Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as
of November 7, 2005, by and between MEDICOR
LTD. (“MediCor” or the “Company”) and PAUL R. KIMMEL (“Executive”).

 

A.            MediCor
is engaged in the business of creation, production and distribution of medical
devices and desires to retain an individual for the position of Executive Vice
President and Financial Controller (“EVP/FC”) of the Company.

 

B.            Executive
represents that he is well qualified to perform the duties of EVP/FC, and will
devote the necessary time, effort and energy to perform those duties.

 

C.            Based
on these representations, the Company desires to hire Executive as its EVP/FC.

 

NOW, THEREFORE, in
consideration of the above recitals and the respective agreements of Company
and Executive set forth below, the Company and Executive, intending to be
legally bound, agree as follows:

 

1.             Employment.  The Company shall employ Executive as its EVP/FC,
and Executive shall accept such employment and perform the services herein
described for Company, upon the terms and conditions set forth in this
Agreement.

 

2.             Term
of Employment.  This Agreement
shall commence as of the Effective Date of the fully executed Personnel Action Form shown
in blank form as Exhibit A hereto. Unless terminated at an earlier date in
accordance with Section 5 below, the term of Executive’s employment with
Company (“Term of Employment”) shall commence on the date first set forth above
and shall continue for a period initially ending on November 6, 2006 (“Initial
Term”). The Term of Employment shall automatically be renewed at the end of the
12th month prior to the end of the Initial Term for an additional 12-month
period and shall be extended at the end of each succeeding month by an additional
month such that the Term of Employment shall extend each month until the end of
succeeding 12th month (each such rolling 12-month period, a “Subsequent
Term”) unless either party provides written notice of their intention not to
renew this Agreement to the other in advance of then applicable termination
date of the Term of Employment.

 

3.             Positions
and Duties.

 

a.             Employment
with Company.  Executive shall
perform for the Company the duties and responsibilities of an EVP/FC of a
corporation and such other duties and responsibilities as the Company shall
reasonably assign to Executive from time to time generally consistent with
Executive’s position as EVP/FC, as determined in the sole discretion of the
Company. Executive shall report to the Company’s Chief Financial Officer.

 

b.             Place
of Employment.  Executive’s principal
place of employment shall be at the Company’s Executive Offices; provided,
however, that Executive will be expected to engage in travel as Company may
reasonably request of Executive.

 

 

4.             Compensation.

 

a.             Salary.  The Company shall pay Executive as
compensation for his services a base salary at the annualized rate of $300,000.00.
Such salary shall be subject to applicable tax withholding and shall be paid
periodically in accordance with the Company’s normal payroll practices. Such
annual compensation shall be reviewed annually for increase (but not decrease)
in the discretion of the Board. In conducting any such annual review, the Board
shall take into account any increase in Executive’s responsibilities, increases
in the compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of Executive and/or other
pertinent factors. The annual compensation specified in this Section 4.a,
together with any increases in such annual compensation that the Company may
grant from time to time, is referred to in this Agreement as “Base
Compensation.”

 

b.             Bonuses.  The Company may pay to Executive periodic or
annual discretionary bonuses for any period ending prior to the end of the Term
of Employment in an amount that will be determined by the Company’s
Compensation Committee based on such factors as Executive’s performance and the
performance of the Company. Concurrently with signing this Agreement, Executive
shall be paid a bonus of $40,000.00, net of federal and state taxes.

 

c.             Executive
Benefits.  While Executive is
employed by the Company hereunder, Executive shall be entitled to participate
in all employee benefit, pension and welfare plans and programs of Company for
executive employees, including any group medical, dental, life insurance and
disability insurance plans, or similar benefit plans of the Company (including
group plans sponsored by MediCor), to the extent that Executive meets the
eligibility requirements for each individual plan or program. Participation in
any such benefits and plans shall be consistent with Executive’s rate of
compensation to the extent that compensation is a determinative factor with
respect to participation and/or coverage under any such benefit or plan. The
Company provides no assurance as to the adoption or continuance of any
particular employee benefit plan or program, and Executive’s participation in
any such plan or program shall be subject to the provisions, rules and
regulations applicable thereto.

 

d.             Stock Options.  MediCor will, within thirty (30) days of
Executive’s signature on this Agreement, grant to Executive an option to
purchase 160,000 shares of MediCor’s common stock (the “Option”) at the
exercise price equal to the fair market value of MediCor’s common stock on the
date of grant. Subject to the terms of the Option (including partial
acceleration in the event of a termination of this Agreement by the Company
without Cause or by the Executive for Good Reason), the Option granted pursuant
to this Agreement will vest with respect to 25% of the shares of common stock
purchasable thereunder on each of the first through fourth anniversaries of the
date of grant, provided Executive remains employed by the Company (or MediCor
or another subsidiary of MediCor) on each such date. Unless specifically
provided in this Agreement, vesting and exercise provisions and all other terms
and conditions governing the Option shall be as set forth in the plan documents
and such option agreements as may be entered into with Executive.

 

e.             Salary
Continuation.  Executive shall be
entitled to receive his Base Compensation for all periods during which he is
unable to perform his duties hereunder by reason of a mental or physical
incapacity, whether resulting from illness, accident or otherwise, prior to
being determined to be suffering from a Disability.

 

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f.              Expenses.  While Executive is employed by the Company hereunder,
Company shall reimburse Executive for all reasonable out-of-pocket business,
travel and entertainment expenses incurred by Executive in the performance of
Executive’s duties and responsibilities hereunder, subject to the Company’s
normal policies and procedures for expense verification and documentation as in
effect from time to time.

 

g.             Paid
Leave.  Executive shall be entitled
to paid leave in accordance with Company’s practices and policies for executive
employees.

 

5.             Termination
of Employment.

 

a.             Voluntary
Termination; Termination for Cause. 
The Company may terminate Executive’s employment at any time for Cause
and Executive may terminate his employment for any reason. If Executive’s
employment terminates by reason of Executive’s voluntary resignation without
Good Reason, or if Executive is terminated for Cause (each as defined herein),
Executive shall be entitled to:

 

(1)           Base
Compensation at the rate in effect at the time of his termination through the
effective date of termination of employment;

 

(2)           any
bonus awarded but not yet paid;

 

(3)           any
deferred bonus, including interest or other credits on the deferred amounts;

 

(4)           reimbursement
for expenses incurred, but not paid prior to such termination of employment;

 

(5)           such
rights to other compensation and benefits as may be provided in applicable
plans and programs of the Company, including, without limitation, applicable
employee benefit plans and programs, according to the terms and conditions of
such plans and programs; and

 

(6)           any
equity compensation that is vested as of the effective date of termination of
employment.

 

No termination for
Cause shall be effective unless Executive is given at least thirty (30) days
prior written notice authorized by a vote of at least a majority of the members
of the Executive Committee of the Board that the Company intends to terminate
his employment for Cause except under the provisions of Section 11(c)(i) or
(iv). Such written notice shall specify the particular act or acts, or failure
to act, which is or are the basis for the decision to so terminate Executive’s
employment for Cause. Executive shall be given the opportunity within fifteen
(15) days of the receipt of such notice to meet with the Board to defend such
act or acts, or failure to act, and if, thereafter, the Board, by majority
vote, continues to maintain that Cause for termination exists, Executive shall
be given fifteen (15) days after such determination to correct such act or
failure to act (if such act or failure to act is reasonably susceptible of
correction or cure within such time). Upon failure of Executive, within fifteen
(15) days, to correct such act or failure to act, Executive’s employment by the
Company shall be terminated under this subsection for Cause.

 

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Anything herein to
the contrary notwithstanding, if, following a termination of Executive’s
employment for Cause due to any conviction of Executive for any crime, such
conviction is overturned on appeal, Executive shall be entitled to the payments
and the economic equivalent of the benefits he would have received if his
employment had been terminated without Cause.

 

b.             Termination
Without Cause or for Good Reason. 
The Company may terminate Executive’s employment at any time without
Cause upon sixty (60) days advance written notice to Executive, and Executive
may terminate his employment for Good Reason. If the Company terminates
Executive’s employment without Cause, other than due to Disability, or
Executive terminates his employment for Good Reason, then, subject to Executive’s
continuing obligations under Section 7, Executive shall thereupon be
entitled to:

 

(1)           a
lump sum payment equal to the Base Compensation for the remainder of the Term
of Employment (subject to applicable tax withholdings), unless such termination
is within 12 months of a Change in Control, in which event such lump sum shall
be equal to Base Compensation for 12 months;

 

(2)           any
bonus awarded but not yet paid;

 

(3)           any
deferred bonus, including interest or other credits on the deferred amounts;

 

(4)           a
Pro Rata Bonus for the fiscal year in which termination of employment occurs;

 

(5)           reimbursement
for expenses incurred, but not paid prior to such termination of employment;

 

(6)           continuation
of the health and welfare benefits of Executive, including, without limitation,
any group health insurance and long-term disability insurance generally
provided to senior executives of the Company other than life insurance or
accidental death and dismemberment insurance, at the level in effect at the
time of his termination of employment through the end of the twelfth (12th)
month following such termination of employment or the economic equivalent
thereof; and

 

(7)           any
equity compensation that is vested as of the effective date of termination of
employment or would otherwise vest during the remainder of the Term of
Employment (or within 12 months of the effective date of termination of
employment if such termination is within 12 months of a Change in Control),
which shall be deemed to have vested immediately prior to the effective date of
termination of employment.

 

Any payments to
which Executive shall be entitled under this Subsection 5.b, including any
economic equivalent of any benefit, shall be made as promptly as possible
following the termination of Executive’s employment hereunder and in no event
later than thirty (30) days following such termination of employment.

 

4

 

c.             Death
or Disability.  In the event of
Executive’s death or a termination of Executive’s employment due to Executive’s
Disability, Executive or his legal representative, as the case may be, shall be
entitled to:

 

(1)           Base
Compensation at the rate in effect at the time of his termination, through (x)
in the case of death, for a period of three (3) months following
termination, and (y) in the case of Disability, for the period, if any, between
the date of his termination and the date by which the Company’s long-term
disability plan have commenced paying its benefits;

 

(2)           any
bonus awarded but not yet paid;

 

(3)           a
Pro Rata Bonus for the fiscal year in which death or disability occurs;

 

(4)           any
deferred bonuses including interest or other credits on the deferred amounts;

 

(5)           reimbursement
for expenses incurred but not paid prior to such termination of employment;

 

(6)           in
the case of death, Executive’s rights to other compensation and benefits as may
be provided in applicable plans and programs of the Company shall be determined
according to the terms and provisions of such plans and programs;

 

(7)           in
the case of Disability, the Company shall continue Executive’s health and
welfare benefits at the level in effect on the date of termination at least
through the end of the sixth month following the termination of Executive’s
employment or provide the economic equivalent thereof, and Executive’s rights
to other compensation and benefits as may be provided in applicable plans and
programs of the Company shall be determined according to the terms and
provisions of such plans and programs; and

 

(8)           any
equity compensation that is vested as of the effective date of termination of
employment.

 

d.             No
Mitigation; No Offset.  In the event
of any termination of employment under this Section 5, Executive shall be
under no obligation to seek other employment and there shall be no offset
against amounts due Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that Executive may
obtain. Any amounts due under this Section 5 are in the nature of
severance payments, or liquidated damages, or both, and are not in the nature
of a penalty.

 

6.             Duty
of Loyalty. As an employee of Company, Executive will devote his best
efforts to the interests of the Company. Executive agrees to devote all of his
working time and attention to his duties hereunder, except for such reasonable
amounts of time for personal, charitable, investment and professional
activities that do not interfere with the service to be rendered by Executive
hereunder. During Executive’s employment with the Company, Executive will not,
except with the written consent of the Board, engage in any activity,
investment, interest or association (1) which is hostile or adverse to or
competitive with the Company, or (2) which

 

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so occupies
Executive’s attention as to interfere with the proper and efficient performance
of his duties at the Company, or (3) which interferes with the independent
exercise of Executive’s judgment in the Company’s best interests.

 

7.             Confidential
Information.  Executive shall
maintain the confidentiality of all confidential and proprietary information of
the Company, and shall execute and deliver to MediCor its standard Proprietary
Information and Invention Agreement in the form attached hereto as Schedule I
(the “Confidentiality Agreement”). Such obligations shall survive any
termination of Executive’s employment relationship or of this Agreement.

 

8.             Third-Party
Trade Secrets.  Executive will
not, during his employment with Company, improperly use or disclose any
proprietary information or trade secrets of any third party, including the
Company’s customers and suppliers, or of any of Executive’s former or
concurrent employers or companies, if any. Executive shall not bring to the
premises of the Company any unpublished documents or any property belonging to
such third parties, unless consented to in writing by such third party. Executive’s
employment with the Company does not and will not breach any agreement or duty which
Executive has concerning confidential information belonging to others. If
Executive is asked to work on any project for the Company which raises a
concern regarding third-party confidential information, Executive will, as soon
as this is apparent to Executive, discuss the situation with the Chairman of
Company without disclosing any confidences.

 

9.             Return of Property.  Upon termination of Executive’s employment
with the Company, Executive shall deliver promptly to the Company all of the
following things which are in Executive’s custody or control:  (1) all records, files, manuals, books,
forms, documents, letters, memoranda, data, customer lists, tables,
photographs, video tapes, audio tapes, computer disks and other computer
storage media and copies thereof, whether or not containing confidential or
proprietary information, that are the property of the Company or that relate in
any way to the business, products, services, personnel, customers, prospective
customers, suppliers, practices, or techniques of the Company; and (2) all
other property of the Company, including but not limited to computers, personal
digital assistants, cellular telephones, pagers, credit cards, and keys.

 

10.          Prohibited
Post-Termination Activities.

 

a.             No
Solicitation.  For a period of one
year following the termination of Executive’s employment, Executive will not
induce any employee of, or consultant to, MediCor or any of its subsidiaries to
engage in any business in which MediCor or any of its subsidiaries is engaged
or contemplates engaging, or solicit any employee to leave the employment of
MediCor or any of its subsidiaries.

 

b.             Noncompetition.  For a period of one year following the
termination of Executive’s employment with the Company, Executive will not
accept employment with, engage in or render advice or assistance to any
business within any market in which MediCor or any of its subsidiaries conducts
business or effects sales which competes with or contemplates competition with
MediCor or any of its subsidiaries in any capacity in which the employment or
rendering of advice, assistance or other services to such business by Executive
would be substantially similar to the services provided by Executive to the
Company during the term of

 

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Executive’s
employment with Company or would result in a competitive advantage to such
subsequent employer.

 

11.          Definitions.  As used herein, the following terms shall
have the respective meanings set forth below.

 

a.             “Affiliate”
shall mean any person or entity controlling, controlled by or under common
control with the Company.

 

b.             “Board”
shall mean the board of directors of the Company.

 

c.             “Cause”
shall mean (i) Executive is convicted of a felony involving moral
turpitude, (ii) Executive, in carrying out his duties under this
Agreement, is guilty of a willful act by Executive which constitutes gross
misconduct and which is materially and demonstrably injurious to the Company, (iii) Executive,
in carrying out his duties under this Agreement, is guilty of a willful
violation of a written Company policy generally applicable to all employees,
the violation of which is stated in such policy to be grounds for termination, (iv) an
act of fraud against, or the misappropriation of property belonging to, the
Company or its Affiliates resulting in material economic harm to the Company, (v) except
as otherwise specified in this clause c, the breach in any material respect of
this Agreement or any confidentiality or proprietary information agreement between
Executive and the Company or its Affiliates, or (vi) the commission of a
willful act which induces any customer of the Company to break a contract with
the Company resulting in material economic harm to the Company.

 

d.             A
“Change in Control” shall be deemed to have occurred if:

 

(1) 
an event occurs with respect to MediCor of a nature that would be required to
be reported in response to Item 14 of Schedule 14A of Regulation 14A
promulgated under Section 14 of the Securities Exchange Act of 1934 (the “1934
Act”);

 

(2) 
any “person,” as such term is used in Sections 13(d) and 14(d)(2) of
the 1934 Act, other than Donald K. McGhan or entities related to, controlled
by, or owned by Donald K. McGhan or his immediate family (collectively, the “McGhan
Entities”) (or with respect to Affiliates, MediCor), becomes a “beneficial
owner,” as such term is used in Rule 13d-3 promulgated under the 1934 Act,
at any time that MediCor or any Affiliate is a Private Company, of more than
51% of the Voting Stock of MediCor or such Affiliate;

 

(3) 
any “person,” as such term is used in Sections 13(d) and 14(d)(2) of
the 1934 Act, other than the McGhan Entities (or with respect to Affiliates,
MediCor), becomes a “beneficial owner,” as such term is used in Rule 13d-3
promulgated under the 1934 Act, while MediCor or any Affiliate is a Public
Company, of 20% or more of the Voting Stock of MediCor or such Affiliate;

 

(4) 
any “person” as such term is used in Sections 13(d) and 14(d)(2) of
the 1934 Act, is the “beneficial owner,” as such term is used in Rule 13d-3
promulgated under the 1934 Act, of a greater percentage of the Voting Stock of

 

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MediCor than the
percentage of such Voting Stock held, directly or indirectly, by the McGhan Entities;

 

(5) 
all or substantially all of the business of MediCor and its consolidated
subsidiaries is disposed of pursuant to a merger, consolidation, asset sale or
other transaction in which MediCor is not the surviving corporation or MediCor
(on a consolidated basis) is materially or completely liquidated or in which
all or substantially all of MediCor’s consolidated assets are sold; or

 

(6) 
MediCor or a subsidiary combines with another company and, immediately after
the combination, the stockholders of MediCor immediately prior to the
combination hold, directly or indirectly, less than 51% of the Voting Stock of
the resulting company (viewed on a consolidated basis).

 

Notwithstanding the
foregoing, a transaction or event shall not constitute a Change in Control if
such transaction or event results from a transaction that is approved in
advance unanimously by MediCor’s executive committee.

 

e.             “Disability”
shall mean Executive’s inability to render, for a period of three consecutive
months, full and effective services hereunder by reason of permanent mental or
physical disability, whether resulting from illness, accident or otherwise;
provided, however, that in no event will Executive be considered disabled for
the purposes of this Agreement unless he is deemed disabled pursuant to the
Company’s long-term disability plan (or any plan in which the Company’s
employees participate).

 

f.              “Good
Reason” shall mean and exist if, without Executive’s prior written consent, one
or more of the following events occurs:

 

(1)           Executive
is not appointed to or is otherwise removed from any office or position
provided for in Section 1 or Section 3.a above, for any reason other
than the termination of his employment or transfer to a substantially
equivalent or superior office or position within the Company (such
determination to be made on the overall responsibilities of Executive within
the Company);

 

(2)           Executive
is assigned duties or responsibilities that are, when taken as a whole,
inconsistent, in any significant respect, with the scope of duties and
responsibilities associated with Executive’s office or position as described in
Section 1 or Section 3.a above;

 

(3)           Executive
suffers a material reduction, when taken as a whole, in the authorities, duties
or responsibilities associated with his office or position as described in Section 1
or Section 3.a above, on the basis of which he makes a determination in
good faith that he can no longer carry out such office or position in the
manner contemplated at the time this Agreement was entered into;

 

(4)           Executive’s
Base Compensation is decreased by the Company, or his benefits or opportunities
under any employee benefit or incentive plan or program of the Company is or
are materially reduced, with the result that Executive’s overall benefits
package is materially reduced;

 

8

 

(5)           There
occurs a Change in Control;

 

(6)           the
Company fails to pay Executive any deferred payments under any bonus or
incentive plans which are due to him at that time;

 

(7)           the
Company fails to reimburse Executive within a reasonable time for business
expenses in accordance with this Agreement or the Company’s policies,
procedures or practices;

 

(8)           if
and to the extent applicable, the Company fails to agree to or actually
indemnify Executive for his actions and/or inactions, as either a director or
executive officer of the Company, to the fullest extent permitted by Delaware
law, and/or the Company fails to maintain satisfactory levels of directors and
officers liability insurance coverage for Executive when such insurance is
available and maintained by MediCor;

 

(9)           the
Company fails to obtain a written agreement reasonably satisfactory to
Executive from any successor or assign of the Company to assume and perform
this Agreement; or

 

(10)         the
Company purports to terminate Executive’s employment for Cause and such
purported termination of employment is not effected in accordance with the
procedures required by this Agreement, and for purposes of this Agreement, such
purported termination of employment shall be invalid and of no force and
effect.

 

g.             “Private
Company” shall mean an entity that has no class of its Voting Stock registered
pursuant to Section 12(b), 12(g) or 15(d) of the 1934 Act.

 

h.             “Pro
Rata Bonus” shall mean an amount equal to the annual bonus otherwise payable
with respect to the year in question, calculated as if Executive had been
employed by the Company for the full year, multiplied by a fraction, the
numerator of which is the number of days in such year during which Executive is
actually employed by the Company and the denominator of which is 365.

 

i.              “Public
Company” shall mean an entity that has one or more classes of its Voting Stock
registered pursuant to Section 12(b), 12(g) or 15(d) of the 1934
Act.

 

j.              “Voting
Stock” shall mean capital stock (or similar security) of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation or similar managers of
another entity.

 

12.          Miscellaneous.

 

a.             Amendments;
Assignment.  No amendment or
modification of this Agreement
shall be deemed effective unless made in writing and signed by the parties
hereto. This Agreement may be assigned by the Company to MediCor or a
wholly-owned subsidiary of MediCor without Executive’s consent.

 

b.             No
Waiver.  No term or condition of this
Agreement shall be deemed to have been waived, except by a statement in writing
signed by the party against whom enforcement of the waiver is sought.  Any written waiver shall not be deemed a
continuing

 

9

 

waiver unless
specifically stated, shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.

 

c.             Counterparts.  This Agreement may be executed in any number
of counterparts, and such counterparts executed and delivered, each as an original, shall constitute
but one and the same instrument.

 

d.             Severability.  To the extent that any portion of any
provision of this Agreement shall be invalid or unenforceable, it shall be
considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.

 

e.             Captions
and Headings.  The captions and
paragraph headings used in this
Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.

 

f.              Notices.  All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given (i) upon receipt, if delivered
personally or via courier, (ii) upon confirmation of receipt, if given by
electronic facsimile provided that another copy is sent by another means permitted by this subsection within
two (2) business days thereafter, and (iii) on the third business day
following mailing, if mailed first-class, postage prepaid, registered or
certified mail from the continental United States as follows:

 

If to Company
to:

 

MediCor Ltd.

4560 S. Decatur Blvd., Ste. 300

Las Vegas, Nevada 89103

Fax: (702) 932-4561

Attn: Chief Financial Officer

 

If to
Executive to:

 

Paul R. Kimmel

7929 Winchester Circle

Santa Barbara, CA 93117

 

Any party may
by notice given in accordance with this subsection to the other party to
designate another address or person for receipt of notices hereunder.

 

g.             Attorneys’
Fees.  If any legal action or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover such reasonable attorneys’ fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled, as may be awarded by the court or arbitrator.

 

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h.             Governing
Law.  The parties agree that this
Agreement will be governed by the laws of the State of Delaware.

 

i.              Arbitration.  Any controversy or claim arising out of or
relating to this Agreement or the breach thereof (including the arbitrability
of any controversy or claim), shall be settled by arbitration in accordance
with the laws of the State of Delaware by one arbitrator. If the parties cannot
agree on the appointment of an arbitrator, then the arbitrator shall be
appointed by the American Arbitration Association. The arbitration shall be
conducted in Clark County, Nevada in accordance with the rules of the
American Arbitration Association, except with respect to the selection of an
arbitrator which shall be as provided in this Section 12.i. The cost of
any arbitration proceeding hereunder shall be borne by the Company. The award
of the arbitrator shall be binding upon the parties. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

 

If it shall be
necessary or desirable for Executive to retain legal counsel and incur other
costs and expenses in connection with the enforcement of any or all of his
rights under this Agreement, and provided that Executive substantially prevails
in the enforcement of such rights, the Company shall pay (or Executive shall be
entitled to recover from the Company, as the case may be) Executive’s
reasonable attorneys’ fees and costs and expenses in connection with the
enforcement of his rights including the enforcement of any arbitration award.

 

j.              Entire
Agreement.  This Agreement contains
the entire agreement of the parties relating to Executive’s employment with the
Company and supersedes all prior agreements and understandings with respect to such subject matter.

 

IN WITNESS WHEREOF, Executive, the Company and, with respect to Section 4.d,
MediCor have executed this Agreement as of the date first set forth above.

 

	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
  MEDICOR LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald
  K. McGhan

  	
   

  
	
   

  	
   

  	
  Its:
  Chairman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  
	
   

  	
  /s/ Paul R.
  Kimmel

  	
   

  
	
   

  	
  Paul R. Kimmel

  
	
   

  	
   

  
	
  WITH RESPECT
  TO SECTION 4.D:

  	
   

  
	
   

  	
   

  
	
  MEDICOR LTD.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Donald
  K. McGhan

  	
   

  	
   

  
	
   

  	
  Its:
  Chairman

  	
   

  	
   

  

 

11

 

Exhibit B

 

RELOCATION EXPENSES

 

This Relocation Expenses Agreement, dated as
of November 7, 2005, is by and
between MEDICOR LTD. (the “Corporation”) and Paul R. Kimmel. (the “Employee”).

 

WHEREAS, the
Employee and the Corporation have entered into an Employment and other
Agreements of even date hereof; and

 

WHEREAS, the
Employee, in order to fulfill his duties and obligations under such Agreements
will need to relocate his primary residence.

 

NOW, THEREFORE, the
parties hereto agree to the following terms and conditions regarding Relocation
Expenses incurred by the Employee:

 

1.             The
Corporation agrees to pay directly or reimburse the Employee for moving
expenses associated with the household goods of his residence in                    ,
including packing, loading, transportation, unloading, unpacking, insurance of
goods moved and reasonable storage costs, if applicable.

 

2.             The
Corporation also agrees to reimburse the Employee for reasonable costs
associated with car expenses, flight expenses, lodging and meals prior to and
during the Employee’s relocation travel from his former residences to his new
primary residence.

 

3.             The
Corporation agrees to reimburse the Employee for reasonable costs and fees
associated with the sale of Employee’s residence in                    ,
including real estate commission fees, inspections, reasonable attorneys’ fees,
transfer taxes and other normal costs associated with the escrow and sale of
real estate.

 

4.             The
Corporation agrees to reimburse Employee for duplicate mortgage interest
expense, if incurred, on Employee’s                    
residence for a period not to exceed six (6) months.

 

5.             The
Corporation agrees to reimburse the Employee for reasonable closing costs
associated with the purchase of the Employee’s residence in the Las Vegas,
Nevada area, including inspection and appraisal fees, loan origination and
standard points costs, taxes and recording fees, title fees and insurance and
other ordinary purchase expenses, including up to a maximum of twenty five
percent (25%) of one month’s base salary for such items as auto license fees,
cleaning of the new residence, legal fees for estate planning purposes due to
relocation, etc.

 

6.             The
Corporation agrees to extend an interest free loan to the Employee for up to
100% of the equity in Employee’s existing home in                    ,
if the sale of such home is not completed prior to ten (10) days of the
closing of Employee’s home purchased in Las Vegas, Nevada.  Such loan is repayable by Employee

 

12

 

immediately upon termination of this
Agreement or within fifteen (15) days following the closing of the sale of the
home in                    ,
whichever occurs earlier.

 

7.             The
Corporation agrees to pay the Employee a tax gross-up at the end of the
calendar year following the initiation of this Agreement of the amount of the
Employee’s calculated federal tax liability resulting for any reimbursement for
relocation costs paid hereunder.  The
base income used for said calculated federal tax liability shall be the
Employee’s annualized salary hereunder, excluding all income from other
sources.

 

IN WITNESS WHEREOF,
the parties hereto have executed this Exhibit B to Employment Agreement to
be effective as of the 7th  day
of November, 2005.

 

	
   

  	
  CORPORATION:

  
	
   

  	
  MEDICOR
  LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald
  K. McGhan

  	
   

  
	
   

  	
   

  	
  Donald K.
  McGhan

  
	
   

  	
  Title:

  	
  Chairman of
  the Board

  
	
   

  	
   

  
	
  EMPLOYEE:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul R.
  Kimmel

  	
   

  
	
   

  	
   

  	
  Paul R.
  Kimmel

  
						

 

13Exhibit 10.1

 

CONFIDENTIAL

 

THIS
PROPRIETARY FORM DOCUMENT IS BEING PROVIDED TO YOU ON A CONFIDENTIAL
BASIS.  BY ACCEPTING THIS DOCUMENT, YOU
ARE AGREEING, AND SHALL BE DEEMED TO HAVE AGREED, TO MAINTAIN THE
CONFIDENTIALITY OF THIS DOCUMENT, EXCEPT THAT THIS DOCUMENT MAY BE DISCLOSED
(I) TO YOUR DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (INCLUDING LEGAL COUNSEL
AND OTHER ADVISORS) ON A NEED-TO-KNOW BASIS AND SOLELY FOR THE PURPOSE OF
REVIEWING THE PROPOSED TRANSACTION (IT BEING UNDERSTOOD THAT THE PERSONS TO
WHOM SUCH DISCLOSURE IS MADE WILL BE INFORMED OF THE CONFIDENTIAL NATURE OF
THIS DOCUMENT AND INSTRUCTED TO KEEP THE DOCUMENT CONFIDENTIAL PURSUANT TO THE
TERMS HEREOF; AND THAT ANY FAILURE BY SUCH PERSONS TO MAINTAIN THE
CONFIDENTIALITY OF THIS DOCUMENT SHALL BE ATTRIBUTABLE TO YOU AND FOR WHICH YOU
HEREBY ACCEPT FULL RESPONSIBILITY), (II) TO THE EXTENT REQUIRED BY APPLICABLE
LAWS OR REGULATIONS OR BY ANY SUBPOENA OR SIMILAR LEGAL PROCESS, OR (III) WITH
THE CONSENT OF GLOBAL TECHNOLOGY FINANCE, LLC. 
FOR PURPOSES OF THIS PARAGRAPH, “DOCUMENT” SHALL INCLUDE THIS DOCUMENT
AND ALL INFORMATION RELATING HERETO PROVIDED BY GLOBAL TECHNOLOGY FINANCE, LLC
AND/OR ITS SUBSIDIARIES.

 

ASSET PURCHASE AND

LIABILITY ASSUMPTION AGREEMENT

 

This ASSET
PURCHASE AND LIABILITY ASSUMPTION AGREEMENT, dated as of                        ,
2005 (this “Agreement”), among Dyntek, Inc., a Delaware corporation (the
“Seller Parent”), and Dyntek Services, Inc., a Delaware corporation
(collectively with the Seller Parent, the “Sellers”), and New England
Technology Finance, LLC, a Delaware limited liability company, as purchaser (“Purchaser”).

 

1.                                       Definitions.

 

(a)                                  Certain
Defined Terms.  As used herein, the
following terms shall have the following corresponding meanings:

 

“Account” shall mean any and all rights of a
Seller to payment for goods sold (but not services rendered), including,
without limitation, receivables, accounts, contract rights, general
intangibles, payment intangibles and any and all such rights evidenced by
chattel paper (whether electronic or tangible), instruments, letter of credit
rights or documents, whether due or to become due and whether or not earned by

 

 

performance, and whether
now or hereafter acquired or arising in the future and any proceeds arising
therefrom or relating thereto.

 

“Accrued Freight Costs” shall mean all shipping
costs that are billed to Eligible Obligors.

 

“Affiliate” shall be as defined from time to
time by the rules and regulations promulgated by the U.S. Securities and
Exchange Commission under the Securities Act of 1933, as amended.

 

“Asset Purchase Agreement” shall mean that
certain Asset Purchase 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.

 

“Authorized Supplier” shall mean any Equipment
vendor that is approved in writing by Purchaser.  Purchaser may, upon written notice to the
Seller Parent, cease to include any Equipment vendor as an Authorized Supplier.

 

“Backlog Account” shall mean an Account:  (i) that arises from a Bona Fide Customer
Order received on or prior to the Termination Date; and (ii) for which the
related Equipment was ordered pursuant to a Backlog Purchase Order.

 

“Backlog Purchase Order” shall mean a purchase
order issued by a Seller to an Authorized Supplier prior to the Termination
Date that is “billed to” Purchaser or a lender of Purchaser under an Other
Floor Plan Financing Agreement and for which the related Equipment was not
shipped to the Account debtor on or prior to the Termination Date.

 

“Bankruptcy Event” shall mean with respect to
any Person, such Person shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter
in effect, or any successor thereto (the “Bankruptcy Code”); or an
involuntary case is commenced against such Person and the petition is not
dismissed within sixty (60) days after commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all
or substantially all of the property of such Person, or such Person commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to such Person or
there is commenced against such Person any such proceeding which remains
undismissed for a period of sixty (60) days, or such Person is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or such Person suffers any appointment of any
custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of sixty (60) days; or such
Person makes a general assignment for the benefit of creditors; or any
corporate action is taken by such Person for the purpose of effecting any of
the foregoing.

 

2

 

“Bona Fide Customer Order” shall mean any bona
fide customer order from an Eligible Obligor that has a Purchase Order
Reference Number; provided, that a telephonic order shall not constitute
a Bona Fide Customer Order unless accompanied by a purchase order in writing.

 

“Change of Control” shall mean any of the
following:

 

(i)                                     with
respect to the Seller Parent, an acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) of beneficial ownership
(within the meaning of Rule 13-d promulgated under the Exchange Act) of 50% or
more of either (a) the then outstanding shares of common stock of the Seller
Parent or (b) the combined voting power of the then outstanding voting
securities of the Seller Parent entitled to vote generally in the election of
directors;

 

(ii)                                  with
respect to the Seller Parent, individuals who, as of the date hereof,
constitute the Board of Directors (the “Board”) of the Seller Parent
(the “Incumbent Board”) cease for any reason to constitute at least a
majority of such Board; provided, however, that any individual
who becomes a member of such Board subsequent to the date hereof whose
election, or nomination for election by shareholders of the Seller Parent was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board; provided, further that any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of the Incumbent
Board;

 

(iii)                               with
respect to any Seller other than the Seller Parent, the failure of the Seller
Parent to own, directly or indirectly, 100% of the capital stock or other
equity interest in such Seller, except as otherwise permitted in advance in
writing by Purchaser in its sole discretion; or

 

(iv)                              the
liquidation, winding up, dissolution of any Seller and/or sale of substantially
all of the assets of any Seller.

 

“Collections” shall mean, with respect to any
Purchased Account:  (i) all funds that
are received by or on behalf of any Seller in payment of any amounts owed in
respect of such Purchased Account (including purchase price, finance charges,
interest and all other charges) or Related Security, or applied to amounts owed
in respect of such Purchased Account (including insurance payments and net
proceeds of the sale or other disposition of repossessed goods or other
collateral or property of the related Account Debtor or any other Person
directly or indirectly liable for the payment of such Purchased Account and
available to be applied thereon) and Unapplied Credits, and (ii) all other
proceeds of such Purchased Account and/or any Related Security therefor.

 

“Contract” shall mean with respect to any
Purchased Account, any and all contracts, instruments, agreements, invoices,
notes or other writings pursuant to which

 

3

 

such Purchase Account
arises or that evidence such Purchased Account or under which an Account Debtor
becomes or is obligated to make payment in respect of such Purchased Account.

 

“Cost” shall mean with respect to an item of
Equipment, the aggregate amount incurred or otherwise paid by any Seller or
Purchaser to the vendor or manufacturer thereof as evidenced by one or more
vendor or manufacturer invoices, plus the Reserves, fees, expenses and
taxes (each as set forth on Annex A), less any special bid rebate
(other than from any flooring provider) allocated to such purchase price in
good faith by Purchaser.  Cost shall be
generally consistent with those items included in Annex A attached
hereto.  Any exceptions or modifications
to the calculation or definition of Cost shall require the prior written
approval of Purchaser.

 

“Credit Insurance” shall mean credit insurance
issued under an insurance policy or account receivable credit protection
provided pursuant to the terms of a factoring agreement obtained by either
Purchaser or a Seller, in any case, which must be acceptable to Purchaser in
its sole discretion.

 

“Customer Stocking Letter” shall mean a
customer stocking letter substantially in the form of Annex B attached
hereto.

 

“Deferred Purchase Price” shall have the
meaning set forth in Section 3(h) below.

 

“DSO” shall mean receivables and inventory days
sales outstanding, and shall be calculated for each Month as follows: ((current
Month’s ending Accounts, vendor receivables and inventory of the Sellers (for
which the Eligible Vendor Liability has been assumed by Purchaser pursuant to
the terms hereof) less (the sum of the current Month’s Revenue, plus
Accrued Freight Costs and sales tax charged on Purchased Accounts)) divided
by (prior Month’s Revenue plus Accrued Freight Costs and sales tax charged
on Purchased Accounts divided by prior Month’s days)) plus
current Month’s days; provided that the inventory shall be valued at the
lower of Cost or market value.  For
example, if:

 

current Month’s ending Accounts, vendor receivables
and inventory of the Sellers (for which the Eligible Vendor Liability has been
assumed by Purchaser pursuant to the terms hereof) = $150 million;

 

current Month’s Revenue plus Accrued Freight
Costs and sales tax charged on Purchased Accounts = $80 million;

 

prior Month’s Revenue plus Accrued Freight
Costs and sales tax charged on Purchased Accounts = $65 million;

 

prior Month’s days = 30;

 

current Month’s days = 30; then

 

DSO = (150-80) / (65/30) + 30 = 62.3

 

4

 

“Eligible Account” shall mean each Account
that:

 

(i)                                     arises
from a Bona Fide Customer Order; and

 

(ii)                                  arises
out of the sale of Equipment in the ordinary course of business of the
applicable Seller; and

 

(iii)                               does
not arise out of a sale made to an Affiliate of any Seller for operational use
by that Affiliate and not for subsequent sale to a customer of such Affiliate;
and

 

(iv)                              has
no set-off, offset, claim, counterclaim, dispute or defense, genuine or otherwise,
to the payment or collection of such Account; and

 

(v)                                 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); and

 

(vi)                              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; and

 

(vii)                           the
Equipment giving rise to such Account has been ordered pursuant to an Eligible
Purchase Order, the Eligible Vendor Liability of which has been assumed by
Purchaser pursuant to this Agreement, and shipped to the Account debtor, and
the Account otherwise represents a final sale; and

 

(viii)                        complies
with all applicable laws; and

 

(ix)                                is
not subject to any adverse security interest, lien or encumbrance (including
tax liens) other than those in favor of Purchaser; and

 

(x)                                   is
eligible for Credit Insurance or otherwise approved as an Eligible Account by
Purchaser in writing in advance; and

 

(xi)                                does
not contain terms providing for payment in more than thirty (30) days from the
date of invoice; and

 

(xii)                             would
qualify as an eligible Account under the Purchaser Senior Credit Agreement or
an Other Floor Plan Financing Agreement.

 

“Eligible Inventory” shall mean those balances
that are the result of Equipment purchased pursuant to Eligible Purchase Orders
as evidenced by the costs listed on the vendor or manufacturer invoices issued
with respect to any Eligible Purchase Order. 
For the avoidance of doubt, Eligible Inventory shall not include any
Equipment subject to Section 3(a)(4) hereof.

 

5

 

“Eligible Obligor” shall mean only those
Account debtors (i) for which the amount of Accounts owed by such Account
debtors is entitled to the benefits of Credit Insurance or (ii) which have been
approved in writing in advance by Purchaser; provided, however,
that for the purposes of this Agreement, no Account debtor shall be deemed an
Eligible Obligor in the event that (y) such Account debtor was deemed to be an
Eligible Obligor based on information that was provided fraudulently and (z)
any Seller had actual knowledge or should have had reason to know that such
information was provided fraudulently.

 

“Eligible Purchase Order” shall mean a purchase
order (i) issued by a Seller to an Authorized Supplier for Equipment, (ii) for
which such Seller has a Bona Fide Customer Order from an Eligible Obligor with
an estimated shipping date or acceptance date within thirty (30) days of the
date of such Bona Fide Customer Order, and (iii) for which the sale of the
related Equipment to the Eligible Obligor will create an Eligible Account.

 

“Eligible Vendor Liability” shall mean, with
respect to any Purchased Account, the liability to an Authorized Supplier for
the purchase price of Equipment purchased by a Seller from such Authorized
Supplier pursuant to the related Eligible Purchase Order.

 

“Equipment” shall mean computers and
communications equipment and related equipment and software.

 

“Fee Grid” shall mean the grid attached hereto
as Schedule I.

 

“Fee Parameters” shall have the meaning set
forth in Section 3(g) below.

 

“Final Liquidation Date” shall have the meaning
set forth in the MSA.

 

“Finance and Servicing Fee” shall have the
meaning set forth in Section 3(f) hereof.

 

“GAAP” shall mean Generally Accepted Accounting
Principles in the United States of America from time to time applied on a
reasonable and consistent basis.

 

“Gross Profit” shall mean with respect to each
sale of Equipment creating a Purchased Account, Revenue generated by the sale
of such Equipment less Cost for such Equipment.

 

“Gross Profit Margin” shall mean, for any
period, Gross Profit for such period divided by total Revenue for such period,
as set forth on Annex A hereto.

 

“Intercreditor Agreement” shall mean an
intercreditor agreement to be entered into by and between the senior lender of
the Sellers and Purchaser, in form and substance reasonably satisfactory to
Purchaser.

 

6

 

“LIBOR Rate” shall mean the rate of interest
published in the Wall Street Journal as the London Interbank Offered Rates for
one Month as quoted on the first day of the Month.

 

“Lockbox Account” shall mean the lockbox
account at the depository bank party to the Lockbox Agreement and identified as
the “Concentration Account” in the Lockbox Agreement, or such other account as
directed by Purchaser from time to time.

 

“Lockbox Agreement” shall mean that certain
Lockbox Agreement, dated as of the date hereof, among Purchaser, the Sellers,
LaSalle Bank, National Association, as the depository bank, and The CIT Group/Commercial Services, Inc., as
collateral agent, as such agreement may be amended, supplemented, restated,
amended and restated, or otherwise modified from time to time pursuant to the
terms thereof.

 

“Material Adverse Effect” shall mean a material
adverse effect upon (i) the business, operations, properties, assets, or
condition (financial or otherwise) of the Sellers, taken as a whole, (ii) the
ability of any Seller to perform its obligations under this Agreement or any
other Transaction Document, (iii) the legality, validity, binding effect or
enforceability against any Seller of this Agreement or any other Transaction
Document, or (iv) the ability of Purchaser to enforce any of its rights or
remedies under this Agreement or any other Transaction Document.

 

“Month” shall mean each calendar month
commencing with the month in which this Agreement becomes effective.

 

“MSA” shall mean that certain Master Servicing
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.

 

“Other Floor Plan Financing Agreements” shall
mean one or more agreements entered into by Purchaser with one or more lenders
providing for the financing of Equipment, in any case, as may be amended,
supplemented, restated, amended and restated, or otherwise modified from time
to time pursuant to the terms thereof.

 

“Payment Date” shall mean, with respect to the
Purchase Price for all Purchased Assets sold pursuant to this Agreement during
any Month or the Finance and Servicing Fee earned during any Month, the last
day of such Month plus the number of DSO days for the succeeding month, or if
such day shall not be a business day, the immediately succeeding business day.

 

“Person” shall mean any natural person,
corporation, limited liability company, trust, joint venture, association,
company, partnership, limited partnership, governmental authority or other
entity.

 

“Purchased Accounts” shall mean, collectively,
the Eligible Accounts that are sold from time to time to Purchaser pursuant to,
and subject to the terms and 

 

7

 

conditions of, this
Agreement.  Upon the effectiveness of a
Purchase Supplement, the Eligible Accounts set forth therein shall constitute “Purchased
Accounts” hereunder.  To the extent
Purchaser elects to purchase a Backlog Account pursuant to Section 3(i)
hereof, such Backlog Account shall be deemed to be a Purchased Account.

 

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

 

“Purchase Date” shall mean each date on which a
purchase of Purchased Assets occurs pursuant to Section 2(a)
hereof.

 

“Purchase Order Reference Number” shall mean
the customer reference number identifying a purchase order issued by an Account
debtor.

 

“Purchase Price” shall mean, with respect to
any Purchased Account and all other related Purchased Assets, 100% of the gross
book value of such Purchased Account.

 

“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, (iii) includes a
list by invoice sequences of Accounts offered for purchase thereby, which
invoice sequences shall have the unique sequence identifier identifying such
Account as being sold to Purchaser, as set forth in the Lockbox Agreement, (iv)
includes evidence satisfactory to Purchaser that each Account offered for
purchase thereby is an Eligible Account and (v) is otherwise acceptable in form
and substance to Purchaser in its sole discretion.

 

“Purchaser” shall have the meaning set forth in
the preamble to this Agreement.

 

“Purchaser Senior Credit Agreement” shall mean
any factoring agreement, credit agreement, inventory and working capital
financing agreement or similar agreement between Purchaser and one or more
purchasers or lenders, as applicable, as such agreement may be amended, restated,
supplemented, replaced or otherwise modified from time to time.

 

“Purchaser Senior Creditor” shall mean any
factor or lender that enters into the Purchaser Senior Credit Agreement.

 

“Rebates” shall mean credits, rebates, bonuses
and discounts offered, owing or payable by any Authorized Supplier,
manufacturer, distributor, vendor or flooring provider in connection with any
Eligible Purchase Order or the related Equipment, except for any volume or
marketing rebates.

 

“Related Security” means, with respect to any
Purchased Account:

 

(i)                                     all
of the applicable Seller’s interest in any Equipment or other goods (including
returned and repossessed Equipment and goods) and documentation of title
evidencing the shipment or storage of any Equipment or other goods (including

 

8

 

returned and repossessed
goods), relating to any sale giving rise to such Purchased Account, and all
credits from vendors of the Equipment upon the return, recall or repurchase
thereof to or by such vendor, and all Rebates;

 

(ii)                                  all
books and records relating to, and all instruments and chattel paper that may
evidence, such Purchased Account or Equipment;

 

(iii)                               all
other security interests or liens and property subject thereto from time to
time purporting to secure payment of such Purchased Account, whether pursuant
to the Contract related to such Purchased Account or otherwise, together with
all UCC financing statements or similar filings relating thereto;

 

(iv)                              all
of the applicable Seller’s rights, interests and claims under the Contracts and
all guaranties, letters of credit, indemnities, insurance (including credit
insurance on any Purchased Account) and other agreements (including the related
Contract) or arrangements of whatever character from time to time supporting or
securing payment of such Purchased Account or, where applicable, such
Equipment, or otherwise relating to such Purchased Account or Equipment,
whether pursuant to the Contract related to such Purchased Account or
otherwise;

 

(v)                                 any
warranties or other similar rights with respect to any of the Equipment; and

 

(vi)                              all
proceeds and products of any of the foregoing.

 

“Renegotiation Notice” shall have the meaning
set forth in Section 3(g) below.

 

“Reserves” shall mean provisions periodically
included in Revenue for sales returns, cost for inventory shrink and
obsolescence and cost for vendor accounts receivables, in each case, made in
accordance with GAAP.

 

“Revenue” shall mean with respect to each sale
of Equipment related to a Purchased Account, (i) the purchase price invoiced to
the end user for such Equipment less (ii) the sum of any Accrued Freight
Costs plus any sales tax.

 

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

 

“Seller Storage Site” shall have the meaning
set forth in Section 3(a) hereof.

 

“Sellers” shall have the meaning set forth in
the preamble to this Agreement.

 

“Termination Date” shall mean the date on which
this Agreement is terminated in accordance with Sections 3(g) or 11
hereof.

 

“Termination Event” shall have the meaning set
forth in Section 11(b) below.

 

“Termination Fee” shall have the meaning set
forth in Section 11(e) below.

 

9

 

“Termination Option” shall have the meaning set
forth in Section 11(g) below.

 

“Transaction Documents” shall mean,
collectively, this Agreement, the Lockbox Agreement, the MSA, the Asset
Purchase Agreement, any Purchase Supplement and all other instruments,
documents and agreements executed by or on behalf of any 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.

 

“UCC” shall mean the Uniform Commercial Code as
in effect in the State of New York from time to time.

 

“Unapplied Credits” shall mean any credits to
an Account that are unapplied for six (6) consecutive Months and which, in the
reasonable judgment of Purchaser, will not be applied in the future.

 

“Vendor Services” shall have the meaning set
forth in Section 3(c) hereof.

 

(b)                                 Other
Defined Terms; Accounting Terms; GAAP. 
Terms used in this Agreement that are defined in the UCC but not defined
in this Section 1 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 delivered pursuant to this Agreement shall be prepared in accordance with
GAAP as in effect at the time of such preparation.

 

10

 

2.                                       Sale.

 

(a)                                  Purchase.  Upon the terms and subject to the conditions
set forth herein, each of the Sellers hereby agrees to sell, convey, transfer
and assign to Purchaser, and Purchaser hereby agrees to purchase and accept
such conveyance, transfer and assignment from each of the Sellers, on the terms
and subject to the conditions set forth herein, of all of the applicable Seller’s
right, title and interest, whether now owned or hereafter acquired, in, to and
under certain Purchased Accounts identified in a duly authenticated Purchase
Supplement, the Related Security and the Collections; provided that the
Termination Date has not occurred.

 

(b)                                 Purchase
Price.  The price for each Purchased
Account and all other related Purchased Assets shall equal the Purchase Price,
which shall be payable as set forth in Sections 3(b) and (h)
below.

 

3.                                       Product
Financing and Assumption of Liability.

 

(a)                                  Product
Financing.  Purchaser hereby agrees to
finance the purchase price of any Equipment purchased by a Seller pursuant to
an Eligible Purchase Order, which may be financed by Purchaser under the
Purchaser Senior Credit Agreement, any Other Floor Plan Financing Agreements or
under separate terms.  All Eligible
Purchase Orders shall have a unique sequence number mutually agreed to among
the Sellers and Purchaser.  Subject to clause
(b) below, the Sellers shall repay the purchase price of any Equipment
financed by Purchaser upon demand together with the Finance and Servicing Fee
attributable to such Equipment as if it related to a Purchased Account, as
determined by Purchaser in good faith; provided, that such amount shall
be immediately due and payable in U.S. dollars and in immediately available
funds, without any demand or other notice by Purchaser, on the first date on
which any of the following occurs:  (i)
the underlying purchase order is no longer an Eligible Purchase Order; (ii) the
resulting Account is not an Eligible Account or is not purchased under this
Agreement by Purchaser; and (iii) unless otherwise pre-approved by Purchaser in
writing, the related Equipment has not been shipped within thirty (30) days of
the date of the related Bona Fide Customer Order.  In addition, each of the Sellers hereby agree
as follows:

 

(1)                                  To
secure the prompt payment and performance of its obligation to repay Purchaser
for the purchase price of any such Equipment, each of the Sellers hereby grants
to Purchaser a valid and first priority, perfected security interest and lien
in all of such Seller’s right, title and interest in, to and under, whether or
not existing or hereafter acquired and wheresoever located, all such Equipment
and the proceeds thereof (including any Account created from the sale
thereof).  Each of the Sellers hereby
authorizes Purchaser to file any UCC financing statements or continuation
statements in any jurisdiction as Purchaser may deem necessary or desirable in
order to perfect and maintain such security interest.

 

(2)                                  Each
of the Sellers shall arrange that all Equipment ordered by it be either shipped
directly to the applicable Eligible Obligor or, in the event that in the
reasonable judgment of such Seller such direct shipment is not practicable, be
stored, pending shipment to such customers, at the sole cost and expense of
such Seller, in a commercially reasonable manner, at a location controlled by
or under contract with such Seller that has been pre-approved by Purchaser in
writing (a “Seller Storage Site”). 
The applicable Seller shall provide Purchaser with prompt notice of the
use of and the Equipment stored in any Seller Storage Site and the location,
owner and operator of any

 

11

 

such Seller
Storage Site.  Each of the Sellers agrees
to use its best efforts to cause any third party lessor or warehouseman of any
Seller Storage Site to acknowledge Purchaser’s and any Purchaser Senior
Creditor’s interest in the Equipment located at such lessor’s or warehouseman’s
Seller Storage Site.

 

(3)                                  Each
of the Sellers agrees that any Equipment which is billed to any Account debtor
but has not yet been shipped by such Seller shall be kept physically segregated
from all other Equipment in such Seller’s possession and such Equipment shall
be identifiable as “sold”.  Each of the
Sellers further agrees that any Equipment purchased by
such Seller with its own resources or credit provided from sources other than
Purchaser shall be shall be identifiable as “Property of Dyntek, Inc.” or “Property
of Dyntek Services, Inc.”, as applicable, and shall be kept physically segregated
from all other Equipment in such Seller’s possession.

 

(4)                                  No
purchase of Equipment to support customer stocking levels or bill and holds (or
the like) are eligible to be financed under this Section 3(a) unless (y)
a Seller provides prior written consent or (z) the Equipment so purchased is
supported by a Customer Stocking Letter.

 

(b)                                 Assumption
of Liability; Payment of Purchase Price. 
Upon the purchase of a Purchased Account, Purchaser hereby assumes all
related Eligible Vendor Liability and no Seller shall have any further
obligation to pay all or any portion of such Eligible Vendor Liability.  The assumption of Eligible Vendor Liability
in any Month shall (i) constitute partial payment of the Purchase Price for the
Purchased Assets sold under this Agreement during such Month in an amount equal
to the aggregate amount of all such assumed Eligible Vendor Liability and (ii)
terminate the obligation of the Sellers to repay the purchase price of the
related Equipment in connection with the product financing by Purchaser
pursuant to clause (a) above.

 

(c)                                  Vendor
Servicing.  Purchaser agrees to
service and administer the payment of Eligible Purchase Orders to the
applicable Authorized Supplier (the “Vendor Services”).  For the avoidance of doubt, the Vendor
Services shall not include any Services (as such term is defined in the MSA).

 

(d)                                 No
Warranty.  Each of the Sellers hereby
acknowledges and agrees that Purchaser does not warrant any Equipment and
Purchaser shall not be responsible for any Equipment that is defective or fails
to conform to the warranties extended by the Authorized Supplier or
manufacturer of such Equipment.

 

(e)                                  Unapplied
Credits; Vendor Credits, Rebates and Discounts.  Each of the Sellers hereby acknowledges and
agrees that any and all (a) Unapplied Credits and (b) Rebates are and shall be
the property of Purchaser.

 

(f)                                    Finance
and Servicing Fee.  Purchaser shall
be entitled to a finance and servicing fee (the “Finance and Servicing Fee”)
in respect of the product financing and Vendor Services provided by Purchaser
under this Section 3 during each Month in an amount equal to the product
of (y) 1 minus the applicable percentage set forth on the Fee Grid based upon
the Gross Profit Margin and the DSO for each Month times (z) the aggregate
Gross Profit for such Month; provided, that, notwithstanding anything to
the contrary contained herein, in the event

 

12

 

the LIBOR Rate exceeds 3.50% during any Month, the
applicable percentage set forth on the Fee Grid for purposes of calculating the
Finance and Servicing Fee for the immediately succeeding Month shall be
decreased by the amount by which the LIBOR Rate exceeded 3.50%.  In addition to the payment of the Finance and
Servicing Fee, as consideration for the product financing and Vendor Services
provided by Purchaser under this Section 3, the Sellers shall also
provide certain Services (as defined under the MSA) in connection with the
Purchased Assets pursuant to the MSA.

 

(g)                                 Fee
Parameter.  The Fee Grid has been
calculated based on the parameters contained in the table immediately below
(the “Fee Parameters”).  If, at
any time, the actual values deviate from those in the “Forecast Level” column
by more than the amount specified in the “Acceptable Range” column, Purchaser,
in its election, may elect to terminate this Agreement in accordance with Section
11 or may re-open negotiations regarding the amount and calculation of the
Financing and Servicing Fee by providing the Seller Parent with notice of its
desire to re-open negotiations (such notice, the “Renegotiation Notice”).  Each of the Sellers and Purchaser agrees to
conduct such negotiations, if any, in good faith.

 

	
  Parameter

  	
   

  	
  Forecast Level

  	
   

  	
  Acceptable Range

  
	
  Receivables
  and Inventory DSO (including Vendor Receivables)

  	
   

  	
  70 days

  	
   

  	
  plus 15 days

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revenue

  	
   

  	
  $4,000,000
  per Month

  	
   

  	
  not less
  than $2,000,000 per Month averaged over trailing 3-Month period

  

 

(h)                                 Payment
and Settlement of Purchase Price and Finance and Servicing Fee.

 

(1)                                  On
each Payment Date (a) Purchaser shall pay to the Seller Parent, for the benefit
of the Sellers, the remaining Purchase Price for all Purchased Assets sold
pursuant to this Agreement during the related Month (after deducting the
aggregate amount of all Eligible Vendor Liability assumed by Purchaser during
such Month) and (b) the Sellers shall pay to Purchaser the Finance and
Servicing Fee earned in respect of such Month; provided, that the
Purchase Price shall be payable on such Payment Date only to the extent that
Purchaser has retained and not paid to the Seller Parent, for the benefit of
the Sellers, as of such Payment Date and after giving effect to the payment of
such Purchase Price, at least $750,000 (or such lesser amount as further set
forth in Schedule II hereof) in aggregate deferred Purchase Price (such
retained amount, the “Deferred Purchase Price”).  Any Deferred Purchase Price retained by
Purchaser shall be payable to the Seller Parent, for the benefit of the
Sellers, on the earliest to occur of (i) the Final Liquidation Date, (ii) the
date on which the Termination Option is consummated, and (iii) such earlier
date as determined by Purchaser in its sole discretion.

 

(2)                                  The
Parties hereby agree that the remaining Purchase Price and the Finance and
Servicing Fee for any Month shall be netted and settled in U.S. dollars on the
applicable Payment Date.  In addition,
any payment of Purchase Price shall be reconciled

 

13

 

prior to payment
to deduct any other amounts then due and payable to Purchaser under any
Transaction Document.  Any net payments
to the Seller Parent or Purchaser shall be made by wire transfer in immediately
available funds to the account of either party as such party may indicate in a
written notice delivered to the other from time to time.

 

(3)                                  Notwithstanding
anything to the contrary in this Section 3(h), but subject to the
provisions of Section 11, in the event that this Agreement is terminated
by Purchaser or the Seller Parent pursuant to Section 11, (a) the amount
of the Deferred Purchase Price payable to the Sellers shall be retained by
Purchaser so long as any amounts hereunder or under any other Transaction
Document may be due and owing to Purchaser, including, without limitation,
pursuant to Sections 3, 8, 9, 11, or 14 and
(b) the amount of the Deferred Purchase Price payable to the Sellers shall be
reduced by any such amount due and owing to Purchaser hereunder or under any
other Transaction Document.  Any amount
of the Deferred Purchase Price remaining after all amounts payable to Purchaser
hereunder or under any other Transaction Document have been paid in full in
immediately available funds shall be promptly paid to the Seller Parent, for
the benefit of the Sellers.

 

(4)                                  If
the Seller Parent disagrees with any amounts retained or reduced by Purchaser
pursuant to this Section 3(h), the Seller Parent may provide written
notice to Purchaser setting forth the disputed amount and the reasons for such
dispute and Purchaser shall enter into good faith discussions with the Seller
Parent to resolve such dispute.

 

(i)                                     Backlog
Accounts.  Upon the occurrence of the
Termination Date, Purchaser, at its sole discretion, may elect to (i) purchase
any or all Backlog Accounts, in which case, any such Backlog Account shall be
deemed to be a Purchased Account and shall be subject to the terms hereof
notwithstanding the fact that such Account shall be created after the
Termination Date and/or (ii) cancel any or all Backlog Purchase Orders or cause
to be terminated any or all transaction authorizations (or the like) in
connection with any or all Backlog Purchase Orders.

 

4.                                       Effectiveness;
True Sale; Disclaimer of Liability. 
Each of 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 5
below.  Each of 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 (except
for any Eligible Vendor Liability that are assumed by Purchaser pursuant to Section
3(b) above), and Purchaser shall have no obligation or liability to any
obligor thereon or Account debtor 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.

 

14

 

5.                                       Conditions
Precedent.

 

(a)                                  Effectiveness
of this Agreement.  The effectiveness
of this Agreement 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, in form and substance satisfactory to Purchaser, officer’s
certificates from each Seller relating to the organization, existence and good
standing of each Seller, the authorization of the transactions contemplated
hereby and the incumbency of the officers of each Seller.

 

(3)                                  The
representations and warranties of such Seller set forth in Section 6
shall be true and correct in all material respects as of the date hereof.  Purchaser shall have received an officer’s
certificate from each Seller confirming the foregoing.

 

(4)                                  Purchaser
shall have received, in form and substance satisfactory to Purchaser, all
information which Purchaser has reasonably requested to conduct its due
diligence on the Sellers.

 

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

 

(6)                                  Except
as set forth in the Schedule of Exceptions, there shall not be pending or, to
the best knowledge of any Seller, 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 any Seller or any of its subsidiaries that has not been
disclosed by the Sellers to Purchaser 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.

 

(7)                                  Each
of the Sellers shall have received all requisite governmental and third party
approvals and consents, if any, necessary for the Sellers to enter into and
perform their obligations under this Agreement, all satisfactory in form and
substance to Purchaser.

 

(8)                                  Purchaser
shall have a received an opinion of counsel of the Sellers in form and
substance reasonably satisfactory to Purchaser.

 

(b)                                 Purchases.  The obligation of Purchaser to purchase
Purchased Assets on any Purchase Date shall be subject to the satisfaction of
all of the conditions set forth below:

 

15

 

(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).

 

(3)                                  Each
of the Sellers 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 any Seller, 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 any Seller or any of its subsidiaries that has not been
disclosed by the Sellers in writing to Purchaser, 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)                                  Each
of the Sellers shall have received all requisite governmental and third party
approvals and consents, if any, all reasonably satisfactory in form and
substance to Purchaser.

 

6.                                       Representations
and Warranties of the Sellers.  Except
as set forth in the Schedule of Exceptions, each of the Sellers represents and
warrants to Purchaser the following:

 

(a)                                  Corporate
Existence and Power.  Each of the
Sellers is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation and has all corporate
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 such 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 of the Sellers of this Agreement and the other
Transaction Documents to which it is a party is within its corporate powers,
have been duly authorized by all necessary corporate 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

 

16

 

other instrument binding upon
the Seller or result in the creation or imposition of any adverse lien or
encumbrance on the assets of any 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 each
Seller’s knowledge after due inquiry, threatened against or affecting a 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 a Seller is exposed to any liability or disadvantage which could
reasonably be expected to result in a Material Adverse Effect.  None of the Sellers 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 of the Sellers, 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)                                  Good
Title.  Each of the Sellers has good
and marketable title to the Purchased Assets, free and clear of all liens,
security interests or restrictions on transfer. 
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).

 

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

 

(g)                                 No
Default.  No Seller is in default in
the performance, observance, or fulfillment of any of the obligations,
covenants, or conditions contained in any of such 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 giving of notice or the lapse of time or both, would
constitute such a default under any Contract or Purchased Asset.

 

(h)                                 No
Violation of Laws.  No Seller is 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 such Seller’s
business or the ownership of such 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 any Seller or
any of its officers to criminal liability or have a Material Adverse Effect on
a Seller’s business or operations and no such violation has been alleged.

 

(i)                                     Disclosure;
Accuracy of Information.  All
information furnished to Purchaser by or on behalf of any Seller concerning the
Purchased Assets or the transactions contemplated by the Transaction Documents,
the proceeds thereof, each Seller’s financial

 

17

 

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 the Sellers 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 any 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 any 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 any Seller are based upon good faith
estimates and assumptions believed by the Sellers 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.

 

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

 

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

 

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

 

(m)                               Purchased
Assets from Entities in Good Standing. 
Each of the Purchased Assets are originated or created by a Seller (or
subsidiary or affiliate thereof) that is in good standing under the laws of the
state of its incorporation and every other jurisdiction in which the nature of
its business requires it to be so qualified, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect.

 

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

 

7.                                       Covenants
of the Sellers.  At all times from
the date hereof to the earlier of the Final Liquidation Date and the date on
which the Termination Option is consummated:

 

(a)                                  Conduct
of Business.  Each of the Sellers
shall do all things necessary to remain duly incorporated, validly existing and
in good standing as a domestic corporation in its jurisdiction of incorporation
and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted except where the failure to do
so would not have a

 

18

 

material adverse effect on the
ability of the applicable Seller to perform their respective obligations
hereunder.

 

(b)                                 Compliance
with Laws.  Each of the Sellers shall
comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it or its respective properties may be
subject, except where the failure to do so would not have a Material Adverse
Effect.

 

(c)                                  Compliance
with Contracts.  Each of the Sellers
shall timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by the applicable Seller
under the Contracts.

 

(d)                                 Sale
Treatment.  Each of the Sellers shall
treat the purchases under this Agreement for all purposes as sales and to the
extent any such reporting is required, shall report the transactions
contemplated by this Agreement on all relevant books, records, financial
statements and other applicable documents as a sale of Purchased Assets to Purchaser.

 

(e)                                  Ownership
Interest.  Each of the Sellers shall,
at its expense, take all action necessary or desirable to establish and
maintain a valid and enforceable ownership interest in the Purchased Assets,
free and clear of all liens, security interests or restrictions on transfer
(except as created by Purchaser), in favor of Purchaser (or its assignee,
including any Purchaser Senior Creditor), including taking such action to
perfect, protect or more fully evidence the interest of Purchaser (or its assignee,
including any Purchaser Senior Creditor), as Purchaser may reasonably request.

 

(f)                                    No
Sales, Liens, Etc.  No Seller shall
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any liens, security interests or restrictions on
transfer upon (including the filing of any financing statement) or with respect
to (i) any of the Purchased Assets, or (ii) the Lockbox Account, except as
created by Purchaser or as expressly set forth in the Lockbox Agreement.

 

(g)                                 No
Extension or Amendment of Purchased Accounts.  No Seller shall extend, amend or otherwise
modify the terms of any Purchased Accounts, or amend, modify or waive terms or
conditions of the Contract related thereto, which extension, amendment or
modification would materially adversely affect the collectibility thereof.

 

(h)                                 Change in Payment Instructions; Lockbox
Account.  No Seller shall make any change in its
instructions to Account debtors regarding payments (including with respect to
receivables that are not Purchased Accounts) to be made to the Lockbox Account,
unless such instructions are made at the written request of or with the written
consent of Purchaser.  No Seller shall
maintain any lockbox or other collection account other than the Lockbox Account.  If the Termination Date occurs, no Seller
shall establish a new lockbox or other collection account or enter into a new
lockbox agreement until the earliest to occur of (i) the Final Liquidation
Date, (ii) the date on which the Termination Option is consummated, and (iii)
such earlier date as determined by Purchaser in its sold discretion.

 

(i)                                     Change
in Name or Organization.  No Seller
shall change its name, identity, type of organization, jurisdiction of
organization, organizational structure or the location

 

19

 

of its chief executive office, unless at least thirty
(30) days prior to the effective date of any such change the applicable Seller
notifies Purchaser of such change and delivers to Purchaser such documents,
instruments or agreements, executed by the applicable Seller as are necessary
to reflect such change and to continue the perfection of Purchaser’s ownership
interests in the Purchased Assets.

 

(j)                                     Notice
of Change of Control.  The Seller Parent
shall promptly (and in any event at least twenty (20) business days prior the
effectiveness of any such Change of Control) provide Purchaser with written
notice of any proposed Change of Control; provided, that, in the event
such proposed Change of Control is subject to any confidentiality restrictions,
Purchaser will agree to be bound by such restrictions.

 

(k)                                  Intercreditor
Agreement.  The Sellers hereby
covenant and agree that prior to any Seller entering into any secured financing
arrangement with a lender pursuant to which any Seller grants a security
interest that covers assets of the same type as the Purchased Assets, the
Sellers shall deliver to Purchaser a duly executed Intercreditor Agreement or
other agreement in form and substance reasonably acceptable to Purchaser.

 

(l)                                     Sales
Tax.  The Sellers shall be solely
liable for the payment of, and shall promptly pay when due, all sales taxes
resulting from the sales of Equipment giving rise to the Purchased Assets.  The Sellers shall be solely liable for the
cost and expense of filing all such tax returns.

 

(m)                               No
Sales from Entities Not in Good Standing. 
The Sellers hereby covenant and agree that they shall not sell any
Purchased Assets to Purchaser that is originated or created by an entity that is
not in good standing good standing under the laws of the state of its
incorporation or any other jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect.

 

8.                                       Breach
of Representation, Warranty or Covenant; Remedy.  If any Seller breaches any representation,
warranty or covenant set forth in Section 6 or 7 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.

 

9.                                       Repurchase
Obligation.  The Sellers irrevocably
agree that, promptly upon Purchaser’s written request (and, in any event,
within five (5) business days after receipt thereof), they shall purchase from
Purchaser:

 

(a)                                  Purchased
Accounts at a purchase price equal to the outstanding face amount of such
Purchased Account if (i) the Account debtor thereunder was not an Eligible
Obligor on the date the Account was created or (ii) the Account was not an
Eligible Account on the date the Account was created or (iii) the purchase order
for the related Equipment was not an Eligible Purchase Order on the date the
purchase order was made or (iv) such Account remains uncollected after one
hundred and fifty (150) days from the date of invoice;

 

20

 

(b)                                 vendor
receivables resulting from special bids or Equipment returns that the vendor
rejects as non-valid claims, in each case, related to the Purchased Accounts,
at a purchase price equal to the outstanding face amount thereof; or

 

(c)                                  debit
balances owing by any Equipment vendor in respect of any Eligible Vendor
Liability which remains uncollected after one hundred and fifty (150) days from
the date of the Eligible Purchase Order, at a purchase price equal to the
outstanding face amount thereof; or

 

(d)                                 any
Equipment, the sale of which created a Purchased Account, returned by an
Account debtor that the Sellers or Purchaser are unable to return to a vendor
at a purchase price equal to the outstanding face amount of the related
Eligible Vendor Liability;

 

provided,
however, that no Seller shall have an obligation to repurchase any
Purchased Account or Equipment pursuant to this Section 9 until the
date which is one hundred and fifty (150) days after the invoice date for such
Purchased Account or Equipment; provided, further, that in no
case shall any Seller have any obligation to repurchase any Purchased Account
or Equipment pursuant to this Agreement solely as a result of the financial
inability of the Account debtor to pay (as opposed to the unwillingness to pay)
for the purchase of such Equipment. 
Purchaser shall give the Seller Parent thirty (30) days’ notice of
invoices to be repurchased. 
Notwithstanding anything to the contrary contained herein, the Sellers
shall be obligated to immediately repurchase (but in no event later than
fifteen (15) days after receipt of notice from Purchaser) any Purchased Account
pursuant to this Section 9 with respect to Accounts which, at the
time of the relevant transaction, any Seller knew, or reasonably should have known,
that (x) the Account debtor thereunder was not an Eligible Obligor on the date
the Account was created or (y) the Account was not an Eligible Account on the
date the Account was created or (z) the purchase order for the related
Equipment was not an Eligible Purchase Order on the date the purchase order was
issued.

 

10.                                 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 of the Sellers
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 the Sellers under this Agreement and
the other Transaction Documents and (b) this Agreement shall constitute a
security agreement under applicable law. 
Each of the Sellers hereby authorizes Purchaser to file any UCC
financing statements or continuation statements in any jurisdiction as
Purchaser may deem necessary or desirable in order to perfect and maintain the
interests of Purchaser in the Purchased Assets.

 

11.                                 Termination.

 

(a)                                  Term.  Subject to Sections 3(g), 11(b),
11(c) and 11(d) hereof, the term of this Agreement
shall be three (3) years from the date hereof; provided, however,
that this Agreement shall automatically be extended for additional periods of
one year unless this Agreement has been terminated earlier as provided under Sections
3(g) or 11.

 

21

 

(b)                                 Purchaser
Termination.  Purchaser shall have
the right to terminate this Agreement upon the occurrence of one of the
following events (and this Agreement shall automatically terminate upon the
occurrence of the event set forth in clause (3) below) (each, a “Termination
Event”):

 

(1)                                  the
termination of the MSA;

 

(2)                                  any
Seller shall default in the performance of any of its material obligations
under this Agreement or any of the other Transaction Documents and such default
shall continue unremedied for thirty (30) days after the earlier of (x) written
notice of such default has been delivered by Purchaser to the Seller Parent and
(y) the date upon which any Seller has knowledge of such default;

 

(3)                                  a
Bankruptcy Event shall have occurred with respect to any Seller or is likely to
occur, in the reasonable judgment of Purchaser;

 

(4)                                  the
Seller Parent provides notice to Purchaser of a proposed Change of Control
under Section 7(j) hereto and Purchaser, within ten (10) business
days of receipt of such notice, provides written notice to the Seller Parent
that it does not consent to the proposed Change of Control, in which case, this
Agreement will terminate upon the effective date of such proposed Change of
Control or such earlier date as agreed to between the Seller Parent and
Purchaser.  The Seller Parent agrees to
provide Purchaser all information Purchaser shall reasonably request to
evaluate such proposed Change of Control including, but not limited to,
purchase agreements, financing commitments and financial projections;

 

(5)                                  any
event or condition occurs which results in the acceleration of the maturity of
the senior secured indebtedness of any Seller (except for the indebtedness set
forth on the Schedule of Exceptions) or enables the holder or holders of
such indebtedness to accelerate the maturity thereof;

 

(6)                                  the
Purchaser Senior Creditor terminates the Purchaser Senior Credit Agreement or
any financing agreement or a default otherwise occurs thereunder which default
is not cured or waived;

 

(7)                                  the
Sellers are unable to operate within the Fee Parameters as set forth in Section 3(g),
and such inability continues for a period of fifteen (15) consecutive days;

 

(8)                                  the
occurrence of any of the following:  (i) the
occurrence of any event that has a Material Adverse Effect; or (ii) a
material impairment of the ability of any Seller to perform under this
Agreement and the other Transaction Documents; or

 

(9)                                  any
of the representations or warranties made by any Seller in this Agreement or
any other Transaction Document shall be untrue in any material respect when
made or deemed made.

 

22

 

(c)                                  Termination
by Prior Notice.  The Sellers, on the
one hand, and Purchaser, on the other hand, shall each have the right to
terminate this Agreement at any time for any reason upon one hundred twenty
(120) days prior written notice to the other party.

 

(d)                                 Sellers
Termination.  The Sellers shall have
the right to terminate this Agreement, without penalty under Section 11(e) or
further notice, upon the occurrence of any of the following events:

 

(1)                                  Purchaser
shall default in the performance of any of its material obligations under this
Agreement or the other Transaction Documents and such default shall continue
unremedied for thirty (30) days after written notice of such default has been
delivered by the Seller Parent to Purchaser; or

 

(2)                                  a
Bankruptcy Event shall have occurred with respect to Purchaser.

 

(e)                                  Termination
Fee.  In the event that this
Agreement is terminated (i) by Purchaser pursuant to Section 3(g) or
Sections 11(b)(1), (2), (3), (4), (7), (8) or
(9) or (ii) by the Sellers pursuant to Section 11(c),
the Sellers shall immediately pay Purchaser a termination fee of:  (x) $500,000 to the extent the Termination
Date occurs on or prior to the first anniversary of the date hereof, (y)
$400,000 to the extent the Termination Date occurs after the first anniversary
of the date hereof and on or prior to the second anniversary of the date
hereof, and (z) $300,000 to the extent the Termination Date occurs after the
second anniversary of the date hereof and on or prior to the third anniversary
of the date hereof (such fee, the “Termination Fee”).

 

(f)                                    Survival
of Terms.  The provisions of Sections
3(d), 3(e), 3(f), 3(h), 4, 6, 8,
9, 10, 11, 13, 14 and 15 of this
Agreement shall survive the termination of this Agreement.  The provisions of Section 7 of
this Agreement shall survive the termination of this Agreement until the
earlier of the Final Liquidation Date and the date on which the Termination
Option is consummated.

 

(g)                                 Termination
Option.  Upon the occurrence of the
Termination Date, Purchaser shall have no further obligation to purchase
Accounts or to provide any product financing, Vendor Services or otherwise
under Section 3 of this Agreement. 
Subject to the remainder of this Section 11(g), the Seller
Parent shall have the option, at its sole discretion (such option, the “Termination
Option”) and at its sole expense, for ten (10) business days after the
date of the termination of this Agreement, to purchase from Purchaser (to the
extent owned by Purchaser) all, but not less than all, of both of (i) the
outstanding Purchased Assets at a purchase price equal to the sum of (y) the
aggregate Eligible Vendor Liability assumed by Purchaser in respect of such
Purchased Assets and (z) the Finance and Servicing Fee attributable to such
Purchased Assets, and (ii) the outstanding Accounts purchased by Purchaser
under the Asset Purchase Agreement at a purchase price equal to the book value
(net of Reserves) of such outstanding Accounts less the amount of any
accrued and unpaid Servicing Fee (as defined in the MSA).  For the avoidance of doubt, to the extent
Purchaser elects to purchase a Backlog Account pursuant to Section 3(i) hereof,
such Backlog Account shall be deemed to be a Purchased Account and shall be
purchased by the Seller Parent at the purchase price set forth in clause (i) above
to the extent the Termination Option is exercised.  Purchaser’s

 

23

 

obligation to consummate the Termination Option is
subject to the satisfaction of the following conditions precedent:

 

(1)                                  Purchaser
shall have received duly executed documents governing the Termination Option,
which documents shall be in form and substance satisfactory to Purchaser in its
sole discretion and in any event shall state that (y) any such purchase shall
be without recourse to Purchaser and (z) Purchaser disclaims any representation
or warranty with respect to any such property, as well as the existence (or
not) of any liens, encumbrances or restrictions on transferability on or with
respect to such property in favor of any entity other than Purchaser or its
lenders;

 

(2)                                  Purchaser
shall have received all necessary
consents, payoff letters, lien releases and termination statements from its creditors
permitting it to consummate the Termination Option;

 

(3)                                  Purchaser
shall have received in immediately available funds the purchase price for the
Termination Option and all fees and costs (including attorney’s fees) incurred
by Purchaser in connection with the Termination Option;

 

(4)                                  no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would (y) prevent consummation of the Termination Option or (z) cause
the Termination Option to be rescinded following consummation; and

 

(5)                                  Purchaser shall have received such other
certificates, instruments, documents or agreements as it may reasonably
request.

 

12.                                 Joinder.  A subsidiary of the Seller Parent may join as
a seller under this Agreement upon satisfaction of the following conditions
(and upon the satisfaction of such conditions, such subsidiary shall be a “Seller”
for all purposes under this Agreement and the Transaction Documents):

 

(a)                                  The
Termination Date shall not have occurred.

 

(b)                                 Purchaser
shall have received a joinder agreement in form and substance reasonably
satisfactory to Purchaser that is duly executed by such subsidiary and pursuant
to which such subsidiary shall join as a party to each of the Transaction
Documents.

 

(c)                                  Purchaser
shall have received the results of lien searches for such subsidiary in all
jurisdictions as Purchaser shall reasonably request.

 

(d)                                 Purchaser
shall have received an authorization from such subsidiary 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, and
Purchaser shall have made such filings.

 

(e)                                  There
shall not be pending or, to the best knowledge of any Seller, threatened, any
litigation, action, charge, claim, demand, suit, proceeding, petition,

 

24

 

governmental investigation, or arbitration by,
against, or affecting any Seller or any of its subsidiaries or any property of
such Seller or any of its subsidiaries, and there shall have occurred no
development in any such action, charge, claim, demand, suit, proceeding,
petition, governmental investigation, or arbitration that, in each case, in
Purchaser’s opinion, would reasonably be expected to have a Material Adverse
Effect.

 

(f)                                    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 joinder 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).

 

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

 

(h)                                 Such
subsidiary shall have received all requisite governmental and third party
approvals and consents, all satisfactory in form and substance to Purchaser.

 

(i)                                     Purchaser
shall have a received an opinion of counsel of such subsidiary in form and
substance reasonably satisfactory to Purchaser.

 

13.                                 Administration.

 

(a)                                  The
Seller Parent, as the agent for 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 and such other documentation and proofs of delivery as Purchaser may
reasonably require.  Each of the Sellers
agrees to prepare and mail all invoices relating to all Purchased Accounts, but
Purchaser may do so at Purchaser’s option. 
Each of the Sellers 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 of the Sellers authorizes Purchaser to
file such UCC financing statements and continuation statements as Purchaser may
deem necessary or desirable in order to perfect and maintain the interests of
Purchaser in the Purchased Assets.  Each
of the Sellers further agrees that Purchaser may file this Agreement or a copy
hereof as such UCC financing statement.

 

(b)                                 Each
of 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

 

25

 

collection and transmit notices to Account debtors, 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)                                 Each
of the Sellers shall supply Account debtors, in the format required by Account
debtors, with all forms, documents, certificates, etc. that Account debtors
require to process the Purchased Accounts for payment.

 

(e)                                  If
Purchaser requests, each Seller shall provide Purchaser with copies of all of
such Seller’s bills of lading or proofs of delivery and supplier invoices and
receiving evidence and of such Seller’s sales registry, sales journal, or other
information regarding sales, including customer open order reports.

 

(f)                                    Each
of the Sellers agrees that from time to time, at its expense, it shall promptly
execute and deliver all instruments and documents and take all actions as may be
necessary or as Purchaser may reasonably request in order to perfect or protect
the interest of Purchaser in the Purchased Assets or to enable Purchaser to
exercise or enforce any of its rights hereunder.

 

(g)                                 Notwithstanding
anything to the contrary in this Section 13, the parties hereto
acknowledge that the Sellers shall service the Purchased Assets for Purchaser
as further set forth in the MSA.  The
terms of the MSA shall govern to the extent there is any conflict between the terms
of this Section 13 and the terms of the MSA.

 

14.                                 Indemnification.  Without limiting any other rights that any
such Person may have hereunder or under applicable law, the Sellers hereby
indemnify and hold 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 the Sellers 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 8 and 9
hereof).  Without limiting the foregoing,
the Sellers hereby indemnify and hold harmless each Indemnified Party for
Indemnified Amounts arising out of or relating to:

 

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

 

(b)                                 any
failure of any 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;

 

26

 

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

 

(d)                                 any
tax, including sales tax (but excluding 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 fees and
expenses of counsel in defending against the same, which may arise by reason of
the purchase or ownership of any Purchased Account, including any additional
taxes, penalties or any other amounts payable by Purchaser as a result of the
Sellers’ failure to properly file all tax returns in a timely manner or,
notwithstanding any review of the tax returns by Purchaser, as a result of an
error or other noncompliance by the Sellers in the preparation of any such tax
returns;

 

(e)                                  any
commingling of collections of the Purchased Accounts with funds of any 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.

 

15.                                 Legal
and Financing Expenses.

 

(a)                                  The
Sellers shall immediately pay Purchaser all expenses (including reasonable attorney’s
fees) incurred by Purchaser, directly or indirectly, in connection with or
related to the negotiation, documentation, preparation, consummation and
execution of this Agreement and the other Transaction Documents up to an
aggregate amount of $50,000.  In
addition, the Sellers shall immediately pay Purchaser all expenses (including
attorney’s fees) incurred by Purchaser, directly or indirectly, in connection
with or related to the administration, enforcement, ongoing maintenance and
termination of this Agreement and the other Transaction Documents.  Such amounts will be paid upon delivery of
invoices detailing such expenses, by debiting any amounts payable to any Seller
or, if no such amounts are payable a Seller, by the Sellers by wire transfer in
immediately available funds.  In the
event of a dispute among the parties hereto for which the parties hereto are
unable to reach a mutually agreeable resolution in a reasonable matter of time
and fail to utilize arbitration in Section 16, the party that is unsuccessful
in such litigation will pay the legal costs for both parties.

 

(b)                                 In
the event Purchaser incurs, directly or indirectly, additional Costs not
contemplated in Annex A, the Sellers shall immediately pay Purchaser
such Costs upon notice by Purchaser; provided, that the Sellers shall
not have any obligation under this Section 15(b) to the extent
such additional Costs arise solely from the gross negligence or willful
misconduct of Purchaser as determined in an arbitration pursuant to Section 16
or by a final judgment of a court of competent jurisdiction.

 

27

 

16.                                 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.

 

(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 a 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

 

28

 

with a copy to:

 

Stradling Yocca Carlson & Rauth

660 Newport Center Drive, Suite 1600

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 of the Sellers 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

 

29

 

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 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 16(h),
EACH OF THE SELLERS 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 OR THE SELLER PARENT APPEARING 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 16(h),
EACH OF 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 THE SELLERS 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 EACH 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

 

30

 

and the same instrument.  Delivery of an executed counterpart of this
Agreement by facsimile or electronic mail shall be equally as effective as delivery
of an original executed counterpart of this Agreement.

 

(n)                                 Setoff.  Each of the Sellers hereby agrees that
Purchaser is authorized at any time or from time to time, upon ten (10) business
days written notice to the Seller Parent (or one (1) business day notice
if the Termination Date has occurred), to setoff and to appropriate and apply
any and all amounts held by Purchaser for the account of the Sellers
(including, without limitation, any Deferred Purchase Price or Management Fee)
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
pursuant to Sections 3(d), 8, 9 or 14 of this
Agreement or otherwise under the other Transaction Documents.

 

(o)                                 Joint
and Several Liability.  Each of the
Sellers hereby agree that the obligations of the Sellers under this Agreement
and the other Transaction Documents shall be joint and several and shall, to
the fullest extent permitted by law, be unconditional irrespective of (i) the
validity or enforceability, avoidance or subordination of the obligations of
the other Sellers or of any document evidencing all or any part of the
obligations of the other Sellers, (ii) the absence of any attempt to
collect the obligations from the other Sellers or any other security therefor,
or the absence of any other action to enforce the same, (iii) the waiver,
consent, extension, forbearance or granting of any indulgence by Purchaser with
respect to the obligations of the other Sellers, or any part thereof, or any
other agreement now or hereafter executed by the other Sellers and delivered to
Purchaser, (iv) the failure by Purchaser to take any steps to perfect and
maintain its interests in, or to preserve its rights to, any security for the
obligations of the other Sellers or any Purchased Asset, or (v) any other
circumstances which might constitute a legal or equitable discharge or defense
of a Seller.  With respect to each Seller’s
obligations arising as a result of the joint and several liability of the
Sellers under the Transaction Documents, each Seller hereby waives, until the
earlier of the Final Liquidation Date and the date on which the Termination
Option is consummated, any right to enforce any right of subrogation or any remedy
which Purchaser now has or may hereafter have against such Seller, any endorser
or any guarantor of all or any part of the obligations, and any benefit of, and
any right to participate in, any security or collateral given to Purchaser to
secure payment of the obligations or any other liability of the Sellers to
Purchaser.  Purchaser may proceed
directly and at once, without notice, against any Seller to collect and recover
the full amount, or any portion of the obligations, without first proceeding
against any other Seller or any other Person, or against any security or
collateral for the obligations.  Each
Seller consents and agrees that Purchaser shall be under no obligation to
marshal any assets in favor of such Seller or against or in payment of any or
all of the obligations.

 

(p)                                 Agency
of the Seller Parent.  Each of the
Sellers appoints the Seller Parent as its agent for all purposes relevant to
this Agreement and the other Transaction Documents, including, without
limitation, the giving and receipt of notices and the execution and delivery of
all documents, instruments and certificates contemplated herein and therein and
all modifications hereto and thereto. 
Any acknowledgment, consent, direction, certification or other action
which might otherwise be valid or effective only if given or taken by all of
the Sellers acting singly or jointly, or both, shall be valid and effective if
given or taken only by the Seller Parent, whether or not any of the other
Sellers joins therein.

 

(Signature Pages Follow)

 

31

 

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

 

	
   

  	
  SELLERS:

  
	
   

  	
   

  
	
   

  	
  DYNTEK,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DYNTEK
  SERVICES, INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEW
  ENGLAND TECHNOLOGY FINANCE,

  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

SCHEDULE I

 

 

SCHEDULE II

 

 

SCHEDULE III

 

ADDRESSE(S)

 

19700
Fairchild Road, Suite 350

Irvine, CA 92612

 

24401 Halstead Road

Farmington Hills, Michigan 48335

 

 

SCHEDULE IV

 

SCHEDULE OF EXCEPTIONS

 

 

Annex A

 

	
  Income Statement:

  	
   

  	
  MTD

  	
   

  	
  PY MTD

  	
   

  	
  YTD

  	
   

  	
  PY YTD

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  **Revenue**

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sales
  Revenue

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Integration
  Sales

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Sales -
  Freight

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Sales
  Discounts

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Vendor
  Commissions

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Sales -
  Restock Charge

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Sales
  Returns Reserve Provision

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Software
  Sales

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Customer
  Cash Discounts

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Revenue

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  **Cost of
  Goods**

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cost of Goods

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Integration
  Cost of Goods

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS -
  Freight

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS - Price
  Rebates (Special Bid)

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS -
  Invoice to PO Cost Variance

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS -
  Invoice to PO Qty Variance

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS - IC
  Cost Adjustments

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS - IC
  Cogs Adjustments

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS -
  Purchase Price Variance

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  COGS - Do
  Adjustment

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  Xxx

  	
   

  
	
  COGS -
  Physical to Perpetual

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Restocking
  Charge

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Vendor AR
  Reserve Provision

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Inventory
  Reserve Provision

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Inventory
  Cost Adj

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Price
  Protection Claimed

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Vendor
  Rebates (MDF)

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Freight In

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Freight Out

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  DO Freight
  Out

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Software
  COGS

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Software
  Rebates

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Credit Card
  Expense

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Property &
  Other Taxes

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  General
  Insurance

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Bank Fees

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Cost
  of Goods Sold

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gross Profit

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  

 

	
  Balance Sheet

  	
   

  	
  Current Year

  	
   

  	
  Prior Month

  	
   

  	
  Prior Year

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  **Assets**

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash — Main
  Account

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Controlled
  Disbursements

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Cash — COD

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Total Cash

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounts
  Receivable

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Accounts
  Receivable — COD

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  AR Refund
  Clearing

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Accrued
  Revenue

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Allowance
  for Sales Returns

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Total Trade A/R

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Inventory

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Drop Ship
  Inventory

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Non-Stock
  Inventory

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Inventory in
  Transit

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Reserve for
  Inventory Shrinkage

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Total Inventory

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  **Liabilities**

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Merchandise
  Accounts Payable

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Accrued
  Accounts Payable

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Accounts
  Payable — TBR

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Accounts
  Payable — EDI Merch Uncst

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Merchandise
  Received

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Total Payables

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vendor
  Receivables (Special Bid)

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Vendor
  Receivables (Returns)

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Vendor
  Clearing

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Vendor
  Receivables (MDF)

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Vendor
  Receivable (Price Protection)

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Total Vendor A/R

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IBM
  Floorplan Accounts Payable

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  IBM Working
  Capital

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  IBM Uncosted
  Floorplan Payments

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Wire
  Transfers — lender

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Uncosted
  Credits — lender

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Floorplan Financing

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  xxx

  	
   

  
	
  Sales Tax
  Payable — all states required

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Intercompany
  with SPF

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Year to date
  Income

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  
	
  Distributions

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  

 

Note — All balance sheet accounts will need to be supported by a
reconciliation on Monthly basis with the exception of:  Cash — Main (daily); Inventory (daily); DO
Inventory (daily).

 

Note — Bank Fees are fees related to cash accounts, lockbox accounts
and other cash management services provided by the Lockbox Bank.

 

 

Annex B

 

CUSTOMER STOCKING
LETTER

 

Date xxx

 

[Seller]

[Address]

[Address]

 

Attention: [                   ],
Vice President of Finance

 

Subject: CUSTOMER STOCKING PROGRAM –
PO#xxxxxx-xx OE# xxxxxx-xx

 

Dear [          ]:

 

[xxx Corp.] hereby agrees that each product covered by the balance of
the above referenced purchase order which [Seller] on or before [xxx date],
identifies through labeling or otherwise, as belonging to [xxx Corp.] shall,
effective of the time of such identification, be deemed to have been duly
shipped to [xxx Corp.], FOB [Seller], [ADDRESS], and that title to, and the
result of loss with respect to, such product shall pass to [xxx Corp.] at that
time.  [Seller] will invoice [xxx Corp.]
for such product at the time of identification and payment shall be made net 30
days after invoice. Such payment and timeliness of payment is guaranteed by
[xxx Corp.].

 

[xxx Corp ] further requests that [Seller] warehouse such product for
[xxx Corp.] until such date as [xxx Corp.] shall designate, but in no event
beyond [xxx date], and agrees to pay (Terms net 30 days) [Seller] for such
warehousing services at the rate of $xxx [must be at least $1.00] per pallet
per month, the charges for which services are not included in, are in addition
to, the product shown on the above-referenced invoice(s).  At this date, [Seller] will ship the
inventory to [xxx Corp.] at the following address.  Notwithstanding such warehousing by [Seller],
[xxx Corp.] shall be responsible for insuring the product from the time of
identification forward.

 

The above is agreed to and accepted by:

 

	
   

  	
   

  
	
  Authorized Signature

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Title

  
	
   

  
	
   

  	
   

  
	
  Date

  
	
   

  
	
  cc.

  
	
  [                    ],
  CFO

  
	
  [                    ],
  VP Operations

  
				

 

 

NOTES:

Letter must be on End Customer Letterhead;

Letter must be executed by the customer;

PO must accompany letter;

If no PO available, the exact amount of the order must be indicated in
first sentence and a supporting document (detail of order / sales
acknowledgement) must accompany the letter.

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"}]]