"EXHIBIT B"
SUBSCRIPTION AGREEMENT FOR SHARES OF
SYNTHONICS TECHNOLOGIES, INC.
This Subscription Agreement is made 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 Units (the "Units"), consisting of TEN THOUSAND (10,000) shares
of Common Stock of the Company, par value $.01 (the "Shares").
The securities offered hereunder 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 Shares are "Restricted Securities" as defined in the Act
and may not be resold unless the Shares are registered under the Act, or an
exemption from registration under the Act is available.
The Shares are offered on a best efforts basis by the Company and such
registered broker-dealers that are members of the National Association of
Security Dealers, Inc. ("NASD") and other finders with whom the Company has
entered, or may enter into agreements with from time to time, subject to prior
sale, when, as and if delivered to and accepted by the Company and subject to
the right to reject any order in whole or in part and subject to certain other
conditions. (The broker-dealers and finders with who the Company may enter into
agreements with shall hereinafter collectively be referred to as "The Placement
Agent".)
The Shares will be sold to up to thirty-five non-accredited investors
and an unlimited number of Accredited Investors, who represent herein that they
are "Accredited Investors" as such term is defined in Rule 501 promulgated under
Regulation D of the Act.
In consideration of the Company's agreement to accept the undersigned
as a Shareholder of the Company upon the terms and conditions set forth herein,
the undersigned agrees and represents as follows:
1. SUBSCRIPTION.
1.1. The undersigned hereby subscribes to purchase Units at a
price of $1,000 per Unit in the amount indicated on the signature page
hereto. Simultaneously with the execution of this Subscription Agreement, the
undersigned is paying and delivering to the Company the amount set forth on the
signature page below, in the form of a check or wire transfer (the "Payment")
payable to Synthonics Technologies, Inc., 00000 Xxx Xxxxxxx, Xxxxx 000, Xxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000.
1.2 The Offering will terminate on June 2, 1999, (the "Closing
Date"). In the event that the undersigned's subscription is rejected the Payment
will be returned promptly, without any interest thereon.
1.3 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 Shares in whole or in part at any time prior to
the closing (the "Closing Date) of the sale of the Shares 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 1.3(a)
above of this Subscription Agreement, the Company shall deliver to you, the
Shares and a fully executed copy of this Subscription Agreement.
1.4 (a) Subsequent to the issuance of the Units to
Subscriber and until the later of: (i) 90 days from the closing of the Company's
next round of equity financing in excess of $1,000,000 ("Current Round") or (ii)
150 days from the date hereof, Subscriber shall have the option to purchase an
additional 1,448,445 Shares at a purchase price of $144,844 upon the same terms
and conditions set forth herein.
(b) The Company hereby grants the option to Subscriber to
participate in the Current Round and to purchase upon identical terms as
investors in the Current Round, a sufficient number of Shares to enable
Subscriber to maintain, on a fully diluted basis, ownership of 10% of the equity
of the Company. The option granted to Subscriber pursuant to this 1.4(b) shall
expire if not exercised within 30 days of the date Subscriber receives written
notice from the Company of the terms, condition and anticipated closing date of
the Current Round.
2. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER
2.1 The undersigned hereby represents and warrants to, and
agrees with, the Company and the Placement Agent, if any, as follows:
(a) The Shares are 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 such Shares and the undersigned will
not sell, hypothecate or otherwise transfer his or her 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 Shares.
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
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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 Shares 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 Shares 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 Shares.
(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 Shares are a suitable investment for him or her.
(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 his acceptance as a Shareholder of the Company, 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 Shares; and
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(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 as set
forth in the Purchaser Questionnaire, for the reasons set forth in the
undersigned's completed and duly executed Purchaser Questionnaire delivered
simultaneously with this Subscription Agreement. Or, if the undersigned is does
not meet the suitability standards of an Accredited Investor or a Qualified
Investor, then the undersigned is a Non-Accredited Investor and undersigned, by
reason of his business or financial experience, is capable of evaluating the
merits and risks of the purchase of the Shares in order to protect the
undersigned's own interest in connection with this transaction.
(i) The undersigned acknowledges that the Shares and the
underlying securities 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 Shares are "Restricted Securities" as defined in the Act
and may not be resold unless the Shares are 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, assignment or transfer of 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 Shares are registered under the Securities Act, it being
understood that none of the Shares are currently registered for sale and that
the Company has no obligation or intention to so register such, or (ii) 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 Shares, or (iii) such sale, assignment,
or transfer is otherwise exempt from registration under the Securities Act. You
acknowledge that 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:
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(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 Shares 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.
(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 Shares 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 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,
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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.
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,
25,076,279 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. 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 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 March 31,
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1999 (a copy of which is attached hereto as Exhibit A), (iii) Proxy Statement
relating to the Company's 1999 Annual Meeting, and (iv) 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, 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 March 31, 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 March 31, 1999
(the "Balance Sheet"). Since March 31, 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.
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 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
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 the
execution,
Page 7
issuance, sale, and delivery of 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.
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
pursuant to this Agreement; 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
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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.
(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.
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(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.
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
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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 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
Page 11
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.
(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) Holder 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) Holder 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, Holder 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,
Holder shall not be required to exercise Warrants in connection with any
registration until the actual sale of the shares of Common Stock issuable upon
exercise of such warrants or options. The Company shall enter into such
agreements and shall otherwise cooperate with Holder in order to ensure that
Holder is not required to exercise any Warrants prior to the date of the actual
sale of the shares of Common Stock issuable upon exercise of such warrants or
options.
Page 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, including the
Company's initial public offering, 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. [Intentionally Omitted]
7. [Intentionally Omitted]
8. UNDERSTANDINGS
8.1 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 Shares.
(c) There can be no assurance that the undersigned will
be able to sell or dispose of his Shares. Moreover, no assignment, sale,
transfer, exchange or other disposition of the Shares or underlying securities
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 Shares.
(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
Shares in order to protect the undersigned's own interest in connection with
this transaction.
Page 13
(g) The undersigned agrees, and any future permitted transferee
of 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.
8.2 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.
9. MISCELLANEOUS
9.1 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.
9.2 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.
9.3 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 9.
9.4 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.
9.5 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 any Placement Agent and its successors and assigns.
9.6 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.
Page 14
9.7 Except with respect to (i) agreements relating to the services
of Xx. Xxx Xxxxx, set forth that certain term sheet between the parties hereto,
dated June 2, 1999, (ii) the Purchase Agreement, between the parties hereto and
dated as of the date hereof and (iii) the Standstill Letter between the parties,
dated as of the date hereof, 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.
Page 15
9.9 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.
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 2nd day of June, 1999.
230 Units Subscribed X $1000 = $ 230,000 Total Subscription Amount
accompanying this Signature Page
/s/ XXXX XXXXXX
------------------------------------------------------------------------
SIGNATURE OF PURCHASER
Argoquest 7 LLC
------------------------------------------------------------------------
NAME OF PURCHASER
General Partner
------------------------------------------------------------------------
Title of Authorized Signatory if Purchaser is
a corporation, partnership or other entity
------------------------------------------------------------------------
Address, City, State and Zip Code
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").
Accepted by: Synthonics Technologies, Inc.
/s/ F. XXXXXXX XXXX Dated: June 2, 1999
-------------------------------------- -----------------
