Document:

Exhibit 10.1

                                  DYNTEK, INC.

                          SECURITIES PURCHASE AGREEMENT

                                January 30, 2004

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                                Table of Contents
                                                                            Page
                                                                            ----

1.  Agreement to Sell and Purchase.............................................1

2.  Fees and Warrant...........................................................1

3.  Closing, Delivery and Payment..............................................2
    3.1        Closing.........................................................2
    3.2        Delivery........................................................2

4.  Representations and Warranties of the Company..............................2
    4.1        Organization, Good Standing and Qualification...................3
    4.2        Subsidiaries....................................................3
    4.3        Capitalization; Voting Rights...................................3
    4.4        Authorization; Binding Obligations..............................4
    4.5        Liabilities.....................................................4
    4.6        Agreements; Action..............................................4
    4.7        Obligations to Related Parties..................................5
    4.8        Changes.........................................................6
    4.9        Title to Properties and Assets; Liens, Etc......................7
    4.10       Intellectual Property...........................................7
    4.11       Compliance with Other Instruments...............................8
    4.12       Litigation......................................................8
    4.13       Tax Returns and Payments........................................8
    4.14       Employees.......................................................9
    4.15       Registration Rights and Voting Rights...........................9
    4.16       Compliance with Laws; Permits...................................9
    4.17       Environmental and Safety Laws..................................10
    4.18       Valid Offering.................................................10
    4.19       Full Disclosure................................................10
    4.20       Insurance......................................................10
    4.21       SEC Reports....................................................10
    4.22       Listing........................................................11
    4.23       No Integrated Offering.........................................11
    4.24       Stop Transfer..................................................11
    4.25       Dilution.......................................................11

5.  Representations and Warranties of the Purchaser...........................11
    5.1        No Shorting....................................................11
    5.2        Requisite Power and Authority..................................12
    5.3        Investment Representations.....................................12
    5.4        Purchaser Bears Economic Risk..................................12
    5.5        Acquisition for Own Account....................................12
    5.6        Purchaser Can Protect Its Interest.............................12
    5.7        Accredited Investor............................................13
    5.8        Legends........................................................13

6.  Covenants of the Company..................................................14
    6.1        Stop-Orders....................................................14

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    6.2        Listing........................................................14
    6.3        Market Regulations.............................................14
    6.4        Reporting Requirements.........................................14
    6.5        Use of Funds...................................................14
    6.6        Access to Facilities...........................................14
    6.7        Taxes..........................................................15
    6.8        Insurance......................................................15
    6.9        Intellectual Property..........................................16
    6.10       Properties.....................................................16
    6.11       Confidentiality................................................16
    6.12       Required Approvals.............................................16
    6.13       Reissuance of Securities.......................................16
    6.14       Opinion........................................................17

7.  Covenants of the Purchaser................................................18
    7.1        Confidentiality................................................18
    7.2        Non-Public Information.........................................18

8.  Covenants of the Company and Purchaser Regarding Indemnification..........18
    8.1        Company Indemnification........................................18
    8.2        Purchaser's Indemnification....................................18
    8.3        Procedures.....................................................18
    8.4        Offering Restrictions..........................................19

9.  Miscellaneous.............................................................19
    9.1        Governing Law..................................................20
    9.2        Survival.......................................................20
    9.3        Successors.....................................................20
    9.4        Entire Agreement...............................................20
    9.5        Severability...................................................20
    9.6        Amendment and Waiver...........................................21
    9.7        Delays or Omissions............................................21
    9.8        Notices........................................................21
    9.9        Attorneys' Fees................................................22
    9.10       Titles and Subtitles...........................................22
    9.11       Facsimile Signatures; Counterparts.............................22
    9.12       Broker's Fees..................................................22
    9.13       Construction...................................................23

                                LIST OF EXHIBITS
--------------------------------------------------------------------------------
Form of Convertible Term Note......................................... Exhibit A
Form of Warrant....................................................... Exhibit B
Form of Opinion....................................................... Exhibit C
Form of Escrow Agreement.............................................. Exhibit D

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                          SECURITIES PURCHASE AGREEMENT

      THIS SECURITIES  PURCHASE AGREEMENT (this "Agreement") is made and entered
into  as of  January  30 ,  2004,  by  and  between  DYNTEK,  INC.,  a  Delaware
corporation (the "Company"), and __________ (the "Purchaser").

                                    RECITALS

      WHEREAS,  the  Company  has  authorized  the  sale to the  Purchaser  of a
Convertible  Term Note in the aggregate  principal  amount of Three Million Five
Hundred Thousand dollars ($3,500,000.00) (the "Note"), which Note is convertible
into  shares of the  Company's  common  stock,  $0.01  par value per share  (the
"Common Stock") at a fixed  conversion  price of $0.90 per share of Common Stock
("Fixed Conversion Price");

      WHEREAS,  the  Company  wishes  to issue a  warrant  to the  Purchaser  to
purchase up to 425,000 shares of the Company's  Common Stock in connection  with
Purchaser's purchase of the Note;

      WHEREAS,  Purchaser  desires to purchase the Note and Warrant on the terms
and conditions set forth herein; and

      WHEREAS,  the  Company  desires to issue and sell the Note and  Warrant to
Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

      NOW, THEREFORE,  in consideration of the foregoing recitals and the mutual
promises,  representations,  warranties and covenants  hereinafter set forth and
for other good and valuable consideration,  the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

      1.  Agreement to Sell and Purchase.  Pursuant to the terms and  conditions
set forth in this Agreement,  on the Closing Date (as defined in Section 3), the
Company  agrees to sell to the  Purchaser,  and the  Purchaser  hereby agrees to
purchase  from the  Company a Note in the amount of  $3,500,000  convertible  in
accordance  with the terms thereof into shares of the Company's  Common Stock in
accordance with the terms of the Note and this Agreement.  The Note purchased on
the Closing Date shall be known as the "Offering." A form of the Note is annexed
hereto as Exhibit A. The Note will have a Maturity Date (as defined in the Note)
of thirty six (36) months from the date of issuance.  Collectively, the Note and
Warrant  (as defined in Section 2) and Common  Stock  issuable in payment of the
Note,  upon conversion of the Note and upon exercise of the Warrant are referred
to as the "Securities."

      2. Fees and Warrant. On the Closing Date:

            (a) The Company will issue and deliver to the Purchaser a Warrant to
      purchase  up to  425,000  shares of Common  Stock in  connection  with the
      Offering (the "Warrant") pursuant to Section 1 hereof. The Warrant must be
      delivered  on the  Closing

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Date.  A form of Warrant is annexed  hereto as
      Exhibit B. All the representations,  covenants, warranties,  undertakings,
      and  indemnification,  and  other  rights  made or  granted  to or for the
      benefit of the  Purchaser  by the Company are hereby also made and granted
      in  respect  of the  Warrant  and  shares of the  Company's  Common  Stock
      issuable upon exercise of the Warrant (the "Warrant Shares").

            (b) Subject to the terms of Section  2(d) below,  the Company  shall
      pay to  __________,  manager of  Purchaser a closing  payment in an amount
      equal to three and one-half  percent  (3.50%) of the  aggregate  principal
      amount of the Note (the  "Closing  Payment")  and  one-half of one percent
      (0.5%) the outstanding  principal amount on each anniversary (the "Renewal
      Payment.")

            (c) The Company shall  reimburse  the  Purchaser for its  reasonable
      legal fees for services  rendered to the Purchaser in  preparation of this
      Agreement  and  the  Related  Agreements  (as  hereinafter  defined),  and
      expenses in connection with the  Purchaser's  due diligence  review of the
      Company and relevant  matters.  Amounts required to be paid hereunder will
      be paid at the  Closing and shall be $29,500  (net of the $10,000  deposit
      paid by the  Company  on  January  22,  2004) for legal  expenses  and for
      performing due diligence inquiries on the Company.

            (d) The Closing  Payment,  legal fees and due diligence fees (net of
      deposits  previously  paid by the Company) shall be paid at closing out of
      funds held  pursuant to a Funds  Escrow  Agreement  of even date  herewith
      among the  Company,  Purchaser,  and an Escrow  Agent (the  "Funds  Escrow
      Agreement") and a disbursement letter (the "Disbursement Letter").

      3.  Closing,  Delivery  and Payment.  Subject to the terms and  conditions
herein,  the closing of the  transactions  contemplated  hereby (the "Closing"),
shall take place on the date  hereof,  at such time or place as the  Company and
Purchaser  may  mutually  agree  (such date is  hereinafter  referred  to as the
"Closing Date").

      3.2 Delivery.  Pursuant to the Funds Escrow Agreement in the form attached
hereto as Exhibit C, at the  Closing  on the  Closing  Date,  the  Company  will
deliver to the  Purchaser,  among other  things,  a Note in the form attached as
Exhibit A representing  the principal  amount of $3,500,000 and a Warrant in the
form attached as Exhibit B in the Purchaser's name representing  425,000 Warrant
Shares and the Purchaser  will deliver to the Company,  among other things,  the
amounts  set  forth  in the  Disbursement  Letter  by  certified  funds  or wire
transfer.

      4.  Representations  and  Warranties  of the Company.  The Company  hereby
represents and warrants to the Purchaser as of the date of this Agreement as set
forth below which disclosures are in all cases  supplemented by, without further
reference,  information  contained  in  the  Certification  of  Officers  of the
Company,  dated January 25, 2004 and  previously  delivered to the Purchaser and
subject to,  information  included in the Company's filings under the Securities
Exchange Act of 1934 (collectively, the "Exchange Act Filings"), copies of which
have been provided to the Purchaser.

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      4.1  Organization,  Good  Standing  and  Qualification.  The  Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.  The Company has the corporate  power and authority to
own and  operate  its  properties  and  assets,  to  execute  and  deliver  this
Agreement,  and the Note and the  Warrant to be issued in  connection  with this
Agreement,  the Security  Agreement relating to the Note dated as of January 30,
2004  between  the  Company  and  the  Purchaser,  and the  Registration  Rights
Agreement  relating to the  Securities  dated as of January 30, 2004 between the
Company and the Purchaser (collectively, the "Related Agreements"), to issue and
sell the Note and the shares of Common Stock  issuable  upon  conversion  of the
Note (the "Note Shares"),  to issue and sell the Warrant and the Warrant Shares,
and to carry out the provisions of this Agreement and the Related Agreements and
to carry on its business as presently  conducted.  The Company is duly qualified
and  is  authorized  to  do  business  and  is in  good  standing  as a  foreign
corporation  in all  jurisdictions  in which the nature of its activities and of
its  properties  (both owned and  leased)  makes such  qualification  necessary,
except  for  those  jurisdictions  in which  failure  to do so would  not have a
material adverse effect on the Company or its business.

      4.2  Subsidiaries.  The  Company  owns all of the issued  and  outstanding
capital stock of DynTek  Services,  Inc. The Company does not own or control any
equity security or other interest of any other corporation,  limited partnership
or other  operating  business  entity,  except as set forth in the  Exchange Act
Filings.

      4.3 Capitalization; Voting Rights.

            (a) The  authorized  capital  stock of the  Company,  as of the date
      hereof consists of 100,000,000  shares,  of which 90,000,000 are shares of
      Common Stock, par value $.0001 per share,  46,761,572  shares of which are
      issued and outstanding,  and 10,000,000 are shares of preferred stock, par
      value  $.0001 per share of which  1,214,796  shares of Series A  Preferred
      Stock with a stated  value of $.0001  per share and an initial  conversion
      ration of 2.5 shares of Common  Stock per  preferred  share are issued and
      outstanding.

            (b) Except as  disclosed  on  Schedule  4.3 or in any  Exchange  Act
      Filings,  other  than:  (i) the shares  reserved  for  issuance  under the
      Company's  stock  option  plans;  and (ii)  shares  which  may be  granted
      pursuant  to this  Agreement  and the  Related  Agreements,  there  are no
      outstanding options,  warrants, rights (including conversion or preemptive
      rights and rights of first refusal),  proxy or stockholder agreements,  or
      arrangements  or  agreements  of any kind for the purchase or  acquisition
      from the Company of any of its securities. Except as disclosed on Schedule
      4.3 or in any  Exchange  Act  Filings,  neither  the offer,  -------------
      issuance or sale of any of the Note or Warrant,  or the issuance of any of
      the Note Shares or Warrant Shares, nor the consummation of any transaction
      contemplated  hereby will result in a change in the price or number of any
      securities  of the  Company  outstanding,  under  anti-dilution  or  other
      similar provisions contained in or affecting any such securities.

            (c) All issued and outstanding shares of the Company's Common Stock:
      (i) have been duly  authorized  and validly  issued and are fully paid and
      nonassessable;  and

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      (ii) were issued in compliance with all applicable  state and federal laws
      concerning the issuance of securities.

            (d) The rights,  preferences,  privileges  and  restrictions  of the
      shares of the Common Stock are as stated in the Company's  Certificate  of
      Incorporation  (the  "Charter").  The Note Shares and Warrant  Shares have
      been duly and validly  reserved for  issuance.  When issued in  compliance
      with the  provisions  of this  Agreement and the  Company's  Charter,  the
      Securities will be validly issued, fully paid and nonassessable,  and will
      be  free  of any  liens  or  encumbrances;  provided,  however,  that  the
      Securities may be subject to  restrictions  on transfer under state and/or
      federal  securities  laws as set forth herein or as otherwise  required by
      such laws at the time a transfer is proposed.

      4.4 Authorization;  Binding Obligations.  All corporate action on the part
of the Company,  its officers and directors  necessary for the  authorization of
this Agreement and the Related Agreements, the performance of all obligations of
the Company hereunder at the Closing and, the authorization,  sale, issuance and
delivery  of the Note and  Warrant  has been taken or will be taken prior to the
Closing.  The Agreement and the Related Agreements,  when executed and delivered
and to the extent it is a party thereto,  will be valid and binding  obligations
of the Company enforceable in accordance with their terms, except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application  affecting  enforcement of
      creditors' rights; and

            (b) general  principles of equity that restrict the  availability of
      equitable or legal remedies.

The sale of the Note and the subsequent  conversion of the Note into Note Shares
are not and will not be  subject  to any  preemptive  rights  or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the  subsequent  exercise of the Warrant for Warrant  Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.

      4.5  Liabilities.  The  Company,  to the  best  of its  knowledge,  has no
material  contingent  liabilities,  except current  liabilities  incurred in the
ordinary  course of business  and  liabilities  disclosed  in any  Exchange  Act
Filings.

      4.6  Agreements;  Action.  Except  as  set  forth  on  Schedule  4.6 or as
disclosed in any Exchange Act Filings:

            (a) There are no agreements, understandings, instruments, contracts,
      proposed  transactions,  judgments,  orders, writs or decrees to which the
      Company  is a party or to its  knowledge  by which it is bound  which  may
      involve: (i) obligations (contingent or otherwise) of, or payments to, the
      Company in excess of $50,000 (other than  obligations  of, or payments to,
      the Company arising from purchase or sale  agreements  entered into in the
      ordinary  course of  business);  or (ii) the  transfer  or  license of any
      patent, copyright,  trade secret or other proprietary right to or from the
      Company (other than licenses  arising from the purchase of "off the shelf"
      or other standard products); or (iii) provisions

                                      -4-
<PAGE>

      restricting the development,  manufacture or distribution of the Company's
      products or services;  or (iv) indemnification by the Company with respect
      to infringements of proprietary rights.

            (b) Since  September 30, 2003,  the Company has not: (i) declared or
      paid any dividends,  or authorized or made any  distribution  upon or with
      respect to any class or series of its capital  stock;  (ii)  incurred  any
      indebtedness  for money  borrowed  or any other  liabilities  (other  than
      ordinary course obligations or obligations under agreements  identified in
      any  Exchange Act  Filings)  individually  in excess of $50,000 or, in the
      case of indebtedness and/or liabilities individually less than $50,000, in
      excess of $100,000 in the  aggregate;  (iii) made any loans or advances to
      any person not in excess,  individually or in the aggregate,  of $100,000,
      other than ordinary advances for travel expenses;  or (iv) sold, exchanged
      or otherwise disposed of any of its assets or rights,  other than the sale
      of its inventory in the ordinary course of business.

            (c)  For  the  purposes  of  subsections  (a)  and  (b)  above,  all
      indebtedness,   liabilities,  agreements,   understandings,   instruments,
      contracts  and proposed  transactions  involving the same person or entity
      (including  persons or  entities  the  Company  has reason to believe  are
      affiliated  therewith)  shall be aggregated for the purpose of meeting the
      individual minimum dollar amounts of such subsections.

      4.7  Obligations to Related  Parties.  Except as set forth in any Exchange
Act  Filings or on  Schedule  4.7,  there are no  obligations  of the Company to
officers, directors, stockholders or employees of the Company other than:

            (a) for  payment  of  salary  for  services  rendered  and for bonus
      payments;

            (b) reimbursement for reasonable  expenses incurred on behalf of the
      Company;

            (c) for other standard employee benefits made generally available to
      all employees  (including stock option  agreements  outstanding  under any
      stock option plan approved by the Board of Directors of the Company); and

            (d)  obligations  listed in the  Company's  financial  statements or
      disclosed in any of its Exchange Act Filings.

Except as described  above or set forth on Schedule  4.7,  none of the officers,
directors  or,  to the  best  of  the  Company's  knowledge,  key  employees  or
stockholders  of the Company or any  members of their  immediate  families,  are
indebted to the Company,  individually or in the aggregate, in excess of $50,000
or have any direct or indirect  ownership  interest  in any firm or  corporation
with which the  Company is  affiliated  or with which the Company has a business
relationship,  or any firm or corporation which competes with the Company, other
than passive  investments in publicly traded companies  (representing  less than
one percent (1%) of such company) which may compete with the Company.  Except as
described  above, no officer,  director or  stockholder,  or any member of their
immediate  families,  is,  directly or  indirectly,  interested  in any material
contract  with  the  Company  and  no  agreements,  understandings  or  proposed
transactions are contemplated between the Company and any such person. Except as

                                      -5-
<PAGE>

set forth in any Exchange  Act Filings or on Schedule  4.7, the Company is not a
guarantor  or  indemnitor  of any  indebtedness  of any  other  person,  firm or
corporation.

      4.8 Changes. Since September 30, 2003, except as disclosed in any Exchange
Act  Filing  or in any  Schedule  to  this  Agreement  or to any of the  Related
Agreements, there has not been:

            (a) Any  change in the  assets,  liabilities,  financial  condition,
      prospects or operations of the Company, other than changes in the ordinary
      course of business, none of which individually or in the aggregate has had
      or is  reasonably  expected  to have a  material  adverse  effect  on such
      assets, liabilities,  financial condition,  prospects or operations of the
      Company;

            (b) Any  resignation or termination of any officer,  key employee or
      group of employees of the Company;

            (c) Any material change,  except in the ordinary course of business,
      in  the  contingent  obligations  of  the  Company  by  way  of  guaranty,
      endorsement, indemnity, warranty or otherwise;

            (d) Any  damage,  destruction  or loss,  whether  or not  covered by
      insurance,  materially and adversely affecting the properties, business or
      prospects or financial condition of the Company;

            (e) Any waiver by the  Company of a valuable  right or of a material
      debt owed to it;

            (f) Any direct or indirect material loans made by the Company to any
      stockholder,  employee,  officer or  director of the  Company,  other than
      advances made in the ordinary course of business;

            (g) Any material change in any compensation arrangement or agreement
      with any employee, officer, director or stockholder;

            (h) Any declaration or payment of any dividend or other distribution
      of the assets of the Company;

            (i) Any labor organization activity related to the Company;

            (j)  Any  debt,   obligation  or  liability  incurred,   assumed  or
      guaranteed  by the Company,  except those for  immaterial  amounts and for
      current liabilities incurred in the ordinary course of business;

            (k) Any sale,  assignment  or transfer of any  patents,  trademarks,
      copyrights, trade secrets or other intangible assets;

                                      -6-
<PAGE>

            (l) Any change in any  material  agreement to which the Company is a
      party or by which it is bound which may  materially  and adversely  affect
      the business,  assets,  liabilities,  financial  condition,  operations or
      prospects of the Company;

            (m) Any other  event or  condition  of any  character  that,  either
      individually or  cumulatively,  has or may materially and adversely affect
      the  business,  assets,  liabilities,  financial  condition,  prospects or
      operations of the Company; or

            (n) Any  arrangement  or  commitment by the Company to do any of the
      acts described in subsection (a) through (m) above.

      4.9 Title to Properties  and Assets;  Liens,  Etc.  Except as set forth on
Schedule 4.9 or in any Exchange Act Filings, the Company has good and marketable
title to its properties and assets, and good title to its leasehold estates,  in
each case subject to no mortgage,  pledge,  lien, lease,  encumbrance or charge,
other than:

            (a) those resulting from taxes which have not yet become delinquent;

            (b) minor liens and  encumbrances  which do not  materially  detract
      from the value of the property  subject  thereto or materially  impair the
      operations of the Company; and

            (c) those  that have  otherwise  arisen  in the  ordinary  course of
      business.

All facilities,  machinery,  equipment,  fixtures, vehicles and other properties
owned,  leased or used by the Company are in good operating condition and repair
and are  reasonably  fit and  usable for the  purposes  for which they are being
used.  Except as set forth on Schedule 4.9 or in any  Exchange Act Filings,  the
Company is in compliance  with all material terms of each lease to which it is a
party or is otherwise bound.

      4.10 Intellectual Property.

            (a) The Company  owns or  possesses  sufficient  legal rights to all
      patents,  trademarks,   service  marks,  trade  names,  copyrights,  trade
      secrets, licenses,  information and other proprietary rights and processes
      necessary for its business as now conducted and to the Company's knowledge
      as  presently  proposed to be  conducted  (the  "Intellectual  Property"),
      without  any known  infringement  of the  rights of  others.  There are no
      outstanding  options,  licenses or  agreements of any kind relating to the
      foregoing  proprietary  rights,  nor is the Company bound by or a party to
      any  options,  licenses  or  agreements  of any kind with  respect  to the
      patents,  trademarks,   service  marks,  trade  names,  copyrights,  trade
      secrets, licenses,  information and other proprietary rights and processes
      of any other  person or entity  other  than such  licenses  or  agreements
      arising from the purchase of "off the shelf" or standard products.

            (b) The Company has not received any  communications  alleging  that
      the Company has violated any of the patents,  trademarks,  service  marks,
      trade names,  copyrights or trade secrets or other  proprietary  rights of
      any  other  person  or  entity,  nor is the  Company  aware  of any  basis
      therefor.

                                      -7-
<PAGE>

            (c) The  Company  does not  believe  it is or will be  necessary  to
      utilize any inventions, trade secrets or proprietary information of any of
      its employees  made prior to their  employment by the Company,  except for
      inventions,  trade  secrets  or  proprietary  information  that  have been
      rightfully assigned to the Company.

      4.11  Compliance with Other  Instruments.  Except as set forth on Schedule
4.11 or in any Exchange Act Filings,  the Company is not in violation or default
of any term of its  Charter  or  Bylaws,  or of any  material  provision  of any
mortgage, indenture, contract, agreement,  instrument or contract to which it is
party or by which it is bound (other than any which have been waived), or of any
judgment, decree, order or writ. The execution,  delivery and performance of and
compliance  with this  Agreement  and the  Related  Agreements  to which it is a
party,  and the  issuance  and sale of the  Note by the  Company  and the  other
Securities  by the Company each pursuant  hereto,  will not, with or without the
passage of time or giving of notice,  result in any such material violation,  or
be in conflict with or constitute a default under any such term or provision, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the  properties or assets of the Company or the  suspension,  revocation,
impairment,  forfeiture or nonrenewal of any permit,  license,  authorization or
approval  applicable  to the Company,  its business or  operations or any of its
assets or properties.

      4.12  Litigation.  Except as set forth on  Schedule  4.12 hereto or in any
Exchange Act Filings,  there is no action,  suit,  proceeding  or  investigation
pending or, to the Company's knowledge, currently threatened against the Company
that  prevents  the  Company  to  enter  into  this  Agreement  or  the  Related
Agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result,  either  individually  or in the aggregate,  in any material
adverse  change in the assets,  condition,  affairs or prospects of the Company,
financially or otherwise,  or any change in the current equity  ownership of the
Company,  nor is the  Company  aware  that  there  is any  basis  for any of the
foregoing. The Company is not a party or subject to the provisions of any order,
writ,  injunction,  judgment  or  decree of any  court or  government  agency or
instrumentality.  There is no action,  suit,  proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

      4.13 Tax  Returns  and  Payments.  The  Company  has timely  filed all tax
returns  (federal,  state and local) required to be filed by it. All taxes shown
to be due and  payable on such  returns,  any  assessments  imposed,  and to the
Company's  knowledge all other taxes due and payable by the Company on or before
the  Closing,  have  been  paid or will be paid  prior to the time  they  become
delinquent. Except as set forth on Schedule 4.13 or as disclosed in any Exchange
Act Filings, the Company has not been advised:

            (a) that any of its returns,  federal,  state or other, have been or
      are being audited as of the date hereof; or

            (b) of any  deficiency  in  assessment  or proposed  judgment to its
      federal, state or other taxes.

The Company has no knowledge of any  liability of any tax to be imposed upon its
properties  or assets as of the date of this  Agreement  that is not  adequately
provided for.

                                      -8-
<PAGE>

      4.14  Employees.  Except as set forth on Schedule 4.14, the Company has no
collective  bargaining  agreements with any of its employees.  There is no labor
union  organizing  activity pending or, to the Company's  knowledge,  threatened
with respect to the Company.  Except as disclosed in the Exchange Act Filings or
on  Schedule  4.14,  the  Company  is not a party to or  bound by any  currently
effective employment contract,  deferred compensation  arrangement,  bonus plan,
incentive  plan,  profit  sharing plan,  retirement  agreement or other employee
compensation plan or agreement.  To the Company's knowledge,  no employee of the
Company,  nor any  consultant  with  whom  the  Company  has  contracted,  is in
violation  of any  term  of any  employment  contract,  proprietary  information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract  with,  the Company  because of the nature of the
business to be conducted  by the Company;  and to the  Company's  knowledge  the
continued  employment  by  the  Company  of  its  present  employees,   and  the
performance of the Company's  contracts with its independent  contractors,  will
not  result in any such  violation.  The  Company  is not aware  that any of its
employees is  obligated  under any contract  (including  licenses,  covenants or
commitments  of any  nature) or other  agreement,  or  subject to any  judgment,
decree or order of any court or administrative agency, that would interfere with
their  duties to the Company.  The Company has not received any notice  alleging
that any such  violation has  occurred.  Except for employees who have a current
effective  employment agreement with the Company, no employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. Except as set
forth on Schedule 4.14 or in any Exchange Act Filings,  the Company is not aware
that any officer,  key employee or group of employees  intends to terminate his,
her or their  employment  with the Company,  nor does the Company have a present
intention to terminate the  employment of any officer,  key employee or group of
employees.

      4.15  Registration  Rights  and  Voting  Rights.  Except  as set  forth on
Schedule  4.15 and except as disclosed  in Exchange Act Filings,  the Company is
presently not under any obligation,  and has not granted any rights, to register
any of the Company's presently  outstanding  securities or any of its securities
that may hereafter be issued. Except as set forth on Schedule 4.15 and except as
disclosed in Exchange Act Filings, to the Company's knowledge, no stockholder of
the Company has entered into any agreement  with respect to the voting of equity
securities of the Company.

      4.16 Compliance with Laws; Permits.  Except as set forth on Schedule 4.16,
and except as disclosed in Exchange Act Filings,  to its knowledge,  the Company
is not in violation in any material  respect of any  applicable  statute,  rule,
regulation,  order or restriction  of any domestic or foreign  government or any
instrumentality  or agency  thereof in respect of the conduct of its business or
the ownership of its properties  which violation would  materially and adversely
affect the business,  assets,  liabilities,  financial condition,  operations or
prospects  of  the  Company.  No  governmental  orders,  permissions,  consents,
approvals or authorizations  are required to be obtained and no registrations or
declarations  are  required to be filed in  connection  with the  execution  and
delivery of this  Agreement  and the issuance of any of the  Securities,  except
such as has been duly and  validly  obtained  or filed,  or with  respect to any
filings  that  must be made  after  the  Closing,  as will be  filed in a timely
manner.  The Company has all  material  franchises,  permits,  licenses  and any
similar  authority  necessary  for the  conduct  of its  business  as now  being

                                      -9-
<PAGE>

conducted by it, the lack of which would  materially  and  adversely  affect the
business, properties, prospects or financial condition of the Company.

      4.17 Environmental and Safety Laws. The Company is not in violation of any
applicable   statute,   law  or  regulation   relating  to  the  environment  or
occupational health and safety, and to its knowledge,  no material  expenditures
are or will be required in order to comply with any such existing  statute,  law
or regulation.  Except as set forth on Schedule 4.17, no Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by the Company
or, to the  Company's  knowledge,  by any other person or entity on any property
owned,  leased  or  used  by the  Company.  For the  purposes  of the  preceding
sentence, "Hazardous Materials" shall mean:

            (a) materials  which are listed or otherwise  defined as "hazardous"
      or "toxic" under any applicable local, state,  federal and/or foreign laws
      and regulations  that govern the existence  and/or remedy of contamination
      on property,  the protection of the environment  from  contamination,  the
      control of  hazardous  wastes,  or other  activities  involving  hazardous
      substances, including building materials; or

            (b) any petroleum products or nuclear materials.

      4.18 Valid  Offering.  Assuming  the accuracy of the  representations  and
warranties of the Purchaser  contained in this  Agreement,  the offer,  sale and
issuance of the Securities will be exempt from the registration  requirements of
the Securities  Act of 1933, as amended (the  "Securities  Act"),  and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration,  permit or qualification  requirements of all applicable
state securities laws.

      4.19 Full  Disclosure.  The Company has  provided the  Purchaser  with all
information  requested  by the  Purchaser  in  connection  with its  decision to
purchase the Note and Warrant, including all information the Company believes is
reasonably necessary to make such investment  decision.  Neither this Agreement,
the exhibits and schedules hereto, the Related Agreements nor any other document
delivered by the Company to Purchaser or its  attorneys or agents in  connection
herewith or therewith or with the transactions  contemplated  hereby or thereby,
contain  any untrue  statement  of a material  fact nor omit to state a material
fact necessary in order to make the statements  contained herein or therein,  in
light of the circumstances in which they are made, not misleading. Any financial
projections  and other  estimates  provided to the Purchaser by the Company were
based on the Company's experience in the industry and on assumptions of fact and
opinion as to future  events which the  Company,  at the date of the issuance of
such projections or estimates, believed to be reasonable.

      4.20 Insurance.  The Company has general  commercial,  product  liability,
fire and casualty  insurance  policies with coverages which the Company believes
are  customary for  companies  similarly  situated to the Company in the same or
similar business.

      4.21 SEC Reports.  Except as set forth on Schedule  4.21,  the Company has
filed all proxy statements,  reports and other documents required to be filed by
it under the Exchange Act. The Company has  furnished the Purchaser  with copies
of: (i) its Annual  Report on Form 10-K

                                      -10-
<PAGE>

for the fiscal year ended June 30, 2003; and (ii) its Quarterly  Reports on Form
10-Q for the fiscal  quarter ended  September 30, 2003, and the Form 8-K filings
which it has made during 2003 to date (collectively,  the "SEC Reports"). Except
as set forth on Schedule  4.21,  each SEC Report was, at the time of its filing,
in substantial  compliance with the requirements of its respective form and none
of the SEC  Reports,  nor the  financial  statements  (and  the  notes  thereto)
included in the SEC Reports, as of their respective filing dates,  contained any
untrue statement of a material fact or omitted 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.

      4.22  Listing.  The  Company's  Common  Stock is listed for trading on the
NASDAQ  SmallCap  Market  ("NASDAQ SC") and satisfies all  requirements  for the
continuation  of such listing  (other than that the current  "bid" price for its
Common Stock is below the $1.00 minimum bid  threshold on the date hereof).  The
Company has not received any notice that its Common Stock will be delisted  from
NASDAQ SC or that its Common Stock does not meet all requirements for listing.

      4.23  No  Integrated  Offering.  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 of any security or solicited  any offers to
buy any  security  under  circumstances  that would  cause the  offering  of the
Securities  pursuant to this Agreement to be integrated  with prior offerings by
the Company for purposes of the  Securities  Act which would prevent the Company
from selling the Securities  pursuant to Rule 506 under the  Securities  Act, or
any applicable  exchange-related  stockholder approval provisions,  nor will the
Company or any of its affiliates or  subsidiaries  take any action or steps that
would  cause  the  offering  of  the  Securities  to be  integrated  with  other
offerings.

      4.24 Stop Transfer.  The  Securities  are restricted  securities as of the
date of this  Agreement.  The Company will not issue any stop transfer  order or
other order impeding the sale and delivery of any of the Securities at such time
as  the  Securities  are  registered  for  public  sale  or  an  exemption  from
registration  is available,  except as required by state and federal  securities
laws.

      4.25 Dilution.  The Company specifically  acknowledges that its obligation
to issue the shares of Common Stock upon  conversion of the Note and exercise of
the  Warrant is binding  upon the  Company  and  enforceable  regardless  of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company.

      5.  Representations and Warranties of the Purchaser.  The Purchaser hereby
represents  and  warrants to the Company as follows  (such  representations  and
warranties do not lessen or obviate the  representations  and  warranties of the
Company set forth in this Agreement)

      5.1 No Shorting.  The Purchaser or any of its  affiliates  and  investment
partners has not, will not and will not cause any person or entity,  directly or
indirectly,  to engage in "short  sales" of the  Company's  Common  Stock or any
other hedging strategies as long as the Note shall be outstanding.

                                      -11-
<PAGE>

      5.2 Requisite  Power and Authority.  Purchaser has all necessary power and
authority  under all  applicable  provisions  of law to execute and deliver this
Agreement  and the Related  Agreements  and to carry out their  provisions.  All
corporate  action on  Purchaser's  part  required for the lawful  execution  and
delivery  of this  Agreement  and the  Related  Agreements  have been or will be
effectively taken prior to the Closing. Upon their execution and delivery,  this
Agreement and the Related  Agreements  will be valid and binding  obligations of
Purchaser, enforceable in accordance with their terms, except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application  affecting  enforcement of
      creditors' rights; and

            (b) as limited by general  principles  of equity that  restrict  the
      availability of equitable and legal remedies.

      5.3 Investment Representations.  Purchaser understands that the Securities
are being offered and sold pursuant to an exemption from registration  contained
in the Securities Act based in part upon Purchaser's  representations  contained
in the  Agreement,  including,  without  limitation,  that the  Purchaser  is an
"accredited  investor"  within the meaning of Regulation D under the  Securities
Act of 1933, as amended (the "Securities  Act"). The Purchaser  confirms that it
has  received  or has had  full  access  to all  the  information  it  considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant,  respectively.  The Purchaser further confirms that
it has had an opportunity to ask questions and receive  answers from the Company
regarding the Company's business, management and financial affairs and the terms
and conditions of the Offering,  the Note, the Warrant and the Securities and to
obtain  additional  information  (to  the  extent  the  Company  possessed  such
information  or  could  acquire  it  without  unreasonable  effort  or  expense)
necessary to verify any  information  furnished to the Purchaser or to which the
Purchaser had access.

      5.4 Purchaser Bears Economic Risk. Purchaser has substantial experience in
evaluating  and  investing in private  placement  transactions  of securities in
companies  similar to the Company so that it is capable of evaluating the merits
and risks of its  investment  in the Company and has the capacity to protect its
own interests.  Purchaser must bear the economic risk of this  investment  until
the  Securities  are sold pursuant to: (i) an effective  registration  statement
under the Securities  Act; or (ii) an exemption from  registration  is available
with respect to such sale.

      5.5  Acquisition  for Own Account.  Purchaser  is  acquiring  the Note and
Warrant and the Note Shares and the Warrant Shares for  Purchaser's  own account
for  investment  only, and not as a nominee or agent and not with a view towards
or for resale in connection with their distribution.

      5.6  Purchaser  Can Protect Its  Interest.  Purchaser  represents  that by
reason  of its,  or of its  management's,  business  and  financial  experience,
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Note,  the Warrant and the  Securities  and to protect its

                                      -12-
<PAGE>

own  interests  in  connection  with  the  transactions   contemplated  in  this
Agreement,  and the  Related  Agreements.  Further,  Purchaser  is  aware  of no
publication  of  any   advertisement   in  connection   with  the   transactions
contemplated in the Agreement or the Related Agreements.

      5.7 Accredited  Investor.  Purchaser  represents  that it is an accredited
investor within the meaning of Regulation D under the Securities Act.

      5.8 Legends.

            (a) The Note shall bear substantially the following legend:

            "THIS NOTE AND THE COMMON STOCK  ISSUABLE UPON  CONVERSION OF
            THIS NOTE HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT
            OF 1933,  AS AMENDED,  OR ANY  APPLICABLE,  STATE  SECURITIES
            LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
            OF THIS NOTE MAY NOT BE SOLD,  OFFERED  FOR SALE,  PLEDGED OR
            HYPOTHECATED  IN THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
            STATEMENT  AS TO THIS NOTE OR SUCH SHARES  UNDER SAID ACT AND
            APPLICABLE  STATE  SECURITIES  LAWS OR AN  OPINION OF COUNSEL
            REASONABLY   SATISFACTORY   TO   DYNTEK,   INC.   THAT   SUCH
            REGISTRATION IS NOT REQUIRED."

            (b) The Note  Shares and the Warrant  Shares,  if not issued by DWAC
      system (as  hereinafter  defined),  shall bear a legend  which shall be in
      substantially  the  following  form  until such  shares are  covered by an
      effective registration statement filed with the SEC:

            "THE SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE NOT BEEN
            REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR
            ANY APPLICABLE,  STATE  SECURITIES LAWS. THESE SHARES MAY NOT
            BE SOLD,  OFFERED FOR SALE,  PLEDGED OR  HYPOTHECATED  IN THE
            ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER SUCH
            SECURITIES  ACT AND  APPLICABLE  STATE  LAWS OR AN OPINION OF
            COUNSEL  REASONABLY  SATISFACTORY  TO DYNTEK,  INC. THAT SUCH
            REGISTRATION IS NOT REQUIRED."

            (c)  The  Warrant  shall  bear  substantially  the  following
            legend:

            "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
            THIS WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES
            ACT OF 1933, AS AMENDED,  OR ANY APPLICABLE  STATE SECURITIES
            LAWS.  THIS  WARRANT  AND THE  COMMON  SHARES  ISSUABLE  UPON
            EXERCISE OF THIS  WARRANT MAY NOT BE SOLD,  OFFERED FOR SALE,
            PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE

                                      -13-
<PAGE>

            REGISTRATION  STATEMENT AS TO THIS WARRANT OR THE  UNDERLYING
            SHARES OF COMMON  STOCK UNDER SAID ACT AND  APPLICABLE  STATE
            SECURITIES   LAWS  OR  AN  OPINION   OF  COUNSEL   REASONABLY
            SATISFACTORY  TODYNTEK,  INC. THAT SUCH  REGISTRATION  IS NOT
            REQUIRED."

      6.  Covenants of the Company.  At all times that any principal and accrued
interest and/or fees are outstanding  under the Note, the Company  covenants and
agrees with the Purchaser as follows:

      6.1 Stop-Orders. The Company will advise the Purchaser,  promptly after it
receives  notice of issuance by the  Securities  and  Exchange  Commission  (the
"SEC"), any state securities commission or any other regulatory authority of any
stop  order  or of any  order  preventing  or  suspending  any  offering  of any
securities  of the Company,  or of the  suspension of the  qualification  of the
Common  Stock of the Company for  offering or sale in any  jurisdiction,  or the
initiation of any proceeding for any such purpose.

      6.2 Listing.  The Company shall promptly  secure the listing of the shares
of Common Stock  issuable  upon  conversion of the Note and upon the exercise of
the  Warrant  on the NASDAQ SC (the  "Principal  Market")  upon which  shares of
Common  Stock are listed  (subject to  official  notice of  issuance)  and shall
maintain  such  listing so long as any other  shares of Common Stock shall be so
listed.  The Company  will use its best  efforts to maintain  the listing of its
Common Stock on the Principal Market, and will use its best efforts to comply in
all material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the  National  Association  of  Securities  Dealers
("NASD") and such exchanges, as applicable.

      6.3  Market  Regulations.  The  Company  shall  notify  the SEC,  NASD and
applicable  state  authorities,  in accordance with their  requirements,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and regulation,  for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.

      6.4 Reporting Requirements.  The Company will use its best efforts to file
timely with the SEC all reports  required to be filed  pursuant to the  Exchange
Act. The Company will refrain from  terminating its status as an issuer required
by the Exchange Act to file reports  thereunder  even if the Exchange Act or the
rules or regulations thereunder would permit such termination.

      6.5 Use of Funds.  The Company agrees that it will use the proceeds of the
sale of the Note and Warrant for working  capital  purposes only,  including for
the operations of its subsidiaries.

      6.6 Access to  Facilities.  The Company  will  permit any  representatives
designated by the Purchaser (or any successor of the Purchaser), upon reasonable
notice  and  during  normal  business  hours,  at  such  person's   expense  and
accompanied by a representative of the Company, to:

            (a) visit and inspect any of the properties of the Company;

                                      -14-
<PAGE>

            (b)  examine  the  corporate  and  financial  records of the Company
      (unless such  examination is not permitted by federal,  state or local law
      or by contract) and make copies thereof or extracts therefrom; and

            (c) discuss the  affairs,  finances and accounts of the Company with
      the directors, officers and independent accountants of the Company.

Notwithstanding  the  foregoing,  the Company  will not  provide  any  material,
non-public   information  to  the  Purchaser   unless  the  Purchaser   signs  a
confidentiality  agreement and otherwise  complies with Regulation FD, under the
federal securities laws.

      6.7 Taxes.  The Company will  promptly pay and  discharge,  or cause to be
paid and  discharged,  when due and payable,  all lawful taxes,  assessments and
governmental  charges or levies  imposed upon the income,  profits,  property or
business  of the  Company;  provided,  however,  that any such tax,  assessment,
charge or levy  need not be paid if the  validity  thereof  shall  currently  be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books  adequate  reserves with respect  thereto;  and provided,
further,  that the  Company  will pay all such  taxes,  assessments,  charges or
levies  forthwith  upon the  commencement  of  proceedings to foreclose any lien
which may have attached as security therefor.

      6.8 Insurance.  The Company will keep its assets which are of an insurable
character  insured by financially  sound and reputable  insurers against loss or
damage by fire,  explosion  and  other  risks  customarily  insured  against  by
companies in similar business similarly situated as the Company; and the Company
will maintain, with financially sound and reputable insurers,  insurance against
other  hazards and risks and liability to persons and property to the extent and
in the manner which the Company  reasonably  believes is customary for companies
in  similar  business  similarly  situated  as the  Company  and  to the  extent
available  on  commercially  reasonable  terms.  The  Company  and  each  of its
subsidiaries set forth in Section 4.2 hereof (the  "Subsidiaries")  will jointly
and severally bear the full risk of loss from any loss of any nature  whatsoever
with  respect  to the  assets  pledged  to the  Purchaser  as  security  for its
obligations  hereunder  and under the Related  Agreements.  At the Company's own
cost  and  expense  in  amounts  and  with  carriers  reasonably  acceptable  to
Purchaser,  the  Company  and each of the  Subsidiaries  shall  (i) keep all its
insurable  properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies  engaged in businesses  similar to the Company's or the
respective Subsidiary's including business interruption insurance; (ii) maintain
a bond in such  amounts  as is  customary  in the case of  companies  engaged in
businesses  similar  to the  Company's  or  the  Subsidiary's  insuring  against
larceny,  embezzlement or other criminal  misappropriation of insured's officers
and  employees  who may either  singly or jointly  with  others at any time have
access  to the  assets  or funds  of the  Company  either  directly  or  through
governmental  authority  to draw upon  such  funds or to  direct  generally  the
disposition  of  such  assets;  (iii)  maintain  public  and  product  liability
insurance against claims for personal injury,  death or property damage suffered
by others; (iv) maintain all such worker's  compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which the Company
or the  Subsidiary is engaged in business;  and (v) furnish  Purchaser  with (x)
copies of all policies and evidence of the

                                      -15-
<PAGE>

maintenance  of such  policies at least  thirty (30) days before any  expiration
date, (y) excepting the Company's workers' compensation policy,  endorsements to
such policies  naming  Purchaser as  "co-insured"  or  "additional  insured" and
appropriate  loss payable  endorsements  in form and substance  satisfactory  to
Purchaser, naming Purchaser as loss payee, subject to the rights of creditors of
the Company who hold perfected  security  interests prior in right of payment to
Purchaser's,  and (z) evidence that as to Purchaser the insurance coverage shall
not be  impaired  or  invalidated  by any act or neglect  of the  Company or any
Subsidiary and the insurer will provide Purchaser with at least thirty (30) days
notice prior to cancellation. The Company and each Subsidiary shall instruct the
insurance carriers that, in the event of any loss thereunder, the carriers shall
make  payment  for such  loss to the  Company  and/or  the  Subsidiary,  and the
Purchaser and other parties with prior rights in the Companies'  assets as their
rights  shall  appear.  In the event that as of the date of receipt of each loss
recovery  upon any such  insurance,  the  Purchaser has not declared an event of
default with respect to this  Agreement or any of the Related  Agreements,  then
the Company shall be permitted to direct the  application  of such loss recovery
proceeds toward investment in property,  plant and equipment that would comprise
"Collateral"  secured by Purchaser's  security interest pursuant to its security
agreement,  with  any  surplus  funds  to  be  applied  toward  payment  of  the
obligations  of the  Company  to  Purchaser.  In the event  that  Purchaser  has
properly  declared an Event of Default with respect to this  Agreement or any of
the Related Agreements,  then all loss recoveries received by Purchaser upon any
such  insurance  thereafter  may be applied to the  obligations  of the  Company
hereunder and under the Related  Agreements,  in such order as the Purchaser may
determine, subject to the prior rights of other parties in the Company's assets.
Any surplus  (following  satisfaction  of all Company  obligations to Purchaser)
shall  be paid by  Purchaser  to the  Company  or  applied  as may be  otherwise
required  by law.  Any  deficiency  thereon  shall be paid by the Company or the
Subsidiary, as applicable, to Purchaser, on demand,

      6.9  Intellectual  Property.  The Company shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses and other
rights to use  Intellectual  Property  owned or possessed  by it and  reasonably
deemed to be necessary to the conduct of its business.

      6.10  Properties.  The Company  will keep its  properties  in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements,  additions and
improvements  thereto;  and the  Company  will at all  times  comply  with  each
provision  of all  leases  to which it is a party  or  under  which it  occupies
property if the breach of such provision could  reasonably be expected to have a
material adverse effect.

      6.11  Confidentiality.  The Company agrees that it will not disclose,  and
will not include in any public announcement,  the name of the Purchaser,  unless
expressly  agreed to by the  Purchaser  or unless and until such  disclosure  is
required by law or  applicable  regulation,  and then only to the extent of such
requirement. The Company may disclose Purchaser's identity and the terms of this
Agreement to its current and prospective debt and equity financing sources.

      6.12  Required  Approvals.  For so  long as  fifty  percent  (50%)  of the
principal  amount of the Note is  outstanding,  the  Company,  without the prior
written consent of the Purchaser, shall not:

                                      -16-
<PAGE>

            (a) directly or indirectly declare or pay any dividends,  other than
      dividends with respect to its preferred stock;

            (b) liquidate, dissolve or effect a material reorganization;

            (c) become  subject to  (including,  without  limitation,  by way of
      amendment to or modification  of) any agreement or instrument which by its
      terms would  (under any  circumstances)  restrict the  Company's  right to
      perform  the  provisions  of  this  Agreement  or any  of  the  agreements
      contemplated thereby;

            (d)  materially  alter or change  the scope of the  business  of the
      Company;

            (e)  create,  incur,  assume or  suffer  to exist  any  indebtedness
      (exclusive  of trade debt and debt  incurred  to finance  the  purchase of
      equipment  (not in excess of five percent (5%) per annum of the  Company's
      assets)  whether  secured  or  unsecured  other  than  (i)  the  Company's
      indebtedness   to  either   __________  or  Systran   Financial   Services
      Corporation and as set forth on Exhibit 6.12(e) attached hereto and made a
      part  hereof,  or any  refinancings  or  replacements  thereof or any debt
      incurred in connection  with the purchase of assets or in connection  with
      operating  lines of credit as necessary  to operate  such  assets,  or any
      refinancings or replacements thereof, provided however, that the Company's
      secured  indebtedness  incurred  or existing  (other  than to  __________)
      pursuant to this Section 6.12(e)(i) shall not exceed an aggregate of seven
      million dollars  ($7,000,000);  (ii) cancel any debt owing to it in excess
      of $100,000 in the  aggregate  during any 12 month  period;  (iii) assume,
      guarantee,  endorse or otherwise become directly or contingently liable in
      connection  with any  obligations  of any  other  Person  (other  than the
      Company's subsidiaries),  except the endorsement of negotiable instruments
      by a Company  for deposit or  collection  or similar  transactions  in the
      ordinary  course of business or guarantees  provided to any of the lenders
      set forth in subparagraph (i) immediately above.

      6.13 Reissuance of Securities.  The Company agrees to reissue certificates
representing  the Securities  without the legends set forth in Section 5.7 above
at such time as:

            (a) the holder  thereof is permitted  to dispose of such  Securities
      pursuant to Rule 144(k) under the Securities Act; or

            (b) upon resale subject to an effective registration statement after
      such Securities are registered under the Securities Act.

The Company  agrees to  cooperate  with the  Purchaser  in  connection  with all
resales  pursuant  to Rule 144(d) and Rule  144(k) and  provide  legal  opinions
necessary  to allow such resales  provided  the Company and its counsel  receive
reasonably  requested  representations from the selling Purchaser and broker, if
any.

      6.14  Opinion.  On the  Closing  Date,  the  Company  will  deliver to the
Purchaser an opinion  reasonable  acceptable to the Purchaser from the Company's
legal counsel.  The Company will provide,  at the Company's expense,  such other
legal opinions in the future as are  reasonably  necessary for the conversion of
the Note and exercise of the Warrant.

                                      -17-
<PAGE>

      7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:

      7.1 Confidentiality.  The Purchaser agrees that it will not disclose,  and
will not include in any public  announcement,  the name of the  Company,  unless
expressly  agreed to by the  Company  or unless  and until  such  disclosure  is
required by law or  applicable  regulation,  and then only to the extent of such
requirement.

      7.2 Non-Public  Information.  The Purchaser agrees not to effect any sales
in the shares of the  Company's  Common Stock while in  possession  of material,
non-public  information  regarding  the  Company  if such  sales  would  violate
applicable securities law.

      8. Covenants of the Company and Purchaser Regarding Indemnification.

      8.1  Company  Indemnification.  The  Company  agrees  to  indemnify,  hold
harmless,   reimburse  and  defend  Purchaser,  each  of  Purchaser's  officers,
directors,  agents,  affiliates,  control persons,  and principal  shareholders,
against  any  claim,  cost,  expense,  liability,  obligation,  loss  or  damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser   which   results,   arises  out  of  or  is  based   upon:   (i)  any
misrepresentation  by  Company  or breach of any  warranty  by  Company  in this
Agreement  or in any  exhibits  or  schedules  attached  hereto  or any  Related
Agreement;  or (ii) any  breach or  default  in  performance  by  Company of any
covenant or  undertaking  to be  performed  by Company  hereunder,  or any other
agreement entered into by the Company and Purchaser relating hereto.

      8.2  Purchaser's  Indemnification.  Purchaser  agrees to  indemnify,  hold
harmless,  reimburse and defend the Company and each of the Company's  officers,
directors,  agents, affiliates,  control persons and principal shareholders,  at
all times  against any claim,  cost,  expense,  liability,  obligation,  loss or
damage (including  reasonable legal fees) of any nature,  incurred by or imposed
upon  the  Company  which  results,  arises  out of or is  based  upon:  (i) any
misrepresentation  by  Purchaser  or breach of any warranty by Purchaser in this
Agreement  or in any  exhibits  or  schedules  attached  hereto  or any  Related
Agreement;  or (ii) any breach or default in  performance  by  Purchaser  of any
covenant or  undertaking  to be performed by Purchaser  hereunder,  or any other
agreement entered into by the Company and Purchaser relating hereto.

      8.3  Procedures.  (a)  Promptly  after  receipt  by an  indemnified  party
hereunder of notice of the commencement of any action,  such  indemnified  party
shall,  if a claim in respect  thereof is to be made  against  the  indemnifying
party  hereunder,  notify the  indemnifying  party in writing  thereof,  but the
omission  so to notify  the  indemnifying  party  shall not  relieve it from any
liability  which it may have to such  indemnified  party  other  than under this
Section 8 and shall only relieve it from any liability which it may have to such
indemnified  party  under this  Section 8 if and to the extent the  indemnifying
party is prejudiced by such  omission.  In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying  party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and  undertake  the defense  thereof
with counsel  reasonably  satisfactory  to such  indemnified  party,  and, after
notice from the indemnifying  party to such indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such  indemnified  party under this Section 8. for any

                                      -18-
<PAGE>

legal expenses  subsequently  incurred by such  indemnified  party in connection
with the defense thereof; if the indemnified party retains its own counsel, then
the  indemnified  party shall pay all fees,  costs and expenses of such counsel,
provided,  however,  that, if the defendants in any such action include both the
indemnified  party and the  indemnifying  party and the indemnified  party shall
have reasonably  concluded that there may be reasonable defenses available to it
which are different  from or additional to those  available to the  indemnifying
party or if the interests of the indemnified  party  reasonably may be deemed to
conflict with the interests of the  indemnifying  party,  the indemnified  party
shall have the right to select one  separate  counsel  and to assume  such legal
defenses and otherwise to  participate  in the defense of such action,  with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.

      (b) In order to provide for just and equitable  contribution  in the event
of joint liability under the Securities Act in any case in which either: (i) the
Purchaser,  or any  controlling  person  of the  Purchaser,  makes a  claim  for
indemnification  pursuant to this Section 8 but it is judicially  determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such  indemnification may not be enforced in such case  notwithstanding the fact
that  this  Section  8  provides  for  indemnification  in  such  case;  or (ii)
contribution  under  the  Securities  Act  may be  required  on the  part of the
Purchaser or  controlling  person of the  Purchaser in  circumstances  for which
indemnification  is provided  under this Section 8; then, and in each such case,
the Company and the Purchaser will contribute to the aggregate  losses,  claims,
damages or  liabilities to which they may be subject  (after  contribution  from
others) in such  proportion  so that the Purchaser is  responsible  only for the
portion  represented  by the  percentage  that the public  offering price of its
securities  offered by the  registration  statement bears to the public offering
price  of all  securities  offered  by such  registration  statement,  provided,
however,  that,  in any such case,  (A) the  Purchaser  will not be  required to
contribute  any  amount  in  excess  of the  public  offering  price of all such
securities  offered by it pursuant to such  registration  statement;  and (B) no
person or entity guilty of fraudulent  misrepresentation  (within the meaning of
Section  10 of the Act) will be  entitled  to  contribution  from any  person or
entity who was not guilty of such fraudulent misrepresentation.

      8.4  Offering  Restrictions.  Except as  previously  disclosed  in the SEC
Reports or in the  Exchange Act Filings,  or stock or stock  options  granted to
employees  or directors or  consultants  of the Company;  or shares of preferred
stock issued to pay dividends in respect of the Company's  preferred  stock;  or
equity or debt issued in connection  with an acquisition of a business or assets
by the Company;  or the issuance by the Company of stock in connection  with the
establishment of a joint venture,  partnership,  licensing  arrangement or other
strategic   relationship  (these  exceptions  hereinafter  referred  to  as  the
"Excepted  Issuances"),  the  Company  will  not  issue  any  securities  with a
continuously  variable/floating  conversion  feature  which  are or could be (by
conversion or registration)  free-trading  securities (i.e. common stock subject
to a  registration  statement)  prior to the full repayment or conversion of the
Note (the "Exclusion Period").

      9. Miscellaneous

                                      -19-
<PAGE>

      9.1 Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,  WITHOUT REGARD TO PRINCIPLES
OF  CONFLICTS  OF LAWS.  ANY ACTION  BROUGHT BY EITHER  PARTY  AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
NEW YORK.  BOTH PARTIES AND THE  INDIVIDUALS  EXECUTING THIS AGREEMENT AND OTHER
AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE  JURISDICTION OF SUCH
COURTS  AND  WAIVE  TRIAL BY JURY.  IN THE  EVENT  THAT  ANY  PROVISION  OF THIS
AGREEMENT OR ANY OTHER AGREEMENT  DELIVERED IN CONNECTION HEREWITH IS INVALID OR
UNENFORCEABLE  UNDER ANY APPLICABLE  STATUTE OR RULE OF LAW, THEN SUCH PROVISION
SHALL BE DEEMED  INOPERATIVE  TO THE EXTENT THAT IT MAY CONFLICT  THEREWITH  AND
SHALL BE DEEMED  MODIFIED TO CONFORM  WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH
PROVISION  WHICH  MAY PROVE  INVALID  OR  UNENFORCEABLE  UNDER ANY LAW SHALL NOT
AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF ANY AGREEMENT.

      9.2 Survival.  The representations,  warranties,  covenants and agreements
made  herein  shall  survive any  investigation  made by the  Purchaser  and the
closing of the transactions  contemplated hereby to the extent provided therein.
All  statements  as to factual  matters  contained in any  certificate  or other
instrument  delivered  by or  on  behalf  of  the  Company  pursuant  hereto  in
connection  with the  transactions  contemplated  hereby  shall be  deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.

      9.3  Successors.  Except  as  otherwise  expressly  provided  herein,  the
provisions  hereof  shall  inure to the  benefit  of, and be binding  upon,  the
successors,  heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be  enforceable by each person who shall be a holder
of the  Securities  from time to time,  other than the  holders of Common  Stock
which  has been  sold by the  Purchaser  pursuant  to Rule  144 or an  effective
registration  statement.  Purchaser  may not assign its  rights  hereunder  to a
competitor of the Company.

      9.4 Entire Agreement.  This Agreement,  the exhibits and schedules hereto,
the  Related  Agreements  and the  other  documents  delivered  pursuant  hereto
constitute the full and entire  understanding  and agreement between the parties
with regard to the subjects  hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.

      9.5 Severability. In case any provision of the Agreement shall be invalid,
illegal or  unenforceable,  the  validity,  legality and  enforceability  of the
remaining provisions shall not in any way be affected or impaired thereby.

                                      -20-
<PAGE>

      9.6 Amendment and Waiver.

            (a) This  Agreement may be amended or modified only upon the written
      consent of the Company and the Purchaser.

            (b) The  obligations  of the Company and the rights of the Purchaser
      under this  Agreement  may be waived only with the written  consent of the
      Purchaser.

            (c) The  obligations  of the Purchaser and the rights of the Company
      under this  Agreement  may be waived only with the written  consent of the
      Company.

      9.7  Delays or  Omissions..  It is  agreed  that no delay or  omission  to
exercise  any right,  power or remedy  accruing  to any party,  upon any breach,
default or  noncompliance  by another party under this  Agreement or the Related
Agreements,  shall  impair  any such  right,  power or  remedy,  nor shall it be
construed to be a waiver of any such breach,  default or  noncompliance,  or any
acquiescence  therein, or of or in any similar breach,  default or noncompliance
thereafter occurring. All remedies, either under this Agreement, the Note or the
Related  Agreements,  by law  or  otherwise  afforded  to any  party,  shall  be
cumulative and not alternative.

      9.8  Notices.  All notices  required or  permitted  hereunder  shall be in
writing and shall be deemed effectively given:

            (a) upon personal delivery to the party to be notified;

            (b) when sent by confirmed  facsimile if sent during normal business
      hours of the recipient, if not, then on the next business day;

            (c) three (3) business  days after having been sent by registered or
      certified mail, return receipt requested, postage prepaid; or

            (d) one (1) day after deposit with a nationally recognized overnight
      courier,  specifying  next day  delivery,  with  written  verification  of
      receipt.

      All communications shall be sent as follows:

            If to the Purchaser, to:  DynTek, Inc.
                                      18881 Von Karman Avenue
                                      Suite 250
                                      Irvine, CA  92612

                                      Attention:  Chief Financial Officer
                                      Facsimile:  (949) 955-0086

                                      -21-
<PAGE>

                                      with a copy to:

                                      Nixon Peabody LLP
                                      437 Madison Avenue
                                      New York, New York 10022
                                      Attention:  Peter W. Rothberg, Esq.
                                      Facsimile: 866-947-2410

      If to the Company, to:

                                      with a copy to:

or at such  other  address as the  Company or the  Purchaser  may  designate  by
written notice to the other parties hereto given in accordance herewith.

      9.9 Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this  Agreement,  the prevailing  party in such dispute
shall be entitled to recover from the losing party all fees,  costs and expenses
of enforcing  any right of such  prevailing  party under or with respect to this
Agreement,  including,  without limitation, such reasonable fees and expenses of
attorneys and accountants,  which shall include,  without limitation,  all fees,
costs and expenses of appeals.

      9.10 Titles and Subtitles.  The titles of the sections and  subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.

      9.11 Facsimile Signatures; Counterparts. This Agreement may be executed by
facsimile  signatures and in any number of counterparts,  each of which shall be
an original, but all of which together shall constitute one instrument.

      9.12 Broker's  Fees.  Except as set forth on Schedule  11.12 hereof,  Each
party hereto represents and warrants that no agent,  broker,  investment banker,
person or firm acting on behalf of or under the  authority  of such party hereto
is or will be entitled to any broker's or finder's  fee or any other  commission
directly or indirectly in connection with the transactions  contemplated herein.
Each party hereto  further  agrees to indemnify each other party for any claims,
losses  or   expenses   incurred  by  such  other  party  as  a  result  of  the
representation in this Section 11.12 being untrue.

                                      -22-
<PAGE>

      9.13  Construction.   Each  party  acknowledges  that  its  legal  counsel
participated  in the  preparation of this  Agreement and the Related  Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be  resolved   against  the   drafting   party  shall  not  be  applied  in  the
interpretation of this Agreement to favor any party against the other.

             [the remainder of this page is intentionally left blank

                                      -23-
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto  have  executed  the  SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANY:                                  PURCHASER:

DYNTEK, INC.                              ______________________________________

By: ___________________________________   By: __________________________________

Name: _________________________________   Name: ________________________________

Title: ________________________________   Title: _______________________________

                                      -24-
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERTIBLE NOTE

                                      A-1

<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

                                       B-1

<PAGE>

                                    EXHIBIT C

                                 FORM OF OPINION

      1. The Company is a  corporation  validly  existing  and in good  standing
under the laws of the State of Delaware and has all  requisite  corporate  power
and  authority  to own,  operate  and lease its  properties  and to carry on its
business as it is now being conducted.

      2. The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Agreement and Related  Agreements.
All corporate action on the part of the Company and its officers,  directors and
stockholders  necessary  has  been  taken  for:  (i)  the  authorization  of the
Agreement and Related  Agreements and the  performance of all obligations of the
Company thereunder at the Closing;  and (ii) the authorization,  sale,  issuance
and  delivery  of the  Securities  pursuant  to the  Agreement  and the  Related
Agreements.  The Note Shares and the Warrant Shares, when issued pursuant to and
in accordance with the terms of the Agreement and the Related Documents and upon
delivery shall be validly issued and outstanding, fully paid and non assessable.

      3. The execution,  delivery and performance of the Agreement,  the Note or
the Related  Agreements by the Company and the  consummation of the transactions
on its part contemplated by any thereof, will not, with or without the giving of
notice or the passage of time or both:

            (a) Violate the  provisions of the Charter or bylaws of the Company;
      or

            (b) To the best of such counsel's  knowledge,  violate any judgment,
      decree, order or award of any court binding upon the Company.

            4. The Agreement and Related  Agreements will constitute,  valid and
      legally binding  obligations of the Company,  and are enforceable  against
      the Company in accordance with their respective terms, except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application  affecting  enforcement of
      creditors' rights; and

            (b) general  principles of equity that restrict the  availability of
      equitable or legal remedies.

      5. To such  counsel's  knowledge,  the sale of the Note and the subsequent
conversion of the Note into Note Shares are not subject to any preemptive rights
or rights of first refusal that have not been properly  waived or complied with.
To such counsel's knowledge, the sale of the Warrant and the subsequent exercise
of the Warrant for Warrant Shares are not subject to any  preemptive  rights or,
to such counsel's knowledge, rights of first refusal that have not been properly
waived or complied with.

      6. There is no action,  suit,  proceeding or investigation  pending or, to
such counsel's knowledge, currently threatened against the Company that prevents
the right of the  Company to enter  into this  Agreement  or any of the  Related
Agreements,  or to consummate the  transactions

                                      C-1

<PAGE>

contemplated thereby. To such counsel's knowledge, the Company is not a party or
subject to the provisions of any order, writ, injunction,  judgment or decree of
any court or  government  agency or  instrumentality;  nor is there any  action,
suit,  proceeding or investigation by the Company currently pending or which the
Company intends to initiate.

      7. The  UCC-1  Financing  Statement  naming  the  Company  as  debtor  and
__________  as secured party is in proper form for filing and assuming that such
UCC-1  Financing  Statement  has  been  filed  with  the  Secretary  of State of
Delaware,  the  security  interest  created  under the Security  Agreement  will
constitute a perfected  security  interest under the Uniform  Commercial Code in
favor of __________.

                                      C-2

<PAGE>
                                    EXHIBIT D

                            FORM OF ESCROW AGREEMENT

                                      D-1Exhibit 10.2

THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON  CONVERSION OF THIS NOTE HAVE NOT
BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR ANY STATE
SECURITIES  LAWS.  THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON  CONVERSION OF
THIS NOTE MAY NOT BE SOLD,  OFFERED  FOR SALE,  PLEDGED OR  HYPOTHECATED  IN THE
ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE  STATE  SECURITIES  LAWS OR AN OPINION OF COUNSEL  REASONABLY
SATISFACTORY TO DYNTEK, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

                          SECURED CONVERTIBLE TERM NOTE

      FOR VALUE RECEIVED, DYNTEK, INC., a Delaware corporation (the "Borrower"),
hereby promises to pay to __________ (the "Holder") or its registered assigns or
successors in interest, on order, the sum of THREE MILLION FIVE HUNDRED THOUSAND
DOLLARS  ($3,500,000.00),  together with any accrued and unpaid interest hereon,
on January 30, 2007 (the "Maturity Date") if not sooner paid.

      Capitalized  terms used herein without  definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the "Purchase Agreement").

The following terms shall apply to this Note:

                                    ARTICLE I
                             INTEREST & AMORTIZATION

      1.1 Interest Rate and Payment. (a) Subject to Sections 4.9 and 5.6 hereof,
interest  payable on this Note shall  accrue at a rate per annum (the  "Interest
Rate") equal to the "prime rate"  published in The Wall Street Journal from time
to time,  plus one (1%).  The prime rate shall be  increased or decreased as the
case may be for each  increase or decrease in the prime rate in an amount  equal
to such  increase or decrease in the prime rate;  each change to be effective as
of the day of the change in such rate.  Subject  to  adjustment  as set forth in
Section 1.1(b),  in no event shall the prime rate be less than percent  (4.00%).
Interest shall be payable monthly in arrears commencing on April 1, 2004, and on
the first day of each consecutive  calendar month thereafter (each, a "Repayment
Date"), and on the Maturity Date.

      1.1  (b) On the  last  business  day  of  each  month  hereafter  (each  a
"Determination  Date"), the Interest Rate shall be adjusted:  if (i) the Company
shall have  registered the shares of the Company's  common stock  underlying the
conversion  of  the  Note  and  that  certain  warrant  issued  to  Holder  on a
registration  statement  declared  effective  by the SEC,  and  (ii) the  volume
weighted average price of the Common Stock as reported by Bloomberg, L.P. on the
principal market for the 10 trading days  immediately  preceding a Determination
Date exceeds the then applicable  Fixed  Conversion Price in such percentages as
outlined in the table below, the Interest Rate for the succeeding calendar month
shall be decreased  by fifty basis  points  (0.50%) for each twenty five percent
(25%) incremental increase above the Fixed Conversion Price as per the following
example:

<PAGE>

--------------------------------------------------------------------------------
100% or less of Applicable Fixed Conversion Price      Interest  Rate
--------------------------------------------------------------------------------
125% of the applicable Fixed Conversion Price          Interest Rate minus 0.50%
--------------------------------------------------------------------------------
150% of the applicable Fixed Conversion Price          Interest Rate minus 1.0%
--------------------------------------------------------------------------------
175% of the applicable Fixed Conversion Price          Interest  Rate minus 1.5%
--------------------------------------------------------------------------------

      In no event shall the Interest Rate be less than zero (0.00%)

      1.2  Minimum  Monthly  Principal  Payments.  Amortizing  payments  of  the
aggregate  principal  amount  outstanding  under  this  Note  at any  time  (the
"Principal  Amount")  shall begin on August 1, 2004 and shall recur on the first
calendar day of each succeeding  month thereafter until the Maturity Date (each,
an "Amortization  Date").  Subject to Section 3.4 below,  beginning on the first
Amortization  Date,  the Borrower  shall make monthly  payments to the Holder on
each Repayment Date,  each in the amount of $116,667,  together with any accrued
and unpaid interest to date on such portion of the Principal Amount plus any and
all other  amounts  which are then owing  under this Note but have not been paid
(collectively, the "Monthly Amount").

                                   ARTICLE II
                            BORROWER PAYMENT OPTIONS

      2.1 (a) Payment of Monthly Amount in Cash or Common Stock.  Subject to the
terms hereof,  the Borrower  shall have the sole option to determine  whether to
satisfy  payment of the Monthly  Amount on each Repayment Date either in cash or
in  shares  of  Common  Stock  (as  defined  in the  Purchase  Agreement),  or a
combination  of both.  Each  month by the tenth  (10th) day of such  month,  the
Borrower shall deliver to the Holder a written irrevocable notice in the form of
Exhibit B attached hereto electing to pay the Monthly Amount payable on the next
Repayment Date in either cash or Common Stock, or a combination of both (each, a
"Repayment  Election  Notice")  (the date by which such notice is required to be
given  being  hereinafter  referred  to as the  "Notice  Date").  If a Repayment
Election Notice is not delivered to the Holder by the applicable Notice Date for
such Repayment Date, then the Monthly Amount due on such Repayment Date shall be
paid in cash.  Any  portion of the  Monthly  Amount  paid in cash on a Repayment
Date,  shall  be  paid to the  Holder  as an  amount  equal  to (x)  102% of the
principal portion of the Monthly Amount plus (y) any accrued and unpaid interest
in satisfaction of such  obligation.  If the Borrower repays all or a portion of
the Monthly  Amount in shares of Common  Stock,  the number of such shares to be
issued for such  Repayment  Date shall be the number  determined by dividing (x)
the portion of the Monthly  Amount to be paid in shares of Common Stock,  by (y)
the Fixed Conversion  Price. For purposes hereof,  the "Fixed  Conversion Price"
means  $0.90  (which has been  determined  on the date of this Note as an amount
equal  to 100% of the  average  closing  price  for the five  (5)  trading  days
immediately  prior  to  the  date  of  this  Note);   provided,   however,  that
notwithstanding anything contained in this Note, or in the Warrant issued to the
Holder in  connection  with the closing of the sale of this Note pursuant to the
terms of the Purchase Agreement,  the aggregate number of shares of Common Stock
to be issuable (i) under the Warrant and (ii) upon the  repayment or  conversion
of this Note,  including any

                                      -2-
<PAGE>

warrant coverage or other increases granted as a result of delayed filing of any
registration statement with the Securities and Exchange Commission (the "Maximum
Coverage")  with  respect  to the  distribution  of the  shares of Common  Stock
acquired  by Holder  pursuant  to  subprovisions  (i) and (ii)  above,  shall be
subject  to a maximum  limit  such that the  Maximum  Coverage  can not equal or
exceed 20% of the number of shares of Common  Stock  outstanding  on the date of
this Note without obtaining the requisite shareholder approval.

      (b) Monthly  Amount Common Stock Payment  Guidelines.  Subject to Sections
2.1(a) and 2.2 hereof,  if the  Borrower  has elected to pay all or a portion of
the Monthly  Amount due on such Repayment Date in shares of Common Stock and the
closing  price of the  Common  Stock  as  reported  by  Bloomberg,  L.P.  on the
Principal  Market (as  defined in Section  4.7  hereof)  for any of the five (5)
trading days preceding the  applicable  Repayment Date was less than 115% of the
Fixed Conversion Price, then the Borrower shall pay in cash instead. Any part of
the Monthly Amount due on such Repayment Date that the Borrower did not elect to
pay in shares  of Common  Stock  shall be paid by the  Borrower  in cash on such
Repayment  Date. Any part of the Monthly Amount due on such Repayment Date which
the Borrower  elected to pay in shares of Common Stock but which must be paid in
cash (as a result of the closing price of the Common Stock on one or more of the
five (5) trading days preceding the applicable Repayment Date was less than 115%
of the Fixed  Conversion  Price) shall be paid within ten (10)  business days of
the applicable Repayment Date;

      2.2 No Effective  Registration.  Notwithstanding  anything to the contrary
herein,  the Borrower shall not repay any part of its  obligations to the Holder
hereunder  in Common  Stock if (i)  there  fails to exist an  effective  current
Registration  Statement  (as  defined  in  the  Registration  Rights  Agreement)
covering  the  shares of  Common  Stock to be  issued  in  connection  with such
payment, or (ii) an Event of Default hereunder exists and is continuing,  unless
such Event of Default is cured within any applicable cure period or is otherwise
waived in writing by the Holder in whole or in part at the Holder's option.

      2.3 Optional  Prepayments in Common Stock.  Subject to Section 2.2 hereof,
if the average  closing  price of the Common  Stock on the  Principal  Market is
greater  than 115% of the Fixed  Conversion  Price for a period of at least five
(5) consecutive trading days, then the Borrower may, at its sole option, provide
the Holder written notice (a "Prepayment Call Notice")  requiring the conversion
at the  then  applicable  Fixed  Conversion  Price  of all or a  portion  of the
outstanding principal, interest and fees outstanding under this Note (subject to
compliance  with Section 2.3 and 3.2),  together  with  accrued  interest on the
amount being prepaid,  as of the date set forth in such  Prepayment  Call Notice
(the  "Prepayment  Call Date").  The Prepayment  Call Date shall be at least ten
(10) trading  days  following  the date of the  Prepayment  Call Notice.  On the
Prepayment  Call Date,  the Borrower  shall  deliver to the Holder  certificates
evidencing  the shares of Common Stock issued in  satisfaction  of the principal
and interest being prepaid.  Notwithstanding the foregoing, the Borrower's right
to issue shares of Common Stock in satisfaction  of its  obligations  under this
Note  shall be  subject  to the  limitation  that the number of shares of Common
Stock issued in connection  with any Prepayment Call Notice shall not exceed 25%
of the  aggregate  dollar  trading  volume of the Common  Stock for the ten (10)
trading days  immediately  preceding the Prepayment Call Date (as such volume is
reported by the Principal Market).  If the price of the Common Stock falls below
115% of the then applicable  Fixed  Conversion Price during the ten (10) trading
day period immediately  preceding the Prepayment Call Date, then the Holder will
then be required to convert

                                      -3-
<PAGE>

only such amount of the Note as shall equal  twenty  five  percent  (25%) of the
aggregate  dollar  trading  volume (as such volume is reported by the  Principal
Market)  for each  day  that the  Common  Stock  has  exceeded  115% of the then
applicable Fixed Conversion Price.

      The  Borrower  shall not be  permitted  to give the  Holder  more than one
Prepayment Call Notice under this Note during any 10-day period.

      Any  principal  amount  of this Note  which is  prepaid  pursuant  to this
Section  2.3 shall be deemed to  constitute  payments of  outstanding  principal
applying to Monthly Amounts for the remaining  Repayment Dates in  chronological
order.

      2.4 Optional  Redemption  in Cash.  The  Borrower  will have the option of
prepaying  this Note  ("Optional  Redemption")  by paying to the Holder a sum of
money  equal to one hundred two percent  (102%),  if there  exists an  effective
current Registration Statement (as defined in the Registration Rights Agreement)
covering  the  shares of  Common  Stock to be  issued  in  connection  with such
payment,  otherwise one hundred four percent (104%),  of the principal amount of
this Note  together  with  accrued but unpaid  interest  thereon and any and all
other sums due,  accrued or payable to the Holder  arising under this Note,  the
Security  Agreement,  or any  Ancillary  Agreement  (as defined in the  Security
Agreement) (the  "Redemption  Amount")  outstanding on the day written notice of
redemption (the "Notice of  Redemption")  is given to the Holder.  The Notice of
Redemption shall specify the date for such Optional  Redemption (the "Redemption
Payment Date") which date shall be ten (10) days after the date of the Notice of
Redemption  (the  "Redemption  Period").  A Notice  of  Redemption  shall not be
effective  with  respect to any  portion of this Note for which the Holder has a
pending election to convert pursuant to Section 3.1, or for conversions  elected
to be made by the Holder  pursuant to Section 3.1 during the Redemption  Period.
The  Redemption  Amount  shall  be  determined  as if such  Holder's  conversion
elections  had been  completed  immediately  prior to the date of the  Notice of
Redemption.  On the Redemption  Payment Date, the Redemption Amount must be paid
in good  funds  to the  Holder.  In the  event  the  Borrower  fails  to pay the
Redemption  Amount on the Redemption  Payment Date, then such Redemption  Notice
will be null and void.

                                   ARTICLE III
                                CONVERSION RIGHTS

      3.1. Holder's  Conversion Rights. The Holder shall have the right, but not
the obligation,  to convert all or any portion of the then aggregate outstanding
principal amount of this Note,  together with interest and fees due hereon, into
shares of Common  Stock  subject to the terms and  conditions  set forth in this
Article III; provided,  however, that notwithstanding anything contained in this
Note, or in the Warrant  issued to the Holder in connection  with the closing of
the sale of this Note  pursuant  to the  terms of the  Purchase  Agreement,  the
aggregate  number of shares of Common Stock to be issuable (i) under the Warrant
and (ii) upon the repayment or  conversion  of this Note,  including any warrant
coverage  or other  increases  granted  as a result  of  delayed  filing  of any
registration statement with the Securities and Exchange Commission (the "Maximum
Coverage")  with  respect  to the  distribution  of the  shares of Common  Stock
acquired  by Holder  pursuant  to  subprovisions  (i) and (ii)  above,  shall be
subject  to a maximum  limit  such that the  Maximum  Coverage  can not equal or
exceed 20% of the number of shares of Common  Stock  outstanding  on the date of
this Note without

                                      -4-
<PAGE>

obtaining the requisite shareholder approval. The Holder may exercise such right
by delivery to the Borrower of a written  notice of conversion not less than one
(1) day prior to the date upon which such conversion  shall occur. The date upon
which such conversion shall occur is (the "Conversion Date").

      3.2 Conversion  Limitation.  Notwithstanding  anything contained herein to
the contrary,  the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible  into that number of Conversion
Shares which would exceed the difference  between the number of shares of Common
Stock  beneficially  owned by such Holder or issuable  upon exercise of warrants
held by such Holder and 4.99% of the  outstanding  shares of Common Stock of the
Borrower.  For the purposes of the immediately  preceding  sentence,  beneficial
ownership  shall be determined in accordance  with Section 13(d) of the Exchange
Act and Regulation  13d-3  thereunder.  The Holder may void the Conversion Share
limitation  described  in this  Section  3.2 upon 75 days  prior  notice  to the
Borrower or without any notice requirement upon an Event of Default.

      3.3  Mechanics  of Holder's  Conversion.  (a) In the event that the Holder
elects to convert this Note into Common  Stock,  the Holder shall give notice of
such  election by  delivering  an executed and  completed  notice of  conversion
("Notice of  Conversion")  to the Borrower and such Notice of  Conversion  shall
provide a  breakdown  in  reasonable  detail of the  Principal  Amount,  accrued
interest  and fees being  converted.  On each  Conversion  Date (as  hereinafter
defined) and in accordance with its Notice of Conversion,  the Holder shall make
the appropriate reduction to the Principal Amount,  accrued interest and fees as
entered in its records and shall provide  written notice thereof to the Borrower
within two (2) business  days after the  Conversion  Date.  Each date on which a
Notice of  Conversion  is delivered or  telecopied to the Borrower in accordance
with the provisions  hereof shall be deemed a Conversion  Date (the  "Conversion
Date").  A form of Notice of  Conversion to be employed by the Holder is annexed
hereto as Exhibit A.

      (b) Pursuant to the terms of the Notice of  Conversion,  the Borrower will
issue  instructions  to the transfer agent  accompanied by an opinion of counsel
within  three (3)  business  day of the date of the  delivery to Borrower of the
Notice  of  Conversion  and shall  cause  the  transfer  agent to  transmit  the
certificates  representing the Conversion  Shares to the Holder by crediting the
account of the Holder's  designated broker with the Depository Trust Corporation
("DTC") through its Deposit  Withdrawal Agent Commission  ("DWAC") system within
three  (3)  business  days  after  receipt  by the  Borrower  of the  Notice  of
Conversion (the "Delivery  Date"). In the case of the exercise of the conversion
rights set forth herein the  conversion  privilege  shall be deemed to have been
exercised  and the  Conversion  Shares  issuable upon such  conversion  shall be
deemed to have been  issued  upon the date of  receipt  by the  Borrower  of the
Notice of  Conversion  and the Holder  shall be treated for all  purposes as the
record holder of such Common Stock  thereafter,  unless the Holder  provides the
Borrower written instructions to the contrary.

      3.4 Conversion Mechanics.

      (a) The number of shares of Common Stock to be issued upon each conversion
of this Note shall be  determined  by dividing that portion of the principal and
interest  and  fees  to be  converted,  if any,  by the  then  applicable  Fixed
Conversion  Price.  In the event of any  conversions  of  outstanding  principal
amount under this Note in part  pursuant to this Article III,  such  conversions

                                      -5-
<PAGE>

shall be  deemed to  constitute  conversions  of  outstanding  principal  amount
applying to Monthly Amounts for the remaining  Repayment Dates in  chronological
order.  By way of  example,  if the  original  principal  amount of this Note is
$3,500,000 and the Holder converted  $200,000 of such original  principal amount
prior to the first Repayment Date, then (1) the principal  amount of the Monthly
Amount due on the first Repayment Date would equal $0, (2) the principal  amount
of the Monthly  Amount due on the second  Repayment Date would equal $33,334 and
(3) the principal  amount of the Monthly Amount due on the third  Repayment Date
would be $116,667.

      (b) The  Fixed  Conversion  Price and  number  and kind of shares or other
securities to be issued upon  conversion  is subject to adjustment  from time to
time upon the occurrence of certain events, as follows:

      A. Stock Splits, Combinations and Dividends. If the shares of Common Stock
are  subdivided or combined into a greater or smaller number of shares of Common
Stock,  or if a dividend is paid on the Common Stock in shares of Common  Stock,
the Fixed Conversion Price or the Conversion Price, as the case may be, shall be
proportionately  reduced in case of  subdivision  of shares or stock dividend or
proportionately  increased in the case of  combination  of shares,  in each such
case by the ratio which the total number of shares of Common  Stock  outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.

      B.  During the period the  conversion  right  exists,  the  Borrower  will
reserve from its  authorized  and unissued  Common Stock a sufficient  number of
shares to provide for the issuance of Common Stock upon the full  conversion  of
this Note. The Borrower represents that upon issuance,  such shares will be duly
and validly issued, fully paid and non-assessable.  The Borrower agrees that its
issuance of this Note shall  constitute full authority to its officers,  agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates  to  execute  and issue the  necessary  certificates  for shares of
Common Stock upon the conversion of this Note.

      C. Share Issuances.  Subject to the provisions of this Section 3.4, if the
Borrower  shall at any time prior to the  conversion or repayment in full of the
Principal  Amount  issue any shares of Common  Stock to a person  other than the
Holder  (except  (i)  pursuant to  Subsections  A or B above;  (ii)  pursuant to
options,  warrants, or other obligations to issue shares outstanding on the date
hereof,  including the Warrant  issued  pursuant to the Purchase  Agreement,  as
disclosed  to Holder in writing or as  disclosed  in any  Exchange  Act Filings;
(iii)  pursuant  to options  or other  securities  that may be issued  under any
employee incentive plan adopted by the Borrower; (iv) issuance of any securities
within five (5) business days of the date hereof, in an offering registered with
the Securities and Exchange Commission;  (v) issuance of any securities pursuant
to  a  joint  venture,   technology   licensing  or  research  and   development
arrangements  or  pursuant to  arrangements  for the  development,  manufacture,
distribution, marketing or sale of Borrower's (or its subsidiaries') products or
services;  (vi) issuance of any securities pursuant to a merger,  consolidation,
sale of all or  substantially  all of the  assets,  sale or  exchange of capital
stock or other similar transaction; or (vii) issuance of any securities, without
regard to the purpose therefor,  during the 30-day period succeeding the date of
this Note) for a consideration per share (the "Offer Price") less than the Fixed
Conversion  Price  in  effect  at the  time of such  issuance,  then  the  Fixed
Conversion  Price shall be immediately  reset pursuant to the formula below. For
purposes hereof,  the issuance of any security

                                      -6-
<PAGE>

of the Borrower convertible into or exercisable or exchangeable for Common Stock
shall  result  in an  adjustment  to the Fixed  Conversion  Price at the time of
issuance of such securities.

      If the  Corporation  issues any additional  shares pursuant to Section 3.4
above,  then and  thereafter  successively  upon  each  such  issue,  the  Fixed
Conversion  Price shall be adjusted by  multiplying  the then  applicable  Fixed
Conversion Price by the following fraction:

      ------------------------------
                  A + B
      ------------------------------
      (A + B) + [((C - D) x B) / C]
      ------------------------------

            A = Actual shares outstanding prior to such offering

            B = Actual shares sold in the offering

            C = Fixed Conversion Price

            D = Offering price

      D.  Reclassification,   etc.  If  the  Borrower  at  any  time  shall,  by
reclassification  or  otherwise,  change  the  Common  Stock  into the same or a
different  number of  securities  of any class or classes,  this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of  securities  as would have been  issuable  as the result of such  change with
respect to the Common Stock immediately prior to such  reclassification or other
change.

      3.5 Issuance of New Note. Upon any partial  conversion of this Note, a new
Note  containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and  interest  which  shall not have been  converted  or paid.  The
Borrower will pay no costs,  fees or any other  consideration  to the Holder for
the production and issuance of a new Note.

                                   ARTICLE IV
                                EVENTS OF DEFAULT

      If an Event of Default (as defined  below) occurs and is  continuing,  the
Borrower's rights under Sections 2.1, 2.3 and 2.4 shall immediately cease and be
of no further effect until such time as the Event of Default has been cured,  or
has been waived by the Holder.  Upon the occurrence and  continuance of an Event
of Default beyond any applicable  grace period,  the Holder may make all sums of
principal,  interest and other fees then  remaining  unpaid hereon and all other
amounts  payable  hereunder  due and payable  within five (5) days after written
notice  from  Holder  to  Borrower  (each  occurrence  being a  "Default  Notice
Period").  In the event of such  acceleration,  the  amount due and owing to the
Holder shall be one hundred twenty percent (120%) of the  outstanding  principal
amount of the Note (plus accrued and unpaid interest and fees, if any).If,  with
respect  to any Event of  Default  other  than a payment  default  described  in
Section 4.1 below, within the Default Notice Period the Borrower cures the Event
of  Default,  the Event of  Default  will be  deemed to no

                                      -7-
<PAGE>

longer exist and any rights and remedies of Holder  pertaining  to such Event of
Default will be of no further force or effect.

      The occurrence of any of the following events,  shall constitute an "Event
of Default":

      4.1 Failure to Pay  Principal,  Interest or other Fees. the Borrower fails
to pay when due any  installment of principal,  interest or other fees hereon in
accordance herewith.

      4.2 Breach of  Covenant.  The Borrower  breaches any material  covenant or
other term or condition  of this Note or the Purchase  Agreement in any material
respect and such breach,  if subject to cure,  continues  for a period of thirty
(30) days after the occurrence thereof.

      4.3 Breach of Representations and Warranties.  Any material representation
or warranty of the Borrower made herein,  in the Purchase  Agreement,  or in any
Related  Document (as defined in the  Purchase  Agreement)  shall be  materially
false or  misleading  and shall not be cured for a period of  fifteen  (15) days
after the occurrence thereof.

      4.4 Receiver or Trustee.  The Borrower  shall make an  assignment  for the
benefit of creditors,  or apply for or consent to the  appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee  shall  otherwise be  appointed.

      4.5 Judgments.  Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its property or other assets for
more than  $250,000,  and shall  remain  unvacated,  unbonded or unstayed  for a
period of ninety (90) days.

      4.6  Bankruptcy.  Bankruptcy,  insolvency,  reorganization  or liquidation
proceedings  or other  proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower, and in
the event  involuntarily  instituted against the Borrower shall not be dismissed
within sixty (60) days thereafter.

      4.7 Stop Trade.  An SEC stop trade order or the Principal  Market  trading
suspension of the Common Stock shall be in effect for five (5) consecutive  days
or five (5 )days during a period of ten (10) consecutive days,  excluding in all
cases a suspension of all trading on the Principal Market;  provided,  that this
shall only be an Event of Default to the extent that the Borrower shall not have
been able to cure such trading  suspension within thirty (30) days of the notice
thereof or list the Common Stock on another trading market  identified herein as
a Principal Market within sixty (60) days of such notice. The "Principal Market"
for the Common Stock shall include the NASD OTC Bulletin Board,  NASDAQ SmallCap
Market,  NASDAQ  National Market System,  American Stock  Exchange,  or New York
Stock Exchange,  or any securities  exchange or other securities market on which
the Common Stock is then being listed or traded  (whichever  of the foregoing is
at the time the principal trading exchange or market for the Common Stock).

      4.8 Failure to Deliver  Common Stock or  Replacement  Note. The Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note if such failure to timely  deliver  Common Stock shall not
be cured within two (2) Business  Days, or if required,  a  replacement  Note if
such  failure  to  deliver  a  replacement  Note is not cured  within  seven (7)
Business Days.

                                      -8-
<PAGE>

      4.9 Default Under Related  Agreements.  The occurrence and  continuance of
any Event of Default as defined in the Related Agreements.

      4.10 Payment  Grace Period.  The Borrower  shall have a three (3) business
day grace period to pay any monetary amounts due under this Note or the Purchase
Agreement or any Related  Document,  after which grace period a default interest
rate of five  percent  (5%) per annum above the then  applicable  Interest  Rate
hereunder shall apply to the monetary amounts due.

                           DEFAULT RELATED PROVISIONS

      4.11 Conversion Privileges. The conversion privileges set forth in Article
III shall remain in full force and effect  immediately  from the date hereof and
until this Note is paid in full.

      4.12  Cumulative   Remedies.   The  remedies  under  this  Note  shall  be
cumulative.

                                    ARTICLE V
                                  MISCELLANEOUS

      5.1 Failure or Indulgence  Not Waiver.  No failure or delay on the part of
the Holder  hereof in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other  right,  power or  privilege.  All  rights  and  remedies  existing
hereunder  are  cumulative  to, and not  exclusive  of,  any rights or  remedies
otherwise available.

      5.2 Notices.  Any notice herein required or permitted to be given shall be
in writing and shall be deemed  effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal  business hours of the recipient,  if not, then on the next business day,
(c) five days after having been sent by  registered  or certified  mail,  return
receipt  requested,  postage  prepaid,  or (d)  one  day  after  deposit  with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written  verification  of  receipt.  All  communications  shall  be  sent to the
Borrower  at  the  address  provided  in  the  Purchase  Agreement  executed  in
connection  herewith,  and to the Holder at the address provided in the Purchase
Agreement  for such  Holder,  with a copy to John E.  Tucker,  Esq.,  825  Third
Avenue,  14th Floor, New York, New York 10022,  facsimile number (212) 541-4434,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.

      5.3 Amendment  Provision.  The term "Note" and all reference  thereto,  as
used  throughout  this  instrument,  shall mean this  instrument  as  originally
executed,  or  if  later  amended  or  supplemented,   then  as  so  amended  or
supplemented,  and any  successor  instrument  issued  pursuant  to Section  3.5
hereof, as it may be amended or supplemented.

      5.4  Assignability.  This Note shall be binding  upon the Borrower and its
successors  and  assigns,  and shall  inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement.

                                      -9-
<PAGE>

      5.5  Governing  Law.  This Note  shall be  governed  by and  construed  in
accordance with the laws of the State of New York,  without regard to principles
of  conflicts  of laws.  Any action  brought by either  party  against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York.  Both  parties and the  individual  signing this Note on behalf of the
Borrower  agree to submit to the  jurisdiction  of such courts.  The  prevailing
party  shall  be  entitled  to  recover  from the  other  party  its  reasonable
attorney's  fees and  costs.  In the event  that any  provision  of this Note is
invalid or unenforceable  under any applicable statute or rule of law, then such
provision  shall  be  deemed  inoperative  to the  extent  that it may  conflict
therewith  and shall be deemed  modified to conform with such statute or rule of
law. Any such provision which may prove invalid or  unenforceable  under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from  bringing  suit or taking  other legal  action  against the Borrower in any
other  jurisdiction  to  collect on the  Borrower's  obligations  to Holder,  to
realize on any  collateral  or any other  security for such  obligations,  or to
enforce a judgment or other court order in favor of the Holder.

      5.6  Maximum  Payments.  Nothing  contained  herein  shall  be  deemed  to
establish  or require  the  payment of a rate of  interest  or other  charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest  required  to be paid or other  charges  hereunder  exceed the  maximum
permitted by such law, any payments in excess of such maximum  shall be credited
against  amounts  owed by the  Borrower  to the Holder and thus  refunded to the
Borrower.

      5.7 Security Interest. The holder of this Note has been granted a security
interest in certain  assets of the Borrower  more fully  described in a Security
Agreement dated as of January 30, 2004.

      5.8  Construction.   Each  party   acknowledges  that  its  legal  counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction  that  ambiguities are to be resolved  against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.

      5.9 Cost of  Collection.  If default is made in the  payment of this Note,
the  Borrower  shall pay to Holder  reasonable  costs of  collection,  including
reasonable attorney's fees.

       [Balance of page intentionally left blank; signature page follows.]

                                      -10-
<PAGE>

         IN WITNESS  WHEREOF,  Borrower has caused this Convertible Term Note to
be signed in its name effective as of this 30th day of January, 2004.

                                             DYNTEK, INC.

                                            By:________________________________

                                            Name:______________________________

                                            Title:_____________________________

WITNESS:

_________________________________-

                                      -11-
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be  executed  by the Holder in order to convert all or part of the Note into
Common Stock

[Name and Address of Holder]

The  Undersigned  hereby  elects to convert  $_________  of the principal due on
[specify  applicable  Repayment Date] under the Convertible  Term Note issued by
DYNTEK,  INC.  dated  January __, 2004 by delivery of Shares of Common  Stock of
DYNTEK,  INC. on and subject to the  conditions  set forth in Article II of such
Note.

1. Date of Conversion ____________________________

2. Shares To Be Delivered: _______________________

                                           By:_______________________________

                                           Name:_____________________________

                                           Title:____________________________

                                      -12-
<PAGE>

                                    EXHIBIT B

                            REPAYMENT ELECTION NOTICE

(To be executed by the Borrower in order to pay all or part of a Monthly  Amount
with Common Stock)

[Name and Address of Holder]

DYNTEK,  INC.  hereby  elects to pay  $_________  of the  Monthly  Amount due on
[specify  applicable  Repayment Date] under the Convertible  Term Note issued by
DYNTEK,  INC.  dated  January,  2004 by  delivery  of Shares of Common  Stock of
DYNTEK,  INC. on and subject to the  conditions  set forth in Article II of such
Note.

1. Fixed Conversion Price: $___________________

2. Amount to be paid: $________________________

3. Shares To Be Delivered (2 divided by 1): __________________

Date: ____________                           DYNTEK, INC.

                                             By:_______________________________

                                             Name:_____________________________

                                             Title:____________________________

                                      -13-

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