Exhibit 10.2
SUBSCRIPTION AGREEMENT
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DYNTEK, INC.
Minimum 37 Units / Maximum 150 Units
1 Unit = 20,000 Shares of Common Stock and 4,000 Warrants
$13,600/Unit
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Print Name of Subscriber: _________
Number of Units Subscribed For:
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SUBSCRIPTION AGREEMENT
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For the Purchase of Units
of
DynTek, Inc.
The undersigned hereby subscribes for the number of Units (the
"Units" or "Securities") as set forth below the Investor's name on the Execution
Page, with each Unit consisting of Twenty Thousand (20,000) Shares of Common
Stock, $0.0001 par value ("Common Stock"), and Four Thousand (4,000) Common
Stock Purchase Warrants ("Warrants"), of DynTek, Inc., a Delaware corporation
(the "Company") at a purchase price of $13,600 per Unit. Each Warrant entitles
the holder thereof to purchase one- share of Common Stock at a purchase price of
$0.90 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 common stock purchase warrant
containing 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
(the "Offering") on a best efforts basis in a 37 Units minimum offering (the
"Minimum Offering") and 150 Units maximum offering (the
"Maximum Offering"). 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
Materials", as hereinafter defined, and shall terminate on the earlier of the
Closing of the Maximum Offering or May 31, 2004, 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").
The aggregate purchase price to be paid by the Investor to the
Company in full consideration for the issuance and sale of the Units shall be
equal to the quotient of (a) $13,600 multiplied by (b) the number of Units being
purchased by the Investor. The entire purchase price is due and payable upon the
execution of this Subscription Agreement, and shall be paid by check, subject to
collection, or by wire transfer, made payable to the order of "Commerce
Bank/Delaware, NA, Escrow Agent for DynTek, Inc." The Company and the Placement
Agent shall have the right to reject this subscription in whole or in part.
The Company will hold the first closing upon the receipt and
acceptance by the Company and Placement Agent of the Minimum Offering ("First
Closing"). As additional subscriptions are received and accepted by the Company
and Placement Agent, the Company will hold additional closings as the Company
and Placement Agent deem necessary until it has received and accepted
subscriptions for the entire offering or the Termination Date, whichever occurs
first.
PROSPECTIVE INVESTORS SHOULD RETAIN THEIR OWN PROFESSIONAL ADVISORS TO
REVIEW AND EVALUATE THE ECONOMIC, TAX AND OTHER CONSEQUENCES OF AN INVESTMENT IN
THE COMPANY.
THE SECURITIES ARE OFFERED PURSUANT TO THE COMPANY'S SUBSCRIPTION
DOCUMENTS ANNEXED HERETO (COLLECTIVELY, THE "OFFERING MATERIALS") WHICH
OFFERING MATERIALS HAVE NOT
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BEEN FILED OR REGISTERED WITH OR APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS. NO STATE SECURITIES LAW
ADMINISTRATOR HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR THE ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
IT IS INTENDED THAT THE SECURITIES OFFERED HEREBY WILL BE MADE AVAILABLE
ONLY TO "ACCREDITED INVESTORS", AS DEFINED IN RULE 501 OF REGULATION D
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
THE SECURITIES OFFERED HEREBY ARE BEING OFFERED PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE STATE
SECURITIES LAWS FOR NON-PUBLIC OFFERINGS. SUCH EXEMPTIONS LIMIT THE NUMBER
AND TYPES OF INVESTORS TO WHICH THE OFFERING WILL BE MADE AND RESTRICT
SUBSEQUENT TRANSFERS OF THE INTERESTS.
THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE
REQUIRED TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS
OF THIS OFFERING.
NO SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY,
REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE SECURITIES LAWS IS NOT
REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION REQUIREMENTS.
WE DRAW YOUR ATTENTION TO THE ANTI-FRAUD PROVISIONS OF THE FEDERAL AND
STATE SECURITIES LAWS, PARTICULARLY RULE 10b-5 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, WHICH PROHIBITS THE PURCHASE OR SALE OF
SECURITIES ON THE BASIS OF MATERIAL NON-PUBLIC INFORMATION. IN LIGHT OF
THESE PROVISIONS, INCLUDING RULE 10b-5, WE ADVISE YOU THAT, IF YOU ARE IN
POSSESSION OF MATERIAL INFORMATION RELATING TO THE COMPANY WHICH YOU KNOW
OR HAVE REASON TO KNOW IS NON-PUBLIC, YOU SHOULD NOT PURCHASE OR SELL OR
CAUSE TO BE PURCHASED OR SOLD ANY OF THE COMPANY'S SECURITIES. IN
ADDITION, YOU SHOULD NOT DISCLOSE ANY OF SUCH INFORMATION UNLESS AND UNTIL
SUCH INFORMATION HAS BEEN PUBLICLY DISCLOSED.
THE OFFERING MATERIALS ARE SUBMITTED IN CONNECTION WITH THE PRIVATE
PLACEMENT OF THE SECURITIES AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS
NOT
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AUTHORIZED. IN ADDITION, THE OFFERING MATERIALS CONSTITUTE AN OFFER ONLY
IF A NAME AND IDENTIFICATION NUMBER APPEAR IN THE APPROPRIATE SPACES
PROVIDED ON THE COVER PAGE AND CONSTITUTE AN OFFER ONLY TO THE PERSON
WHOSE NAME APPEARS THEREON. ANY REPRODUCTION OR DISTRIBUTION OF THE
OFFERING MATERIALS IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF THEIR
CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, IS PROHIBITED.
ANY PERSON ACTING CONTRARY TO THE FOREGOING RESTRICTIONS MAY PLACE HIMSELF
AND THE COMPANY IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS.
THE COMPANY AND PLACEMENT AGENT RESERVE THE RIGHT TO ACCEPT OR REJECT ANY
SUBSCRIPTION FOR SECURITIES, IN WHOLE OR IN PART, OR TO ALLOT TO ANY
PROSPECTIVE INVESTOR FEWER THAN THE NUMBER OF SECURITIES SUCH INVESTOR
DESIRES TO PURCHASE.
IN DECIDING WHETHER TO PURCHASE SECURITIES, EACH INVESTOR MUST CONDUCT AND
RELY ON ITS OWN EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED IN MAKING AN INVESTMENT DECISION
WITH RESPECT TO THE SECURITIES. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE
THE CONTENTS OF THE OFFERING MATERIALS OR ANY PRIOR OR SUBSEQUENT
COMMUNCIATIONS FROM THE COMPANY, OR ANY PROFESSIONAL ASSOCIATED WITH THE
OFFERING, AS LEGAL OR TAX ADVICE. THE OFFEREE AUTHORIZED TO RECEIVE THE
OFFERING MATERIALS SHOULD CONSULT ITS OWN TAX COUNSEL, ACCOUNTANT OR
BUSINESS ADVISOR, RESPECTIVELY, AS TO LEGAL, TAX AND RELATED MATTERS
CONCERNING ITS PURCHASE OF THE SECURITIES.
THE INFORMATION PRESENTED HEREIN WAS PREPARED BY THE COMPANY AND IS BEING
FURNISHED SOLELY FOR USE BY PROSPECTIVE INVESTORS IN CONNECTION WITH THE
OFFERING. THE INFORMATION CONTAINED IN THE OFFERING MATERIALS HAS BEEN
SUPPLIED BY THE COMPANY AND HAS BEEN INCLUDED HEREIN IN RELIANCE ON THE
COMPANY. THE OFFERING MATERIALS CONTAINS SUMMARIES OF CERTAIN DOCUMENTS,
BELIEVED BY THE COMPANY TO BE ACCURATE, BUT REFERENCE IS HEREBY MADE TO
SUCH DOCUMENTS FOR COMPLETE INFORMATION CONCERNING THE RIGHTS AND
OBLIGATIONS OF THE PARTIES THERETO. COPIES OF SUCH DOCUMENTS ARE AVAILABLE
AT THE OFFICES OF THE COMPANY. ALL OF SUCH SUMMARIES ARE QUALIFIED IN
THEIR ENTIRETY BY THIS REFERENCE.
EXCEPT AS OTHERWISE INDICATED, THE CONFIDENTIAL PRIVATE OFFERING
MEMORANDUM SPEAKS AS OF THE DATE THEREOF. NEITHER THE DELIVERY OF THE
OFFERING MATERIALS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES,
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CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY AFTER THE DATE THEREOF.
NO GENERAL SOLICITATION WILL BE CONDUCTED AND NO OFFERING LITERATURE OR
ADVERTISING IN ANY FORM WILL OR MAY BE EMPLOYED IN THE OFFERING OF THE
SECURITIES, EXCEPT FOR THE OFFERING MATERIALS (INCLUDING AMENDMENTS OR
SUPPLEMENTS HERETO) AND THE DOCUMENTS SUMMARIZED THEREIN. NO PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THE OFFERING MATERIALS OR THE DOCUMENTS SUMMARIZED THEREIN
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON.
BY ACCEPTING DELIVERY OF ANY OFFERING MATERIAL, THE OFFEREE AGREES (I) TO
KEEP CONFIDENTIAL THE CONTENTS THEREOF, AND NOT TO DISCLOSE THE SAME TO
ANY THIRD PARTY OR OTHERWISE USE THE SAME FOR ANY PURPOSE OTHER THAN
EVALUATION BY SUCH OFFEREE OF A POTENTIAL PRIVATE INVESTMENT IN THE
COMPANY, AND (II) TO RETURN THE SAME TO THE PLACEMENT AGENT IF (A) THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE ANY SECURITIES, (B) THE OFFEREE'S
SUBSCRIPTION IS NOT ACCEPTED, OR (C) THE OFFERING IS TERMINATED OR
WITHDRAWN.
THE COMPANY WILL MAKE AVAILABLE TO ANY PROSPECTIVE INVESTOR, PRIOR TO THE
CLOSING, THE OPPORTUNITY TO ASK QUESTIONS OF AND TO RECEIVE ANSWERS FROM
REPRESENTATIVES OF THE COMPANY CONCERNING THE COMPANY OR THE TERMS AND
CONDITIONS OF THE OFFERING AND TO OBTAIN ANY ADDITIONAL RELEVANT
INFORMATION TO THE EXTENT THE COMPANY POSESSES SUCH INFORMATION OR CAN
OBTAIN IT WITHOUT UNREASONABLE EFFORT OR EXPENSE. INVESTORS AGREE TO
ADVISE THE COMPANY IN WRITING IF THEY ARE RELYING UPON ANY SUCH
INFORMATION.
FOR RESIDENTS OF ALL STATES
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933,
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AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
FOR FLORIDA RESIDENTS
THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE
HOLDER IN A TRANSACTION EXEMPT UNDER ss.517.061 OF THE FLORIDA SECURITIES
ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE
OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF
VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF
CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE
ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO SUCH INVESTOR, WHICHEVER OCCURS LATER.
FOR NEW JERSEY RESIDENTS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE BUREAU OF
SECURITIES OF THE STATE OF NEW YORK NOR HAS THE BUREAU PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. THE FILING OF THE WITHIN OFFERING
DOES NOT CONSTITUTE APPROVAL OF THE ISSUE OR SALE THEREOF BY THE BUREAU OF
SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FOR NEW YORK RESIDENTS
THE OFFERING MATERIALS HAVE NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF
THE STATE OF NEW YORK PRIOR TO THEIR ISSUANCE AND USE. THE ATTORNEY
GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS
OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE OFFERING MATERIALS DO NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL
FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS
MADE IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING. THEY CONTAIN A FAIR SUMMARY OF THE MATERIAL TERMS AND
DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN.
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FOR TEXAS RESIDENTS
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE TEXAS ACT AND ARE BEING SOLD IN RELIANCE UPON THE
EXEMPTION CONTAINED IN SECTION 5(I)(a) AND RULE 109.13 OF SUCH ACT. THESE
SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY
PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE ACT OF 1933, AS
AMENDED AND/OR THE TEXAS ACT OR EXEMPTION THEREFROM.
The undersigned acknowledges that the Units being purchased
hereunder will not be registered under the 1933 Act, or the securities laws of
any State, that absent an exemption from registration contained in those laws,
the issuance and sale of the Units would require registration, and that the
Company's reliance upon such exemption is based upon the undersigned's
representations, warranties, and agreements contained in the Offering Materials.
1. The undersigned represents, warrants, and agrees as follows:
(a) The undersigned agrees that this Subscription Agreement is and
shall be irrevocable.
(b) The undersigned has carefully read the Offering Materials, all
of which the undersigned acknowledges have been provided to the undersigned. The
undersigned has been given the opportunity to ask questions of, and receive
answers from, the Company concerning the terms and conditions of this Offering
and the Offering Materials and to obtain such additional written information, to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of same as the
undersigned desires in order to evaluate the investment. The undersigned further
acknowledges that he or she fully understands the Offering Materials, and the
undersigned has had the opportunity to discuss any questions regarding any of
the Offering Materials with his or her counsel or other advisor. Notwithstanding
the foregoing, the only information upon which the undersigned has relied is
that set forth in the Offering Materials and his or her own independent
investigation. The undersigned acknowledges that the undersigned has received no
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representations or warranties from the Company, the Placement Agent, or their
respective officers, directors, stockholders, employees or agents in making this
investment decision other than as specifically set forth in the Offering
Materials.
(c) The undersigned is aware that the purchase of the Units is a
speculative investment involving a high degree of risk and that there is no
guarantee that the undersigned will realize any gain from this investment, and
that the undersigned could lose the total amount of the undersigned's
investment. The undersigned acknowledges that the undersigned has specifically
and carefully reviewed and is aware of all of the risk factors related to the
purchase of Units.
(d) The undersigned understands that no federal or state agency or
authority has made any finding or determination regarding the fairness of this
Offering of the Units for investment, or any recommendation or endorsement of
this Offering of the Units.
(e) The undersigned is purchasing the Units for the undersigned's
own account, with the intention of holding the Units, with no present intention
of dividing or allowing others to participate in this investment or of reselling
or otherwise participating, directly or indirectly, in a distribution of the
Units, and shall not make any sale, transfer, or pledge thereof without
registration under the 1933 Act and any applicable securities laws of any state
or other jurisdiction or unless an exemption from registration is available
under those laws to the satisfaction of the Company and its counsel.
(f) The undersigned represents that the undersigned, if an
individual, has adequate means of providing for his or her current needs and
personal and family contingencies and has no need for liquidity in this
investment in the Units. The undersigned represents that the undersigned is an
"Accredited Investor" as defined in Rule 501(a) of Regulation D promulgated
under the 1933 Act, as evidenced by meeting at least one of the following
standards:
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(1) the Investor is a natural person and had individual income
(i.e., not including, if applicable, income of the Investor's
spouse) in excess of $200,000 in the two previous years and
reasonably expects to have income in excess of $200,000 in the
present year, or he, she and his or her spouse had joint
income in excess of $300,000 in the two previous years and
reasonably expect to have joint income of $300,000 in the
present year;
(2) the Investor is a natural person and his or her net worth at
the time of his or her purchase of the Units (i.e., excess of
total assets over total liabilities), inclusive of home, home
furnishings and automobiles, either individually or jointly
with his or her spouse, exceeds $1,000,000;
(3) the Investor is an organization defined in Section 501(c) (3)
of the Internal Revenue Code, business trust, partnership, or
corporation with total assets in excess of $5,000,000, which
was not formed for the specific purpose of acquiring the
Units;
(4) any trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Units, whose
purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii);
(5) the Investor is an employee benefit plan within the meaning of
ERISA and (i) the Investor's investment decision is made by a
plan fiduciary, as defined in Section 3(21) of ERISA, that is
either a bank, savings and loan association, insurance
company, or registered investment advisor, (ii) the Investor's
total assets are in excess of $5,000,000 or (iii), if a
self-directed plan, the Investor's investment decisions are
made solely by persons who are Accredited Investors;
(6) the Investor is a bank as defined in Section 3(a)(2) of the
Securities Act; any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities
Act whether acting in its individual or fiduciary capacity;
any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; an insurance company as
defined in Section 2(13) of the Securities Act; an investment
company registered under the Investment Company Act of 1940,
as amended; a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality thereof, for
the benefit of its employees, if such plan has total assets in
excess of $5,000,000; or a private business development
company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940; or
(7) the Investor is an entity in which all of the equity owners
would qualify as "Accredited Investors."
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The undersigned has no reason to anticipate any material change in
his or her personal financial condition for the foreseeable future.
(g) The undersigned is financially able to bear the economic risk of
this investment, including the ability to hold the Units indefinitely or to
afford a complete loss of his or her investment in the Units.
(h) The undersigned represents that the undersigned's overall
commitment to investments which are not readily marketable is not
disproportionate to the undersigned's net worth, and the undersigned's
investment in the Units will not cause such overall commitment to become
excessive. The undersigned understands that the statutory basis on which the
Units are being sold to the undersigned and others would not be available if the
undersigned's present intention were to hold the Units for a fixed period or
until the occurrence of a certain event. The undersigned realizes that in the
view of the Securities and Exchange Commission, a purchase now with a present
intent to resell by reason of a foreseeable specific contingency or any
anticipated change in the market value, or in the condition of the Company, or
that of the industry in which the business of the Company is engaged or in
connection with a contemplated liquidation, or settlement of any loan obtained
by the undersigned for the acquisition of the Units, and for which such Units
may be pledged as security or as donations to religious or charitable
institutions for the purpose of securing a deduction on an income tax return,
would, in fact, represent a purchase with an intent inconsistent with the
undersigned's representations to the Company and the Securities and Exchange
Commission would then regard such sale as a sale for which the exemption from
registration is not available. The undersigned will not pledge, transfer or
assign this Subscription Agreement, or any interest herein or any obligation or
right hereunder without first obtaining the written consent of the Company and
the Placement Agent.
(i) The undersigned represents that the funds provided for this
investment are either separate property of the undersigned, community property
over which the undersigned has
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the right of control, or are otherwise funds as to which the undersigned has the
sole right of management.
(j) FOR PARTNERSHIPS, CORPORATIONS, TRUSTS, OR OTHER ENTITIES ONLY:
If the undersigned is a partnership, corporation, trust or other entity, (i) the
undersigned has enclosed with this Subscription Agreement appropriate evidence
of the authority of the individual executing this Subscription Agreement to act
on its behalf (e.g., if a trust, a certified copy of the trust agreement; if a
corporation, a certified corporate resolution authorizing the signature and a
certified copy of the articles of incorporation; or if a partnership, a
certified copy of the partnership agreement), (ii) the undersigned represents
and warrants that it was not organized or reorganized for the specific purpose
of acquiring the Units, (iii) the undersigned has the full power and authority
to execute this Subscription Agreement on behalf of such entity and to make the
representations and warranties made herein on its behalf, and (iv) this
investment in the Company has been affirmatively authorized, if required, by the
governing board of such entity and is not prohibited by the governing documents
of the entity.
(k) The address shown under the undersigned's signature at the end
of this Subscription Agreement is the undersigned's principal residence if he or
she is an individual or its principal business address if a corporation or other
entity.
(l) The undersigned has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the Units.
(m) The undersigned acknowledges that the certificates for the
securities comprising the Units which the undersigned will receive will contain
a legend substantially as follows:
THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED
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OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH LAWS IS AVAILABLE.
The undersigned further acknowledges that stop transfer orders will
be placed upon the certificates for the Securities comprising the shares of
Common Stock in accordance with the 1933 Act.
(n) Pursuant to the terms and conditions set forth in the
Registration Rights Agreement being simultaneously executed herewith, the
undersigned acknowledges that the Company has agreed to include the shares of
Common Stock that are included in the Units and the shares of Common Stock
underlying the Warrants (the "Warrant Shares") (with such shares of Common Stock
and Warrant Shares being collectively referred to as the "Securities") in a
registration statement (the "Registration Statement") to be filed with the
Securities and Exchange Commission (the "Commission")(the "Registration
Statement") and to use its best efforts to have such Registration Statement
declared effective by the Commission, as promptly thereafter as practicable. It
is hereby acknowledged that the subscriber has "piggyback" registration rights
pursuant to the registration rights granted in the Registration Rights Agreement
included as part of the Offering Materials (the "Registration Rights
Agreement"). The Company shall use its good faith efforts to keep such
Registration Statement continuously effective as long as the delivery of a
prospectus thereunder is required under the Act and its regulations [including
but not limited to Rule 144 thereunder or its successor regulations ("Rule
144")] in connection with the disposition of the Securities; provided, that it
is agreed and acknowledged that such obligation of the Company to maintain the
effectiveness of the Registration Statement shall cease upon the ability of the
subscribers to sell or otherwise dispose of all of the Securities covered by the
Registration Statement under Rule 144; provided further, that notwithstanding
the
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Company's obligation to maintain the effectiveness of the Registration Statement
pursuant to the immediately preceding proviso, and notwithstanding the duration
of any Blackout Period or periods of Suspension, such obligation to maintain the
effectiveness of the Registration Statement shall cease under all circumstances
no later than the fourth anniversary of the date of the final Closing of the
Offering (the "Final Date").
(o) The Company may delay the filing or the effectiveness of the
Registration Statement for a period not to exceed 90 days (a "Blackout Period")
if the Board of Directors of the Company, in its reasonable judgment, determines
that such registration would interfere with any pending material financing,
acquisition, corporate reorganization or any other material corporate
development involving the Company or any of its subsidiaries or would require
premature disclosure thereof; provided, however, that the aggregate number of
days included in all Blackout Periods during any consecutive 12 months shall not
exceed 90 days.
(p) The Company agrees to pay all Registration Expenses in
connection with the Registration Statement. All Selling Expenses relating to
Securities registered on behalf of the subscriber pursuant to the Registration
Statement shall be borne by the subscriber. For purposes of this Subscription
Agreement, "Registration Expenses" shall mean (i) all registration, listing,
qualification and filing fees (including NASD filing fees), (ii) fees and
disbursements of counsel for the Company, (iii) accounting fees incident to any
such registration, (iv) blue sky fees and expenses (including counsel fees in
connection with the preparation of a Blue Sky Memorandum and legal investment
survey and NASD filings), (v) all expenses of any persons in preparing or
assisting in preparing, printing, distributing, mailing and delivering the
Registration Statement, any prospectus, any underwriting agreements, transmittal
letters, securities sales agreements, securities certificates and other
documents relating to the performance of and compliance with this Subscription
Agreement, (vi) the expenses incurred in connection with making road show
presentations and holding meetings with potential investors to facilitate the
distribution and sale
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of the Securities which are customarily borne by the issuer, (vii) underwriter
fees, excluding discounts and commissions, and (viii) all internal expenses of
the Company (including all salaries and expenses of officers and employees
performing legal or accounting duties); provided, however, Registration Expenses
shall not include any Selling Expenses. For purposes of this Subscription
Agreement, "Selling Expenses" shall mean underwriting discounts, selling
commissions and stock transfer taxes applicable to the Securities registered on
behalf of the subscriber.
(q) The Registration Statement will not be deemed to have become
effective (and the related registration will not be deemed to have been
effected) with respect to a subscriber unless it has been declared effective by
the Commission prior to a request by the subscriber that such Registration
Statement be withdrawn; provided, however, that if, after it has been declared
effective, the offering of any Securities pursuant to such Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the Commission or any other governmental agency or court, any
period during which use of such Registration Statement shall be so interfered
with shall be treated as a Suspension Period as defined below.
Any period during which the Company fails to keep the Registration
Statement effective and usable for resale of Securities shall be referred to as
a "Suspension Period." A Suspension Period shall (a) commence on and include the
earlier of the date that (i) the Company gives notice or (ii) the subscriber is
advised by counsel or the Commission, in either case, that the Registration
Statement is no longer effective or usable for resale of Securities and (b) end
on and including the date when the subscriber either receives copies of a
supplemented or amended prospectus or is advised in writing by the Company
(having a reasonable basis to so advise) that the use of a prospectus contained
in the Registration Statement may be resumed. In the event of one or more
Suspension Periods, the applicable time period referenced in subparagraph (n)
above shall be extended by the number of days included in each Suspension
Period, and, in the event
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any Suspension Period occurs sooner than 30 days after the end of the previous
Suspension Period or 30 days after the initial effectiveness of the Registration
Statement, none of the days between such Suspension Periods (as the case may be)
or prior to such Suspension Period shall be included in computing such
applicable time period; provided, that it is agreed and acknowledged that the
occurrence of one or more Suspension Periods shall not extend the period during
which the Company must maintain the effectiveness of the Registration Statement
beyond the Final Date.
(r) At any time or from time to time, the subscriber may elect to
have its Securities sold in an underwritten offering and may select the
investment banker or investment bankers and manager or managers that will serve
as lead and co-managing underwriters with respect to the offering of its
Securities, subject to the consent of the Company which shall not be
unreasonably withheld.
(s) The subscriber agrees, as a condition to the registration
obligations with respect to the subscriber provided herein, to furnish to the
Company such information regarding the subscriber required to be included in the
Registration Statement, the ownership of Securities by the subscriber and the
proposed distribution by the subscriber of such Securities as the Company may
from time to time reasonably request in writing.
(t) The subscriber agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind which the Company reasonably
regards as requiring subscriber to discontinue sale of the Securities pursuant
to the Registration Statement, the subscriber will forthwith discontinue
disposition of the Securities pursuant to the affected Registration Statement
until the subscriber's receipt of the copies of any supplemented or amended
prospectus as shall be required in the reasonable opinion of the Company, and,
if so directed by the Company, the subscriber will deliver to the Company (at
the expense of the Company), all copies in its possession, other than permanent
file copies then in the subscriber's
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possession, of any prospectus covering such Securities which was current at the
time of receipt of such notice.
Section 2. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each person who participates as an underwriter (any such
person being an "Underwriter"), the subscriber and their respective partners,
directors, officers and employees and each person, if any, who controls any
subscriber or underwriter within the meaning of Section 15 of the Act or Section
20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as
follows:
(i) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement pursuant to which Securities were registered under the
Act, including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
prospectus, including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading;
(ii) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any other claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is effected
with the written consent of the Company; and
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(iii) against any and all reasonable expense whatsoever, as incurred
(including fees and disbursements of counsel), incurred in investigating,
preparing or defending against any litigation, investigation or proceeding by
any governmental agency or body, commenced or threatened, in each case whether
or not such person is a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission;
provided, however, that this indemnity agreement does not apply to the
subscriber or underwriter with respect to any loss, liability, claim, damage,
judgment or expense to the extent arising out of any untrue statement or alleged
untrue statement of a material fact contained in any prospectus, or the omission
or alleged omission therefrom of a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in any such case made in reliance upon and in conformity
with written information furnished to the Company by the subscriber or
underwriter expressly for use in a Registration Statement (or any amendment
thereto) or any prospectus (or any amendment or supplement thereto); and
provided further, in the case of an offering that is not an underwritten
offering, the Company will not be liable to the subscriber under the indemnity
agreement in this Section 2(a) for any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense that arises out of the
subscriber's failure to send or give a copy of the final prospectus (as its may
then be amended or supplemented) to the person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of the Securities to such person if such
statement or omission was corrected in such final prospectus (as it may then be
amended or supplemented) and the Company has previously furnished copies thereof
in accordance with this Agreement.
(b) Indemnification by the subscriber. The subscriber agrees to
indemnify and hold harmless the Company, and each underwriter and each of their
respective partners, directors, officers and employees (including each officer
of the Company who signed the
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Registration Statement), and each person, if any, who controls the Company or
any underwriter within the meaning of Section 15 of the Act, against any and all
losses, liabilities, claims, damages, judgments and expenses described in the
indemnity contained in paragraph (a) of this Section (provided that any
settlement of the type described therein is effected with the written consent of
the subscriber), as incurred, but only with respect to untrue statements or
alleged untrue statements of a material fact contained in any prospectus or the
omissions or alleged omissions therefrom of a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, in any such case made in reliance upon and in conformity
with written information furnished to the Company by the subscriber expressly
for use in such Registration Statement (or any amendment thereto) or such
prospectus (or any amendment or supplement thereto).
(c) Conduct of Indemnification Proceedings. Each indemnified party
or parties shall give reasonably prompt notice to each indemnifying party or
parties of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but which it or they may have under this
indemnity agreement, except to the extent that the indemnifying party is
materially prejudiced by such failure to give notice. If the indemnifying party
or parties so elects within a reasonable time after receipt of such notice, the
indemnifying party or parties may assume the defense of such action or
proceeding at such indemnifying party's or parties' expense with counsel chosen
by the indemnifying party or parties and approved by the indemnified party
defendant in such action or proceeding, which approval shall not be unreasonably
withheld; provided, however, that, if such indemnified party or parties
determines in good faith that a conflict of interest exists and that therefore
it is advisable for such indemnified party or parties to be represented by
separate counsel or that, upon advice of counsel, there may be legal defenses
available to it or them which are different from or in addition to those
available to the indemnifying party, then the indemnifying party or parties
shall
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not be entitled to assume such defense and the indemnified party or parties
shall be entitled to separate counsel (limited in each jurisdiction to one
counsel for all underwriters and another counsel for all other indemnified
parties under this Subscription Agreement) at the indemnifying party's or
parties' expense. If an indemnifying party or parties is not so entitled to
assume the defense of such action or does not assume such defense, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party or parties will pay the reasonable fees and expenses of
counsel for the indemnified party or parties (limited in each jurisdiction to
one counsel for all underwriters and another counsel for all other indemnified
parties under this Subscription Agreement). No indemnifying party or parties
will be liable for any settlement effected without the written consent of such
indemnifying party or parties, which consent shall not be unreasonably withheld.
If an indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such indemnifying party
or parties shall not, except as otherwise provided in this subsection (c), be
liable for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
(d) Contribution. (i) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
losses, liabilities, claims, damages, judgments and expenses suffered by an
indemnified party referred to therein, each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, liabilities,
claims, damages, judgments and expenses in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and of the subscriber
(including, in each case, that of their respective officers, directors,
employees and agents) on the other, in connection with the statements or
omissions which
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resulted in such losses, liabilities, claims, damages, judgments or expenses, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the subscriber (including, in each case, that of
their respective officers, directors, employees and agents) on the other, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or by or on behalf of the Holder, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, liabilities, claims, damages, judgments and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (c) of this Section, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
(ii) The Company and the subscriber agree that it would not be just
and equitable if contribution pursuant to this paragraph (d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in sub-paragraph (i) above.
Notwithstanding the provisions of this paragraph (d), in the case of
distributions to the public, the subscriber shall not be required to contribute
any amount in excess of the amount by which (A) the total price at which the
Securities sold by the subscriber and distributed to the public were offered to
the public exceeds (B) the amount of any damages which the subscriber has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(iii) For purposes of this Section, each person, if any, who
controls the subscriber or an underwriter within the meaning of Section 15 of
the Act (and their respective
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partners, directors, officers and employees) shall have the same rights to
contribution as the subscriber or underwriter; and each director of the Company,
each officer of the Company who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act, shall have the same rights to contribution as the Company.
3. The undersigned expressly acknowledges and agrees that the
Company is relying upon the undersigned's representation contained in the
Offering Materials.
4. The undersigned has been furnished with and has carefully read
the Company's Confidential Private Offering Memorandum, and any amendments
thereto with respect to the Private Placement, as well as the following
documents which the Company has filed with the SEC all of which are part of the
Offering Materials:
(i) Form 10-K Report for the Year Ended December 31, 2003, filed
October 7, 2003;
(ii) Form 10-Q filed November 14, 2003;
(iii) Form 8-K Report filed December 9, 2003;
(iv) Form 8-K Report filed December 10, 2003;
(v) Form 8-K Report filed February 3, 2004;
(vi) Form S-1 filed February 6, 2004;
(vii) Form 8-K Report filed February 10, 2004;
(viii) Form 10-Q Report filed February 17, 2004; and
(ix) Form 8-K Report filed February 23, 2004.
5. The undersigned is not an officer, director, stockholder,
employee of, or consultant to, the Placement Agent. The undersigned does not
have any direct or indirect affiliation with the Placement Agent or any other
member of the National Association of Securities Dealers, Inc.
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6. The undersigned subscriber acknowledges that the undersigned
understands the meaning and legal consequences of the representations and
warranties which are contained herein and hereby agrees to indemnify, save and
hold harmless the Company, the Placement Agent and their respective officers,
directors, partners, employees, agents, and attorneys from and against any and
all claims or actions arising out of a breach of any representation, warranty or
acknowledgment of the undersigned contained in any of the Offering Materials.
Such indemnification shall be deemed to survive any purchase of the Units and to
include not only the specific liabilities, losses, damages or obligations with
respect to which such indemnity is provided, but also all reasonable costs,
expenses, counsel fees and expenses of settlement relating thereto, whether or
not any such liabilities, losses, damages or obligations shall have been reduced
to judgment.
7. The Company has been duly and validly incorporated and is validly
existing and in good standing as a corporation under the laws of the State of
Delaware. The Company has all requisite power and authority, and all necessary
authorizations, approvals and orders required as of the date hereof to own its
properties and conduct its business and to enter into this Subscription
Agreement and the other Offering Materials and to be bound by the provisions and
conditions hereof or therein.
8. The Placement Agent will receive a commission equal to five
percent (5%) of the gross proceeds of this Offering, a two percent (2%)
non-accountable expense allowance and Shares of Common Stock equal to 20% of the
number of Shares sold in this Offering. In addition, upon the exercise of any
Warrant for a period of four years commencing one year after the date of the
final Closing of the Offering, the Company has agreed to pay the Placement Agent
a fee of 5% of the exercise price for each Warrant exercised in accordance with
the NASD Rule and Regulations and Securities Exchange Act of 1934, as amended.
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9. Except as otherwise specifically provided for hereunder, no party
shall be deemed to have waived any of his or her or its rights hereunder or
under any other agreement, instrument or papers signed by any of them with
respect to the subject matter hereof unless such waiver is in writing and signed
by the party waiving said right. Except as otherwise specifically provided for
hereunder, no delay or omission by any party in exercising any right with
respect to the subject matter hereof shall operate as a waiver of such right or
of any such other right. A waiver on any one occasion with respect to the
subject matter hereof shall not be construed as a bar to, or waiver of, any
right or remedy on any future occasion. All rights and remedies with respect to
the subject matter hereof, whether evidenced hereby or by any other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.
10. The parties have not made any representations or warranties with
respect to the subject matter hereof not set forth herein, and this Subscription
Agreement, together with any instruments executed simultaneously herewith,
constitutes the entire agreement between them with respect to the subject matter
hereof. All understandings and agreements heretofore entered into between the
parties with respect to the subject matter hereof are merged in this
Subscription Agreement and any such instrument, which alone fully and completely
expresses their agreement.
11. This Subscription Agreement may not be changed, modified,
extended, terminated or discharged orally, but only by an agreement in writing,
which is signed by all of the parties to this Subscription Agreement.
12. The parties agree to execute any and all such other and further
instruments and documents, and to take any and all such further actions
reasonably required to effectuate this Subscription Agreement and the intent and
purposes hereof.
13. If any provision or any portion of any provision of this
Subscription Agreement or the application of any such provision or any portion
thereof to any person or
-23-
circumstance, shall be held invalid or unenforceable, the remaining portion of
such provision not held invalid or unenforceable to any person or circumstance
shall not be affected thereby.
14. This Subscription Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.
15. This Subscription Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York without giving
effect to conflicts of law principles and the undersigned hereby consents to the
jurisdiction of the courts of the State of New York and/or the United States
District Court for the Southern District of New York.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOLLOW]
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Manner in Which Title is to be Held: (check one)
1. ______ Individual
2. ______ Joint Tenants with Right of Survivorship (both parties must sign)
3. ______ Married with Separate Property
4. ______ Community Property
5. ______ Tenants in Common
6. ______ Corporation
7. ______ Partnership
8. ______ XXX of ___________________________________________
9. ______ Trust, dated opened _____________
10. ______ Xxxxx of __________________________________________
11. ______ As a Custodian for _________________________________________________
under the Uniform Gift to Minors Act of the State of _______________
12. ______ Other (please indicate)
================================================================================
Total Number of Units to be purchased at Closing: ______________________
Total Purchase Price ($13,600 per Unit): $ ____________________
================================================================================
INDIVIDUAL INVESTORS ENTITY INVESTORS
____________________________________ ______________________________________
Signature (Individual) Name of Entity, if any
______________________________________
Signature
____________________________________ Its __________________________________
Signature (All record holders Title
should sign
____________________________________ ______________________________________
Name(s) Typed or Printed Name Typed or Printed
Address to Which Correspondence Address to Which Correspondence
Should be Directed Should be Directed
____________________________________ ______________________________________
____________________________________ ______________________________________
____________________________________ ______________________________________
City, State and Zip Code City, State and Zip Code
____________________________________ ______________________________________
Social Security Number Tax Identification Number
--------------------------------------------------------------------------------
The foregoing subscription is accepted this ___ day of ____________, 200__, on
behalf of DynTek, Inc. DynTek, Inc.
By: _______________________________
Xxxxxx Xxxx, President
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