  	
   

  	
  Disclosure Schedule

  
	
   

  
	
  INDEX TO EXHIBITS

  
	
   

  
	
  EXHIBIT A

  	
   

  	
  Form of Note

  
	
  EXHIBIT B

  	
   

  	
  Form of Stock Purchase Warrant

  
	
  EXHIBIT C

  	
   

  	
  Form of Security and Pledge Agreement

  
					

 

 

NOTE
PURCHASE AGREEMENT,
dated as of October 26, 2005, between DynTek, Inc., a Delaware
corporation (the “Company”), and the purchasers named in the attached Schedule I
(individually a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, the Company wishes to issue and sell to
the Purchasers up to an aggregate of $2,500,000 in principal amount of its
promissory notes, together with stock purchase warrants exercisable for shares
of capital stock of the Company; and

 

WHEREAS, the Purchasers, severally, wish to
purchase the notes and warrants on the terms and subject to the conditions set
forth in this Agreement;

 

NOW,
THEREFORE, in
consideration of the premises and the mutual covenants contained in this
Agreement, the parties agree as follows:

 

ARTICLE I

 

PURCHASE, SALE OF NOTES AND TERMS OF NOTES AND
WARRANTS

 

SECTION 1.01.    The Notes. 
The Company has authorized the issuance and sale to the Purchasers, in
the respective amounts set forth in the Schedule of Purchasers attached
hereto, of the Company’s Secured Promissory Notes, due December 31, 2006,
in the original aggregate principal amount of up to $2,500,000.  The Notes shall be substantially in the form
set forth in Exhibit A hereto and are herein referred to
individually as a “Note” and collectively as the “Notes,” which terms shall
also include any notes delivered in exchange or replacement therefor.

 

SECTION 1.02.    The Warrants. 
The Company, in return for the commitment of the Purchasers to purchase
the Notes, has also authorized the issuance to the Purchasers of the Company’s
Stock Purchase Warrants (the “Warrants”) for the purchase (subject to
adjustment as provided in the Warrants) of 1,000,000 shares of the Company’s
common stock (“Common Stock”) as set forth in the Warrants.  The Warrants shall be substantially in the
form set forth in Exhibit B hereto and are herein referred to
individually as a “Warrant” and collectively as the “Warrants”, which terms
shall also include any warrants delivered in exchange or replacement therefor.

 

SECTION 1.03.    Purchase and Sale of Notes. 
The Company agrees to issue and sell to the Purchasers, and, subject to
and in reliance upon the representations, warranties, terms and conditions of
this Agreement, the Purchasers, severally and not jointly, agree to purchase,
the Notes set forth opposite their respective names in the Schedule of
Purchasers attached as Schedule I for the aggregate purchase price
set forth therein.  The closing of such
purchase and sale (the “Closing”) shall be held at the office of [           ],
on October 26, 2005 at 10:00 A.M., Los Angeles time, or on such other
date and at such time as may be mutually agreed upon.  At the Closing, the Company will issue and
deliver to each Purchaser one Note, payable to the order of such Purchaser, in
the principal amount set forth opposite such Purchaser’s name in the Schedule of
Purchasers attached as Schedule I, and one Warrant, registered in the
name of such Purchaser, exercisable for shares of Common Stock as provided
therein, against (i) delivery to the Company of a check payable to the
order of the Company, in the amount set forth opposite

 

1

 

the name of such Purchaser under the heading “Aggregate Purchase Price
for Notes and Warrants” on Schedule I, (ii) transference of such sum
to the account of the Company by wire transfer, or (iii) delivery or
transference of such sum to the Company by any combination of such methods of
payment.

 

SECTION 1.04.    Payments and Endorsements. 
Payments of principal and interest on the Notes shall be made directly
by check duly mailed or delivered to the Purchasers at their addresses referred
to in the Schedule of Purchasers attached as Schedule I or
made to the account of the Purchaser by wire transfer referred to in the Schedule of
Purchasers attached as Schedule I or indicated in any notice
delivered by a Purchaser to the Company, without any presentment or notation of
payment, except that prior to any transfer of any Note, the holder of record
shall endorse on such Note a record of the date to which interest has been paid
and all payments made on account of principal of such Note.

 

SECTION 1.05.    Redemptions of Notes.

 

(a)           Required
Redemptions.  On the earlier of: (i) the stated
maturity date of the Notes, (ii) the accelerated maturity date of the
Notes upon any Event of Default, or (iii) the closing of a rights offering
in an aggregate amount of approximately $15,000,000 (the “Rights Offering”),
the Company will pay the principal amount of the Notes then outstanding
together with all accrued and unpaid interest then due thereon. Additionally,
the Company shall use all of the proceeds of any other sale of the Company’s
capital stock to pay a portion or all of the principal amount of the Notes then
outstanding together with all accrued and unpaid interest then due thereon.

 

(b)           Optional
Redemptions.  The Notes may be voluntarily prepaid, without
any penalty or premium, at any time.

 

(c)           Pro
Rata Redemptions.  Each redemption of Notes shall be made to the
holders of the Notes in the same ratio as the total principal amount of Notes
then held by such holder bears to the aggregate principal amount of the Notes
then outstanding.

 

SECTION 1.06.    Payment on Non-Business Days. 
Whenever any payment to be made shall be due on a Saturday, Sunday or a
public holiday under the laws of the State of California, such payment may be
made on the next succeeding business day, and such extension of time shall in
such case be included in the computation of payment of interest due.

 

SECTION 1.07.    Registration of Notes, etc. 
The Company shall maintain at its principal office a register of the
Notes and shall record therein the names and addresses of the registered
holders of the Notes, the address to which notices are to be sent and the
address to which payments are to be made as designated by the registered holder
if other than the address of the holder, and the particulars of all transfers,
exchanges and replacements of Notes.  No
transfer of a Note shall be valid unless made on such register for the
registered holder or his executors or administrators or his or their duly
appointed attorney, upon surrender therefor for exchange as hereinafter
provided, accompanied by an instrument in writing, in form and execution
reasonably satisfactory to the Company. 
Each Note issued hereunder, whether originally or upon transfer,

 

2

 

exchange or replacement of a Note or Notes, shall be registered on the
date of execution thereof by the Company and shall be dated the date to which
interest has been paid on such Notes or Note. 
The registered holder of a Note shall be that person in whose name the
Note has been so registered by the Company. 
A registered holder shall be deemed the owner of a Note for all purposes
of this Agreement and, subject to the provisions hereof, shall be entitled to
the principal and interest evidenced by such Note free from all equities or
rights of setoff or counterclaim between the Company and the transferor of such
registered holder or any previous registered holder of such Note.

 

SECTION 1.08.    Transfer and Exchange of Notes. 
The registered holder of any Note or Notes may, prior to maturity or
prepayment thereof, surrender such Note or Notes at the principal office of the
Company for transfer or exchange; provided,
however, the registered holder of any Note or Notes shall not
transfer any such Note (a) to any person or entity which is not an “accredited
investor” within the meaning of Rule 501 under the Securities Act of 1933,
as amended (the “Securities Act”) or (b) so long as no Event of Default
has occurred, without the consent of the Company, which consent shall not be
unreasonably withheld.  Within a
reasonable time after notice to the Company from a registered holder of its
intention to make such exchange and without expense (other than transfer taxes,
if any) to such registered holder, subject to the Company’s consent if such consent
is required by this Section 1.08, the Company shall issue in exchange
therefor another Note or Notes, in such denominations as requested by the
registered holder, for the same aggregate principal amount as the unpaid
principal amount of the Note or Notes so surrendered and having the same
maturity and rate of interest, containing the same provisions and subject to
the same terms and conditions as the Note or Notes so surrendered.  Each new Note shall be made payable to such
person or persons, or registered assigns, as the registered holder of such
surrendered Note or Notes may designate, and such transfer or exchange shall be
made in such a manner that no gain or loss of principal or interest shall
result therefrom.

 

SECTION 1.09.    Replacement of Notes. 
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Note and, if requested in the case of any such
loss, theft or destruction, upon delivery of an indemnity bond or other
agreement or security reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of such Note, the
Company will issue a new Note, of like tenor and amount and dated the date to
which interest has been paid, in lieu of such lost, stolen, destroyed or
mutilated Note; provided, however, if any Note of which a
Purchaser whose name is set forth in the Schedule of Purchasers attached
as Schedule I, its nominee, or any of its partners is the
registered holder is lost, stolen or destroyed, the affidavit of the President,
Treasurer or any Assistant Treasurer or any other authorized representative of
the registered holder setting forth the circumstances with respect to such
loss, theft or destruction shall be accepted as satisfactory evidence thereof,
and no indemnification bond or other security shall be required as a condition
to the execution and delivery by the Company of a new Note in replacement of
such lost, stolen or destroyed Note other than the registered holder’s written
agreement to indemnify the Company.

 

SECTION 1.10.    Events of Default. 
If any of the following events (“Events of Default”) shall occur and be
continuing:

 

3

 

(a)           The Company shall fail to pay any
installment of principal of, or interest due on, any of the Notes within five (5) days
of when due; or

 

(b)           Any material representation or warranty
made by the Company in this Agreement or the Security and Pledge Agreement (as
hereinafter defined), or by the Company (or any officers of the Company) in any
certificate, instrument or written statement contemplated by or made or
delivered pursuant to or in connection with this Agreement or the Security and
Pledge Agreement shall prove to have been incorrect when made in any material
respect; or

 

(c)           The Company shall fail to perform or
observe any other material term, covenant or agreement contained in this
Agreement, the Security and Pledge Agreement, the Notes, the Warrants, or any
agreement executed and delivered by the Company in connection with this
Agreement or the Security and Pledge Agreement on its part to be performed or
observed and any such failure remains unremedied for ten (10) business
days after written notice thereof shall have been given to the Company by any
registered holder of the Notes; or

 

(d)           The Company shall fail to pay any
indebtedness in excess of an aggregate of $100,000 for borrowed money (other
than as evidenced by the Notes) owing by the Company, or any interest or
premium thereon, when due (or, if permitted by the terms of the relevant
document, within any applicable grace period), whether such indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, or shall fail to perform any term, covenant or agreement
on its part to be performed under any agreement or instrument evidencing or
securing or relating to any indebtedness in excess of an aggregate of $100,000
owing by the Company when required to be performed (or, if permitted by the
terms of the relevant document, within any applicable grace period), if the
effect of such failure to pay or perform is to accelerate, or to permit the
holder or holders of such indebtedness, or the trustee or trustees under any
such agreement or instrument to accelerate, the maturity of such indebtedness,
unless such failure to pay or perform shall be waived by the holder or holders
of such indebtedness or such trustee or trustees; or

 

(e)           The Company shall be involved in
financial difficulties as evidenced (i) by its admitting in writing its
inability to pay its debts generally as they become due; (ii) by its
commencement of a voluntary case under Title 11 of the United States Code as
from time to time in effect, or by its authorizing, by appropriate proceedings
of its Board of Directors or other governing body, the commencement of such a
voluntary case which is not dismissed within sixty (60) days; (iii) by its
filing an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of
any such petition; (iv) by the entry of an order for relief in any
involuntary case commenced under said Title 11; (v) by its seeking relief
as a debtor under any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or by its consenting to
or acquiescing in such relief; (vi) by the entry of an order by a court of
competent jurisdiction (a) finding it to be bankrupt or insolvent, (b) ordering
or approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors, or (c) assuming custody of, or appointing
a receiver or other custodian for, all or a substantial part of its property;

 

4

 

or (vii) by
its making an assignment for the benefit of, or entering into a composition
with, its creditors, or appointing or consenting to the appointment of a
receiver or other custodian for all or a substantial part of its property; or

 

(f)            Any judgment, writ, warrant of attachment
or execution or similar process shall be issued or levied against a substantial
part of the property of the Company and such judgment, writ, or similar process
shall not be released, vacated or fully bonded within sixty (60) days after its
issue or levy;

 

then,
and in any such event, any holder of any Note may, by notice to the Company,
declare the entire unpaid principal amount of the Notes, all interest accrued
and unpaid thereon and all other amounts payable under this Agreement to be forthwith
due and payable, whereupon the Notes, all such accrued interest and all such
amounts shall become and be forthwith due and payable (unless there shall have
occurred an Event of Default under subsection 1.10(e) in which case
all such amounts shall automatically become due and payable), without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The
Company represents and warrants to the Purchasers that, as of the Closing and
except as set forth in the Disclosure Schedule attached as Schedule II
(which Disclosure Schedule makes explicit reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty as to which such
exception shall apply):

 

SECTION 2.01.    Organization, Qualifications and
Corporate Power.

 

(a)           The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and is duly licensed or qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business transacted by it or the character of the properties owned or
leased by it requires such licensing or qualification, except where the failure
to be so licensed or qualified does not have a material adverse effect on the
Company’s business or financial condition. 
The Company has the corporate power and authority to own and hold its
properties and to carry on its business as now conducted and as proposed to be
conducted, to execute, deliver and perform this Agreement and the Security and
Pledge Agreement, to issue, sell and deliver the Notes and Warrants and to
issue and deliver the shares of Common Stock issuable upon exercise of the
Warrants (the “Warrant Shares”).

 

(b)           The Company has no subsidiaries, other
than as set forth on Schedule II. The Company does not (i) own
of record or beneficially, directly or indirectly, (A) any shares of
capital stock or securities convertible into capital stock of any other
corporation or (B) any participating interest in any partnership, joint
venture or other non-corporate business enterprise or (ii) control,
directly or indirectly, any other entity, other than as set forth on Schedule II.

 

5

 

SECTION 2.02.    Authorization of Agreements, Etc.

 

(a)           The execution and delivery by the Company
of this Agreement and the Security and Pledge Agreement, the performance by the
Company of its obligations hereunder and thereunder, the issuance, sale and
delivery of the Notes and Warrants have been duly authorized by all requisite
corporate action and will not (i) violate any provision of law, any order
of any court or other agency of government, (ii) violate the Certificate
of Incorporation or the By-laws of the Company, as amended, (iii) violate
any provision of any indenture, agreement or other instrument to which the
Company or any of its properties or assets is bound, (iv) conflict with,
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any such indenture, agreement or other instrument, or (v) result
in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of
the Company, except in the case of clauses (i), (iii), (iv) and (v), as
would not have a material adverse effect on the Company.

 

(b)           The Notes and Warrants have been duly
authorized and, when issued in accordance with this Agreement, will be free and
clear of all liens, charges, restrictions, claims and encumbrances imposed by
or through the Company.  The shares of
Common Stock issuable upon exercise of the Warrants will be duly reserved for
issuance upon exercise of the Warrants and, when so issued, will be duly
authorized, validly issued, fully paid and nonassessable shares of Common
Stock, and will be free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company, except for transfer
restrictions imposed by applicable securities laws.  Except as set forth on Schedule II,
neither the issuance, sale or delivery of the Notes and Warrants nor the
issuance or delivery of the Warrant Shares is subject to any preemptive right
of shareholders of the Company or to any right of first refusal or other right
in favor of any person.

 

6

 

SECTION 2.03.    Validity. 
This Agreement, the Security and Pledge Agreement, the Notes and the
Warrants have been duly executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company, enforceable in
accordance with their terms.

 

SECTION 2.04.    Authorized Capital Stock. 
The authorized capital stock of the Company consists of 150,000,000
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 October 24, 2005, 81,164,636
shares of Common Stock and no shares of Preferred Stock, were validly issued
and outstanding, fully paid and nonassessable. 
Except as disclosed in SEC Reports (as defined below), 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 of any securities by the Company.

 

SECTION 2.05.    SEC Filings, Other Filings and Regulatory
Compliance.  Since January 1, 2002, the Company has
timely made all filings required to be made by it under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). 
The Company has delivered or made accessible to the Investors true,
accurate and complete copies of (a) the Company’s Annual Report on Form 10-K
for the fiscal year ended June 30, 2005, (b) the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 2005, (c) the
Company’s definitive proxy statement dated April 26, 2005 relating to its
Annual Meeting of Stockholders, and (d) all the Company’s Current Reports
on Form 8-K filed since July 1, 2005 (the “SEC Reports”).  The SEC Reports when filed, complied in all
material respects with all applicable requirements of the Exchange Act and the
Sarbanes-Oxley Act of 2002, if and to the extent applicable, and the rules and
regulations of the Securities and Exchange Commission (the “SEC”) thereunder
applicable to the SEC Reports.  None of
the SEC Reports, at the time of filing, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading in light of
the circumstances in which they were made. 
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,
OCT Bulletin Board under all currently effective inclusion requirements.  Each balance sheet included in the SEC
Reports (including any related notes and schedules) 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 SEC Reports
(including any related notes and schedules) fairly presents in all material
respect the consolidated results of operations of the Company for the periods or
as of the dates therein set forth in accordance with generally accepted
accounting principles (“GAAP”) consistently applied during the periods or as a
result of year end adjustments and except as otherwise stated therein).  Such financial statements included in the SEC
Reports were, at the 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 which all material assets and
liabilities, and all material transactions, including off-balance sheet
transactions, of the Company are recorded in accordance with GAAP.

 

7

 

SECTION 2.06.    Governmental Approvals. 
Subject to the accuracy of the representations and warranties of the
Purchasers set forth in Article III, no registration or filing with, or
consent or approval of or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Company of this Agreement, the
issuance, sale and delivery of the Notes or Warrants or, upon exercise thereof,
the issuance and delivery of the Warrant Shares, other than filings pursuant to
state securities laws (all of which filings have been made by the Company,
other than those which are required or permitted to be made after the Closing and
which will be duly made on a timely basis) in connection with the sale of the
Notes and Warrants.

 

SECTION 2.07.    Offering of the Notes and Warrants. 
Neither the Company nor any person authorized or employed by the Company
as agent, broker, dealer or otherwise in connection with the offering or sale
of the Notes and Warrants or any security of the Company similar to the Notes
and Warrants has offered the Notes and Warrants or any such similar security
for sale to, or solicited any offer to buy the Notes and Warrants or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including,
without limitation, any offer, issuance or sale of any security of the Company
under circumstances which might require the integration of offers or sales of
such security with the offer and sale of the Notes and Warrants under the
Securities Act or the rules and regulations of the SEC thereunder), in
either case so as to subject the offering, issuance or sale of the Notes and
Warrants to the registration provisions of the Securities Act.

 

SECTION 2.08.    Material Changes. 
Except as set forth in Schedule II attached hereto, since June 30,
2005, there has not been (i) any direct or indirect redemption, purchase
or other acquisition by the Company of any shares of Common Stock; (ii) any
declaration, setting aside or payment of any dividend or other distribution by
the Company with respect to Common Stock; (iii) any material liabilities
(absolute, accrued or contingent) incurred or assumed by the Company, other
than current liabilities incurred in the ordinary course of business,
liabilities under contracts entered into in the ordinary course of business,
purchase price payment obligations incurred in connection with the acquisition
of Red Rock Communications Solutions, Inc. and Integration Technologies, Inc.
and liabilities not required to be reflected on the Company’s financial
statements pursuant to GAAP; (iv) 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) (each, a “Lien”)
or adverse claim on any of the Company’s properties or assets, except for Liens
for taxes not yet due and payable, interest of lessors under operating capital
leases, purchase money liens, amounts deposited for security for surety bonds,
Liens incurred in the ordinary course of business or Liens that are not
material in amount to the Company and its subsidiaries.

 

SECTION 2.09.    Litigation. 
Except as disclosed in the Schedule II attached hereto,
there is no action, suit, proceeding or investigation pending or, to the
Company’s knowledge, currently threatened against the Company or any of its
subsidiaries that questions the validity of this Agreement or the right of the
Company to enter into it, or to consummate the transactions

 

8

 

contemplated hereby, or that could reasonably be expected to result,
either individually or in the aggregate, in a material adverse effect on the
Company.  The foregoing includes, without
limitation, actions pending or, to the Company’s knowledge, threatened
involving the prior employment of any of the Company’s employees or their use
in connection with the Company’s business of any information or techniques
allegedly proprietary to any of their former employers.  Neither the Company nor any of its
subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or governmental authority.  Except as disclosed in Schedule II
attached hereto, there is no action, suit, proceeding or investigation by the
Company or any of its Subsidiaries currently pending or which the Company or
any of its subsidiaries currently intends to initiate, which could reasonably
be expected to have a material adverse effect.

 

SECTION 2.10.    Ownership of Property; Liens. 
The Company and each of its subsidiaries has good and marketable title
in fee simple, or a valid leasehold interest in, all of its real property; and
good title to, or a valid leasehold interest in, all of its other property, and
none such property is subject to any Lien except as set forth on Schedule II
attached hereto.

 

SECTION 2.11.    Intellectual Property Rights. 
To the best of its knowledge, 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”).  Except as set forth in Schedule II
attached hereto, 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.  Except as set forth in Schedule II
attached hereto, there is no 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. 
Except as set forth in Schedule II attached hereto, 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.

 

SECTION 2.12.    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 believes to be prudent and customary in the businesses in which
the Company is engaged.

 

SECTION 2.13.    Brokers. 
The Company has no contract, arrangement or understanding with any
broker, finder or similar agent with respect to the transactions contemplated
by this Agreement.

 

SECTION 2.14.    Non-Operational Subsidiaries. 
Neither BugSolver.Com, Inc., TekInsight e-Government Services, Inc.
nor TekInsight Research, Inc. operates any business nor does any such
entity own any assets.

 

9

 

SECTION 2.15.    Federal Reserve Regulations. 
The Company is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin securities (within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of the Notes or Warrants will be used to purchase or carry
any margin security or to extend credit to others for the purpose of purchasing
or carrying any margin security or in any other manner which would involve a
violation of any of the regulations of the Board of Governors of the Federal
Reserve System.

 

SECTION 2.16.    Representations Complete. 
The representations and warranties made by the Company in this
Agreement, the statements made in any certificates furnished by the Company
pursuant to this Agreement, and the statements made by the Company in any
documents mailed, delivered or furnished to the Purchasers in connection with
this Agreement, taken as a whole, do not contain and will not contain, as of
their respective dates and as of the Closing Date, to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

 

Each
Purchaser severally represents and warrants to the Company that:

 

(a)           it is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and was not organized for the
specific purpose of acquiring the Notes or Warrants;

 

(b)           it has sufficient knowledge and
experience in investing in companies similar to the Company in terms of the
Company’s stage of development so as to be able to evaluate the risks and
merits of its investment in the Company and it is able financially to bear the
risks thereof;

 

(c)           it has had an opportunity to discuss the
Company’s business, management and financial affairs with the Company’s management;

 

(d)           the Notes being purchased by it and the
Warrants being issued to it are being acquired for its own account for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof;

 

(e)           it understands that (i) the Notes
and Warrants and the Warrant Shares have not been registered under the
Securities Act, by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
or Rule 505 or 506 promulgated under the Securities Act, (ii) the
Notes and Warrants and, upon conversion thereof, the Warrant Shares must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration, (iii) the Notes
and Warrants and the Warrant Shares will bear a legend to such effect and (iv) the
Company will make a notation on its transfer books to such effect;

 

10

 

(f)            in the case of [              ].,
all limited partnership action on the part of such Purchaser and its partners
necessary for the performance of such Purchaser’s obligations under this
Agreement, the Security and Pledge Agreement and such Purchaser’s Warrant, and
the transactions contemplated hereby and thereby, will be taken prior to the
Closing.  This Agreement, the Security
and Pledge Agreement and the Warrant, are valid, binding and enforceable
obligations of Purchaser, subject to applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditor’s rights and to the availability of the remedy of specific
performance.  The Purchaser has all
requisite legal and limited partnership power to execute and deliver this
Agreement, the Security and Pledge Agreement and the Purchaser’s Warrant;

 

(g)           it understands that the Notes and
Warrants and Warrant Shares are being offered and, in the case of the Notes and
Warrant Shares, sold, to Purchaser 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 Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Notes and Warrants and Warrant Shares;

 

(h)           The Company or its counsel have made
available all materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the Notes and
Warrants and Warrant Shares which have been specifically requested by such
Purchaser.  Each Purchaser has been
afforded the opportunity to ask questions of the Company, was permitted to meet
with the Company’s officers and has received what such Purchaser believes to be
complete and satisfactory answers to any such inquiries.  Neither such inquiries nor any other due
diligence investigation conducted by the Purchasers or any of their respective
representations shall modify, amend or affect such Purchaser’s right to rely on
the Company’s representations and warranties contained herein.  Each Purchaser understands that such
Purchaser’s investment in the Securities involves a high degree of risk,
including without limitation the risks and uncertainties disclosed in the  SEC Documents.  Each Purchaser acknowledges it has reviewed
the disclosures presented under the caption “Risk Factors” in the Company’s Form 10-Qs
and Form 10-Ks;

 

(i)            it 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 Notes and Warrants
and Warrant Shares; and

 

(j)            it is a resident of the jurisdiction set
forth under Purchaser’s name on Schedule I hereto.

 

11

 

ARTICLE IV

 

CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS

 

The
obligation of each Purchaser to purchase and pay for the Notes and Warrants
being purchased by it on the Closing Date is, at its option, subject to the
satisfaction, on or before the Closing Date of the following conditions:

 

(a)           Security
and Pledge Agreement.  A Security and Pledge
Agreement, in the form attached as Exhibit C (the “Security and
Pledge Agreement”), and all related financing statements and other similar
instruments and documents, shall have been executed and delivered to the
Purchasers by a duly authorized officer of the Company and a duly authorized
officer of each of the subsidiaries of the Company party thereto.

 

(b)           Warrants. 
Warrants, in the form attached hereto as Exhibit B, in favor
of each of the Purchasers, shall have been executed and delivered to the
Purchasers by a duly authorized officer of the Company.

 

(c)           Legal
Opinion.  The Purchasers shall have received an opinion
of the Company’s counsel, dated the Closing Date, with respect to legal matters
customary for transactions of this type, in a form reasonably acceptable to the
Purchasers.

 

(d)           Representations
and Warranties to be True and Correct.  The
representations and warranties contained in Article II shall be true,
complete and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date
(except to the extent that the representation or warranty speaks to a specific
date), and the President and Chief Financial Officer of the Company shall have
certified to such effect to the Purchasers in writing.

 

(e)           Performance. 
The Company shall have performed and complied in all material respects
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date and the President and Chief Financial
Officer of the Company shall have certified to the Purchasers in writing to
such effect and to the further effect that all of the conditions set forth in
this Article IV have been satisfied.

 

(f)            All
Proceedings to be Satisfactory.  All corporate
and other proceedings to be taken by the Company in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to the Purchasers and their counsel, and the
Purchasers and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they reasonably may request.

 

(g)           Supporting
Documents.  The Purchasers and their counsel shall have
received copies of the following documents:

 

(i)            (A) the Certificate of
Incorporation of the Company, certified as of a recent date by the Secretary of
State of the State of Delaware, and (B) a certificate of said Secretary
dated as of a recent date as to the due incorporation and good standing of the

 

12

 

Company, the payment of all excise taxes by the
Company and listing all documents of the Company on file with said Secretary;

 

(ii)           a certificate of the Secretary or an
Assistant Secretary of the Company dated the Closing and certifying:  (A) that attached thereto is a true and
complete copy of the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors or the shareholders of the
Company authorizing the execution, delivery and performance of this Agreement
and the Security and Pledge Agreement, the issuance, sale and delivery of the
Notes and Warrants and the reservation, issuance and delivery of the Warrant
Shares, and that all such resolutions are in full force and effect and are all
the resolutions adopted in connection with the transactions contemplated by
this Agreement; (C) that the Certificate of Incorporation of the Company
has not been amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company executing any
of this Agreement, the Security and Pledge Agreement, the Notes and Warrants
and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii); and

 

(iii)          such additional supporting documents
and other information with respect to the operations and affairs of the Company
as the Purchasers or their counsel reasonably may request.

 

(h)           Preemptive
and First Refusal Rights.  All
shareholders of the Company having any preemptive or first refusal rights with
respect to the issuance of the Notes and Warrants or the Warrant Shares shall
have irrevocably waived the same in writing or all such rights shall have
expired.

 

(i)            Commitment
Fee.  The Company shall have paid to the Purchasers
the commitment fee in the aggregate amount of $125,000.

 

(j)            Fees
of Purchasers’ Counsel.  The Company
shall have paid in accordance with Section 6.01 the fees and disbursements
of each Purchasers’ counsel invoiced at the Closing.

 

All such
documents shall be satisfactory in form and substance to the Purchasers and
their counsel.

 

ARTICLE V

 

COVENANTS OF THE COMPANY

 

The
Company agrees that, so long as any Notes are outstanding, except to the extent
compliance in any case or cases is waived in writing by the holders of at least
66-2/3% of the aggregate unpaid principal amount of the Notes then outstanding:

 

13

 

SECTION 5.01.    Financial Statements, Reports, Etc. 
The Company shall furnish to each Purchaser:

 

(a)           within ninety (90) days after the end of
each fiscal year of the Company a consolidated balance sheet of the Company and
its subsidiaries, if any, as of the end of such fiscal year and the related
consolidated statements of income for the fiscal year then ended, prepared in
accordance with GAAP and certified by a firm of independent public accountants
of recognized national standing selected by the Board of Directors of the
Company;

 

(b)           within forty five (45) days after the end
of each fiscal quarter in each fiscal year a consolidated balance sheet of the
Company and its subsidiaries, if any, and the related consolidated statements
of income unaudited but prepared in accordance with generally accepted
accounting principles and certified by the Chief Financial Officer of the
Company, such consolidated balance sheet to be as of the end of such fiscal
quarter and such consolidated statements of income to be for such fiscal
quarter and for the period from the beginning of the fiscal year to the end of
such fiscal quarter;

 

(c)           promptly after the commencement thereof,
notice of all actions, suits, claims, proceedings, investigations and inquiries
of the type described in Section 2.09 of this Agreement that could
materially adversely affect the Company or any of its subsidiaries, if any;

 

(d)           promptly upon sending, making available
or filing the same, all press releases, reports and financial statements that
the Company sends or makes available to its stockholders or directors or files
with the SEC; and

 

(e)           promptly, from time to time, such other
information regarding the business, prospects, financial condition, operations,
property or affairs of the Company and its subsidiaries as such Purchaser
reasonably may request.

 

Notwithstanding
this Section 5.01, so long as the Company is required to make filings
pursuant to the Exchange Act and makes such filings in a timely manner, the
Company shall be deemed to have furnished to the Purchasers the financial
statements and other reports required by this Section 5.01.

 

14

 

SECTION 5.02.    Corporate Existence; Maintenance of
Business.  The Company shall, and shall cause each of
its subsidiaries to, preserve and maintain its existence.  The Company shall, and shall cause each of
its subsidiaries to, preserve and keep in force and effect all licenses,
permits, franchises, approvals, patents, trademarks, trade names, trade styles,
copyrights, and other proprietary rights necessary to the conduct of its
business where the failure to do so could reasonably be expected to have a
material adverse effect.

 

SECTION 5.03.    Properties, Insurance. 
The Company shall maintain as to its properties and business, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is customary for
companies similarly situated, which insurance shall be deemed by the Company to
be sufficient.

 

SECTION 5.04.    Use of Proceeds. 
The Company shall use the proceeds from the sale of the Notes and
Warrants solely for working capital and general corporate purposes, including
the payment of accounts payable.

 

SECTION 5.05.    Compliance with Laws. 
The Company shall comply with all applicable laws, rules, regulations
and orders, noncompliance with which could materially adversely affect its
business or condition, financial or otherwise.

 

SECTION 5.06.    Keeping of Records and Books of Account. 
The Company shall keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of the
Company, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

 

SECTION 5.07.    Dividends and Certain Other Restricted
Payments.  The Company shall not, nor shall it permit
any of its subsidiaries to, (a) declare or pay any dividends on or make
any other distributions in respect of any class or series of its capital stock
or other equity interests or (b) directly or indirectly purchase, redeem,
or otherwise acquire or retire any of its capital stock or other equity
interests or any warrants, options, or similar instruments to acquire the same.

 

SECTION 5.08.    Material Contracts. 
The Company shall not, nor shall it permit any of its subsidiaries to,
enter into any contract, agreement or business arrangement which requires
annual expenditures of $2,500,000 or more, or which is not cancelable on notice
of 60 days or less.

 

SECTION 5.09.    Capital Expenditures. 
The Company shall not, nor shall it permit any of its subsidiaries to,
incur any Capital Expenditures other than in the ordinary course consistent
with past practice.  For purposes of this
Agreement, “Capital Expenditures” means, with respect to any person or entity
for any period, the aggregate amount of all expenditures (whether paid in cash
or accrued as a liability) by such person or entity during that period for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to property, plant, or equipment (including replacements,
capitalized repairs, and improvements) 

 

15

 

which should be capitalized on the balance sheet of such person or
entity in accordance with GAAP.

 

SECTION 5.10.    Mergers, Consolidations and Sales. 
The Company shall not, nor shall it permit any of its subsidiaries to,
be a party to any merger or consolidation, or sell, transfer, lease or
otherwise dispose of all or any substantial part of its assets.

 

SECTION 5.11.    Acquisitions. The Company shall not, nor shall it
permit any of its subsidiaries to, directly or indirectly, acquire all or any
substantial part of the assets or business of any other entity or division
thereof.

 

SECTION 5.12.    Prepayment of Indebtedness. The Company shall not, nor shall it
permit any of its subsidiaries, to prepay any indebtedness for borrowed money.

 

SECTION 5.13.    Issuance of Shares. 
The Company shall not, nor shall it permit any of its subsidiaries,
assign, sell or transfer, any shares of capital stock or other equity interests
of the Company or such subsidiary; provided,
however, that the foregoing shall not operate to prevent (a) Liens
on the capital stock or other equity interests of subsidiaries of the Company
granted to the Administrative Agent pursuant to the Security and Pledge
Agreement, or (b) the issuance, sale, and transfer to any person of any
shares of common stock of the Company in connection with the Rights Offering.

 

SECTION 5.14.    Executive and Officer Compensation. 
The Company shall not, nor shall it permit any of its subsidiaries to,
grant any increase in the compensation of officers or executive employees
(excluding any such increase required under a currently effective employment
agreement by and between such officer or executive employee and the Company).

 

SECTION 5.15.    Change in the Nature of Business. 
The Company shall not, nor shall it permit any of its subsidiaries to,
engage in any business or activity other than the general nature of the
business engaged in by it as of the Closing Date or discontinue its engagement
in any business or activity engaged in by it as of the Closing Date.

 

SECTION 5.16.    Compliance with Security and Pledge
Agreement.  The Company shall comply at all times with
all of the terms and conditions of the Security and Pledge Agreement.

 

ARTICLE VI

 

MISCELLANEOUS

 

SECTION 6.01.    Expenses. 
Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated; provided, however, that the Company shall pay the reasonable fees
and disbursements of each of the Purchasers’ special counsel, [                        ],
in connection with such transactions, upon delivery of a reasonably itemized
invoice setting forth the services performed by such special counsel in
connection with such transactions.

 

16

 

SECTION 6.02.    Survival of Agreements. 
All covenants, agreements, representations and warranties made in this
Agreement, the Security and Pledge Agreement or any certificate or instrument
delivered to the Purchasers pursuant to or in connection with this Agreement or
the Security and Pledge Agreement shall survive the execution and delivery of
this Agreement or the Security and Pledge Agreement, the issuance, sale and
delivery of the Notes and Warrants, and the issuance and delivery of the
Warrant Shares, and with respect to the Notes, until the repayment of the Notes
in full and, with respect to the Warrants, until the exercise of the Warrants
in full.

 

SECTION 6.03.    Brokerage. 
Each party hereto will indemnify and hold harmless the others against
and in respect of any claim for brokerage or other commissions relative to this
Agreement or to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to have been made by
such party with any third party.

 

SECTION 6.04.    Parties in Interest. 
All representations, covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.  Without
limiting the generality of the foregoing, all representations, covenants and
agreements benefiting the Purchasers shall inure to the benefit of any and all
subsequent holders from time to time of Notes, Warrants or Warrant Shares.

 

SECTION 6.05.    Notices. 
All notices, requests, consents and other communications hereunder shall
be in writing and shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or recognized
overnight courier service, addressed as follows:

 

(a)           if to the Company, at 19700 Fairchild
Road, Suite 230, Irvine, California 92612, fax: (949) 955-0086, Attention:
Chief Financial Officer, with a copy to [               ];
and

 

(b)           if to any Purchaser, at the address of
such Purchaser set forth in Schedule I, with a copy to [               ].

 

or,
in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.

 

SECTION 6.06.    Governing Law. 
This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of California without regard for conflicts of
laws or choice of laws principles.

 

SECTION 6.07.    Entire Agreement. 
This Agreement, including the Schedules and Exhibits hereto, along with
the Notes, the Warrants and the Security and Pledge Agreement, constitutes the
sole and entire agreement of the parties with respect to the subject matter
hereof.  All Schedules and Exhibits
hereto are hereby incorporated herein by reference.  There are no other agreements of the parties
and no party is relying on any representations of the other not

 

17

 

expressly set forth herein.  All
Schedules and Exhibits hereby are hereby incorporated herein by reference.

 

SECTION 6.08.    Counterparts. 
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

 

SECTION 6.09.    Amendments. 
This Agreement may not be amended or modified, and no provisions hereof
may be waived, without the written consent of the Company and the holders of at
least a majority of the outstanding principal amount of the Notes and at least
a majority of the outstanding shares of capital stock of the Company issued or
issuable upon exercise of the Warrants.

 

SECTION 6.10.    Severability. 
If any provision of this Agreement shall be declared void or
unenforceable by any judicial or administrative authority, the validity of any
other provision and of the entire Agreement shall not be affected thereby.

 

SECTION 6.11.    Titles and Subtitles. 
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or
provision of this Agreement.

 

SECTION 6.12.    No Publicity. 
Except as expressly provided below, no party shall make, issue or
release any public announcement, press release, statement or acknowledgment
(collectively, “Public Announcement”) of the existence of, or reveal publicly
the terms, conditions and status of, the transactions contemplated hereby,
without the prior written consent of the other party as to the content and time
of release of and the media in which such Public Announcement is to be made;
provided, however, that in the case of a Public Announcement which a party is
required by law to make, issue or release, the making, issuing or releasing of
any such Public Announcement, by a party so required to do so shall not
constitute a breach if such party has given, to the extent reasonably possible,
not less than two (2) business days prior notice to the other party, and
has attempted, to the extent reasonably possible, to allow the other party to
review and approve such Public Announcement; provided further, however, that
upon the Company’s making of Public Announcement regarding the existence of, or
the terms, conditions and status of, the transactions contemplated hereby,
whether pursuant to the filing of a Form 8-K or otherwise, subject to the
consent of the Company, which consent may not be unreasonably withheld, the
Purchasers may advertise the closing of the transactions contemplated by this
Agreement, and make appropriate announcements of the financial arrangements
entered into among the parties hereto, including, without limitation,
announcements commonly known as tombstones, in such trade publications,
business journals, newspapers of general circulation and to such selected
parties as the Purchasers shall deem reasonably appropriate.

 

SECTION 6.13.    Usury Savings Clause. 
The parties intend to comply at all times with applicable usury
laws.  If at any time such laws would
render usurious any amounts due under the Notes under applicable law, then it
is the parties’ express intention that the Company not be required to pay
interest on the Notes at a rate in excess of the maximum lawful rate, that the
provisions of this Section 6.13 shall control over all other provisions of
this Note which may be

 

18

 

in apparent conflict hereunder, that such excess amount shall be
immediately credited to the principal balance of this Note (or, if this Note
has been fully paid, refunded by the Purchaser to the Company), and the
provisions hereof shall immediately reformed and the amounts thereafter
decreased, so as to comply with the then applicable usury law, but also so as
to permit the recovery of the fullest amount otherwise due under the Notes.  The Company hereby represents and warrants
that its assets are sufficient to meet the requirements for exemption from the
usury laws of the State of California as provided by Section 25118 of the
California Corporations Code.

 

THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK

 

19

 

Table
of Contents

 

Page

 

IN
WITNESS WHEREOF,
the Company and the Purchasers have executed this Note Purchase Agreement as of
the day and year first above written.

 

	
   

  	
  DYNTEK,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
  PURCHASERS:

  	
   

  
	
   

  	
   

  
	
  [                           ]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
												

 

20

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}]]