Exhibit 10.6
DYNTEK SERVICES, INC.
SECURITY AGREEMENT
To: __________
Gentlemen:
1. To secure the payment of all Obligations (as hereafter defined), we
hereby grant to you a continuing security interest in all of the following
property now owned or at any time hereafter acquired by us, or in which we now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all accounts, inventory, equipment, goods, documents, instruments
(including, without limitation, promissory notes), contract rights, general
intangibles (including, without limitation, payment intangibles and an absolute
right to license on terms no less favorable than those current in effect among
our affiliates), chattel paper, supporting obligations, investment property,
letter-of-credit rights, trademarks and tradestyles in which we now have or
hereafter may acquire any right, title or interest, all proceeds and products
thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefore subject only to the
Permitted Encumbrances as defined herein.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by us to and by DynTek, Inc., our parent
corporation incorporated in Delaware ("DynTek") whether arising hereunder , out
of, or in connection with that certain Securities Purchase Agreement dated as of
the date hereof by and between the DynTek and __________. ("__________") (the
"Securities Purchase Agreement"), that certain Secured Convertible Term Note
dated as of the date hereof made by the DynTek in favor of __________ (the "Term
Note") the Warrant dated as of the date hereof made by Dyntek in favor of
__________ in connection with the Term Note (the "Term Note Warrant") that
certain Registration Rights Agreement dated as of the date hereof by and between
Dyntek and __________ in connection with the Term Note (the "Term Note
Registration Rights Agreement"), as each may be amended, modified, restated or
supplemented from time to time, are collectively referred to herein as the
"Documents").
3. We hereby represent, warrant and covenant to you that:
(a) we are a company validly existing, in good standing and formed
under the laws of the State of Delaware and we will provide you thirty
(30) days' prior written notice of any change in our state of formation;
(b) our legal name is DynTek Services, Inc. , as set forth in our
Certificate of Incorporation as amended through the date hereof;
(c) we are the lawful owner of the Collateral and have the sole
right to grant a security interest therein and will defend the Collateral
against all claims and demands of all persons and entities;
(d) we will keep the Collateral free and clear of all attachments,
levies, taxes, liens, security interests and encumbrances of every kind
and nature ("Encumbrances"), other than encumbrances on the Collateral
identified in any Exchange Act Filings (as defined in the Securities
Purchase Agreement, dated as of the date hereof, by and between DynTek,
Inc. and __________. ("__________")(the "Securities Purchase Agreement")),
and permitted encumbrances set forth on Schedule 3(d), (collectively, the
"Permitted -------------- Encumbrances"), except to the extent said
Encumbrance terminated, does not secure indebtedness in excess of $100,000
and such Encumbrance is removed, or otherwise released within ten (10)
days of the creation thereof;
(e) we will at our own cost and expense keep the Collateral in good
state of repair (ordinary wear and tear excepted) and will not waste or
destroy the same or any part thereof other than ordinary course discarding
of items no longer used or useful in our business;
(f) we will not without your prior written consent, sell, exchange,
lease or otherwise dispose of the Collateral, whether by sale, lease or
otherwise, except for (x) the sale of inventory in the ordinary course of
business, (y) the disposition or transfer in the ordinary course of
business during any fiscal year of obsolete and worn-out equipment or
equipment no longer necessary for our ongoing needs, or (z) Collateral
having an aggregate fair market value of not more than $25,000, and only
to the extent that:
(i) the proceeds of any such disposition are used to acquire
replacement Collateral which is subject to your security interest or
are used to repay Obligations or to pay general corporate expenses;
or
(ii) following the occurrence of an Event of Default which
continues to exist, the proceeds of which are remitted to you to be
held as cash collateral for the Obligations (following the repayment
of all obligations of the undersigned subject to perfected security
interests prior in right of payment to yours);
(g) we will insure the Collateral in your name (as well as in the
name of Persons with perfected security interests prior in right of
payment to yours) against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as you shall specify in
amounts and under policies by insurers reasonably acceptable to you, which
insurance shall be customary in amount and type for persons similarly
situated to us, and all premiums thereon shall be paid by us and the
policies delivered to you. If we fail to do so, you may procure such
insurance and the cost thereof shall constitute Obligations; and
(h) we will at all reasonable times allow you or your
representatives free access to and the right of inspection of the
Collateral;
(i) we hereby indemnify and save you harmless from all loss,
costs, damage, liability and/or expense, including reasonable
attorneys' fees, that you may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations and/or in the
enforcement of this Agreement or in the prosecution or defense of
any action or
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proceeding either against you or us concerning any matter growing
out of or in connection with this Agreement, and/or any of the
Obligations and/or any of the Collateral except to the extent caused
by your own gross negligence or willful misconduct.
4. We shall be in default under this Agreement upon the happening of any
of the following events or conditions, each such event or condition an "Event of
Default:"
(a) we shall fail to pay when due or punctually perform any of the
Obligations and such failure shall continue for a period of three (3)
business days following any failure to make payment, or for a period of
thirty (30) days following default for any other such failure;
(b) any covenant, warranty, representation or statement made or
furnished to you by us or on our behalf was false in any material respect
when made or furnished;
(c) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral (other than Permitted
Encumbrances) or the making of any levy, seizure or attachment thereof or
thereon except to the extent:
(i) such loss is covered by insurance proceeds which are used
to replace the item or repay us; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed or otherwise released within ten
(10) days of the creation or the assertion thereof;
(d) we shall become insolvent, cease operations, dissolve, terminate
our business existence, make an assignment for the benefit of creditors,
suffer the appointment of a receiver, trustee, liquidator or custodian of
all or any part of our property;
(e) any proceedings under any bankruptcy or insolvency law shall be
commenced by or against us and if commenced against us shall not be
dismissed within sixty (60) days; or
(f) an Event of Default shall have occurred under and as defined in
the Note.
(g) DynTek shall repudiate, purport to revoke or fail to perform any
of its obligations under the Term Note (after passage of applicable cure
period, if any)
5. Upon the occurrence of any Event of Default and at any time thereafter,
you may declare all Obligations immediately due and payable and you shall have
the remedies of a secured party provided in the Uniform Commercial Code as in
effect in the State of New York, this Agreement and other applicable law. Upon
the occurrence of any Event of Default and at any time thereafter subject to the
rights of the holders of perfected security interests prior in right of payment
to yours, you will have the right to take possession of the Collateral and to
maintain such possession on our premises or to remove the Collateral or any part
thereof to such
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other premises as you may desire. Upon your request, we shall assemble the
Collateral and make it available to you at a place designated by you. If any
notification of intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed properly and reasonably given if mailed
at least ten (10) days before such disposition, postage prepaid, addressed to us
either at our address shown herein or at any address appearing on your records
for us. Any proceeds of any disposition of any of the Collateral shall be
applied by you to the payment of all expenses in connection with the sale of the
Collateral, including reasonable attorneys' fees and other legal expenses and
disbursements and the reasonable expense of retaking, holding, preparing for
sale, selling, and the like, and any balance of such proceeds may be applied by
you toward the payment of the Obligations in such order of application as you
may elect, and we shall be liable for any deficiency.
6. If we default in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on our part to be
performed or fulfilled under or pursuant to this Agreement, you may, at your
option without waiving your right to enforce this Agreement according to its
terms, immediately or at any time thereafter and without notice to us, perform
or fulfill the same or cause the performance or fulfillment of the same for our
account and at our sole cost and expense, and the cost and expense thereof and
otherwise to enforce the terms of this Agreement (including reasonable
attorneys' fees) shall be added to the Obligations and shall be payable on
demand with interest thereon at the highest rate permitted by law or, at your
option.
7. We appoint you, any of your officers, employees or any other person or
entity whom you may designate as our attorney, with power to execute such
documents in our behalf and to supply any omitted information and correct patent
errors in any documents executed by us or on our behalf; to file financing
statements against us covering the Collateral; to sign our name on public
records; and to do all other things as are reasonably necessary to carry out
this Agreement. We hereby ratify and approve all acts of the attorney and
neither you nor the attorney will be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law, other than
gross negligence or willful misconduct. This power being coupled with an
interest, is irrevocable so long as any Obligations remain unpaid.
8. No delay or failure on your part in exercising any right, privilege or
option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations shall be admissible in evidence in any
action or proceeding, shall be binding upon us for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof. You
shall have the right to enforce any one or more of the remedies available to
you, successively, alternately or concurrently. We agree to join with you in
executing financing statements or other instruments to the extent required by
the Uniform Commercial Code in form reasonably satisfactory to you and in
executing such other documents or instruments as may be required or deemed
necessary by you for purposes of affecting or continuing your security interest
in the Collateral.
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9. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and cannot be terminated orally. This
Agreement shall terminate upon repayment of all obligations under the Term Note,
and upon such termination you shall promptly execute and deliver all such
documents, and file all such termination statements, and take all such actions
as we shall deem reasonably necessary to release and reflect termination of the
security interests granted to you hereunder. All of the rights, remedies,
options, privileges and elections given to you hereunder shall inure to the
benefit of your successors and assigns. The term "you" as herein used shall
include your company, any parent of your company, any of your subsidiaries and
any co-subsidiaries of your parent, whether now existing or hereafter created or
acquired, and all of the terms, conditions, promises, covenants, provisions and
warranties of this Agreement shall inure to the benefit of and shall bind the
representatives, successors and assigns of each of us and them. You and we
hereby (a) waive any and all right to trial by jury in litigation relating to
this Agreement and the transactions contemplated hereby and we agree not to
assert any counterclaim in such litigation, (b) submit to the nonexclusive
jurisdiction of any New York State court sitting in the borough of Manhattan,
the city of New York and (c) waive any objection you or we may have as to the
bringing or maintaining of such action with any such court.
10. The security interest in the Collateral granted by us to you pursuant
to this Agreement is and shall remain subordinate and junior to the security
interest we granted to Systran Financial Services Corporation ("Systran")
pursuant to that certain Factoring Agreement, dated July 1, 2003, among Systran,
us, and DynTek, Inc. ("Senior Financing Agreement"), in all respects. In
furtherance of the foregoing, all of your rights and remedies, and all of our
covenants, agreements and obligations, under this Agreement are subordinate and
subject to all of the terms, conditions, covenants and agreements contained in
the Senior Financing Agreement.
11. All notices from you to us shall be sufficiently given if mailed or
delivered to us at our address set forth below. Very truly yours,
DYNTEK SERVICES, INC.
By: ________________________________
Name: ______________________________
ACKNOWLEDGED: Title: _____________________________
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 000
By: ____________________________________ Xxxxxx, XX 00000
Name: __________________________________ Attention: Chief Financial Officer
Title: _________________________________ Facsimile: (000) 000-0000
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Schedule 3(d)
Permitted Encumbrances
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