SUBSCRIPTION AGREEMENT FOR CONVERTIBLE NOTE OF
SYNTHONICS TECHNOLOGIES, INC.
This Subscription Agreement is made this 22nd day of December, 1999, by and
between Synthonics Technologies, Inc., a Utah Corporation (hereinafter the
"Company" or "Synthonics") and the undersigned prospective purchaser (the
"Purchaser") who is subscribing for a note, in the form attached hereto as
Exhibit A (the "Note"), convertible pursuant to the terms and conditions
thereof, into ELEVEN MILLION, FIVE HUNDRED AND EIGHTEEN THOUSAND AND NINETY-SIX
(11,518,096) shares of Common Stock of the Company, par value $.01 (the
"Shares").
The Note and the Shares have not been registered with the Securities and
Exchange Commission or any State securities commission in reliance of an
exemption from such registration pursuant to Rule 506 of Regulation D of the
Securities Act of 1933 (the "Act") and certain other State securities laws. The
Note and the Shares are "Restricted Securities" as defined in the Act and may
not be resold unless registered under the Act, or an exemption from registration
under the Act is available.
In consideration of the Company's agreement to sell the Note and upon the
conversion of the Note in accordance with its terms to accept the undersigned as
a Shareholder of the Company, the undersigned agrees and represents as follows:
1. SUBSCRIPTION.
1.1. The undersigned hereby subscribes to purchase the Note for the
cash consideration of FIVE HUNDRED THOUSAND DOLLARS ($500,000) and the
non-cash and/or other consideration described in that certain "Investment
Term Sheet" attached hereto as Exhibit B (the "Term Sheet"), the terms and
conditions of which are hereby incorporated into this Agreement by
reference. The cash portion of the consideration set forth in the Term
Sheet shall be paid and delivered to the Company at a closing to be held on
December 23, 1999 in the form of a check or wire transfer (the "Payment")
payable to Synthonics Technologies, Inc., 31324 Xxx Xxxxxxx, Xxxxx 000,
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000.
1.2 It is understood and agreed that this subscription is made subject
to the following terms and conditions:
(a) The Company shall have the right to accept or reject this and
any other subscription for the Note in whole or in part at any time
prior to the closing (the "Closing Date) of the sale of the Note being
purchased hereby, notwithstanding prior receipt by the undersigned of
notice of acceptance; and
(b) In the event this Subscription is accepted by the Company, in
whole or in part, and subject to the conditions set forth in Section
1.2(a) above of this Subscription Agreement, the Company shall deliver
to you the Note, substantially in the form of Exhibit A, executed by
an authorized officer of the Company and a fully executed copy of this
Subscription Agreement.
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2. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER
2.1 The undersigned hereby represents and warrants to, and agrees
with, the Company as follows:
(a) The Note is being purchased for his or her own account, for
investment purposes only, and not for the account of any other person,
and not with a view to distribution, assignment or resale to others or
to fractionalization in whole or in part and no other person has or
will have a direct or indirect beneficial interest in the Note or the
Shares and the undersigned will not sell, hypothecate or otherwise
transfer the Note or the Shares except in accordance with the
Securities Act of 1933 (the "ACT") and applicable state securities
laws or unless, in the opinion of counsel for the Company, an
exemption from the registration requirements of the ACT and such laws
is available.
(b) The undersigned has been furnished with and has carefully
read the Public Filings and all other information which the
undersigned considers necessary or appropriate for deciding whether to
purchase the Note. In evaluating the suitability of an investment in
the Company, the undersigned has not relied upon any representations
or other information (whether oral or written) from the Company, or
any of its agents other than as set forth in the Public Filings, and
no oral or written representations have been made or oral or written
information furnished to the undersigned or his advisors, if any, in
connection with the offering of the Note which were in any way
inconsistent with the Public Filing.
(c) The Company has made available to the undersigned all
documents and information that the undersigned has requested relating
to an investment in the Company.
(d) The undersigned recognizes the Company is an emerging growth
stage Company, that it has generated very little revenue from
operations, has limited working capital and that proposed development,
marketing and promotional expenditures are expected to result in
additional losses over at least the next twelve months, and perhaps
longer. Investment in the Company involves substantial risk, and
investors should not purchase the Note unless they can afford the
complete loss of their investment, and the undersigned has taken full
cognizance of and understands all of the risk factors related to the
purchase of the Note.
(e) The undersigned has carefully considered and has, to the
extent he believes such discussion necessary, discussed with his
professional legal, tax and financial advisers the suitability of an
investment in the Company for his particular tax and financial
situation and he has determined that the Note is a suitable investment
for him or her.
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(f) All information which the undersigned has provided to the
Company concerning the undersigned and his financial position is
correct and complete as of the date set forth below, and if there
should be any change in such information prior to the conversion of
the Note, he or she will immediately provide such information to the
Company and will promptly send confirmation of such information to the
Company.
(g) If this Subscription Agreement is executed and delivered on
behalf of a partnership, corporation, trust, estate or other entity:
(i) the undersigned's execution, delivery and performance of
and under this Subscription Agreement, and all documents
ancillary hereto, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized, and
the undersigned is duly authorized (a) to execute and deliver
this Subscription Agreement and all other instruments executed
and delivered on behalf of such partnership, corporation, trust,
estate or other entity, in connection with the purchase of the
Shares; and (b) to purchase and hold Shares,
(ii) such entity has not been formed for the specific
purpose of acquiring the Note; and
(iii) when executed and delivered by the Company, will
constitute such partnership's, corporation's, trust's, estate's
or other entity's legal, valid and binding obligation enforceable
against it in accordance with its terms.
(h) The undersigned is an "Accredited Investor" as such term is
defined in Rule 501(a) of Regulation D of the Securities Act of 1933.
(i) The undersigned acknowledges that the Note and the Shares
have not been registered with the Securities and Exchange Commission
or any State securities commission in reliance of an exemption from
such registration pursuant Rule 506 of Regulation D and certain other
State securities laws. The Note and (upon issuance) the Shares are
"Restricted Securities" as defined in the Act and may not be resold
unless registered under the Act, or an exemption from registration
under the Act is available.
(j) You have been advised by the Company that this transaction
has not been reviewed, approved or disapproved, by the United States
Securities and Exchange Commission or any securities administrator of
any State in the United States or self-regulatory organization, in
reliance of an exemption from such registration pursuant to Rule 506
of Regulation D and certain other State securities laws, and that the
Company's reliance thereon is based in part upon the representations
made by you in this Subscription Agreement. You acknowledge that you
have been informed by the Company of, or are otherwise familiar with,
the nature of the limitations imposed by the Securities Act and the
rules and regulations thereunder on the transfer of securities,
including Rule 144 of the Act. In particular, you agree that no sale,
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assignment or transfer of the Note or, upon conversion, the Shares
shall be valid or effective, and the Company shall not be required to
give any effect to any such sale, assignment or transfer, unless (i)
the sale, assignment or transfer of the Note or the Shares are
registered under the Securities Act, it being understood that neither
the Note nor the Shares are currently registered for sale and that the
Company has no obligation or intention to so register such, or (ii)
the Note or, upon conversion, the Shares are sold, assigned or
transferred in accordance with all the requirements and limitations of
Rule 144, it being understood that Rule 144 is not available at the
present time for the sale of the Note or the underlying Shares, or
(iii) such sale, assignment, or transfer is otherwise exempt from
registration under the Securities Act. You acknowledge that the Note
and, upon conversion, the Shares shall be subject to a stop transfer
order and the certificates evidencing any Shares shall bear a
restrictive legend.
(k) It never has been represented, guaranteed or warranted by any
broker, the Company, any of the officers, directors, shareholders,
attorneys, employees or agents of either, or any other persons,
whether expressly or by implication, that:
(i) the Company or you will realize any given percentage of
profits, if any, or amount or type of consideration, profit, if
any, or loss as a result of the Company activities or your
investment in the Company; or
(ii) the past performance or experience of the management of
the Company, or of any other person, will in any way indicate the
future results of the ownership of the securities or of the
Company's activities.
(l) You acknowledge that you understand the meaning and legal
consequences of the representations and warranties contained in this
Section 2.1, and you hereby agree to indemnify and hold harmless the
Company and each incorporator, officer, director, employee, attorney,
agent and controlling person thereof, past, present or future, from
and against any and all loss, damage or liability due to or arising
out of a breach of any such representation or warranty.
(m) Neither this Subscription Agreement, nor any of your
interests herein, shall be assignable or transferable by you in whole
or in part except by operation of law.
(n) You are not subscribing for the Note as a result of or
subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not
previously known to you in connection with investments in securities
generally.
(o) You or your purchaser representative have such knowledge and
experience in finance, tax, securities, investments and other business
matters so as to be able to protect your interests in connection with
this transaction, and your investment in the Company hereunder is not
material when compared to your total financial capacity.
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(p) The foregoing representations and warranties are true and
accurate as of the date hereof, shall be true and accurate as of the
date of the acceptance hereof by the Company and shall survive the
execution and delivery of this Subscription Agreement and the purchase
of the Note, the conversion of the Note and thereafter.
(q) The undersigned shall indemnify and hold harmless the Company
and any of its officers, employees, registered representatives,
directors or control persons of any such entity who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made by the undersigned to the
Company concerning himself or his financial position in connection
with the offering or sale of the Note or the Shares which is not
remedied by timely notice to the Company as provided above, against
losses, liabilities and expenses for which the Company or any of its
officers, employees, registered representatives, directors or control
persons of any such entity which have not otherwise been reimbursed
(including attorneys' fees, judgments, fines and amounts paid in
settlement) as actually and reasonably incurred by such person or
entity in connection with such action, suit or proceeding.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and agrees with, you as follows:
3.1 Organization. Company is duly organized, validly existing and in good
standing under the laws of the State of Utah, with all requisite power and
authority to own, lease, license, and use its properties and assets and to carry
out the business in which it is engaged as described in the Public Filings. The
Company is duly qualified to transact the business in which it is engaged and is
in good standing as a foreign corporation in every jurisdiction in which its
ownership, leasing, licensing or use of property or assets or the conduct of its
business make such qualification necessary, except where the failure to be so
qualified would not, in the aggregate, have a material adverse effect on the
business, operations, liabilities or condition (financial or otherwise) of the
Company.
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3.2 Capitalization.
(a) The Company is authorized by its Certificate of
Incorporation, as amended, to issue 100,000,000 shares of Common Stock
and 20,550,000 shares of Preferred Stock, and at the date of this
Agreement, 28,421,679 shares of the Common Stock are currently issued
and outstanding, and 10,000 shares of Series A Convertible Preferred
Stock, par value $10.00 per share (the "Preferred Stock") are
currently issued and outstanding. The Company has also authorized
20,000,000 shares of Series B Preferred Stock par value $0.01, of
which no shares are issued and outstanding. Immediately prior to the
issuance of the Note, the Company had 45,919,386 shares of Common
Stock outstanding on a fully diluted basis. All of the issued and
outstanding shares of the Common Stock and the Preferred Stock have
been duly authorized and validly issued and are fully-paid and
non-assessable and were issued in material compliance with or in
reliance upon an exemption or exemptions from, the registration and
prospectus delivery requirements of all applicable state and federal
laws regulating the offer, sale or issuance of securities, and the
purchasers of such securities have no right to rescission arising from
failure by the Company to comply with applicable state or federal
securities laws. The Company has no authority to issue any other
classes or series of capital stock.
(b) Except as set forth in the Public Filings, and except for
options granted under any stock option or incentive plan of the
Company, there are no outstanding options, contracts, commitments,
warrants, preemptive rights agreements or other rights of any
character affecting or relating in any manner to the issuance, upon
the conversion of the Note, of the Shares or other equity securities
of the Company, or entitling any person or entity to acquire any of
the Shares or other equity securities of the Company, including
options granted under any stock option or incentive plan.
3.3 Public Filings. The Company has heretofore furnished the Purchasers
with true and complete copies of the following public filings (the "Public
Filings") of the Company: (i) Annual Report on Form 10-KSB for the year ended
December 31, 1998, as filed with the SEC, (ii) Quarterly Report on Form 10-QSB
for the fiscal quarter ended September 30, 1999 (a copy of which is attached
hereto as Exhibit C), (iii) Proxy Statement relating to the Company's 1999
Annual Meeting, (iv) the Proxy Statement, filed with the SEC on November 19,
1999, relating to the Company's proposed re-incorporation in Delaware and
adoption of a new stock option plan, and (v) all other reports, other than Form
SR's or Registration Statements filed by the Company with the SEC since December
31, 1998. As of their respective dates, such reports and statements complied as
to form in all material respects with the requirements applicable thereto and
did 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,
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in light of the circumstances under which they were made, not misleading. The
audited financial statements and unaudited interim financial statements of the
Company included or incorporated by reference in such reports have been prepared
in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present the assets,
liabilities and financial position of the Company as of and at the dates thereof
and the results of operations and changes in financial position for the periods
then ended, subject in the case of the unaudited interim financial statements,
to normal, recurring year-end adjustments and any other adjustments described
therein. As of September 30, 1999, the Company had no Liabilities or obligations
(absolute, accrued, contingent or otherwise) material to the Company of a nature
required by GAAP to be stated on a balance sheet of the Company (the
"Liabilities") which were not reflected on the balance sheet included in the
Company's Quarterly Report on form 10-QSB for the period ended September 30,
1999 (the "Balance Sheet"). Since September 30, 1999, the Company has incurred
no Liabilities except (a) Liabilities incurred in the ordinary course of
business consistent with past practice and (b) Liabilities incurred, other than
in the ordinary course of business consistent with past practice, which do not,
individually or in the aggregate, exceed $100,000, other than a loan from Future
Media Productions, Inc. in the principal amount of $100,000.
3.4 Authorization. The Company has all requisite power and authority to
execute, deliver and perform its obligations under this Subscription Agreement,
and to issue, sell and deliver the Note, and upon conversion, the Shares. This
Subscription Agreement has been duly authorized by the Company, and (subject,
with respect to enforceability, to the provisions of specific performance,
bankruptcy and similar laws and principles of equity) when executed and
delivered by the Company, will constitute the legal, valid and binding
obligations of the Company, enforceable as to the Company in accordance with its
respective terms.
3.5 To the best of the Company's knowledge, no consent, authorization,
approval, order, license, certificate or permit of or from, or declaration or
filing with, a federal, state, local or other governmental authority or any
court or any other tribunal is required by the Company for the execution,
delivery or performance by the Company of this Subscription Agreement, or the
execution, issuance, sale, delivery or performance of the its obligations under
the Note, or upon conversion of the Note, the issuance and delivery of the
Shares (except as specified herein or as may be required under Federal and State
securities laws).
3.6 To the best of the Company's knowledge, no consent of any party to any
contract, agreement, instrument, lease, license, arrangement or understanding to
which the Company is a party or to which any of its properties or assets are
subject is required for the execution, delivery or performance by the Company of
this Subscription Agreement.
3.7 The execution, delivery and performance by the Company in accordance
with the terms and conditions of this Subscription Agreement, and the execution,
issuance, sale, and delivery of the Note, and upon conversion, the Shares by the
Company in accordance with any instrument or other document governing the rights
and obligations of any such securities, will not violate, result in a breach of,
conflict with (with or without the giving of notice or the passage of time or
both) or entitle any party to terminate or call a default under any material
contract, agreement, instrument, lease, license, arrangement or understanding or
violate or result in a breach of any term of the certificate of incorporation or
by-laws of, or conflict with any law, rule, regulation, order, judgment or
decree binding upon, the Company or to which any of its operations, businesses,
properties or assets are subject, the result of which may have a material
adverse effect on the business, operations, liabilities or condition (financial
or otherwise) of the Company.
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3.8 To the knowledge of the Company the Public Filings do not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
There has been no material adverse change in the financial condition, results of
operation, business, properties, assets, liabilities or future prospects of the
Company from the latest information set forth in the Public Filings.
4. REGISTRATION RIGHTS
4.1 Definitions. For the purposes of this Agreement, the following words
shall have the meanings set forth below:
(a) An "Affiliate" of any Person is any other Person which controls,
is controlled by or is under common control with such Person.
(b) "Registrable Securities" means (x) the Common Stock issued or
issuable upon the conversion of the Note; and (y) any Common Stock or other
securities of the Company issued or issuable with respect to the securities
identified in clause (x) above by reason of a stock dividend or stock split
or in connection with a conversion, exchange, combination of shares,
recapitalization, merger, consolidation or other reorganization.
Each share of Registrable Securities shall continue to be Registrable
Securities in the hands of each subsequent holder thereof; provided, that
each share of Registrable Securities shall cease to be Registrable
Securities when transferred to any Person who is not an Affiliate of a
holder of Registrable Securities, pursuant to a registered public offering
or pursuant to Rule 144.
(c) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act.
4.2 Incidental Registration.
(a) If the Company at any time proposes to register on a firmly
underwritten public offering basis any of its Common Stock to be offered
for cash for its own account pursuant thereto it shall give written notice
(the "Company's Notice"), at its expense, to all holders of Registrable
Securities of its intention to do so at least 15 days prior to the filing
of a registration statement with respect to such registration with the
Commission. If any holder of Registrable Securities desires to dispose of
all or part of such stock, he, she or it may request registration thereof
in connection with the Company's registration by delivering to the Company,
within ten days after receipt of the Company's Notice, written notice of
such request (the "Holder's Notice") stating the number of shares of
Registrable Securities which such holder desires to sell pursuant to the
registration. The Company shall use its best efforts to cause all shares
specified in the Holder's Notice to be registered under the Securities Act
so as to permit the sale or other disposition by such holder or holders of
the shares so registered, subject however, to the limitations set forth in
Section 4.3 hereof.
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(b) Notwithstanding anything to the contrary contained in this Section
4.2, no person (as defined, for these purposes, in Rule 144) who then
beneficially owns 1% or less of outstanding shares of any class of
securities of the Company or is not subject to the volume limitations set
forth in Rule 144 may request that any of its Registrable Securities be
included in any registration statement filed by the Company pursuant to
this Section 4.2 unless, in the opinion of counsel for such person, such
person's intended disposition of Registrable Securities could not be
effected within 90 days of the date of said opinion without registration of
such shares under the Securities Act (assuming, for this purpose, that if
"current public information" (as defined in Rule 144) is available with
respect to the Company as of the date of such opinion, it will remain so
available for such 90-day period).
4.3 Limitations on Incidental Registration.
(a) The Company shall have the right to limit the aggregate size of
the offering or the number of shares to be included therein by shareholders
of the Company if requested to do so in good faith by the managing
underwriter or agent of the offering. Only securities which are to be
included in the underwriting may be included in the registration.
(b) Whenever the number of shares which may be registered pursuant to
Section 4.2 is limited by the provisions of Section 4.3(a) above, the
Company will include in such registration, (i) first, the shares the
Company proposes to sell, (ii) second, the Common Stock issued or issuable
upon conversion of the Series A Convertible Preferred Stock allocated among
the holders of such stock (iii) third, the Common Stock issued or issuable
upon conversion of the Series B Preferred Stock allocated among the holders
of such stock and (iv) fourth, the other securities requested to be sold by
all other shareholders of the Company who have the contractual right to
include all or a portion of their shares in the registration allocated pro
rata among such holders on the basis of the number of registrable
securities owned by each such holder; provided, that if any such holder of
Registrable Securities or holder of other securities would thus be entitled
to include more shares than such holder requested to be registered, the
excess will be allocated among the other holders of Registrable Securities
or the holders of other securities, respectively, on the basis of the
number of shares of Registrable Securities or other registrable securities,
respectively, then held by each holder.
(c) The Company may grant subsequent investors registration rights
which shall have priority over the registration rights granted to the
holders of Registrable Securities by this Agreement.
4.4 Expenses of Registration. All expenses incurred in effecting any
registration pursuant to Section 4.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, expenses of compliance with
Blue Sky laws, fees and disbursements of counsel for the Company, and expenses
of any audits incidental to or required by any each registration shall be borne
by the Company; provided, that each holder of Registrable Securities shall bear
his, her or its own legal expenses (if he, she or it retains separate counsel)
and all underwriting discounts or brokerage fees or commissions relating to the
sale of its Registrable Securities or other registrable securities of the
Company.
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4.5 Indemnification.
(a) In the event of any registration of any of its securities under
the Securities Act pursuant to this Agreement, the Company shall indemnify
and hold harmless each holder of Registrable Securities requesting or
joining in a registration of such securities, each underwriter (as defined
in the Securities Act), and each controlling person (within the meaning of
the Securities Act) of any holder or underwriter, if any, against any
losses, claims, damages or liabilities, joint or several (or actions in
respect thereof), to which such holder, underwriter or controlling person
may be subject under the Securities Act, under any other statute or at
common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement (or alleged untrue statement) of any material fact contained in
any registration statement under which such securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any summary prospectus issued in connection with any
securities being registered, or any amendment or supplement thereto, or any
other document used to sell the securities (including an illegal
prospectus), or (ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any violation by the Company of
the Securities Act or any Blue Sky law, or any rule or regulation
promulgated under the Securities Act or any Blue Sky law, or any other law,
applicable to the Company in connection with any such registration and
shall reimburse each such holder, underwriter or controlling person for any
legal or other expenses reasonably incurred by such holder, underwriter or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable to any holder, underwriter or controlling
person in any such event to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
omission, or alleged untrue statement or omission, made in such
registration statement, preliminary prospectus, summary prospectus, final
prospectus, or amendment or supplement thereto, or any other document, in
reliance upon and in conformity with written information furnished to the
Company by any such holder, underwriter, controlling person or expert (as
that term is defined by the Securities Act) specifically for use therein,
and provided, further, that the Company shall not be required to indemnify
any person against any liability arising from any untrue or misleading
statement or omission or any alleged untrue statement or omission in the
preliminary prospectus if such deficiencies are corrected in the final
prospectus. The indemnity provided for herein shall remain in full force
and effect regardless of any investigation made by or on behalf of such
holder, underwriter or controlling person, and shall survive transfer of
such securities by such holder.
(b) In the event of any registration of any of the Company's
securities under the Securities Act in which a holder of Registrable
Securities or other registrable securities of the Company participates
pursuant to this Agreement, each such holder shall furnish to the Company
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in writing such information and affidavits as the Company reasonably
requests for use in connection with such registration statement and agrees
to indemnify and hold harmless the Company, its directors, each underwriter
(as defined in the Securities Act) and each controlling person (within the
meaning of the Securities Act) of the Company or underwriter, if any, and
the Company's accountants and attorneys, against any losses, claims,
damages or liabilities, joint or several (or actions in respect thereof),
to which the Company, or any director, underwriter or controlling person
may be subject under the Securities Act, under any other statute or at
common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement (or alleged untrue statement) of any material fact contained in
any registration statement under which such securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any summary prospectus issued in connection with any
securities being registered, or any amendment or supplement thereto, or any
other document used to sell the securities (including an illegal
prospectus), or (ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse the Company, any
director, underwriter, and controlling person for any legal or other
expenses reasonably incurred by such persons in connection with
investigating or defending any such loss, claim, damage, liability or
action; in each case, to the extent, and only to the extent, that such
untrue statement or omission (or alleged untrue statement or omission) is
contained in any information or affidavit so furnished in writing by such
holder. The indemnity provided for herein shall survive transfer of such
securities by said holder.
(c) If the indemnification provided for in Sections 4.5(a) or (b)
above is unavailable to an indemnified party in accordance with its terms
in respect of any losses, claims, damages or liabilities referred to
therein, then the indemnitor in lieu of indemnifying such indemnified party
thereunder shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities, in such proportion as is appropriate to reflect the relative
fault of the indemnitor on the one hand and of the indemnified parties on
the other in connection with the statements or omissions which resulted in
such losses, claims, damages, or liabilities, as well as any other relevant
equitable considerations. The relative fault of the indemnitor and of the
indemnified parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by
the indemnitor, or the indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Purchaser agree
that it would not be just and equitable if contribution pursuant to this
Section 4.5(c) 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 the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities or actions in respect thereof referred to
in the immediately preceding paragraph shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. No person guilty of a fraudulent
misrepresentation (within the meaning of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
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(d) Promptly after receipt by an indemnified party under Sections
4.5(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against an indemnitor under such Sections, notify the indemnitor in writing
of the commencement thereof; but the omission so to notify the indemnitor
shall not relieve it from any liability which it may have to any
indemnified party otherwise than under such Sections 4.5(a) or (b) or to
the extent that it has not been prejudiced as a proximate result of such
failure. In case any action shall be brought against any indemnified party,
and it shall notify the indemnitor of the commencement thereof, the
indemnitor shall be entitled to participate therein and, to the extent that
it shall wish, to assume the defense thereof. Upon the assumption by the
indemnitor of the defense of such action, the indemnitor shall not be
liable to such indemnified party under this Section 4.5 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof.
4.6 Covenants of Holder.
(a) Purchaser will furnish to the Company in writing such information
as the Company may reasonably require from such seller, and otherwise
reasonably cooperate with the Company in connection with any Registration
Statement with respect to such Registrable Securities.
(b) Purchaser will not (until further notice) effect sales of
Registrable Securities involved in any Registration Statement thereof after
receipt of written notice from the Company to suspend sales to permit the
Company to correct or update such Registration Statement or Prospectus.
(c) At the end of any period during which the Registration Statement
is current and effective, Purcahser shall discontinue sales of shares
pursuant to such Registration Statement on receipt of notice from the
Company of its intention to remove from registration the shares covered by
such Registration Statement which remain unsold, and Holder shall notify
the Company of the number of shares registered which remain unsold promptly
after receipt of such notice from the Company.
(d) Notwithstanding any other provision herein to the contrary,
Purchaser shall not be required to exercise his right to convert the Note
in connection with any registration until the actual sale of the shares of
Common Stock issuable upon exercise of such Note. The Company shall enter
into such agreements and shall otherwise cooperate with Purchaser in order
to ensure that Purchaser is not required to exercise his right to convert
the Note prior to the date of the actual sale of the shares of Common Stock
issuable upon exercise of such conversion right.
12
5. MARKET STAND-OFF.
The Purchaser agrees that, in connection with any underwritten public
offering by the Company of its securities pursuant to an effective registration
statement filed under the Securities Act, as amended, the Purchaser shall agree
not to sell, make any short sale of, loan, hypothecate, pledge, grant any option
for the repurchase of, or otherwise dispose or transfer for value or otherwise
agree to engage in any of the foregoing transactions with respect to any
securities of the Company without the prior written consent of the Company or
its underwriters, for such period of time from and after the effective date of
such registration statement as may be requested by the Company or such
underwriters.
6. UNDERSTANDINGS
6.1 The undersigned understands, acknowledges and agrees with the Company
as follows:
(a) This Subscription is and shall be irrevocable, except that the
undersigned shall have no obligations hereunder in the event that (i) this
subscription is rejected for any reason; or (ii) the purchase and sale of
Shares is not consummated by the Closing Date.
(b) No federal agency or state agency or regulatory agency has made
any finding or determination as to the fairness of this offering or
investment, nor any recommendation or endorsement of the Note or the
Shares.
(c) There can be no assurance that the undersigned will be able to
sell or dispose of the Note or Shares. Moreover, no assignment, sale,
transfer, exchange or other disposition of the Note or Shares can be made
other than in accordance with all applicable securities laws. It is
understood that in order not to jeopardize the offering's exempt status
under Rule 506 of Regulation D of the Act, the transferee will be required
to fulfill certain investor suitability requirements.
(d) There can be no assurance as to the Federal, State or local tax
results of an investment in the Note.
(e) The undersigned has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of
investment in the Company and of making an informed investment decision.
(f) The undersigned, by reason of his business or financial
experience, is capable of evaluating the merits and risks of the purchase
of the Note in order to protect the undersigned's own interest in
connection with this transaction.
(g) The undersigned agrees, and any future permitted transferee of the
Note or Shares agrees, that the Shares shall not be sold, assigned,
transferred or otherwise disposed of except as permitted by, and in
compliance with, the provisions of Rule 144 promulgated under the
Securities Act; You acknowledge that the certificates evidencing the Shares
shall bear a legend relating to such restrictions.
13
6.2 The representations, warranties, understandings, acknowledgments and
agreements made by the undersigned in this Agreement are true and accurate as of
the date hereof, shall be true and correct as of the date of the acceptance
hereof by the Company and shall survive thereafter.
7. MISCELLANEOUS
7.1 All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, singular or plural as the identity of the
person or persons may require.
7.2 Neither this Subscription Agreement nor any provisions hereof shall be
waived, modified, changed, discharged, terminated, revoked or canceled except by
an instrument in writing signed by the party against whom any change, discharge
or termination is sought.
7.3 Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered or sent
by registered mail, return receipt requested, addressed, if to the Company:
Synthonics Technologies, Inc., 31324 Xxx Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxxxx
Xxxxxxxxxx 00000, or if to Purchaser the address set forth below, as amended
from time to time, or to such other address furnished by notice given in
accordance with this Article 7.
7.4 Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and the
undersigned, or otherwise, or delay by the Company in exercising such right or
remedy, will not operate as a waiver thereof. No waiver by the Company will be
effective unless and until it is in writing and signed by the Company.
7.5 This Subscription Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of California, and
shall be binding upon the undersigned, his heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Company and its
successors and assigns.
7.6 In the event that any provision of this Subscription Agreement 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 provision hereon which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
7.7 This Subscription Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede any and
all prior or contemporaneous representations, warranties, agreements and
understandings in connection therewith. This Agreement may be amended only by a
writing executed by all parties hereto.
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7.8 This Subscription Agreement may be executed in one or more counterparts
representing, however, one and the same Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on the attached Signature Page.
15
SUBSCRIPTION AGREEMENT - SIGNATURE PAGE
--------------------------------------------------------------------------------
This page constitutes the Signature Page to this Subscription Agreement.
The undersigned represents to the Company that (a) the information contained
herein is complete and accurate on the date hereof and may be relied upon by the
Company, and (b) the undersigned will notify the Company immediately of any
change in any of such information occurring prior to the acceptance of the
subscription and prior to the Closing relating to the Shares, once the
Subscription Agreement is accepted, and will promptly send the Company written
confirmation of such change. The undersigned hereby certifies that he has read
and understands the Public Filings and this Subscription Agreement.
Under penalty of perjury, the undersigned also certifies that he is not
subject to backup withholding under the rules and regulations of the Internal
Revenue Service. Please make the check payable to "Synthonics Technologies,
Inc."
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this __ day of December, 1999.
-----------------------------------------------
SIGNATURE OF PURCHASER
Future Media Productions, Inc.
------------------------------
NAME OF PURCHASER
------------------------------------------------
Title of Authorized Signatory if Purchaser is
a corporation, partnership or other entity
------------------------------------------------
Address, City, State and Zip Code
THE NOTE AND SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION IN RELIANCE OF AN EXEMPTION FROM
SUCH REGISTRATION PURSUANT TO RULE 506 OF REGULATION D OF THE SECURITIES ACT OF
1933 (THE "ACT").
Accepted by: Synthonics Technologies, Inc.
_______________________________________ Dated: ______________
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