DYNTEK, INC. PLACEMENT AGENT'S AGREEMENT

 

                                                                    Exhibit 10.1

 

                                  DYNTEK, INC.

 

                           PLACEMENT AGENT'S AGREEMENT

 

February 27, 2004

 

Network 1 Financial Securities, Inc.

The Galleria, Penthouse

2 Bridge Avenue, Building 2

Red Bank, New Jersey 07701

 

Dear Ladies & Gentlemen:

 

      The   undersigned,   DynTek,   Inc., a Delaware   corporation (the "Company"),

proposes to offer for sale in a private placement ("Offering"),   a minimum of 37

Units   (the   "Minimum   Offering")   and a   maximum   of 150   Units   (the   "Maximum

Offering')("Units")   at a purchase price of $13,600 per Unit. Each Unit consists

of 20,000   Shares of Common Stock of the Company (the   "Offering"),   $0.0001 par

value ("Common Stock"),   and 4,000 Common Stock Purchase Warrants of the Company

("Warrants" or "Warrant").   Each Warrant entitles the holder thereof to purchase

one share of Common Stock at a purchase price of $0.90 cents per Share,   subject

to adjustment in certain circumstances, at any time commencing upon issuance and

thereafter until the fifth anniversary of the date of issuance. The Warrant will

be evidenced by a Share purchase   warrant   containing   "piggyback"   registration

provisions,   anti-dilution provisions and other terms and conditions customarily

contained in Warrant agreements. The minimum investment will be one (1) Unit for

a minimum investment of $13,600, except that the Company and the Placement Agent

may accept subscriptions for lesser amounts at their discretion.   The Units will

be   offered   on a best   efforts   basis.   The   Units   shall   be   offered   only to

"Accredited   Investors",   as such   term is   defined   under   Rule   501(a)   of the

Securities Act of 1933 (the "Act"), including without limitation entities within

such   definition,    without    registration,    pursuant   to   the   exemption   from

registration   created by   Regulation D under the Act. The Offering will commence

on the date of the   "Offering   Documents",   as   hereinafter   defined,   and shall

terminate at the end of the Offering Period as set forth in Section 1.2 hereof.

 

      The Company is subject to the informational requirements of the Securities

Exchange   Act of 1934,   as   amended   (the   "Exchange   Act"),   and in   accordance

therewith,   files periodic reports,   proxy and information   statements and other

information with the Securities and Exchange Commission (the "Commission"). Such

reports, proxy and information statements and other information will be referred

to   herein   as   the   "Public    Documents."   The    Subscription    Agreements   and

Questionnaires   to be executed by each purchaser and the Company   (collectively,

the "Subscription   Agreements"),   along with the Public Documents annexed to the

Subscription   Agreements   as   Exhibits   thereto,   will   be   referred   to   herein

collectively as the "Offering Documents." Network 1 Financial   Securities,   Inc.

is sometimes referred to herein as "Network 1" or the "Placement Agent." As used

herein,   unless otherwise indicated,   the term "Company" shall mean DynTek, Inc.

and any subsidiaries of DynTek, Inc. (each a "Subsidiary" and collectively,   the

"Subsidiaries"), both separately and as a consolidated entity.

 

                                   (C) 2004 Network 1 Financial Securities, Inc.

 

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Network 1 Financial Securities, Inc.

Private Placement Agent's Agreement

February 27, 2004

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      The   Company   has   agreed to include   both the Shares of Common   Stock and

Shares of Common Stock   underlying   the Warrants (the "Warrant   Shares") in each

Unit in a   registration   statement to be filed under the Act and to use its best

efforts   to   have   such   registration    statement    declared   effective   by   the

Commission, as promptly as practicable.

 

      1. Appointment of Placement Agent; The Offering Period.

 

            1.1   Appointment   of   Placement   Agent.   You   are   hereby   appointed

exclusive   Placement   Agent of the Company   during the   offering   period   herein

specified   ("Offering   Period")   for the   purpose of   assisting   the   Company in

placing   the   Units   with   purchasers   who are   qualified   accredited   investors

("Subscribers").   You hereby   accept such agency and agree to assist the Company

in placing Units with the   Subscribers.   Your agency hereunder is not terminable

by the Company except upon   termination of the Offering or breach by you of your

material obligations hereunder.

 

            1.2 Offering   Period.   The Offering Period shall commence on the day

the Offering   Documents are first made   available to you by the Company and will

continue   until the   earlier of the final   Closing (as   hereinafter   defined) on

Maximum Offering or May 31, 2004 (The   "Termination   Date"),   unless extended by

the Company for a period of up to ninety (90) days from such date without notice

to any Subscriber (the "Offering   Period").   If, at any time during the Offering

Period,   subscriptions   for the Minimum Offering have been received and accepted

by the Company (and funds in payment   therefore   have cleared),   then,   upon the

mutual   consent of the   Company   and the   Placement   Agent,   an initial   closing

("Initial Closing") shall take place with respect to such accepted subscriptions

and the Company   shall   continue the Offering   until all Units have been sold or

the   Termination   Date,   whichever   occurs   first.   After the   Initial   Closing,

subsequent closings with respect to accepted subscriptions may take place at any

time during the Offering Period as may be mutually determined by the Company and

the Placement Agent (such subsequent   closings and the Initial Closing will each

be referred to herein as a "Closing").

 

            1.3 Offering Documents. The Company will provide the Placement Agent

with a   sufficient   number of copies of the Offering   Documents   for delivery to

potential   Subscribers   and such other   information,   documents and   instruments

which the Placement Agent deems   reasonably   necessary to act as Placement Agent

hereunder   and   to   comply   with   the   rules,    regulations    and   judicial   and

administrative   interpretations   respecting compliance with applicable state and

federal statutes related to the Offering.

 

            1.4   Segregation of Funds.   Each Subscriber of Units shall tender to

the Placement Agent a check payable to the order of "Commerce Bank/Delaware, NA,

Escrow Agent for DynTek,   Inc.   Escrow   Account" in the amount of the investment

subscribed   for, which funds shall be held in escrow by Commerce   Bank/Delaware,

NA, as escrow agent, in accordance

 

                                   (C) 2004 Network 1 Financial Securities, Inc.

 

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Network 1 Financial Securities, Inc.

Private Placement Agent's Agreement

February 27, 2004

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with Rules 10b-9 and 15c2-4   promulgated   under the   Securities   Exchange Act of

1934 ("Exchange Act"), as set forth in the Offering Documents.

 

      2.   Representations and Warranties of the Company.   The Company represents

and warrants to the Placement Agent and the Subscribers as follows:

 

            2.1 Disclosure in Offering Documents.

 

                  2.1.1 Private   Offering   Exemption;   Offering   Documents.   The

Offering   Documents   conform in all material   respects with the   requirements of

Section   4(2) of the   Act,   and   Rules   501-506   of   Regulation   D and   with the

requirements   of all other   applicable   rules and   regulations of the Commission

currently in effect   relating to transactions   not involving a public   offering.

The Offering Documents contain all material   statements which are required to be

stated   therein in   accordance   with such   requirements   and do not   contain any

untrue statement of a material fact or omit to state a material fact required to

be stated therein or necessary to make the statements   therein,   in the light of

the circumstances under which they were made, not misleading.   Assuming that (i)

a proper Form D is filed in   accordance   with Rule 503 of Regulation D, (ii) the

offer and the sale of the   Units by the   Placement   Agent is made in   compliance

with Rule 506 of   Regulation   D and/or   Section   4(2) of the Act,   and (iii) the

representations of the Subscribers in the Subscription Agreements signed by them

are true and   correct   (which   facts will not be   independently   verified by the

Company),   the sale of Units in the Offering is exempt from   registration   under

the Act and is in compliance with Regulation D.

 

                  2.1.2 Disclosure of Contracts.   The descriptions in the Public

Documents   of   all   material   contracts,   agreements,   instruments,   indentures,

mortgages, loans, leases, licenses,   arrangements or undertakings of any nature,

written or oral, of the Company which involve   future   payments,   performance or

services,   development   of products,   or delivery of goods or materials to or by

the   Company of an   aggregate   amount or value in excess of   $250,000,   or which

otherwise    are    material   to   the    business   or    prospects   of   the   Company

(collectively,   "Contracts")   are accurate in all material   respects and present

fairly   the   information   required   to be   disclosed   therein   and   there are no

contracts or other   documents   required to be described in the Public   Documents

which have not been so described. The Company has furnished the Placement Agent,

when and if requested,   with true,   correct and complete   copies (or where oral,

written   descriptions)   of all   Contracts,   including all   exhibits,   schedules,

amendments,   supplements,    modifications   and   waivers   thereto.   Each   of   the

Contracts is in full force and effect, the Company has performed in all material

respects all of its obligations thereunder and is not in default thereunder, and

no party to a   Contract   has made a claim to the   effect   that the   Company   has

failed to perform any obligations   thereunder.   To the knowledge of the Company,

there   is no   plan,   intention,   or   indication   of any   contracting   party to a

Contract to cause termination,   cancellation or modification of such Contract or

to reduce or otherwise change its activity   thereunder so as to adversely affect

in any material respect the benefits derived or expected to be

 

                                   (C) 2004 Network 1 Financial Securities, Inc.

 

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Network 1 Financial Securities, Inc.

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February 27, 2004

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derived therefrom by the Company. The Company does not know of the occurrence of

any   event or the   existence   of any   state of facts   which   with   notice or the

passage of time or both would cause it to be in material   default   thereof.   The

Company is not a party to, or bound by, any warranty   agreement   with respect to

products   sold or any   contract,   agreement,   commitment   or   restriction   which

obligates the Company to perform services or to produce   products   unprofitably.

None of the provisions of any Contracts   violates any existing   applicable   law,

rule, regulation,   judgment, order or decree of any governmental agency or court

having jurisdiction over the Company, or its material assets or businesses.

 

            2.2 Changes After Dates in Offering Documents.

 

                  2.2.1 No Material   Adverse Change.   Except as otherwise stated

in the Public Documents,   since the Balance Sheet Date, as hereinafter   defined,

(i) there has been no material   adverse   change in the   condition,   financial or

otherwise,   or in the results of operations,   business or business   prospects of

the Company,   including, but not limited to a material loss or interference with

its business from fire, storm,   explosion,   flood or other casualty,   whether or

not covered by   insurance,   or from any labor   dispute or court or   governmental

action,   order or decree,   whether   or not   arising   in the   ordinary   course of

business,   (ii) the Company has not become a party to, and neither the   business

nor the property of the Company has become the subject of, any litigation which,

if adversely   determined,   would have a material adverse effect on the business,

properties,   assets,   condition (financial or otherwise) of the Company, whether

or not in the ordinary   course of business (a "Material   Adverse   Effect"),   and

(iii) there have been no   transactions   entered into by the Company,   other than

those in the ordinary   course of business or reflected in the Public   Documents,

which are material with respect to the condition,   financial or otherwise, or to

the results of operations, or business of the Company. The Balance Sheet Date is

defined as December 31, 2003.

 

                  2.2.2   Recent   Securities   Transactions.   Etc.   Since the most

recent   Balance Sheet date, and except as otherwise   specifically   stated in the

Public Documents,   the Company has not (i) issued any securities or incurred any

liability or obligation, direct or contingent, for borrowed money; (ii) declared

or paid any   dividend   or made any other   distribution   on or in   respect to its

capital stock; or (iii) issued any options, warrants or other rights to purchase

the capital stock of the Company,   or any security or other   instrument which by

its terms is convertible into, exercisable for or exchangeable for capital stock

of the Company,   except for   securities   issued under the Company's Most Current

Employee   Stock   Option   Plan or   pursuant   to the   exercise   or   conversion   of

securities outstanding on the Balance Sheet Date.

 

            2.3 No Preemptive Rights;   Options;   Registration Rights.   Except as

set forth in the Public   Documents,   there are no   preemptive or other rights to

subscribe for or purchase,   or any   restriction   upon the voting or transfer of,

any   shares of Common   Stock,   or other   securities   of the   Company,   under the

Certificate of Incorporation or By-Laws of the Company or under any

 

                                   (C) 2004 Network 1 Financial Securities, Inc.

 

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Network 1 Financial Securities, Inc.

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February 27, 2004

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agreement or other outstanding   instrument to which the Company is a party or by

which it is bound.   Except   as set forth in the   Public   Documents,   other   than

securities   issued under the Company's   Most Current   Employee Stock Option Plan

the Company does not have outstanding any option, warrant, convertible security,

or other right   permitting or requiring it to issue, or otherwise to purchase or

convert any obligation into,   shares of Common Stock, or other securities of the

Company   and the   Company   has not   agreed to issue or sell any shares of Common

Stock, or other securities of the Company.

 

            2.4 Financial   Statements.   The financial statements of the Company,

including any notes thereto and supporting   schedules,   included or incorporated

by   reference   in   the   Public   Documents   ("Financials"),   fairly   present   the

financial position and results of operations of the Company at the dates thereof

and for the periods covered thereby, subject, in the case of interim periods, to

year-end adjustments and normal recurring accruals.   The Company has no material

liabilities or obligations, contingent, direct, indirect or otherwise except (i)

as set forth in the   balance   sheet for the Balance   Sheet Date   included in the

Financials or the footnotes thereto,   (ii) those incurred in the ordinary course

of business   since the Balance Sheet Date,   and (iii)   otherwise as set forth in

the   Public   Documents.   The   Public   Documents   also   set   forth   all   material

outstanding amounts due to any employees, officers, directors or stockholders of

the   Company,   or to any of   their   respective   affiliates,   including,   but not

limited to, accrued salaries, loans, etc.

 

            2.5 Authorized Capital;   Options;   Etc. The Company had, at the date

or dates indicated in the Public   Documents,   such duly   authorized,   issued and

outstanding   capitalization as set forth in the Public Documents.   Except as set

forth in the Public Documents, there are no material options, warrants, or other

rights to purchase or otherwise   acquire any authorized   but unissued   shares of

capital stock of the Company or any security   convertible into shares of capital

stock of the Company, or any contracts or commitments to issue or sell shares of

capital stock or any such options, warrants, rights or convertible securities.

 

            2.6 Valid Issuance of Securities: Etc.

 

                  2.6.1   Outstanding   Securities.   All   issued   and   outstanding

securities of the Company have been duly   authorized   and validly issued and are

fully paid and non-assessable;   the holders thereof have no rights of rescission

with   respect   thereto,   and are not subject to personal   liability by reason of

being such holders;   and none of such securities were issued in violation of the

preemptive   rights of any   holders   of any   security   of the   Company or similar

contractual rights granted by the Company.   All outstanding options and warrants

to purchase shares of capital stock constitute the valid and binding obligations

of the Company,   enforceable   in   accordance   with their terms.   The   authorized

capital stock and   outstanding   options and warrants   conform to all   statements

relating thereto contained in the Public Documents.   The offers and sales of the

outstanding   capital stock,   options and warrants to purchase   shares of

 

                                   (C) 2004 Network 1 Financial Securities, Inc.

 

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February 27, 2004

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capital stock were at all relevant times either registered under the Act and the

applicable   state   securities or Blue Sky laws or exempt from such   registration

requirements.

 

                  2.6.2 Units.   The securities   contained in the Units have been

duly and validly   authorized   and, when issued and delivered in accordance   with

the terms of the Subscription Agreements, will be duly and validly issued, fully

paid and   non-assessable.   The   holders   of the   Units   will not be   subject   to

personal   liability   by reason of being such   holders and will not be subject to

the   preemptive   rights of any holders of any security of the Company or similar

contractual   rights granted by the Company.   All corporate action required to be

taken for the   authorization,   issuance and sale of the Units and the securities

contained in the Units have been duly and validly taken.

 

            2.7 Registration Rights of Third Parties. Except as set forth in the

Public Documents,   no holders of any securities of the Company or of any options

or warrants of the Company   exercisable for or convertible or exchangeable   into

securities   of the Company have the right to require the Company to register any

such   securities of the Company under the Act or to include any such   securities

in a registration statement to be filed by the Company.

 

            2.8 Due   Authorization.   The   Company   has   full   right,   power   and

authority to enter into this Agreement and the Subscription Agreements, to issue

the Units and the   securities   contained   in the Units and to perform all of its

obligations    hereunder   and   thereunder   and   to   consummate   the   transactions

contemplated   by the   Offering   Documents.   This   Agreement   has   been,   and the

Subscription Agreements,   when executed and delivered,   will have been, duly and

validly   authorized by all necessary   corporate action and no further   corporate

action   or   approval   is or will be   required   for their   respective   execution,

delivery and   performance.   This   Agreement   constitutes   and each   Subscription

Agreement   (assuming   the due   authorization,   execution   and   delivery   by each

subscriber)   to be entered   into by the Company with respect to the purchase and

sale of the Units, will constitute,   when executed and delivered by the Company,

valid and binding obligations of the Company, enforceable against the Company in

accordance with their respective terms (except (i) as such enforceability may be

limited   by   bankruptcy,   insolvency,   reorganization   or   similar   laws   now or

hereafter in effect relating to or affecting   creditors' rights generally,   (ii)

that the enforceability of the   indemnification   and contribution   provisions of

the   respective   agreements   may be limited by the federal and state   securities

laws and public policy,   and (iii) that the remedy of specific   performance   and

injunctive   and other forms of equitable   relief may be subject to the equitable

defenses and to the discretion of the court before which any proceeding therefor

may be brought).

 

            2.9 No Conflicts. The Company's execution, delivery, and performance

of this   Agreement and the   Subscription   Agreements,   the   consummation   by the

Company of the transactions   contemplated   herein and therein and the compliance

by the   Company   with the   provisions   of this   Agreement   and the   Subscription

Agreements   have been duly authorized by all

 

                                   (C) 2004 Network 1 Financial Securities, Inc.

 

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February 27, 2004

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necessary   corporate   action and do not and will not, with or without the giving

of notice or the lapse of time or both (i)   result in a breach   of, or   conflict

with any of the terms and   provisions   of, or   constitute   a default   under,   or

result in the   creation,   modification,   termination   or imposition of any lien,

charge or encumbrance upon any property or assets of the Company pursuant to the

terms of any indenture,   mortgage, deed of trust, note, loan or credit agreement

or any other   agreement or   instrument   evidencing   an   obligation   for borrowed

money,   or any other   agreement or instrument to which the Company is a party or

by which the Company   may be bound or to which any of the   property or assets of

the Company is subject;   (ii) result in any   violation of the   provisions of the

Certificate of   Incorporation   or the By-laws of the Company;   (iii) violate any

existing   applicable   law, rule,   regulation,   judgment,   order or decree of any

governmental agency or court, domestic or foreign,   having jurisdiction over the

Company or any of its material properties or material   businesses;   or (iv) have

any material adverse effect on any permit, license,   certificate,   registration,

approval,   consent,   license or   franchise   necessary   for the Company to own or

lease and operate any of its properties or to conduct its business.

 

            2.10 No Defaults.   Except as described in the Public   Documents,   no

material   default   exists in the due   performance   and   observance   of any term,

covenant or condition of any permit,   license,   contract,   indenture,   mortgage,

deed of   trust,   note,   loan or credit   agreement,   or any   other   agreement   or

instrument   evidencing an obligation for borrowed   money, or any other agreement

or   instrument   to which the   Company is a party or by which the   Company may be

bound or to which any of the   properties or assets of the Company is subject the

effect of which   would have a Material   Adverse   Effect.   The   Company is not in

violation of any material term or provision of its Certificate of   Incorporation

or   By-Laws   or   in   material   violation   of   any   franchise,   license,   permit,

applicable law, rule, regulation,   judgment or decree of any governmental agency

or court,   domestic or foreign,   having   jurisdiction over the Company or any of

its properties or business, except as described in the Public Documents.

 

            2.11 Corporate Power; Licenses; Consents.

 

                  2.11.1   Conduct of   Business.   The Company   has all   requisite

corporate power and authority, and has all necessary authorizations,   approvals,

orders,   licenses,   certificates   and   permits   of   and   from   all   governmental

regulatory   officials,   agencies,   authorities   and   bodies   to own or lease its

properties   and conduct its business as described in the Public   Documents.   The

Company is and has been doing   business   in   material   compliance   with all such

authorizations,   approvals,   orders, licenses,   certificates and permits and all

federal,   state and local laws,   rules and   regulations.   The disclosures in the

Public Documents   concerning the effects of federal,   state and local regulation

on the Company's business as currently conducted or contemplated to be conducted

are correct in all material respects and do not omit to state a material fact.

 

                  2.11.2 Transactions Contemplated Herein; Consents. The Company

has all   corporate   power and   authority to enter into this   Agreement,   and the

Subscription   Agreements

 

                                    (C) 2004 Network 1 Financial Securities, Inc.

 

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February 27, 2004

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to carry out the provisions and conditions hereof and thereof, and all consents,

authorizations,   approvals and orders required in connection therewith have been

obtained.   Except as set forth in the Public   Documents,   no consent,   approval,

authorization,   order   of, or   filing   with,   any   court,   governmental   agency,

authority or other body is required to consummate the transactions   contemplated

by this   Agreement   and the   Subscription   Agreements,   and the   issuance of the

Units, except that the offer and sale of the Units in certain   jurisdictions may

be   subject   to the   provisions   of the   securities   or   Blue   Sky   laws of such

jurisdictions.

 

            2.12 Title to Property; Insurance. Except as set forth in the Public

Documents,   the   Company   has   good   and   marketable   title   to,   or   valid   and

enforceable   leasehold   estates   in,   all   items of real and   personal   property

(tangible   and   intangible)   owned or leased by it, free and clear of all liens,

encumbrances,   claims,   security   interests,   defects   and   restrictions   of any

material nature   whatsoever.   The Company has adequately   insured its properties

against loss or damage by fire or other casualty and maintains such insurance in

adequate amounts which are adequate to protect its financial   condition   against

the risks involved in the conduct of its businesses.

 

            2.13   No   Pending   Actions.   Except   as   set   forth   in   the   Public

Documents, there are no actions, suits, proceedings,   claims, or hearings of any

kind or nature   existing or pending   (or, to the best   knowledge of the Company,

threatened)   or, to the best   knowledge of the Company,   any   investigations   or

inquiries, before or by any court, or other governmental authority,   tribunal or

instrumentality   (or, the   Company's   best   knowledge,   any state of facts which

would   give rise   thereto),   pending   or   threatened   against   the   Company,   or

involving   the   properties   of the   Company,   which might result in any Material

Adverse Effect or which might   materially   adversely   affect the transactions or

other acts   contemplated by this Agreement or the validity or   enforceability of

this   Agreement.   Except as   described   in the   Public   Documents,   there are no

outstanding   orders,   judgments or decrees of any court,   governmental agency or

other   tribunal   naming the Company and   enjoining   the Company from taking,   or

requiring   the   Company   to take,   any   action,   or to which   the   Company,   its

properties or business, is bound or subject.

 

            2.14 Due Incorporation, Qualification and Good Standing. The Company

has been duly incorporated,   is validly existing as a corporation and is in good

standing   under   the laws of its state of   incorporation.   The   Company   is duly

qualified   and licensed and in good   standing as a foreign   corporation   for the

transaction   of business and is in good standing in each   jurisdiction   in which

the   ownership   or   leasing of its   properties   or the   conduct of its   business

requires such   qualification   or licensing,   except where the failure to qualify

would   not   have a   Material   Adverse   Effect.   The   Company   has all   requisite

corporate   power   and   authority   necessary   to own or hold its   properties   and

conduct its business as described in the Public Documents.

 

                                   (C) 2004 Network 1 Financial Securities, Inc.

 

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            2.15 Taxes. Except as set forth in the Public Documents, the Company

has filed all   federal tax   returns   and all state and   municipal   and local tax

returns (whether   relating to income,   sales,   franchise,   withholding,   real or

personal   property or other types of taxes)   required to be filed under the laws

of the United States and applicable states, and has paid in full all taxes which

have   become   due   pursuant   to such   returns or claimed to be due by any taxing

authority or otherwise due and owing;   provided,   however,   that the Company has

not paid any tax, assessment,   charge, levy or license fee that it is contesting

in good faith and by proper proceedings and adequate reserves for the accrual of

same are   maintained if required by generally   accepted   accounting   principles.

Each of the tax returns heretofore filed by the Company correctly and accurately

reflects the amount of its tax liability thereunder.   Except as set forth in the

Public   Documents,   the Company   has   withheld,   collected   and paid all levies,

assessments,   license   fees and taxes to the extent   required.   As used   herein,

"tax" or "taxes" include all taxes,   charges,   fees, levies or other assessments

imposed by any Federal,   state,   local, or foreign taxing authority,   including,

without limitation, income, premium, recapture, credit, excise, property, sales,

use,   occupation,   service,   service use,   leasing,   leasi