Exhibit 10.1
SERVICES AGREEMENT
AMONG
DYNTEK, INC., DYNTEK SERVICES, INC.
AND
YOUNG XXXXXXXX, P.C.
AS OF MARCH 1, 2004
SERVICES AGREEMENT
This Services Agreement ("Agreement") is made as of March 1, 2004 (the
"Effective Date"), by and among DynTek, Inc., a Delaware corporation ("DI"),
DynTek Services, Inc., a Delaware corporation ("DSI" which, together with DI,
may be jointly referred to as "DynTek"), and Young Xxxxxxxx, P.C., a Mississippi
professional corporation ("YW") who agree as follows:
1. YW'S SERVICES.
a) General. During the term of this Agreement, which shall begin on the
Effective Date and end June 30, 2010 (the "Term"), YW, shall perform,
or cause to be performed, the services described below (collectively,
the "Services") regarding the Managed Contracts (defined below).
Except for those responsibilities expressly reserved to DynTek
hereunder, DynTek hereby delegates all such responsibilities and
authority to YW and hereby irrevocably designates and appoints YW as
its sole and exclusive agent to perform all such functions on its
behalf. YW hereby accepts such delegation and appointment. DynTek will
not interfere and will completely defer to YW and comply with YW's
requests regarding all of its decisions in rendering Services so long
as YW is not acting in an unreasonable manner. YW shall have the
responsibility and commensurate authority to conduct, supervise,
administer and manage all operations and performance under the Managed
Contracts including, but not limited to:
i) hiring, administering, coordinating, terminating and supervising
all employees (whether DynTek employees or Permissible Employees
(defined below)), vendors, suppliers and subcontractors relating
to any work on or supplying any materials for the Managed
Contracts;
ii) operating all facilities (real estate or otherwise) that it uses
in performing under the Managed Contracts and carrying out its
duties under this Agreement;
iii) establishing the number, type and position of all employees,
including DynTek employees, to work on the Managed Contracts,
subject to the budget limitations described herein;
iv) setting compensation, pricing, payment and other terms for all
DynTek employees, vendors, suppliers and subcontractors relating
to the Managed Contracts;
v) entering into, as agent for DynTek, such agreements as may be
necessary for the performance of the Managed Contracts and for
obtaining outside services, supplies, space, utilities,
concessions and the like;
vi) handling all communications, meetings, negotiations and
relations with the other parties to the Managed Contracts;
vii) providing reports and notices to the other parties to the
Managed Contracts as deemed necessary by YW or as required under
the Managed Contracts;
viii) incurring Operating Expenses on behalf of DynTek to be paid by
DynTek; and
ix) performing any other acts necessary in connection with the
performance of the Managed Contracts;
b) Permissible Employees. Except as set forth in this Section 1(b) and
subject to YW's discretion to hire, replace and terminate individual
employees, all on-site personnel positions used to perform
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services under the Managed Contracts which are currently filled with
DynTek employees on the Effective Date, shall continue to be filled
with DynTek employees. YW may, at any time, directly employ for its
own account supervisory employees who, at the time of hiring, may be
persons who are either then current DynTek employees or persons hired
to replace former DynTek employees who performed functions that would
otherwise need to be performed by DynTek employees under the Managed
Contracts (the "Permissible Employees"). Such Permissible Employees
may perform other duties for YW as long as they fulfill all material
responsibilities for the Managed Contracts they previously performed
while employed by DynTek.
c) Delegation Permitted. YW may execute any of its duties under this
Agreement by or through agents, contractors, employees or
attorneys-in-fact; provided, however, that no such delegation shall
limit or reduce in any way YW's duties and obligations under this
Agreement.
2. DYNTEK'S COVENANTS AND RESPONSIBILITIES. DynTek shall:
a) Procure, pay for and maintain all insurance coverage, performance
bonds, letters of credit, qualifications, property taxes, licenses and
permits required under the terms of the Managed Contracts, by law or
under any leases or other agreements applicable to its performance
under the Managed Contracts and add and maintain YW as an additional
insured under its liability insurance policies (the expenses of such
may be referred to as "Other DynTek Expenses");
b) timely pay all Operating Expenses (defined below) as well as all
salaries, wages, benefits (accrued vacation pay shall be considered
"benefits" and not salaries or wages for purposes of this Agreement)
and taxes regarding its employees employed in connection with
performance of the Managed Contracts;
c) provide benefits to all of its employees working on the Managed
Contracts on the same basis as all other non-executive employees of
DynTek, provided, however, if benefits provided to employees working
on the Managed Contracts are or will be materially reduced from those
in effect as of the Effective Date, YW may hire such employees
directly and DynTek shall reimburse YW for its costs in doing so in
the same manner as provided for in the case of YW's employment of
Permitted Employees;
d) provide YW, its representatives and contractors and the on-site DynTek
employees providing services regarding the Managed Contracts
exclusive, free and unrestricted access to, and the right to use, all
facilities, furniture, fixtures, equipment (including computer
equipment and software) used or otherwise associated with the Managed
Contracts (upon reasonable advance notice, other DynTek representative
shall have full access to such premises accompanied by YW
representatives);
e) provide all necessary information technology help-desk and other
computer and technology support services needed in connection with the
performance of the Managed Contracts, at the same levels as being
provided on the Effective Date;
f) grant to, and DynTek hereby grants, YW a perpetual right to use
license for all electronic and written Child Support Business (defined
below) marketing and promotional materials, files, bid materials and
libraries, manuals, data, and related copyrights and other
Intellectual Property Assets, and DynTek shall promptly provide YW
with soft and hard copies of such materials as and when requested by
YW;
g) notify YW of any communications to or from any representative of any
party to the Managed Contracts and promptly forward copies of any
written communications (including, but not limited to, copies of
invoices rendered) to YW;
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h) provide to YW adequate advance notice of any meetings with any
representative or employee of any party to the Managed Contracts and
provide YW the opportunity to have its representatives attend;
i) refer to YW any contacts, inquiries or leads relating to new Child
Support Business engagements and provide consulting support to YW
regarding its pursuit of any such Child Support Business engagements;
j) provide marketing contacts for new Child Support Business engagements
in states where DynTek has such contacts but where YW is not currently
doing business;
k) cooperate with YW and not interfere with YW's operations or management
of the Managed Contracts;
l) use best efforts to preserve intact the Child Support Business of
DynTek, and maintain good relations and good will with, and use best
efforts to keep available the services of, suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Child Support Business of DynTek;
m) use best efforts to preserve the Managed Contracts and the goodwill of
the other parties to the Managed Contracts;
n) confer with YW concerning any operational matters of a material nature
relating to the Managed Contracts;
o) otherwise report periodically to YW concerning the status of the
business, operations, and finances of its Child Support Business;
p) except for only those Encumbrances in existence on the date hereof
which are listed on Schedule 2(p) to that certain Disclosure Letter
furnished by DynTek to YW simultaneously with the execution of this
Agreement (the "Disclosure Letter"), and any replacements thereof upon
refinancing of such existing obligations of DynTek, transfer, sell,
assign, encumber, pledge or suffer to exist any Encumbrance upon the
Managed Contracts or its rights and receivables thereunder without the
prior written consent of YW, which shall not be unreasonably withheld;
q) not modify or amend the Managed Contracts and use best efforts to not
allow such to be cancelled or terminated without YW's prior consent;
r) furnish YW and YW's representative with copies of all such contracts,
books and records, and other existing documents, data and information
relating to Child Support Business as YW may reasonably request;
s) upon the request of YW, furnish YW certificates of coverage and true
and complete copies of all policies of insurance to which any DynTek
is a party or under which DynTek, is or has been covered with respect
to its Child Support Business, at any time during the Term or within
the three (3) years preceding the Effective Date;
t) allow YW to audit and/or review DynTek's calculation and collection of
Contract Revenues (defined below) at YW's sole expense, provided,
however, if such audit and/or review reveals a miscalculation or
erroneous reporting of 10% or more of Contract Revenues DynTek shall
reimburse YW for its expenses in obtaining such audit and/or review;
and
u) promptly notify YW of any fact or condition that causes or constitutes
a breach of any of DynTek' representations and warranties as of the
date of this Agreement, or if DynTek becomes aware of the
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occurrence after the date of this Agreement of any fact or condition
that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or
discovery of such fact or condition.
3. FEES, BUDGETS AND PAYMENT.
a) Management Fee. DynTek shall pay YW a management fee equal to twelve
percent (12%) of the gross Contract Revenues arising under all of the
Managed Contracts during the Term (the "Management Fee"). The
Management Fee shall be paid monthly within fifteen (15) days of the
end of each month in which Services are provided regardless of whether
DynTek receives payment under all of the Managed Contracts. DynTek
shall use best efforts to diligently and promptly collect all Contract
Revenues. If there is a material contract change provision that
reduces gross Contract Revenues to DynTek under the Managed Contracts
by more than five percent (5%) per annum, the parties shall negotiate
in good faith an adjustment to the Management Fee. If the parties fail
to reach an agreement on such adjustment within thirty (30) days of
such change, they shall submit the matter to binding arbitration in
accordance with Section 15(f).
b) Operating Expenses. DynTek shall promptly pay all Operating Expenses.
"Operating Expenses" means all expenses of every type (other than
employee salaries, benefits and taxes and the Management Fee) relating
to the performance of the Managed Contracts other than Other DynTek
Expenses. Operating Expenses shall be paid within the terms or
arrangements made by YW with vendors, service providers, lessors and
others, but in no event later than thirty (30) days from invoice date
for any invoices submitted to DynTek. The annual sum of Operating
Expenses for 2004 shall be limited to the amounts set forth in
DynTek's proposed 2004 Budget, a copy of which is attached as Schedule
3(b) to the Disclosure Letter (in the form attached as Schedule 3(b)
to the Disclosure Letter and subject to the increases referred to in
this Agreement, the "Budget"). Operating Expenses shall be increased
by three percent (3%) compounded annually effective January 1st of
each year during the Term. All invoices for Operating Expenses must be
reviewed and approved by YW and presented to and paid by DynTek prior
to charging them to the Budget. YW may incur other costs regarding the
performance of the Managed Contracts that will not be reimbursed by
DynTek unless approved by DynTek in writing prior to reimbursement. YW
shall have the sole and exclusive authority and discretion to incur
Operating Expenses that will be charged to the Budget. Expenses or
liabilities incurred by DynTek prior to the Effective Date shall not
be charged to the Budget.
c) Employee Expenses. DynTek shall pay (or, as to Permissible Employees,
reimburse YW for) all salaries, benefits, taxes and other direct costs
associated with all DynTek employees (and Permissible Employees, if
any) who work on the Managed Contracts when they become due. The total
aggregate salaries (excluding benefits, accrued vacation pay and
taxes) of such employees, including Permissible Employees, shall be no
greater than the total aggregate salaries proposed in the Budget
unless such excess is offset by a corresponding reduction in Operating
Expenses. The Budget for such salaries shall increase by three percent
(3%) compounded annually (effective May 1 of each year). Increases in
staffing outside of the Budget must be approved by DynTek, which
approval shall not be unreasonably conditioned, withheld or delayed.
Effective January 1, 2006, the budgeted salary and benefits associated
with one (1) Regional Supervisor position in the Kansas contract
budget shall be eliminated.
d) Budget Limitations. The Budget limitations described herein relate to
total annual aggregate expenditures under the Budget regardless of
category, line item, or month incurred. YW may shift spending between
categories and line items of Operating Expenses or between salaries
and Operating Expenses as long as total annual expenditures under the
Budget, in the aggregate, are not exceeded.
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4. YW LEADS FURNISHED TO DYNTEK. YW may provide leads for potential information
technology and consulting services contracts and engagements to DynTek. As a
material inducement for YW to enter into this Agreement, DynTek shall use
good faith and diligent best efforts to pursue such business (subject to the
right to pre-qualify such leads prior to pursuit, which qualification shall
not be unreasonably conditioned, withheld or delayed). If successful in
obtaining such business, DynTek shall pay YW twenty percent (20%) of the
gross profit derived, directly or indirectly, from all such leads provided
by YW, including any renewals thereof.
5. REBIDS OF MANAGED CONTRACTS. If any of the Managed Contracts is re-bid or
similarly replaced, YW may bid or otherwise procure such contract for its
own account and DynTek shall support YW's bid or procurement efforts and not
bid or otherwise compete for the procurement of such contract. If YW
successfully obtains such re-bid contract, it shall pay DynTek a re-bid fee
of four percent (4%) of Contract Revenues as and when collected by it under
such re-bid contract until the earlier of June 30, 2010, or the termination
or expiration of the re-bid contract. However, in the case of the Kansas
Contracts (as defined in Schedule 8(k) hereof), if either of such contracts
is re-bid prior to June 30, 2005, the re-bid fee for the re-bid Kansas
Contract shall be seven percent (7%) of such Contract Revenues until June
30, 2005, and thereafter revert to four percent (4%) of such Contract
Revenues. Further, if the Nebraska Contract (as defined in Schedule 8(k)
hereof) is re-bid prior to July 31, 2007, the re-bid fee for the re-bid
Nebraska Contract shall be seven percent (7%) until July 31, 2007, and
thereafter revert to four percent (4%) of such Contract Revenues. Upon YW
obtaining any such re-bid contract, (i) YW may employ any DynTek employees
who have worked under the Managed Contracts, and (ii) DynTek shall sell,
assign and transfer to YW all furniture, fixtures, equipment (including
computer equipment and software used in connection with the Managed
Contracts), leases of real and personal property, non-exclusive licenses,
bid materials and libraries, process manuals, data, intellectual property
and any other assets used or otherwise associated with such re-bid Managed
Contracts (not previously transferred to YW) for the total sum of $10.00.
Where applicable, such transfers are subject to obtaining any applicable
third party consents which DynTek shall use best efforts to promptly obtain.
6. CONSENTS. Prior to YW assuming its management responsibilities under this
Agreement, DynTek shall obtain consents from the other parties to the
Managed Contracts substantially in the form attached as Exhibit A. If DynTek
does not obtain the consents from the other parties to the Managed Contracts
on or before March 10, 2004, YW may grant one or more extensions of such
date or terminate this Agreement for all purposes. YW and DynTek shall
commence transition work in connection with the duties to be assumed by YW
in advance of DynTek's obtaining of such consents and agreement and the
parties shall cooperate to obtain such consents and agreement as soon as
possible.
7. PROTECTIVE COVENANTS
a) DynTek Noncompetition; Non-solicitation. During the Term and for a
period of seven years following the expiration of the Term:
i) DynTek will not, directly or indirectly, engage in Child Support
Business within the United States and its territories and
protectorates;
ii) DynTek will not, directly or indirectly, invest in, own, manage,
operate, finance, control, be employed by, associated with, or
in any manner connected with, lend DynTek's name or any similar
name to, lend DynTek's credit to, or render Child Support
Business services to, any person or entity which is engaged in
whole or in part in Child Support Business activities within the
United States and its territories and protectorates;
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iii) DynTek will not, directly or indirectly, either for itself or
any other person or entity, (A) induce or attempt to induce any
employee of YW to leave the employ of YW, (B) in any way
interfere with the relationship between YW and any employee of
YW, (C) employ, or otherwise engage as an employee, independent
contractor, or otherwise, any employee of YW, or (D) induce or
attempt to induce any customer, client, supplier, licensee, or
business relation of YW to cease doing business with YW, or in
any way interfere with the relationship between any customer,
client, supplier, licensee, or business relation of YW.
iv) DynTek will not, directly or indirectly, either for itself or
any other Person, solicit the Child Support Business of a
customer or client of YW; and
v) In the event of a breach by DynTek of any covenant set forth in
Section 7(a) of this Agreement, the term of such covenant will
be extended by the period of the duration of such breach.
b) Credentials. At any time during or after the Term, DynTek shall not
use the Managed Contracts or any contracts or business in which YW is
involved as a reference, credential or other qualification in seeking
any future Child Support Business engagements.
c) Third Party Covenants. DynTek has several agreements with present and
past employees of DynTek that include provisions prohibiting such
persons from competing with DynTek in Child Support Business
activities. DynTek also has agreements with other persons or entities
that prohibit solicitation of present and past DynTek employees. At
the request of YW, DynTek will either assign those agreements or the
rights under those agreements to YW (if legally possible under such
agreements) or, at the request of YW, DynTek will seek to enforce
those agreements with YW having the right to make all decisions
associated with the enforcement of those agreements subject to
DynTek's ability to refuse to follow those directions should DynTek's
Board of Directors reasonably determine it would be materially,
financially detrimental to DynTek to do so. All costs of the
enforcement of those Contracts shall be paid by YW to DynTek under
arrangements satisfactory to DynTek that are concluded prior to the
commencement of any such proceedings.
d) Confidential Information. DynTek shall not, at any time, disclose to
any unauthorized persons or use for its own account or for the benefit
of any third party any confidential information relating to the
Managed Contracts or otherwise transferred or licensed to YW, whether
before or after the date hereof, without YW's written consent, unless
and to the extent that the Confidential Information is or becomes
generally known to and available for use by the public other than as a
result of DynTek's fault or the fault of any other person bound by a
duty of confidentiality to YW or DynTek. DynTek agrees to deliver to
YW at the time of execution of this Agreement, and at any other time
YW may request, all documents, memoranda, notes, plans, records,
reports, and other documentation, or data, whether embodied in a disk
or in other form (and all copies of all of the foregoing), relating to
the businesses, operations, or affairs of the Child Support Business
of DynTek or YW.
e) YW Covenant. YW shall not use DynTek's trade secrets, or its
confidential or proprietary information, to develop, initiate or
establish a business which competes or will compete directly or
indirectly with DynTek's current business as of the Effective Date
other than its Child Support Business and call centers (whether or not
related to Child Support Business); provided, however, no information
shall be deemed confidential, proprietary or a trade secret unless
clearly identified as such in writing prior to any disclosure to YW.
No such information shall be disclosed by DynTek to YW without prior
notice to and consent of YW.
f) Survival. All of the covenants set forth in this Section 7 shall
survive the termination or expiration of this Agreement.
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8. REPRESENTATIONS AND WARRANTIES OF DYNTEK. DynTek represents and warrants to
YW as follows:
a) Each of DI and DSI is a corporation duly organized, validly existing,
and in good standing under the laws of the state of Delaware, with
full corporate power and authority to conduct its Child Support
Business as contemplated by this Agreement, and to perform all its
obligations under this Agreement and the Managed Contracts. Each of DI
and DSI is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction
in which any of the Managed Contracts is performed and such
qualification is required.
b) This Agreement constitutes the legal, valid, and binding obligation of
DI and DSI, enforceable against each of them in accordance with its
terms. Subject only to obtaining the consents from the other parties
to the Managed Contracts, DI and DSI each have the absolute and
unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and to perform their obligations under this
Agreement.
c) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated
herein will, directly or indirectly (with or without notice or lapse
of time) conflict with, or result in a violation of, the certificate
of incorporation or bylaws of either DI or DSI, any resolution adopted
by the board of directors or the stockholders of either DI or DSI, or
any other agreement or instrument to which either DI or DSI is a
party, including, but not limited to, the Managed Contracts (upon
obtaining the consents from the other parties to the Managed
Contracts).
d) Except for the consents referred to in Section 6, neither DI nor DSI
is or will be required to give any notice to or obtain any consent
from any person or entity in connection with the execution and
performance of this Agreement.
e) Except as set forth in Schedule 2(p) to the Disclosure Letter, there
are no Encumbrances upon or with respect to any of the Managed
Contracts or any assets owned or used by DI or DSI in the performance
of the Managed Contracts.
f) The 2002 and 2003 financial statements attached collectively as
Schedule 8(f) to the Disclosure Letter present fairly and consistently
the financial condition and the results of operations and cash flows
of the DynTek Child Support Business of the respective dates of and
for the periods referred to in such financial statements. The Budget
fairly represents the anticipated revenues, expenses, employee
positions, salaries and cash flows of DynTek's Child Support Business
under the Managed Contracts.
g) DynTek has no material liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent,
or otherwise) relating to the Managed Contracts except for current
liabilities incurred in the ordinary course of business.
h) Since December 1, 2003, there has not been any material adverse change
in the business, operations, properties, prospects, assets, or
condition of DynTek's Child Support Business, and no event has
occurred or circumstance exists that may result in such a material
adverse change.
i) DynTek is in full compliance with all material legal requirements
applicable to it or to the conduct or operation of its Child Support
Business, the performance of the Managed Contracts or the ownership or
use of any of its assets used in connection with its Child Support
Business.
j) There is no pending legal proceeding that has been commenced by or
against DynTek or that
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otherwise relates to or may affect DynTek's Child Support Business or
the Managed Contracts, or any of the assets owned or used by DynTek in
its Child Support Business. To DynTek's knowledge, no such legal
proceeding has been threatened, and no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such legal proceeding.
k) Schedule 8(k) hereof contains a complete and accurate list of all
documents comprising the Managed Contracts, and DynTek has delivered
to YW true and complete copies of all such documents as well as all
other contracts, leases or other agreements associated with DynTek's
present or future performance of the Managed Contracts (the "Other
Agreements"). DynTek is, and at all times since the inception of the
Managed Contracts and Other Agreements has been, in material
compliance with all applicable terms and requirements of each of the
Managed Contracts and the Other Agreements. No event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or
give the other parties to the Managed Contracts or the Other
Agreements the right to declare a default or exercise any remedy
under, or to cancel, terminate, or modify, the Managed Contracts or
the Other Agreements. DynTek has not given to or received from any
other party to the Managed Contracts or the Other Agreements, at any
time, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential material
violation or material breach of, or material default under, the
Managed Contracts or Other Agreements. There are no renegotiations of,
attempts to renegotiate, or outstanding rights to renegotiate any
terms of the Managed Contracts or Other Agreements and no other party
thereto has made demand or request for such renegotiation.
l) Schedule 3(b) to the Disclosure Letter contains a complete and
accurate list of each employee (or, if applicable, open employee
position) of DynTek currently working (or budgeted to work) on the
Managed Contracts, including current compensation paid or payable.
m) DynTek has fully funded any non-discretionary profit sharing or
similar plans payments applicable to employees providing services
regarding the Managed Contracts prior to the Effective Date.
n) No representation or warranty of DynTek in this Agreement omits to
state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not
misleading.
o) There is no fact known to DynTek that has specific application to
DynTek (other than general economic or industry conditions) and that
materially adversely affects or, as far as DynTek can reasonably
foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Child Support
Business of DynTek that has not been set forth in this Agreement.
9. REPRESENTATIONS AND WARRANTIES OF YW. YW represents and warrants to DynTek
as follows:
a) YW is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Mississippi.
b) This Agreement constitutes the legal, valid, and binding obligation of
YW, enforceable against YW in accordance with its terms. YW has the
absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and to perform its obligations under this
Agreement.
c) Neither the execution and delivery of this Agreement by YW nor the
consummation or performance of any of the transactions contemplated
herein by YW will directly or indirectly (with or without notice or
lapse of time) conflict with, or result in a violation of, the
certificate of incorporation or
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bylaws of YW, any resolution adopted by the board of directors or the
stockholders of YW, or any other agreement or instrument to which YW
is a party.
d) Except for the consents to be obtained from the other parties to the
Managed Contracts, YW is not and will not be required to obtain any
consent from any person in connection with the execution and
performance of this Agreement.
10. YW DEFAULT AND DYNTEK REMEDIES. YW shall not be deemed in default under this
Agreement with respect to the performance of the Managed Contracts in any
respect (a "Managed Contract Breach") unless and until (i) the other party
to a Managed Contract provides DynTek notice of a default under a Managed
Contract caused solely by an act or omission of YW in breach of its duties
under this Agreement, (ii) after YW/DynTek is given a reasonable opportunity
to cure such default, YW fails to cure such default, and (iii) such other
party to the Managed Contract actually terminates such Managed Contract.
Upon a Managed Contract Breach, DynTek shall have no right to terminate this
Agreement, fail to pay any expenses or perform its other obligations
hereunder, or offset or fail or refuse to pay YW any sums due it hereunder.
DynTek's sole and exclusive remedy for a Managed Contract Breach shall be to
seek an injunction through binding arbitration for specific performance of
this Agreement by YW. In the case of any breach of this Agreement by YW
other than a Managed Contract Breach, DynTek shall have no right to
terminate this Agreement; however, it may pursue such other remedies as
shall be available to it through binding arbitration.
11. DYNTEK DEFAULT. DynTek shall be deemed to be in default under this Agreement
(a "DynTek Default") upon one or more of the following occurrences:
a) If DynTek fails to pay YW any Management Fee when due and DynTek fails
to cure such non-payment within fifteen (15) days after YW has
provided DynTek with notice of non-payment;
b) If DynTek fails to pay, when due, any Operating Expense and DynTek
fails to cure such non-payment within fifteen (15) days after YW has
provided DynTek with notice of non-payment;
c) If DynTek fails to pay, when due, any salaries, benefits or taxes of
its employees working on the Managed Contracts or Permissible
Employees, provided, however, in one instance only during the Term, YW
shall provide notice of default under this Section 11(c) and if DynTek
cures such non-payment within three (3) days of such notice it shall
not be deemed in default hereunder;
d) If DynTek materially defaults in the performance of its duties or
obligations under this Agreement, other than a default specified in
subparagraphs (a), (b) or (c) of this Section 11, which default shall
not be substantially cured within thirty (30) days after written
notice is given to DynTek specifying the default;
e) At any time there shall be filed by or against DynTek in any court a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of the
property of DynTek which is not dismissed within sixty (60) days of
such filing;
f) DynTek makes an assignment for the benefit of creditors or petitions
for or enters into an agreement or arrangement with its creditors; or
g) There is a breach of any of DynTek's representations or warranties
contained in this Agreement.
12. YW'S REMEDIES. Upon a DynTek Default:
a) DynTek shall immediately pay all sums not paid, if any, plus interest
thereon from due date at the
Page 9 of 14
rate of eight percent (8%) per annum, compounded monthly, plus all
costs of collection including reasonable attorneys' fees.
b) YW may direct DynTek to assign the Managed Contracts to YW and to
sell, assign and transfer to YW all furniture, fixtures, equipment
(including computer equipment and software used in connection with the
Managed Contracts), leases of real and personal property,
non-exclusive licenses, bid materials and libraries, process manuals,
data, intellectual property and any other assets used or otherwise
associated with the Managed Contracts (not previously transferred to
YW) for the total sum of $10.00 and YW's obligation to pay net income
to DynTek as described below. DynTek shall, within five (5) business
days of YW's notice to do so, fully and irrevocably assign, sell and
transfer all of its rights, title and interest in, to and under the
Managed Contracts and the related assets referenced above to YW. YW
may substitute itself as the prime contractor under the Managed
Contracts. If DynTek fails to assign, sell and transfer the Managed
Contracts and other assets as required above, YW may, as DynTek's
attorney-in-fact (which appointment hereunder is irrevocable during
the Term), execute such instruments of conveyance as its deems
necessary and proper to fully assign, sell and transfer the Managed
Contracts and other assets to YW. Upon the assignment of the Managed
Contracts, YW may employ any DynTek employees who have worked under
the Managed Contracts. After retaining, deducting and withholding
amounts sufficient to fully (i) compensate YW for any damages and
expenses incurred as a result of a DynTek Default, (ii) pay all
Operating Expenses, salaries, benefits and other expenses relating to
employees (including Permitted Employees), (iii) pay other expenses
incurred by YW in the performance of the Managed Contracts that, if
DynTek was fully performing under this Agreement, would otherwise be
borne by DynTek (e.g., insurance and bonding expenses), and (iv)
compensate YW for the Management Fee, YW shall account for and pay
over to DynTek the remaining net income, if any, resulting during the
Term from the Managed Contracts so assigned.
c) YW may direct and require the other parties to the Managed Contracts
to immediately begin making all payments due under the Managed
Contracts directly to YW. DynTek shall fully cooperate with YW and the
other parties to the Managed Contracts and confirm YW's right to
directly receive all such payments. DynTek hereby waives any and all
claims that it may have against the other parties to the Managed
Contracts relating to any payments made to YW by such parties under
this provision. DynTek shall reconfirm this waiver if requested to do
so by YW or any other party to the Managed Contracts. DynTek agrees
that its sole recourse and remedy if it disagrees with YW's actions
under this provision is to submit this issue to binding arbitration
with YW. Pending a final decision under such binding arbitration, YW
shall segregate any such funds received by it under this provision
from its other funds, pay Operating Expenses, salaries, the Management
Fee and other sums required to be paid by DynTek hereunder from such
funds, and remit any excess funds to DynTek.
d) YW may offset and withhold any damages, expenses or other sums due it
from DynTek from any re-bid fees owing to DynTek.
e) YW may take possession of all DynTek-owned furniture, fixtures,
equipment (including, but not limited to, computer equipment), and
other assets used in connection with the performance of the Managed
Contracts.
f) YW may, by giving written notice thereof to DynTek, terminate this
Agreement as of a date specified in such notice of termination, in
which case YW shall reassign the Managed Contracts back to DynTek (if
such have been previously assigned to YW) and DynTek shall have the
right to perform the Managed Contracts without reference to its
obligations otherwise stated in this Agreement; however, such
termination shall not relieve DynTek from any liability arising from
its breach of this Agreement.
Page 10 of 14
g) The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that in addition to any legal remedies YW may
have YW shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement by DynTek and to enforce specifically the
terms and provisions hereof in a court of competent jurisdiction or in
arbitration, as appropriate.
h) YW may pursue any other rights available to YW at law or in equity.
i) All of YW's rights, powers and remedies provided under this Agreement
or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by YW shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by YW.
13. INDEMNIFICATION; NO LIABILITY. Each party shall indemnify and hold harmless
the other from any third party claim, liability, loss, cost or damages
caused solely by or resulting solely from (i) the acts or omissions of such
party or any of its agents, servants or employees in breach of this
Agreement AND (ii) activities of such party in performing its duties or
carrying out its obligations under this Agreement. However, in no instance
shall YW have any liability or indemnification obligation to DynTek for any
termination, non-renewal, breach, penalties or other loss of, or under, the
Managed Contracts. Except as provided for in this Section 13, YW shall not
assume or otherwise be responsible or liable for any liabilities of or
claims against DynTek.
14. RIGHT OF OFFSET. DynTek shall have the right to offset amounts past due to
DynTek under any other agreements with YW, or any of its subsidiaries
including Child Support Technologies, Inc., from the Management Fees due
hereunder. Upon offset, such amounts shall be considered to be paid to
DynTek under such agreement(s).
15. GENERAL PROVISIONS.
a) CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings specified or referred to below:
i) "Child Support Business" - the business of providing child
support enforcement, collection, consulting and/or call center
services relating to child support activities.
ii) "Contract Revenues" - all sums actually invoiced and paid under
the Managed Contracts after the Effective Date, provided,
however, for purposes of this Agreement, Contract Revenues shall
not be deemed reduced as a result of any offsets or penalties
arising from or related to the performance of the Managed
Contracts prior to the Effective Date or from any other
Applicable Contracts other than the Managed Contracts.
iii) "Encumbrance"- any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal,
or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other
attribute of ownership.
iv) "Managed Contracts" - means the Contracts listed on Schedule
8(k) hereof, as currently in effect or as the same may be
hereafter amended, supplemented, extended or renewed (but not
any that are re-bid).
b) PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement will be issued, if at all, at such time
and in such manner as mutually agreed by the
Page 11 of 14
parties, except such announcements as may be required by law shall be
made by a party without the need for mutual agreement so long as the
announcement is made with reasonable advance notice to the other
party. YW may disclose the Agreement and its relationship with DynTek
in its promotional materials and literature. DynTek and YW will
consult with each other concerning the means by which the employees,
customers, and suppliers and others having dealings with DynTek or YW
will be informed of this Agreement, and YW will have the right to be
present for any such communication.
c) RELATIONSHIP OF PARTIES. The relationship of YW to DynTek hereunder
shall be that of an independent contractor. Nothing in this Agreement
is intended or shall be construed to constitute YW, or any of its
representatives, an employee or partner of DynTek. Although YW is a
professional corporation formed for the purpose of engaging in the
practice of law and other purposes, neither YW nor any of its attorney
employees or shareholders is providing legal services to DynTek under
this Agreement or otherwise. There is not, and this Agreement shall
not be construed to create, any attorney/client relationship between
DynTek and YW or any of its attorney employees or shareholders.
d) NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by hand (with written confirmation
of receipt), (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return
receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
DynTek: DynTek, Inc./DynTek Services, Inc. With a copy to: Xxxxx Xxxxxxx, LLP
00000 Xxx Xxxxxx, Xxxxx 000 437 Madison Avenue
Irvine, CA 92612 Xxx Xxxx, XX 00000
Attn: Mr. Xxxxx Xxxxxx Attn: Xxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000 Fax: (000) 000-0000
YW: Young Xxxxxxxx, P.C. With a copy to: Young, Williams, Xxxxxxxxx &
P. O. Box 23059 Xxxxxxxx, P.A.
Xxxxxxx, XX 00000-0000 P. O. Xxx 00000
Attn: Xx. Xxxxxx X. Xxxxx Xxxxxxx, XX 00000-0000
Fax: (000) 000-0000 Attn: Xxxxx X. Xxxxx, XX, Esq.
Fax: (000) 000-0000
e) JURISDICTION. Subject to the parties' agreement to arbitrate, any
action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement shall be brought against any
of the parties only within the courts of the State of Mississippi,
County of Xxxxx, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such
action or proceeding and waives any objection to venue laid therein.
f) BINDING ARBITRATION.
i) Any controversy or claim arising out of or relating to this
Agreement for the breach hereof which cannot be settled by the
parties, except for action for equitable relief to enforce the
covenants set forth in Section 7 which may be pursued in the
courts referred to in Section 15(e), shall be settled by
arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association ("AAA") as set forth
herein.
Page 12 of 14
ii) Each party may select one arbitrator. Selection shall be
completed within ten (10) days of the receipt of a demand for
arbitration. If either party fails to select an arbitrator
within such ten- (10) day period, the one selected shall act as
sole arbitrator. If two arbitrators have been selected, the two
arbitrators selected shall select a third within fifteen (15)
days after their selection. If they fail to do so, the AAA shall
select the third arbitrator. The arbitrators shall set a date of
hearing no later than sixty (60) days from the date all
arbitrators have been selected. If the amount in controversy is
less than $10,000.00, the parties shall mutually agree on one
arbitrator to conduct the binding arbitration as mutually agreed
by the parties outside of the AAA process. If the parties are
unable to mutually agree upon one arbitrator or the alternative
arbitration process within (10) days of the receipt of a demand
for arbitration, the arbitration shall be conducted by the AAA
as described above.
iii) The arbitration shall take place in Dallas, Texas.
iv) The award of any arbitration shall be final, conclusive and
binding on the parties hereto.
v) The arbitrators may award any legal or equitable remedy.
Judgment upon any arbitration award may be entered and enforced
in any court of competent jurisdiction.
vi) Either party to arbitration hereunder may bring an action for
injunctive relief against the other party if such action is
necessary to preserve jurisdiction of the arbitrators or to
maintain status quo pending the arbitrators' decision. Any such
action called pursuant to this paragraph shall be discontinued
upon assumption of jurisdiction by the arbitrators and their
opportunity to consider the request for equitable relief pending
final decision in the arbitration.
g) FURTHER ASSURANCES. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and
things, all as the other party may reasonably request for the purpose
of carrying out the intent of this Agreement and the documents
referred to in this Agreement.
h) WAIVER. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim
or right unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or
of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
i) ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between
the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be
charged with the amendment.
j) ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Except as
otherwise provided in this Agreement or by operation of law, neither
party may assign any of its rights under this Agreement without the
prior consent of the other party, which will not be unreasonably
Page 13 of 14
withheld. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions
and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
k) SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part
or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
l) SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of
such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding
words or terms.
m) TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
n) GOVERNING LAW. This Agreement will be governed by the laws of the
State of Mississippi without regard to conflicts of laws principles.
o) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed
to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Young Xxxxxxxx, P.C. DynTek, Inc. DynTek Services, Inc.
By: ___________________ By: ___________________ By: _________________
Name: Xxxxxx X. Xxxxx Name: _________________ Name: _______________
Title: President Title: ________________ Title: ______________
Exhibits to this Agreement:
Exhibit A - Form of Consent of Parties to Managed Contracts
Schedules to this Agreement:
Schedule 8(k) - Managed Contracts documents summary
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