EXHIBIT 10.1


 


NOTE PURCHASE AGREEMENT


 


between


 


DYNTEK, INC.


 


and


 


THE PURCHASERS NAMED IN SCHEDULE I


 


Dated as of March 8, 2006


 

















 


INDEX TO
SCHEDULES


 


	
  SCHEDULE I

  	
   

  	
  Schedule of Purchasers

  
	
  SCHEDULE II

  	
   

  	
  Trade Creditors

  
	
  SCHEDULE III

  	
   

  	
  Note Holders

  
	
  SCHEDULE IV

  	
   

  	
  Disclosure Schedules

  
	
  SCHEDULE V

  	
   

  	
  Use of Proceeds

  



 


INDEX TO
EXHIBITS


 


	
  EXHIBIT A

  	
   

  	
  Form of
  Senior Note

  
	
  EXHIBIT B

  	
   

  	
  Form of
  Settlement and Release Agreement

  
	
  EXHIBIT C

  	
   

  	
  Form of
  Conversion and Settlement Agreement

  
	
  EXHIBIT D

  	
   

  	
  Form of
  Warrant

  
	
  EXHIBIT E

  	
   

  	
  Form of
  Security and Pledge Agreement (Senior Notes)

  
	
  EXHIBIT F

  	
   

  	
  Form of
  Junior Note

  
	
  EXHIBIT G

  	
   

  	
  Form of
  Security and Pledge Agreement (Junior Notes)

  



 

















 


THIS NOTE PURCHASE AGREEMENT (the “Agreement”) is dated as of March 8,
2006, between DynTek, Inc., a Delaware corporation (the “Company”), and
the purchasers named in the attached Schedule I (each individually
a “Purchaser” and collectively the “Purchasers”).


 


WHEREAS, the Company wishes to issue and sell to the
Purchasers up to an aggregate of $6,700,000 in principal amount of its senior
secured promissory notes; and


 


WHEREAS, the Company wishes to issue and sell to a
Purchaser up to an aggregate of $3,000,000 in principal amount of a junior
secured promissory note; and


 


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


 


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


 


ARTICLE I


 


PURCHASE AND SALE OF NOTES AND TERMS OF NOTES


 


SECTION 1.01.                                   The
Senior Notes. The Company has authorized the issuance and sale
to the Purchasers, in the respective amounts set forth in the Schedule of
Purchasers attached hereto in Schedule I, of the Company’s Senior Secured
Promissory Notes, due March 1, 2010 (the “Senior Note Maturity Date”), in
the original aggregate principal amount of up to $6,700,000. The Senior Notes
will be substantially in the form set forth in Exhibit A
hereto and are herein referred to individually as a “Senior Note” and
collectively as the “Senior Notes,” which terms will also include any notes
delivered in exchange or replacement therefor.


 


SECTION 1.02.                                   The
Junior Note. The Company has authorized
the issuance and sale to the Purchaser, set forth in the Schedule of
Purchasers attached hereto in Schedule I, of the Company’s Junior
Secured Convertible Promissory Note (the “Junior Note”, and collectively with
the Senior Notes referred to as the “Notes,” which term will also include any
notes delivered in exchange or replacement therefor), due March 1, 2011
(the “Junior Note Maturity Date”), in the original aggregate principal amount
of up to $3,000,000. The Junior Note will be substantially in the form set
forth in Exhibit F hereto.


 


SECTION 1.03.                                   Purchase
and Sale of Notes. The Company agrees to issue and sell to the
Purchasers, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchasers, severally
and not jointly, agree to purchase, the Notes set forth opposite their
respective names in the Schedule of Purchasers attached as Schedule I
for the aggregate purchase price set forth therein. The consideration to be
paid for the Notes will consist of $9,700,000 cash. The closing of such
purchase and sale (the “Closing”) will be held at the office of Paul, Hastings,
Janofsky & Walker LLP, 695 Town Center Drive, Costa Mesa, CA 92626, on
March 8, 2006 (the “Closing
Date”) at 10:00 A.M., Pacific Standard Time, or on such other date and at
such time as may be mutually agreed upon. At the Closing, the Company will
issue and deliver to each Purchaser one Senior Note or one Junior Note, as the
case may be, payable to the order of such Purchaser, in the principal
amount set forth opposite such Purchaser’s name in the Schedule of
Purchasers attached as Schedule I against delivery to the Company
of a check payable to the order of the Company, in the amount set forth
opposite the name of such Purchaser under the heading “Aggregate Purchase Price
for Notes” on Schedule I, less the Purchaser’s reasonable estimated
expenses to be paid by the Company pursuant to Section 7.01, transference
of such sum to the account of the Company by wire transfer, or delivery or
transference of such sum to the Company by any combination of such methods of
payment.


 

















 


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


 


SECTION 1.05.                                   Interest
Rate for Senior Note; Payment of Principal and Interest for Senior Note. The Senior
Notes will accrue interest at the rate of 8% per annum if paid in cash or 11%
per annum if paid in kind. The Company in its sole discretion may elect to
pay in cash or in kind until March 31, 2009, after which interest will be
paid in cash. Interest will be due and payable quarterly in arrears on the last
day of each fiscal quarter (each, a “Senior Note Interest Payment Date”), with
the first interest payment due June 30, 2006. If the Company chooses to
make interest payments in kind, the amount of accrued interest to be so paid
will be added to the principal amount of the Senior Notes on the applicable Senior
Note Interest Payment Date. Principal will be amortized over three years and
payable in equal monthly installments on the last day of each month beginning
on March 31, 2009. The Senior Notes and all accrued but unpaid interest
thereon shall be due and payable in full at the Senior Note Maturity Date
unless earlier redeemed pursuant to the terms and conditions set forth in Section 1.06
herein.


 


SECTION 1.06.                                   Prepayment
of Senior Notes. The Senior Notes will be payable by the Company
prior to the Senior Note Maturity Date as follows (all prepayments made by the
Company to the Senior Note holders under this Agreement shall be made by wire
transfer of immediately available funds in the lawful currency of the United
States without setoff or withholding of any kind):


 


(a)                                  Voluntary Prepayment by the Company. At any time until the Senior Notes have
been repaid in full, the Company may, at its sole option, redeem the entire
outstanding principal amount of the Senior Notes (including any and all accrued
but unpaid interest on such principal amount) through the date of repayment on
such principal amount (such entire outstanding principal amount, plus all such
accrued but unpaid interest, hereinafter referred to for purposes of this Section 1.06
as the “Redemption Amount”) by paying to the holders of the Senior Notes
105% of the Redemption Amount, with such payments to be apportioned ratably
among the Purchasers or their transferees according to the unpaid principal
balance and accrued but unpaid interest thereon to which such payments relate.


 


(b)                                  Prepayment on Change of Control. At any time until the Senior Notes have
been repaid in full, the Company will redeem the Senior Notes in their entirety
upon the occurrence of a Change of Control by paying to the holders of the Senior
Notes 105% of the Redemption Amount on the closing date of the Change of
Control. Such payments will be apportioned ratably among the Senior Note
holders according to the unpaid principal balance and accrued but unpaid
interest thereon to which such payments relate. For purposes of this Section 1.06(b),
“Change of Control” means the event of (i) a merger, consolidation,
recapitalization or share exchange in which the holders of the voting stock of
the Company immediately prior to such merger, consolidation, recapitalization
or share exchange will not own 50% or more of the voting stock of the
continuing or surviving corporation or other entity, or the parent company of
such corporation or other entity, immediately after such merger, consolidation,
recapitalization or share exchange, (ii) the sale, assignment, conveyance,
transfer, lease or other disposition (other than the grant of a security
interest) of all or substantially all of the assets of Company to any person or
group of related persons, or (iii) any sale or other disposition of the
voting stock of the Company representing 50% or more of the total voting power
of the Company’s outstanding capital stock in a single transaction or a series of
related transactions to any person, or group of related persons; provided, however that none of the
following events shall be deemed to be a Change of Control for


 


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purposes of this Agreement: (A) the Company’s
issuance of shares of its Common Stock, $0.0001 par value (the “Common Stock”)
to any of its existing unsecured trade creditors set forth on Schedule II
which opt to convert trade debt (as of the date of this Agreement) up to
the amount set forth on Schedule II into Common Stock at a
conversion rate of $0.02 per share within three business days of the date
immediately following the effective date of the Reverse Stock Split (as defined
below in Section 1.15(g)), or June 30, 2006, whichever is earlier, pursuant
to a Settlement and Release Agreement substantially in the form set forth
as Exhibit B; and (B) the Company’s issuance of Common Stock within
the earlier of (i) three business days of the effective date of the
Reverse Stock Split, or (ii) June 30, 2006, pursuant to a conversion
and settlement agreement, substantially in the form of Exhibit C
hereto (a “Conversion and Settlement Agreement”), with each and all of
the holders (all of such holders are set forth on Schedule III) of the
Company’s:  (a) 9% Senior
Subordinated Convertible Notes dated as of October 15, 2004 (the “9%
Notes”), (b) Amended and Restated 9% Senior Subordinated Convertible
Notes dated as of October 26, 2005 (the “Amended 9% Notes”), (c) Secured
Promissory Notes dated as of October 26, 2005 (the “Bridge Notes”), and (d) Secured
Promissory Notes dated as of September 20, 2005 issued to the former shareholders
of Integration Technologies, Inc. (the “Acquisition Notes” and
together with the 9% Notes, the Amended 9% Notes and the Bridge Notes, the “Outstanding
Notes”).


 


(c)                                  Prepayment on Sale of Assets. At any time until the Senior Notes have
been repaid in full, the Company will redeem all or a portion of the Redemption
Amount immediately upon the occurrence of a Substantial Asset Sale as follows:  Upon the occurrence of a Substantial Asset
Sale, (i) 50% of the gross proceeds of such sale (the “Asset Sale Prepayment
Amount”) will be paid to the Purchasers or subsequent transferees of the Senior
Notes in respect of the Redemption Amount; and (ii) a prepayment
penalty equal to 2% of the Asset Sale Prepayment Amount will be paid by the
Company to the Purchasers or subsequent transferees of the Senior Notes. Such
payments will be apportioned ratably among the Senior Note holders according to
the unpaid principal balance and accrued but unpaid interest thereon to which
such payments relate. For purposes of this Section 1.06(c), a “Substantial
Asset Sale” is any voluntary or involuntary sale or series of sales of the
Company’s assets (including casualty losses or condemnations)  which generate(s) (i)  gross proceeds of
$100,000 or more in the case of a single-asset sale, or (ii) aggregate
gross proceeds of $100,000 or more over any 12-month period in the case of a series of
asset sales.


 


SECTION 1.07.                                   Warrants
for Senior Notes. At the Closing, the Company will issue to the
Purchasers of Senior Notes pro rata,
according to each Purchaser’s proportion of the aggregate principal amount of
the Senior Notes, warrants for the purchase of an aggregate of 19.9% of the
Common Stock of the Company, exercisable at $0.001 per share, in the form set
forth as Exhibit D.


 


SECTION 1.08.                                   Interest
Rate for Junior Note; Payment of Principal and Interest for Junior Note. The Junior
Note will accrue interest at the rate of ten percent (10%) per annum,
compounding quarterly. The said interest shall become due quarterly in arrears
and shall be payable on the last day of each fiscal quarter (each, an “Interest
Payment Date”) in respect of the immediately preceding completed fiscal quarter.
The first Interest Payment Date will be June 30, 2006. At the Company’s
sole option, all interest payments due and payable through June 30, 2009 may be
paid in kind at the rate of fourteen percent (14%) per annum, compounding
quarterly, in which case the accrued interest will be added to the principal
amount of the Junior Note on the applicable Interest Payment Date, and interest
will accrue on the aggregate principal amount. All interest payments due and
payable after June 30, 2009 must be paid in cash. The Junior Note shall be
due and payable in full at the Junior Note Maturity Date unless earlier
converted in accordance with Section 3 of the Junior Note.


 


SECTION 1.09.                                   Redemption
of Junior Note. Until March 1, 2010, the Company may not
prepay the Junior Note in whole or in part without the prior written
consent of the holder thereto, which may be given or withheld in such
holder’s sole discretion. At anytime from March 1, 2010 until the


 


3

















 


Junior Note Maturity Date,
the Company may prepay this Junior Note in whole or in part at any
time without penalty.


 


SECTION 1.10.                                   Conversion
of Junior Note. All or any part of the principal plus accrued
but unpaid interest on the Junior Note may be converted at any time into a
number of fully paid and nonassessable shares of Common Stock of the Company,
at the sole option of the holder of the Junior Note, pursuant to the terms and
conditions of conversion set forth in the Junior Note.


 


SECTION 1.11.                                   Payment
on Non-Business Days. Whenever any payment to be made will be due
on a Saturday, Sunday or a public holiday under the laws of the State of
California, such payment may be made on the next succeeding business day,
and such extension of time will in such case be included in the computation of
payment of interest due.


 


SECTION 1.12.                                   Registration
of Notes. The Company will maintain at its principal office
a register of the Notes and will record therein the names and addresses of the
registered holders of the Notes, the address to which notices are to be sent
and the address to which payments are to be made as designated by the registered
holder if other than the address of the holder, and the particulars of all
transfers, exchanges and replacements of Notes. No transfer of a Note will be
valid unless made on such register for the registered holder or his executors
or administrators or his or their duly appointed attorney, upon surrender
therefor for exchange as hereinafter provided, accompanied by an instrument in
writing, in form and execution reasonably satisfactory to the Company. Each
Note issued hereunder, whether originally or upon transfer, exchange or
replacement of a Note or Notes, will be registered on the date of execution
thereof by the Company and will be dated the date to which interest has been
paid on such Notes or Note. The registered holder of a Note will be that person
in whose name the Note has been so registered by the Company. A registered
holder will be deemed the owner of a Note for all purposes of this Agreement
and, subject to the provisions hereof, will be entitled to the principal and
interest evidenced by such Note free from all equities or rights of setoff or
counterclaim between the Company and the transferor of such registered holder
or any previous registered holder of such Note.


 


SECTION 1.13.                                   Transfer
and Exchange of Notes. The registered holder of any Note or Notes
may, prior to maturity or prepayment thereof, surrender such Note or Notes at
the principal office of the Company for transfer or exchange; provided, however, the registered holder of any Note or
Notes will not transfer any such Note (a) to any person or entity which is
not an “accredited investor” within the meaning of Rule 501 under the
Securities Act of 1933, as amended (the “Securities Act”), (b) to any
person or entity that could result in the loss of the exemption from
registration under the Securities Act applicable to the original sale of the
Notes, as determined in the reasonable discretion of the Company pursuant to a
written opinion of the Company’s counsel, and (c) so long as no Event of
Default has occurred, without the consent of the Company, which consent will
not be unreasonably withheld. Within a reasonable time after notice to the
Company from a registered holder of its intention to make such exchange and
without expense (other than transfer taxes, if any) to such registered holder,
subject to the Company’s consent, if such consent is required by this Section 1.13,
the Company will issue in exchange therefor another Note or Notes, in such
denominations as requested by the registered holder, for the same aggregate
principal amount as the unpaid principal amount of the Note or Notes so
surrendered and having the same maturity and rate of interest, containing the
same provisions and subject to the same terms and conditions as the Note or
Notes so surrendered. Each new Note will be made payable to such person or
persons, or registered assigns, as the registered holder of such surrendered
Note or Notes may designate, and such transfer or exchange will be made in
such a manner that no gain or loss of principal or interest will result
therefrom.


 


SECTION 1.14.                                   Replacement
of Notes. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such


 


4

















 


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


 


SECTION 1.15.                                   Events
of Default. If any of the following events (“Events of Default”)
shall occur and be continuing:


 


(a)                                  The Company will fail to pay any installment
of principal of, or interest due on, any of the Notes within five (5) calendar
days of the date such installment is due;


 


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


 


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


 


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


 


(e)                                  The Company will be involved in financial
difficulties as evidenced (i) by its admitting in writing its inability to
pay its debts generally as they become due; (ii) by its commencement of a
voluntary case under Title 11 of the United States Code as from time to time in
effect, or by its authorizing, by appropriate proceedings of its Board of
Directors or other governing body, the commencement of such a voluntary case
which is not dismissed within sixty (60) days; (iii) by its filing an
answer or other pleading admitting or failing to deny the material allegations
of a petition filed against it commencing an involuntary case under said Title
11, or seeking, consenting to or acquiescing in the


 


5

















 


relief therein provided, or by its failing to
controvert timely the material allegations of any such petition; (iv) by
the entry of an order for relief in any involuntary case commenced under said
Title 11; (v) by its seeking relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or by its consenting to or acquiescing in such relief; (vi) by
the entry of an order by a court of competent jurisdiction (a) finding it
to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its
creditors, or (c) assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property; or (vii) by
its making an assignment for the benefit of, or entering into a composition
with, its creditors, or appointing or consenting to the appointment of a
receiver or other custodian for all or a substantial part of its property;


 


(f)                                    The Company shall fail to perform any of
its obligations under Section 5.21, Section 5.22, Section 5.23
or Article VI of this Agreement;


 


(g)                                 The Company shall fail to effect a one-for-ten
reverse stock split of its Common Stock (the “Reverse Stock Split”) within 90
days following the Closing Date;


 


(h)                                 The Company shall fail to reduce Chief
Executive Officer Casper Zublin’s salary by $100,000 ratably over the 48 months
within 15 days following the Closing Date, with such reduction to be set forth
in a written agreement between the Company and Mr. Zublin in form and
substance reasonably satisfactory to the Purchasers;


 


(i)                                    The Company shall fail to complete the
conversion of all of the obligations outstanding under the Outstanding Notes into
Common Stock of the Company at a conversion rate of $0.02 per share on or before the earlier of (a) three business days
following the effective date of the Reverse Stock Split, or (b) June 30,
2006;


 


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


 


(k)                                The Company shall fail to effect, as set
forth on Schedule C of the respective Security and Pledge
Agreements, the termination within (i) ten (10) calendar days of the
Closing Date of each of those certain financing statements on file by Laurus
Master Fund, Ltd., C.W. Zublin, Jr. Trust, Glen Ackerman, and Lisa
Ackerman in any jurisdiction purporting to evidence a security interest in any
assets of the Company or its affiliates and (ii) thirty (30) calendar days
of the Closing Date of any and all other financing statements on file in any
jurisdiction purporting to evidence a security interest in any assets of the
Company or its affiliates, other than the financing statements evidencing the
security interests of the Purchasers pursuant to the Security and Pledge
Agreements.


 


then,
and in any such event, any holder of any Note may, by notice to the Company,
declare the entire unpaid principal amount of the Note, all interest accrued
and unpaid thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Note, all such accrued interest and
all such amounts will become and be forthwith due and payable (unless there
will have occurred an Event of Default under subsection 1.15(e) in
which case all such amounts will automatically become due and payable), without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company.


 


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ARTICLE II


 


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


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


 


SECTION 2.01.                                   Organization,
Qualifications and Corporate Power.


 


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


 


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


 


SECTION 2.02.                                   Authorization
of Agreements, Etc.


 


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


 


(b)                                  The Notes and the Warrants have been duly
authorized and, when issued in accordance with this Agreement, will be free and
clear of all liens, charges, restrictions, claims and encumbrances imposed by
or through the Company. Except as set forth on Schedule IV, the
issuance, sale and delivery of the Notes and the Warrants are not subject to
any preemptive right of shareholders of the Company or to any right of first
refusal or other right in favor of any person.


 


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


 


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SECTION 2.04.                                   Authorized
Capital Stock. The authorized capital stock of the Company consists
of 450,000,000 shares of Common Stock, $.0001 par value per share, and
10,000,000 shares of preferred stock, $0.0001 par value per share (“Preferred
Stock”). As of the date of this Agreement, 81,164,636 shares of Common Stock
and no shares of Preferred Stock were validly issued and outstanding, fully
paid and nonassessable. Except as disclosed in SEC Reports (as defined below),
there are no options, warrants and convertible securities of the Company, and
any other rights to acquire securities of the Company. All outstanding
securities of the Company are validly issued, fully paid and nonassessable. No
stockholder of the Company is entitled to any preemptive rights with respect to
the purchase of or sale of any securities of the Company.


 


SECTION 2.05.                                   SEC
Filings, Other Filings and Regulatory Compliance. Since January 1,
2002, the Company has timely made all filings required to be made by it under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The
Company has delivered or made accessible to the Purchasers true, accurate and
complete copies of (a) the Company’s Annual Report on Form 10-K for
the fiscal year ended June 30, 2005, (b) the Company’s Quarterly
Reports on Form 10-Q for the fiscal quarters ended September 30, 2005
and December 31, 2005, (c) the Company’s definitive proxy statement
dated November 17, 2005 relating to its Annual Meeting of Stockholders,
and (d) all the Company’s Current Reports on Form 8-K filed since July 1,
2005 (collectively, the “SEC Reports”). The SEC Reports when filed, complied in
all material respects with all applicable requirements of the Exchange Act and
the Sarbanes-Oxley Act of 2002, if and to the extent applicable, and the rules and
regulations of the Securities and Exchange Commission (the “SEC”) thereunder
applicable to the SEC Reports. None of the SEC Reports, at the time of filing,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances in which they
were made. The Company has taken, or will have taken prior to the Closing, all
necessary actions to maintain eligibility of its Common Stock for trading on
OTC Bulletin Board under all currently effective inclusion requirements. Each
balance sheet included in the SEC Reports (including any related notes and
schedules) fairly presents in all material respects the consolidated financial
position of the Company as of its date, and each of the other financial
statements included in the SEC Reports (including any related notes and
schedules) fairly presents in all material respect the consolidated results of
operations of the Company for the periods or as of the dates therein set forth
in accordance with generally accepted accounting principles (“GAAP”)
consistently applied during the periods indicated or as a result of year end
adjustments and except as may be indicated in the notes thereto or, in the
case of interim consolidated financial statements, where information and
footnotes contained in such financial statements are not required to be in
compliance with GAAP). Such financial statements included in the SEC Reports
were, at the time they were filed, consistent with the books and records of the
Company in all material respects and complied as to form in all material
respects with then applicable accounting requirements and with the rules and
regulations of the SEC with respect thereto. The Company keeps accounting
records in which all material assets and liabilities, and all material
transactions, including off-balance sheet transactions, of the Company are
recorded in accordance with GAAP.


 


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


 


8

















 


SECTION 2.07.                                   Offering
of the Notes. Except for the filing of a registration statement
on Form S-1 with the SEC on November 25, 2005 in connection with a
proposed rights offering, which registration statement was withdrawn as of February 3,
2006, neither the Company, nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance of the
Notes and the Warrants to the Purchasers. Based upon the policy position of the
SEC, as described in the SEC staff’s No-Action Letters dated June 26, 1990
to Black Box Incorporated and February 28, 1992 to Squadron, Ellenoff,
Pleasant & Lehrer, and the Purchasers’ representations in Article III,
the issuance of the Notes and the Warrants to the Purchasers will not be
integrated with any other issuance of the Company’s securities (past, current
or future) for purposes of the Securities Act.


 


SECTION 2.08.                                   Material
Changes. Except as set forth in Schedule IV
attached hereto, since June 30, 2005, there has not been (i) any
direct or indirect redemption, purchase or other acquisition by the Company of
any shares of Common Stock; (ii) any declaration, setting aside or payment
of any dividend or other distribution by the Company with respect to the Common
Stock; (iii) any material liabilities (absolute, accrued or contingent)
incurred or assumed by the Company, other than current liabilities incurred in
the ordinary course of business, liabilities under contracts entered into in
the ordinary course of business, purchase price payment obligations incurred in
connection with the acquisition of Red Rock Communications Solutions, Inc.
and Integration Technologies, Inc. and liabilities not required to be
reflected on the Company’s financial statements pursuant to GAAP; or (iv) any
mortgage, pledge, security interest, encumbrance, lien or charge of any kind
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in connection with such mortgage, pledge, security interest,
encumbrance, lien or charge) (each, a “Lien”) or adverse claim on any of the
Company’s properties or assets, except for Liens for taxes not yet due and
payable, interest of lessors under operating capital leases, purchase money
liens, amounts deposited for security for surety bonds, Liens incurred in
connection with the Company’s credit facility with New England Technology
Finance, LLC, Liens incurred in the ordinary course of business or Liens that
are not material in amount to the Company and its subsidiaries.


 


SECTION 2.09.                                   Litigation. Except as
disclosed in the Schedule IV attached hereto, there is no action,
suit, proceeding or investigation pending or, to the Company’s knowledge,
currently threatened against the Company or any of its subsidiaries that
questions the validity of this Agreement or the right of the Company to enter
into it, or to consummate the transactions contemplated hereby, or that could
reasonably be expected to result, either individually or in the aggregate, in a
material adverse effect on the Company. The foregoing includes, without limitation,
actions pending or, to the Company’s knowledge, threatened involving the prior
employment of any of the Company’s employees or their use in connection with
the Company’s business of any information or techniques allegedly proprietary
to any of their former employers. Neither the Company nor any of its
subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or governmental authority. Except
as disclosed in Schedule IV attached hereto, there is no action,
suit, proceeding or investigation by the Company or any of its Subsidiaries
currently pending or which the Company or any of its subsidiaries currently
intends to initiate, which could reasonably be expected to have a material
adverse effect.


 


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


 


9

















 


SECTION 2.11.                                   Intellectual
Property Rights. To the best of its knowledge, the Company owns or
possesses the licenses or rights to use all patents, patent applications,
patent rights, inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names and copyrights
necessary to enable it to conduct its business as now operated (the “Intellectual
Property”). Except as set forth in Schedule IV attached hereto,
there are no material outstanding options, licenses or agreements relating to
the Intellectual Property, nor is the Company bound by or a party to any
material options, licenses or agreements relating to the patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names or copyrights
of any other person or entity. Except as set forth in Schedule IV
attached hereto, there is no claim or action or proceeding pending or, to the
Company’s knowledge, threatened that challenges the right of the Company with
respect to any Intellectual Property. Except as set forth in Schedule IV
attached hereto, to the knowledge of the Company, the Company’s Intellectual
Property does not infringe any intellectual property rights of any other person
which, if the subject of an unfavorable decision, ruling or finding would have
a material adverse effect.


 


SECTION 2.12.                                   Insurance. The Company
is insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company believes to
be prudent and customary in the businesses in which the Company is engaged.


 


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


 


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


 


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


 


SECTION 2.16.                                   Office Headquarters. The sole lease agreement now currently in full force
and effect for the Company’s principal place of business is that certain Office
Lease Agreement, made and entered into as of the 21st day of July, 2003, by and
between CA-Fairchild Corporate Center Limited Partnership, a Delaware limited
partnership, as landlord, and Integration Technologies, Inc., a California
corporation, tenant (as amended, supplemented, or otherwise modified from time
to time) (the “Office Lease”).


 


SECTION 2.17.                                   Representations
Complete. The representations and warranties made by the
Company in this Agreement, the statements made in any certificates furnished by
the Company pursuant to this Agreement, and the statements made by the Company
in any documents mailed, delivered or furnished to the Purchasers in connection
with this Agreement, taken as a whole, do not contain and will not contain, as
of their respective dates and as of the Closing Date, any misstatements of
material fact or omit to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading.


 


10

















 


ARTICLE III


 


REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS


 


Each Purchaser severally
represents and warrants (except, with respect to the first sentence of (f) below,
as to which Lloyd I. Miller, III and Trust A-4 - Lloyd I. Miller, make no
representation or warranty) to the Company that:


 


(a)                                  it is a “large institutional accredited
investor” as such term is used in the SEC staff’s No-Action Letter dated February 28,
1992 to Squadron, Ellenoff, Pleasant & Lehrer, or, if a Purchaser is
not an institution, it beneficially owns and invests on a discretionary basis
at least $100,000,000 in securities of issuers that are not affiliated with
such Purchaser, and was not organized for the specific purpose of acquiring the
Notes;


 


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


 


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


 


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


 


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


 


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


 


(g)                                 it understands that (i) the Notes are
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state securities
laws, and (ii) that the Company is relying upon the truth and accuracy of,
and Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Notes;


 


(h)                                 The Company or its counsel have made
available all materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the Notes which
have been specifically requested by such Purchaser. Each Purchaser has been
afforded the opportunity to ask questions of the Company, was permitted to meet
with the Company’s officers and has


 


11

















 


received what such Purchaser believes to be
complete and satisfactory answers to any such inquiries. Neither such inquiries
nor any other due diligence investigation conducted by the Purchasers or any of
their respective representations will modify, amend or affect such Purchaser’s
right to rely on the Company’s representations and warranties contained herein.
Each Purchaser understands that such Purchaser’s investment in the Securities
involves a high degree of risk, including without limitation the risks and
uncertainties disclosed in the  SEC
Documents. Each Purchaser acknowledges it has reviewed the disclosures
presented under the caption “Risk Factors” in the Company’s Form 10-Qs and
Form 10-Ks;


 


(i)                                    it understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Notes; and


 


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


 


ARTICLE IV


 


CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS


 


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


 


(a)                                  Security and Pledge Agreements. A Security and Pledge Agreement by and
among the Company, DynTek Services, Inc., and the holders of the Senior
Notes, in the form attached as Exhibit E (the “Senior Security
and Pledge Agreement”), and all related financing statements and a Security
and Pledge Agreement by and among the Company, DynTek Services, Inc. and
the holders of the Junior Note, in the Form attached as Exhibit G
(the “Junior Security and Pledge Agreement”, and collectively with the
Senior Security and Pledge Agreement, the “Security and Pledge Agreements”)
and other similar instruments and documents, will have been executed and
delivered to the Purchasers by a duly authorized officer of the Company and a
duly authorized officer of each of the subsidiaries of the Company party
thereto.


 


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


 


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


 


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


 


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


 


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


 


(i)                                     (A) the Certificate of Incorporation of
the Company, as amended, certified as of a recent date by the Secretary of
State of the State of Delaware, and (B) a certificate of said Secretary
dated as of a recent date as to the due incorporation and good standing of the
Company, the payment of all excise taxes by the Company and listing all
documents of the Company on file with said Secretary;


 


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


 


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


 


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


 


(g)                                 Preemptive and First Refusal
Rights. All stockholders
of the Company having any preemptive or first refusal rights with respect to
the issuance of the Notes will have irrevocably waived the same in writing or
all such rights will have expired.


 


(h)                                 Fees of Purchasers’ Counsel. The Company will have paid in accordance
with Section 7.01 the fees and disbursements of each Purchaser’s counsel
invoiced at the Closing; provided, however, that the Purchasers may deduct
such amounts from the consideration to be delivered to the Company for the
purchase of the Notes pursuant to Section 1.03.


 


(i)                                    Termination by Either Purchaser. Neither Purchaser will be obligated to
complete the purchase of the Notes if the other Purchaser elects not to
complete the transaction.


 


(j)                                    Conversion of Existing Debt. On or before the Closing Date, the Company
shall have entered into a binding, written Conversion and Settlement Agreement,
substantially in the form of Exhibit C with each and every
holder of the 9% Notes, the Amended 9% Notes, the Bridge Notes and the
Acquisition Notes, respectively.


 


13

















 


(k)                                Board of Directors. Effective as of the Closing Date, Robert
Webber and Marshall Toplansky shall have resigned from the Company’s Board of
Directors, and Alan Howe shall have been appointed to the Company’s Board of
Directors.


 


(l)                                    Renegotiation of Trade Debt. At least $575,000 in face amount of the
Company’s existing unsecured trade debt set forth on Schedule II
shall have been renegotiated pursuant to the terms of a Settlement and Release
Agreement substantially in the form of Exhibit B, and such
Settlement and Release Agreements shall have been duly entered into by the
Company with those certain trade creditors pursuant to binding, written
agreements.


 


(m)                              Equity Investment. A private placement of the Company’s Common
Stock of at least $1,000,000 at a price per share of $0.02 by Network 1
Financial Services, Inc. (the “Private Placement”) shall be subject
to a binding, written agreement with the Company which shall close before the closing
of this Agreement.


 


(n)                                 Warrant. The Company shall have issued to the
Purchasers of Senior Notes pro rata,
according to each such Purchaser’s proportion of the aggregate principal amount
of the Senior Notes, warrants for the purchase of an aggregate of 19.9% of the
Common Stock of the Company, exercisable at $0.001 per share, in the form set
forth as Exhibit D.


 


ARTICLE V


 


COVENANTS OF THE COMPANY


 


The Company agrees that, so
long as any Notes are outstanding, except to the extent compliance in any case
or cases is waived in writing by the holders of the entire aggregate unpaid
principal amount of the Notes then outstanding:


 


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


 


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


 


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


 


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


 


14

















 


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


 


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


 


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


 


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


 


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


 


SECTION 5.04.                                   Use
of Proceeds. The Company will use the proceeds from the sale of
the Senior Notes, less the amounts withheld pursuant to Section 7.01,
solely to repay all outstanding obligations of the Company to the Laurus Master
Fund Ltd,. as set forth on Schedule V. The Company will use the
proceeds from the sale of the Junior Note, less the amounts withheld pursuant
to Section 7.01, solely to repay any remaining outstanding obligations to
the Laurus Master Fund, Ltd. after the proceeds of the Senior Notes are
depleted, with any remaining proceeds from the Junior Notes to be used solely
for the purposes set forth on Schedule V.


 


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


 


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


 


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


 


SECTION 5.08.                                   Material
Contracts. The Company will not, nor will it permit any of
its subsidiaries to, enter into any contract, agreement or business arrangement
which requires annual expenditures of $2,500,000 or more.


 


15

















 


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


 


SECTION 5.10.                                   Mergers, Consolidations
and Asset Sales.
The Company will not, nor will it permit any of its subsidiaries to, be a party
to any merger or consolidation, or sell, transfer, lease or otherwise dispose
of all or any substantial part of its assets; provided, however, that the
Company shall have the sole discretion to discontinue its or any of its
subsidiaries’ Business, Process Outsourcing, or BPO, services segment at any
time. The Company will not, nor will it permit any of its subsidiaries to sell,
transfer, lease or otherwise make any Substantial Asset Sale (as such term is
defined in Section 1.06) for consideration other than cash while the Notes
or any part thereof remain outstanding.


 


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


 


SECTION 5.12.                                   Prepayment
of Indebtedness. The Company will not, nor will it permit any of
its subsidiaries, to prepay any indebtedness for borrowed money; provided,
however, that this Section 5.12 will not prohibit the Company from
redeeming the Notes pursuant to the terms of this Agreement.


 


SECTION 5.13.                                   Issuance
of Shares. The Company will not, nor will it permit any of
its subsidiaries to issue, assign, sell or transfer any shares of capital stock
or other equity interests of the Company or such subsidiary; provided, however, that the foregoing will not operate to
prevent (a) Liens on the capital stock or other equity interests of
subsidiaries of the Company pursuant to the amended and restated Security and
Pledge Agreements; (b) the issuance, sale, and transfer to any person of
any shares of Common Stock of the Company pursuant to (i) the Private
Placement or warrants issued in connection therewith or the issuance by the
Company of shares of Common Stock upon the exercise of such warrants, (ii) execution
and consummation of the terms of the Conversion and Settlement Agreements, or (iii) the
Settlement and Release Agreements; (c) the issuance of the Junior Note to the
Purchaser set forth on Schedule I hereto, or the issuance of Common Stock
upon conversion thereof; (d) the issuance by the Company to the Purchasers
of the warrants in the form set forth in Exhibit D hereto, or the
issuance by the Company of shares of Common Stock upon the exercise of such
warrants; (e) the issuance of options or rights to purchase Common Stock
under the Company’s equity incentive plans, as amended, in effect as of the
date hereof; or (f) the issuance of shares upon the exercise or conversion
of securities exercisable or convertible into shares of the Company’s Common
Stock that are outstanding as of the date hereof or otherwise permitted to be
issued under this Section 5.13.


 


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


 


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


 


16

















 


engaged in by it as of the
Closing Date; provided, however, that the Company shall have the sole
discretion to discontinue its or any of its subsidiaries’ BPO services segment
at any time.


 


SECTION 5.16.                                   Renegotiation
of Trade Debt. The Company will continue to use its reasonable best
efforts to renegotiate the entire amount of its trade debt set forth on Schedule II.


 


SECTION 5.17.                                   Reverse
Stock Split. The Company will use its reasonable best efforts
to effect the Reverse Stock Split within 90 days following the Closing Date.


 


SECTION 5.18.                                   Voting
Rights for Warrants and Junior Note. Unless enforcement of this
covenant is waived in writing by written notice to the Company given by all of
the Senior Note holders not later than thirty (30) calendar days prior to
the record date of the Company’s next Annual Meeting of Stockholders, the
Company, at its next Annual Meeting of Stockholders will use reasonable best
efforts to obtain stockholder approval of an amendment to the Company’s Second
Amended and Restated Certificate of Incorporation to confer upon the holder of (i) the
Warrants the power to vote, in respect to the corporate affairs and management
of the Company, that number of shares of Common Stock into which such Purchaser’s
Warrant may then be exercised in accordance with Section 221 of the
General Corporation Law of the State of Delaware and (ii) the Junior Note
the power to vote, in respect to the corporate affairs and management of the
Company, that number of shares of Common Stock into which such Junior Note may then
be converted in accordance with Section 221 of the General Corporation Law
of the State of Delaware


 


SECTION 5.19.                                   Compliance
with Security and Pledge Agreements. The Company will comply at
all times with all of the terms and conditions of the Security and Pledge
Agreements.


 


SECTION 5.20.                                   Termination
of Financing Statements. Either within ten (10) calendar
days after the Closing Date or thirty (30) calendar days after the Closing
Date, as more specifically set forth on Schedule C of the
respective Security and Pledge Agreements, the Company will take all necessary actions
to terminate all financing statements in any jurisdiction which purport to
evidence a security interest in any asset of the Company or its affiliates in
respect of all entities set forth on Schedule C of the respective
Security and Pledge Agreements, including, without limitation, in favor of the
Laurus Master Fund, Ltd. or any affiliate thereof; provided, however, the
Company will not terminate any financing statement evidencing a security
interest of any of the Purchasers pursuant to the Security and Pledge
Agreements.


 


SECTION 5.21.                                   Deposit
Account. Within (i) ten (10) business
days after the Closing Date, the Company shall take all necessary actions to execute,
deliver and establish a control agreement by and for the benefit of the
Purchasers in respect of that certain deposit account held by the Company at LaSalle
Bank Midwest N.A.(Account No. 6856286387 and ABA No. 07200805) and
such control agreement shall be in form and substance reasonably satisfactory
to the Purchasers and accompanied by an opinion of counsel to the Company
addressed to the Purchasers regarding the creation and perfection of the
Purchasers’ respective security interests in such deposit account and such
other matters as the Purchasers may reasonably request and (ii) fifteen
(15) business days after the Closing Date, the Company shall use commercially reasonable
best efforts to execute, deliver and establish a control agreement by and for
the benefit of the Purchasers in respect of that certain escrow account
established in connection with an Escrow Agreement, dated as of September 22,
1997, by and among, Dyntek, Inc. (f/k/a Data Systems Network Corporation,
a predecessor entity to Dyntek, Inc.), Hooper Holmes, Inc. and
JPMorgan Chase Bank, N.A. (f/k/a NBD Bank which was a predecessor entity to
JPMorgan Chase Bank, N.A.) (as amended, supplemented or modified from time to
time) (the “Escrow Account”) and such control agreement shall be in form and
substance reasonably satisfactory to the Purchasers and accompanied by an
opinion of counsel to the Company addressed to the Purchasers regarding the
creation and perfection


 


17

















 


of the Purchasers’ respective
security interests in such Escrow Account and such other matters as the
Purchasers may reasonably request.


 


SECTION 5.22.                                   Mortgage Leasehold. Within thirty (30) business days after the Closing
Date, the Company shall use its reasonable best efforts to take all action necessary
to execute, deliver and establish a mortgage over the Company’s leasehold
interest in its office headquarters referred to in Section 2.16 hereof for
the benefit of the Purchasers, with such mortgage to be in form and
substance satisfactory to the Purchasers and accompanied by an opinion of
counsel to the Company addressed to the Purchasers regarding the creation and
perfection of the Purchasers’ respective security interests in such leasehold
interest and such other matters as the Purchasers may reasonably request.


 


SECTION 5.23.                                   Delivery of Certificates. Within five (5) business days of the
Closing Date, the Company shall deliver to the Purchasers the certificates for
all shares or units of DynTek Services, Inc. evidenced by a certificate
duly endorsed in blank for transfer or accompanied by an appropriate assignment
or an appropriate undated stock power or powers, in every case sufficient to
transfer title thereto.


 


ARTICLE VI


 


REGISTRATION


 


SECTION 6.01.                                   Piggyback
Registration. If, prior to June 30,
2006, the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Purchasers)
the sale of any of its securities under the Securities Act, then the Company
will promptly give the Purchasers written notice thereof and will use its
reasonable best efforts to include in such registration (A) all or any part of
the shares of Common Stock issuable by the Company upon the exercise of
warrants or conversion of notes (including, for the avoidance of doubt, the
Junior Note) issued by the Company to SACC Partners L.P., Lloyd I. Miller, III
and the Purchasers hereto (i) on October 26, 2005 and (ii) on
the Closing Date; and (B) all Conversion Shares (as such term is defined
in those certain Conversion and Settlement Agreements executed as of the date
hereof by and between (x) the Company and SACC Partners, L.P. and (y) the
Company and Lloyd I. Miller, III) (collectively, the “Registrable
Securities”). This requirement does not apply to Company registrations on Form S-4
or S-8 or their equivalents relating to equity securities to be issued solely
in connection with an acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans. Each Purchaser must give its request for registration under this paragraph
to the Company in writing within 10 days after receipt from the Company of
notice of such pending registration. If the registration for which the Company
gives notice is a public offering involving an underwriting, the Company will
so advise the Purchasers as part of the above-described written notice. In
that event, if the managing underwriter(s) of the public offering impose a
limitation on the number of shares of Common Stock that may be included in
the Registration Statement because, in such underwriter(s)’ judgment, such
limitation would be necessary to effect an orderly public distribution, then
the Company will be obligated to include only such limited portion, if any, of
the Registrable Securities with respect to which the Purchasers have requested
inclusion hereunder. Any exclusion of Registrable Securities will be made pro
rata among all holders of the Company’s securities seeking to include shares of
Common Stock in proportion to the number of shares of Common Stock sought to be
included by those holders. However, the Company will not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities the holders of which are not entitled by right to inclusion of such
securities in such Registration Statement or are not entitled pro rata
inclusion with the Registrable Securities.


 


SECTION 6.02.                                   Mandatory
Registration. If, at anytime on or after June 30, 2006, the
resale of any Registrable Securities have not been registered by the Company
pursuant to Section 6.01


 


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hereof, the Purchasers may deliver
notice to the Company to require that the Company register all Registrable
Securities on a registration statement on Form S-1, or other form then
available to the Company under applicable SEC rules and regulations (the “Registration
Statement”), covering the resale of all of the Registrable Securities. The date
on which the Company receives such notice is referred to herein as the “Demand
Date.”  The Company shall use commercially
reasonable best efforts (i) to cause such Registration Statement to be
filed under the Securities Act as promptly as practicable after receipt of
notice of such demand, but in any event not more than 30 days following the
Demand Date and (ii) to cause such Registration Statement to be declared
effective under the Securities Act as promptly as practicable, but in any event
no later than 90 days following the Demand Date (the “Demand Effective Date”). However,
so long as the Company has filed the Registration Statement within 30 days
after the Demand Date, (a) if the SEC takes the position that registration
of the resale of the Registrable Securities by the Purchasers is not available
under applicable laws, rules and regulations and that the Company must
register the offering of the Registrable Securities as a primary offering by
the Company, or (b) if the Registration Statement receives SEC review,
then the Demand Effective Date will be the 120th day after the Demand Date. In
the case the SEC takes the position that resale registration is not available,
the Company will, within 40 business days after the date the Company receives
such SEC response, file a Registration Statement as a primary offering. The
Company’s best efforts will include, without limitation, promptly responding to
all comments received from the staff of the SEC. If the Company receives
notification from the SEC that the Registration Statement will receive no
action or review from the SEC, then the Company will cause the Registration Statement
to become effective within five business days after such SEC notification. Once
the Registration Statement is declared effective by the SEC, the Company will
cause the Registration Statement to remain effective throughout the
Registration Period, except as permitted under this Section. “Registration
Period” means the period between the Demand Date and the earlier of the date on
(i) which (x) all of the Registrable Securities have been sold by the
Purchasers pursuant to a Registration Statement and (y) are freely
tradable under the Securities Act, or (ii) all the Registrable Securities may be
immediately sold by the Purchasers without registration and without restriction
as to the number of Registrable Securities to be sold, pursuant to Rule 144
or otherwise. On the date of each monthly anniversary of the date on which any
breach of this Section 6.02 first occurs (including failure to file a
Registration Statement or to cause a Registration Statement to be declared
effective within the time periods set forth herein) until the applicable
default is cured (each, a “Payment Date”), the Company shall issue to the
Purchasers as damages additional shares of the Company’s Common Stock equal to
2.0% of the aggregate amount of the Registrable Securities, and all such shares
shall become Registrable Securities; provided, however,
that the total number of shares of the Company’s Common Stock payable pursuant
to this Section 6.02 to any Purchaser shall not exceed the number of
shares, less one share, which, if issued, would have, at the time of the
Closing Date or Payment Date, required stockholder approval of such issuance
pursuant to Section 4350(i)(1)(D) of the Nasdaq Marketplace Rules if
the Company is then subject to such rule. In the event the number of shares of
the Company’s Common Stock issuable under this Section 6.02 is restricted
by the limitations of the previous sentence, the Company may waive such
limitation or, at the Company’s election, the balance of the damages payable by
the Company pursuant to this Section 6.02 may be paid in cash
(valuing the shares not so issued at the average of the closing prices of the
Company’s Common Stock over the twenty (20) trading days immediately preceding
the one-month anniversary of the default which requires the issuance of shares)
on the applicable Payment Date in accordance with payment instructions provided
by each Purchaser.


 


SECTION 6.03.                                   Continued
Effectiveness of Registration Statement. Subject to the limitations
set forth in Section 6.08, the Company will keep the Registration
Statement covering the Registrable Securities effective under Rule 415 at
all times during the Registration Period. In the event that the number of
shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable Securities issued,
the Company will (if permitted) amend the Registration Statement or file a new
Registration Statement (on the short form available therefor, if


 


19

















 


applicable), or both, so as
to cover all of the Registrable Securities. The Company will file such
amendment or new Registration Statement as soon as practicable, but in no event
later than 30 business days after the necessity therefor arises (based upon the
market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company will use its best efforts to
cause such amendment or new Registration Statement to become effective as soon
as is practicable after the filing thereof, but in no event later than 90 days
after the date on which the Company reasonably first determines the need
therefor.


 


SECTION 6.04.                                   Accuracy
of Registration Statement. Any Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) filed by the Company covering Registrable Securities will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. The Company
will prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to
permit sales pursuant to the Registration Statement at all times during the
Registration Period, and, during such period, will comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until the
termination of the Registration Period, or if earlier, until such time as all
of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth
in the Registration Statement.


 


SECTION 6.05.                                   Furnishing
Documentation. The Company will furnish to the Purchasers, or to
their legal counsel, (a) promptly after such document is filed with the
SEC, one copy of any Registration Statement filed pursuant to this Agreement
and any amendments thereto, each preliminary prospectus and final prospectus
and each amendment or supplement thereto; and (b) a number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, and such other documents as the Purchasers may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by the Purchasers. The Company will promptly notify by facsimile or email
the Purchasers of the effectiveness of the Registration Statement and any
post-effective amendment.


 


SECTION 6.06.                                   Additional
Obligations. The Company will use its best efforts to (a) register
and qualify the Registrable Securities covered by a Registration Statement
under such other securities or blue sky laws of such jurisdictions as the
Purchasers reasonably request, (b) prepare and file in those jurisdictions
any amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain their
effectiveness during the Registration Period, (c) take any other actions
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (d) take any other actions
reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions. Notwithstanding the foregoing, the Company is not
required, in connection with such obligations, to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 6.06, (ii) subject itself to general
taxation in any such jurisdiction, (iii) file a general consent to service
of process in any such jurisdiction, (iv) provide any undertakings that
cause material expense or material burden to the Company, or (v) make any
change in its charter or bylaws, which in each case the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders.


 


SECTION 6.07.                                   Underwritten
Offerings. If the Purchasers select underwriters reasonably
acceptable to the Company for an underwritten offering, the Company will enter
into and perform its obligations under an underwriting agreement in usual
and customary form including, without


 


20

















 


limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering.


 


SECTION 6.08.                                   Suspension
of Registration.


 


(a)                                  The Company will notify (by telephone and
also by facsimile and reputable overnight courier) the Purchasers of the
happening of any event of which the Company has knowledge as a result of which
the prospectus included in the Registration Statement as then in effect
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Company will make such notification as promptly as practicable (but in no event
more than two business days) after the Company becomes aware of the event, will
promptly (but in no event more than ten business days) prepare and file a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and will deliver a number of copies of such supplement
or amendment to the Purchasers as they may reasonably request.


 


(b)                                  Notwithstanding the obligations under Section 6.08(a),
if in the good faith judgment of the Company, following consultation with legal
counsel, it would be detrimental to the Company and its stockholders for
resales of Registrable Securities to be made pursuant to the Registration
Statement due to the existence of a material development or potential material
development involving the Company which the Company would be obligated to
disclose in the Registration Statement, but which disclosure would be premature
or otherwise inadvisable at such time or would reasonably be expected to have a
material adverse effect upon the Company and its stockholders, the Company will
have the right to suspend the use of the Registration Statement for a period of
not more than forty-five (45) days; provided, however,
that the Company may so defer or suspend the use of the Registration
Statement no more than one time in any twelve-month period.


 


(c)                                  Subject to the Company’s rights under this Article VI,
the Company will use its reasonable best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement
and, if such an order is issued, will use its best efforts to obtain the
withdrawal of such order at the earliest possible time and to notify the
Purchasers of the issuance of such order and the resolution thereof.


 


(d)                                  Notwithstanding anything to the contrary
contained in this Agreement, if the use of the Registration Statement is
suspended by the Company, the Company will promptly (but in no event more than two
business days) give notice of the suspension to the Purchasers, and will
promptly (but in no event more than two business days) notify the Purchasers as
soon as the use of the Registration Statement may be resumed.


 


SECTION 6.09.                                   Transfer
Agent; Registrar. The Company will provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities
not later than the effective date of the Registration Statement.


 


SECTION 6.10.                                   Share
Certificates. The Company will cooperate with the Purchasers and
with the managing underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to a Registration Statement and will
enable such certificates to be in such denominations or amounts as the case may be,
and registered in such names as the Purchasers or the managing underwriter(s),
if any, may reasonably request.


 


21

















 


SECTION 6.11.                                   Plan
of Distribution. At the reasonable request of the Purchasers, the
Company will promptly prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement, and
the prospectus used in connection with the Registration Statement, as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.


 


SECTION 6.12.                                   Securities
Laws Compliance. The Company will comply with all applicable laws
related to any Registration Statement relating to the offer and sale of
Registrable Securities and with all applicable rules and regulations of
governmental authorities in connection therewith (including, without
limitation, the Securities Act, the Exchange Act and the rules and
regulations promulgated by the SEC).


 


SECTION 6.13.                                   Further
Assurances. The Company will take all other reasonable actions
as the Purchasers or the underwriters, if any, may reasonably request to
expedite and facilitate disposition by such Purchaser of the Registrable
Securities pursuant to the Registration Statement.


 


SECTION 6.14.                                   Expenses. The Company
will bear all reasonable expenses, other than underwriting discounts and
commissions, and transfer taxes, if any, incurred in connection with
registrations, filings or qualifications pursuant to Article VI of this
Agreement, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements
of counsel for the Company, and the reasonable fees and disbursements of the
Purchasers’ legal counsel.


 


SECTION 6.15.                                   Indemnification. In the event
that any Registrable Securities are included in a Registration Statement under
this Agreement:


 


(a)                                  To the extent permitted by law, the Company
will indemnify, defend and hold harmless each Purchaser that holds Registrable
Securities, and agents, employees, attorneys, accountants, underwriters (as
defined in the Securities Act) for such Purchasers and any directors or
officers of such Purchasers or such underwriter and any person who controls the
Purchasers or such underwriter within the meaning of the Securities Act or the
Exchange Act (each, a “Purchaser Indemnified Person”) against any losses,
claims, damages, expenses or liabilities (collectively, and together with
actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened in respect thereof, “Claims”) to
which any of them become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims arise out of or are based upon any of the following
statements, omissions or violations in a Registration Statement filed pursuant
to this Agreement, any post-effective amendment thereof or any prospectus
included therein:  (a) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, (b) any
untrue statement or alleged untrue statement of a material fact contained in
the prospectus or any preliminary prospectus (as it may be amended or
supplemented) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or (c) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act or any other law, including without limitation any state
securities law or any rule or regulation thereunder (the matters in the
foregoing clauses (a) through (c) being, collectively, “Violations”).
Subject to the restrictions set forth herein with respect to the number of
legal counsel, the Company will reimburse the Purchasers and each such
attorney, accountant, underwriter or controlling person and each such other
Purchaser Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any Claim. Notwithstanding
anything to the contrary contained herein, the


 


22

















 


indemnification contained in this Section 6.15
(i) does not apply to a Claim by a Purchaser Indemnified Person arising
out of or based upon a Violation that occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Purchaser
Indemnified Person expressly for use in the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus or supplement
thereto was timely made available by the Company; and (ii) does not apply
to amounts paid in settlement of any Claim if such settlement is made without
the prior written consent of the Company, which consent will not be
unreasonably withheld. This indemnity obligation will remain in full force and
effect regardless of any investigation made by or on behalf of the Purchaser
Indemnified Persons and will survive the transfer of the Registrable Securities
by the Purchasers.


 


(b)                                  In connection with any Registration Statement
in which a Purchaser is participating, each such Purchaser will indemnify and
hold harmless, the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder within
the meaning of the Securities Act or the Exchange Act (each a “Company
Indemnified Person”) against any Claim to which any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Purchaser
expressly for use in such Registration Statement. Such Purchaser will promptly
reimburse each Company Indemnified Person for any legal or other expenses
(promptly as such expenses are incurred and due and payable) reasonably
incurred by them in connection with investigating or defending any such Claim. However,
the indemnity agreement contained in this section does not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Purchaser, which consent will not be
unreasonably withheld, and no such Purchaser will be liable under this
Agreement for the amount of any Claim that exceeds the net proceeds actually received
by such Purchaser as a result of the sale of Registrable Securities pursuant to
such Registration Statement. This indemnity will remain in full force and
effect regardless of any investigation made by or on behalf of a Company
Indemnified Party and will survive the transfer of the Registrable Securities
by the Purchasers.


 


(c)                                  If any proceeding shall be brought or any
claim asserted against any person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party promptly shall notify the person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all reasonable
fees and expenses incurred in connection with defense thereof; provided,
however, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant
to this Agreement, except (and only) to the extent that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.


 


(d)                                  An Indemnified Party shall have the right to
employ separate counsel in any such proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Indemnified Parties unless: (i) the Indemnifying
Party has agreed in writing to pay such fees and expenses; (ii) the
Indemnifying Party shall have failed promptly to assume the defense of such
proceeding and to employ counsel reasonably satisfactory to such Indemnified
Party in any such proceeding; or (iii) the named parties to any such
proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the


 


23

















 


Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense thereof and such counsel shall
be at the reasonable expense of the Indemnifying Party; provided, however, that
in no event shall the Indemnifying Party be responsible for the fees and
expenses of more than one separate counsel). The Indemnifying Party shall not
be liable for any settlement of any such proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on Claims that are the
subject matter of such proceeding.


 


(e)                                  Subject to the foregoing, all reasonable fees
and expenses of the Indemnified Party (including fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten (10) business days of
written notice thereof to the Indemnifying Party, which notice shall be
delivered no more frequently than on a monthly basis (regardless of whether it
is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).


 


SECTION 6.16.                                   Transfer. The rights of the Purchasers hereunder,
including the right to have the Company register Registrable Securities
pursuant to this Agreement, may be assigned by the Purchasers to
transferees or assignees of all or any portion of the Registrable Securities,
but only if (a) the Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being transferred or assigned, (c) after such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (d) at
or before the time the Company received the written notice contemplated by
clause (b) of this sentence, the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (e) such
transfer is made in accordance with the applicable requirements of this
Agreement, and (f) the transferee is an “accredited investor” as that term
is defined in Rule 501 of Regulation D.


 


ARTICLE VII


 


MISCELLANEOUS


 


SECTION 7.01.                                   Expenses. Each party
hereto will pay its own expenses in connection with the transactions
contemplated hereby, whether or not such transactions will be consummated;
provided, however, that the Company will pay the reasonable fees and
disbursements of each of the Purchasers’ special counsel, Paul, Hastings,
Janofsky & Walker LLP and Andrews Kurth LLP, in connection with such
transactions and with the Bridge Loan, upon delivery of a reasonably itemized
invoice setting forth the services performed by such special counsel in
connection with such transactions. The Purchasers may deduct such fees
from the amount to be delivered for the purchase of the Notes pursuant to Section 1.03.
The Company shall also promptly pay upon demand the fees and disbursements of
each Purchaser’s counsel incurred in connection with any amendments,
modifications, supplements or waivers in connection with this Agreement or any
ancillary document related thereto upon delivery of a reasonably itemized
invoice setting forth the services performed by such special counsel in connection
with such transactions.


 


24

















 


SECTION 7.02.                                   Survival
of Agreements. All covenants, agreements, representations and
warranties made in this Agreement, the Security and Pledge Agreements or any
certificate or instrument delivered to the Purchasers pursuant to or in
connection with this Agreement or the Security and Pledge Agreements will
survive the execution and delivery of this Agreement or the Security and Pledge
Agreements, the issuance, sale and delivery of the Notes and Warrants, and with
respect to the Notes, until the repayment of the Notes in full.


 


SECTION 7.03.                                   Brokerage. Each party
hereto will indemnify and hold harmless the others against and in respect of
any claim for brokerage or other commissions relative to this Agreement or to
the transactions contemplated hereby, based in any way on agreements,
arrangements or understandings made or claimed to have been made by such party
with any third party.


 


SECTION 7.04.                                   Parties
in Interest. All representations, covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto will
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. Without limiting the generality of
the foregoing, all representations, covenants and agreements benefiting the
Purchasers will inure to the benefit of any and all subsequent holders from
time to time of Notes and Warrants.


 


SECTION 7.05.                                   Notices. All notices,
requests, consents and other communications hereunder will be in writing and
will be delivered in person, mailed by certified or registered mail, return
receipt requested, or sent by telecopier or recognized overnight courier
service, addressed as follows:


 


	
  if to the Company:

  	
   

  	
  19700 Fairchild Road, Suite 230

  
	
   

  	
   

  	
  Irvine, California 92612

  
	
   

  	
   

  	
  fax: (949) 955-0086

  
	
   

  	
   

  	
  Attention: Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Christopher Ivey, Esq.

  
	
   

  	
   

  	
  Stradling Yocca Carlson & Rauth

  
	
   

  	
   

  	
  660 Newport Center Drive, Suite 1600

  
	
   

  	
   

  	
  Newport Beach, CA 92660

  
	
   

  	
   

  	
  fax: (949) 725-4100

  



 


If
to any Purchaser, at the address of such Purchaser set forth in Schedule I,
and


 


	
  If to Lloyd I. Miller, III, with a
  copy to:

  	
   

  	
  Paul N. Silverstein, Esq.

  
	
   

  	
   

  	
  Andrews Kurth LLP

  
	
   

  	
   

  	
  450 Lexington Avenue

  
	
   

  	
   

  	
  New York, NY 10017

  
	
   

  	
   

  	
  fax: (212) 850-2929

  
	
   

  	
   

  	
   

  
	
  If to SACC Partners LP,
  with a copy to:

  	
   

  	
  Peter J. Tennyson, Esq.

  
	
   

  	
   

  	
  Paul, Hastings, Janofsky &
  Walker LLP

  
	
   

  	
   

  	
  695 Town Center Drive,
  17th Floor

  
	
   

  	
   

  	
  Costa Mesa, CA 92626

  
	
   

  	
   

  	
  fax: (714) 668-6337

  



 


SECTION 7.06.                                   Governing
Law. This Agreement will be governed by and construed in accordance with
the substantive laws of the State of California without regard for conflicts of
laws or choice of laws principles.


 


25

















 


SECTION 7.07.                                   Entire
Agreement. This Agreement, including the Schedules and
Exhibits hereto, along with the Notes, the Warrants and the Security and Pledge
Agreements, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference. There are no other agreements of the
parties and no party is relying on any representations of the other not
expressly set forth herein or any ancillary document related hereto or thereto.
All Schedules and Exhibits hereby are hereby incorporated herein by reference.


 


SECTION 7.08.                                   Counterparts. This
Agreement may be executed in two or more counterparts, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument.


 


SECTION 7.09.                                   Amendments. This
Agreement may not be amended or modified, and no provisions hereof may be
waived, without the written consent of the Company and the holders of at least
662/3% of the
outstanding principal amount of the Notes.


 


SECTION 7.10.                                   Severability. If any
provision of this Agreement will be declared void or unenforceable by any
judicial or administrative authority, the validity of any other provision and
of the entire Agreement will not be affected thereby.


 


SECTION 7.11.                                   Titles
and Subtitles. The titles and subtitles used in this Agreement
are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.


 


SECTION 7.12.                                   No
Publicity. Except as expressly provided below, no party will
make, issue or release any public announcement, press release, statement or
acknowledgment (collectively, “Public Announcement”) of the existence of, or
reveal publicly the terms, conditions and status of, the transactions
contemplated hereby, without the prior written consent of the other party as to
the content and time of release of and the media in which such Public
Announcement is to be made; provided, however, that in the case of a Public
Announcement which a party is required by law to make, issue or release, the
making, issuing or releasing of any such Public Announcement, by a party so
required to do so will not constitute a breach if such party has given, to the
extent reasonably possible, not less than two (2) business days prior
notice to the other party, and has attempted, to the extent reasonably
possible, to allow the other party to review and approve such Public
Announcement; provided further, however, that upon the Company’s making of
Public Announcement regarding the existence of, or the terms, conditions and
status of, the transactions contemplated hereby, whether pursuant to the filing
of a Form 8-K or otherwise, subject to the consent of the Company, which
consent may not be unreasonably withheld, the Purchasers may advertise
the closing of the transactions contemplated by this Agreement, and make
appropriate announcements of the financial arrangements entered into among the
parties hereto, including, without limitation, announcements commonly known as
tombstones, in such trade publications, business journals, newspapers of
general circulation and to such selected parties as the Purchasers will deem
reasonably appropriate.


 


SECTION 7.13.                                   Usury
Savings Clause. The parties intend to comply at all times with applicable
usury laws. If at any time such laws would render usurious any amounts due
under the Notes under applicable law, then it is the parties’ express intention
that the Company not be required to pay interest on the Notes at a rate in
excess of the maximum lawful rate, that the provisions of this Section 7.13
will control over all other provisions of the Notes which may be in
apparent conflict hereunder, that such excess amount will be immediately
credited to the principal balance of the Notes (or, if the Notes have been
fully paid, refunded by the Purchaser to the Company), and the provisions
thereof will immediately reformed and the amounts thereafter decreased, so as
to comply with the then applicable


 


26

















 


usury law, but also so as to
permit the recovery of the fullest amount otherwise due under the Notes. The
Company hereby represents and warrants that its assets are sufficient to meet
the requirements for exemption from the usury laws of the State of California
as provided by Section 25118 of the California Corporations Code or any
successor statute.


 


SECTION 7.14.                                   Further Assurances. The Company agrees to (i) execute
and deliver, or cause to be executed and delivered, all such other and further
agreements, documents and instruments and (ii) take or cause to be taken
all such other and further actions as any Purchaser may reasonably request
to effectuate the intent and purposes, and carry out the terms, of this
Agreement.


 


[Signature page follows]


 


27

















 


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


 


	
   

  	
  DYNTEK, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Casper Zublin, Jr.

  
	
   

  	
  Name:

  	
  Casper Zublin, Jr.

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
					



 


PURCHASERS:


 


SACC
PARTNERS, L.P.


 


	
  By:

  	
  /s/ Bryant Riley

  	
   

  
	
  Name:

  	
  Bryant Riley

  	
   

  
	
  Title:

  	
  General Partner

  	
   

  
					



 


LLOYD I.
MILLER, III


 


	
  By:

  	
  /s/ Lloyd I. Miller, III

  	
   

  
	
  Name: Lloyd I.
  Miller, III

  	
   

  



 


 


TRUST A-4
- LLOYD I. MILLER


 


	
  By:

  	
  PNC Bank,
  National Association,

  	
   

  
	
  Its: Trustee

  
	
   

  
	
  By:

  	
  /s/ Lloyd I.
  Miller, III

  	
   

  
	
  Name: Lloyd I.
  Miller, III

  
	
  Title:
  Investment Advisor to Trustee

  
					



 


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