SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(A)
(AMENDMENT NO. 1)1
Synthonics Technologies, Inc.
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(Name of Issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
8716Y107
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(CUSIP Number)
Alex Sandel
Argoquest 7, LLC
25136 Anza Drive
Valencia, CA 91355
With a copy to:
Murray Markiles, Esq.
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Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Century City, CA 90067
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
November 30, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13D to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
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1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, SEE
the NOTES).
(Continued on following pages)
Page 1 of 8
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SCHEDULE 13D
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CUSIP NO. 8716Y107 PAGE 2 OF 8 PAGES
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1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Argoquest 7, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS* WC (See Response to Item 3).
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES 3,748,445 (See Response to Item 5).
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 3,748,445 (See Response to Item 5).
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PERSON 10 SHARED DISPOSITIVE POWER
WITH -0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,748,445 (See Response to Item 5.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.6% (See Response to Item 5.)
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
Page 2 of 8
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ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D (this "Statement") relates to the common
stock, par value $0.01 per share (the "Common Stock"), of Synthonics
Technologies, Inc., a Utah corporation (the "Company" or the "Issuer"), and is
being filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The address of the principal executive offices of the Company is 31324
Via Colinas, Suite 106, Westlake Village, California 91362.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) This Statement is hereby filed by Argoquest 7, LLC, a limited liability
company organized in Delaware (the "Reporting Person"). The business address of
the Reporting Person is Argoquest 7, LLC, 25136 Anza Drive, Valencia, CA 91355.
(d) During the last five years, neither the Reporting Person nor the
Manager has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the last five years, neither the Reporting Person nor the
Manager was a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities
laws or finding any violation with respect to such laws.
(f) The Manager is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to that certain Equity Agreement - Summary of Terms, dated as
of June 2, 1999 by and between the Issuer and Alex Sandel, and that certain
Assignment, dated as of June 2, 1999, by Alex Sandel for the benefit of
Argoquest 7, LLC (collectively, the "Agreement"), attached hereto as "Exhibit A"
and incorporated herein by reference as though fully set forth herein (all
capitalized terms not otherwise herein defined shall have the meaning ascribed
to them in the Agreement) and that certain Subscription Agreement, dated as of
June 2, 1999, by and between Argoquest 7, LLC and the Issuer, attached hereto as
"Exhibit B" and incorporated herein by reference as though fully set forth
herein (the "Subscription Agreement"), the Issuer agreed to sell to the
Reporting Person and the Reporting Person agreed to purchase 2,300,000 shares of
the common stock of the Issuer at a purchase price of $.10 per share, for a
total purchase price of $230,000. The Reporting Person paid for such shares in
cash from working capital funds.
On June 11, 1999, the Reporting Person filed a Schedule 13D
inadvertently reporting beneficial ownership of an incorrect number of shares of
Common Stock and an incorrect aggregate purchase price paid therefor. The
Schedule 13D filed on June 11, 1999 stated that the
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Reporting Person purchased an option to purchase 1,371,320 shares of the Common
Stock, at a purchase price of $.10 per share, for an aggregate purchase price of
$137,132. However, the option is exercisable for 1,448,445 shares of the Common
Stock, at a purchase price of $.10 per share, for an aggregate purchase price of
$144,844 (the "Option"). The Option became fully vested upon the signing of the
Agreement and the purchase of the 2,300,000 shares of the Common Stock, as
described above. The Option is outstanding until the later of (1) 90 days from
the close of the Issuer's current stage of financing or (2) 150 days from the
date of the Agreement. In addition, the Reporting Person has the right to
purchase stock in the current stage of the Issuer's financing being raised
sufficient for the Reporting Person to maintain 10% of the outstanding Common
Stock (the "Purchase Option"). The Purchase Option is at the same price or
average price per share of the Common Stock that is obtained in the Issuer's
current stage of financing. Pursuant to the Subscription Agreement, the Purchase
Option shall expire if not exercised within 30 days of the date the Reporting
Person receives written notice from the Issuer of the terms, conditions and
anticipated closing date of the Current Round (as defined in the Subscription
Agreement).
On or about October 19, 1999, the Reporting Person exercised a portion
of the Option to acquire 800,000 shares of the Common Stock at a purchase price
of $.10 per share for an aggregate purchase price of $80,000. The Reporting
Person still retains such portion of the Option to acquire 648,445 shares of the
Common Stock.
In addition, pursuant to the Agreement, the Issuer, among other things,
agreed to (1) give Future Media Productions, Inc., an affiliate of the Reporting
Person, the exclusive right to service the Issuer's CD-ROM replication needs,
based on prevailing market prices for such services, and (2) collaborate on a
joint marketing program and presentation with respect to the development and
positioning of certain programs. Any proceeds from the joint marketing program
and presentation are for the full benefit of the Issuer and will not be shared
with the Reporting Person or any affiliates of the Reporting Person, other than
through participation of the Reporting Person's share of the Common Stock.
No part of the purchase price for the Common Stock, Option and/or
Purchase Option issued to the Reporting Person pursuant to the Agreement has
been obtained or will be represented by funds or other consideration borrowed or
otherwise obtained for the purpose of acquiring, holding, trading or voting the
securities.
ITEM 4. PURPOSE OF THE TRANSACTION.
The Reporting Person acquired the Common Stock, Option and Purchase
Option pursuant to the Agreement for investment purposes. Pursuant to the
Agreement, the Reporting Person agreed that neither it nor any affiliate of the
Reporting Person would purchase any additional shares of the Common Stock,
without the permission of the Board of Directors of the Issuer, in the open
market or other transactions which would raise the Reporting Person's share of
the Common Stock in excess of 10% of the outstanding shares on a fully diluted
basis of the Issuer, at such time, PROVIDED, HOWEVER, that the Reporting Person
may through the open market or other private transactions acquire an additional
10% of the outstanding shares of the Common Stock, PROVIDED, THAT, the Reporting
Person (1) gives advance notice of such purchases to the Board of
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Directors of the Issuer and (2) executes a standstill agreement stating that
such purchases are for investment purposes only and neither the Reporting Person
nor any of its affiliates will take action to acquire control of the Issuer (the
"Standstill Agreement"), a copy of which is attached hereto as "Exhibit C" and
incorporated herein by reference as though fully set forth herein. In addition,
pursuant to the Agreement, the Chief Financial Officer of Future Media
Productions, Inc. will act as the principal financial officer of the Issuer for
twelve months following the date of the Agreement. This service will be provided
to the Issuer pursuant to the transactions contemplated in the Agreement with no
additional charge to the Issuer, until such time as the Issuer completes its
current stage of financing pursuant to the terms of the Agreement. Pursuant to
the Agreement, the Reporting Person also has the right to nominate one member to
the Board of Directors of the Issuer, PROVIDED, THAT, such nominee must be
approved by the Issuer, such approval which shall not be unreasonably withheld
by the Issuer.
The Reporting Person from time to time intends to review its investment
in the Issuer on the basis of various factors, including the Issuer's business,
financial condition, results of operations and prospects, general economic and
industry conditions, the securities markets in general and those for the
Issuer's securities in particular, as well as other developments and other
investment opportunities. Based upon such review and subject to the provisions
of the Agreement, the Reporting Person will take such actions in the future as
it may deem appropriate, consistent with the securities laws, in light of the
circumstances existing from time to time. If the Reporting Person believes that
further investment in the Issuer is attractive, whether because of the market
price of the Issuer's securities or otherwise, it may acquire Common Stock,
pursuant to the exercise of the Option and/or the Purchase Option.
The Reporting Person currently has no plans or proposals to dispose of
the Common Stock, the Option and/or the Purchase Option or some or all of the
Common Stock the Reporting Person may acquire by the exercise of the Option
and/or the Purchase Option, PROVIDED, HOWEVER, that depending on market and
other factors, in the future, the Reporting Person may determine to dispose of
some or all of the Common Stock acquired by exercise of the Option and/or
Purchase Option in privately negotiated transactions, subject to certain
transfer restrictions and rights of first refusal of the Issuer as set forth in
the Agreement.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The Schedule 13D filed by the Reporting Person on June 11, 1999
inadvertently reported beneficial ownership of an incorrect number of shares of
the Common Stock, an incorrect percentage of the shares of the outstanding
Common Stock that the Reporting Person's beneficial ownership of the Issuer's
securities represents and an incorrect number of shares of the outstanding
Common Stock. The Schedule 13D filed on June 11, 1999 stated that the Reporting
Person is the beneficial owner of 3,671,320 shares of the Common Stock, or
approximately 10% of the Common Stock based on a total of 36,713,182 shares of
the Common Stock outstanding on a fully diluted basis
Page 5 of 8
<PAGE>
as of June 2, 1999. The Schedule 13D filed on June 11, 1999 also stated that
such ownership includes the Option to acquire up to 1,371,320 shares of the
Common Stock. However, pursuant to the Agreement, as of June 2, 1999, the
Reporting Person is the beneficial owner of 3,748,445 shares of the Common
Stock, or approximately 9.6% of the Common Stock based on a total of 37,484,452
shares of the Common Stock outstanding on a fully diluted basis (including
shares of the Common Stock and the Common Stock issuable upon exercise of the
Option issued to the Reporting Person pursuant to the Agreement) as of June 2,
1999. Such ownership includes the Option to acquire up to 1,448,445 shares of
the Common Stock. Pursuant to the Agreement, as described in Item 3 of this
statement, the Reporting Person also beneficially owns the Purchase Option to
acquire such number of shares of the Common Stock in the Issuer's current stage
of financing sufficient to maintain 10% of the shares of the outstanding Common
Stock.
(b) The Schedule 13D filed by the Reporting Person on June 11, 1999
inadvertently reported an incorrect number of shares of the Common Stock of
which the Reporting Person has the sole power to vote or direct the vote and
dispose or direct the disposition. The Schedule 13D filed on June 11, 1999
stated that the Reporting Person has the sole power to vote or direct the vote
and dispose or direct the disposition of 3,671,320 shares of the Common Stock
and such shares that the Reporting Person purchases pursuant to the Purchase
Option. However, the Reporting Person has the sole power to vote or direct the
vote and dispose or direct the disposition of 3,748,445 shares of the Common
Stock and such shares that the Reporting Person purchases pursuant to the
Purchase Option.
(c) Except as set forth herein, the Reporting Person has not engaged in any
transactions in the Common Stock during the past sixty (60) days.
(d) Not applicable.
(e) Not applicable.
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<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The Agreement, attached as "Exhibit A" to the Schedule 13D filed by the
Reporting Person on June 11, 1999, is hereby incorporated herein by reference as
though fully set forth herein.
The Subscription Agreement, attached as "Exhibit B" to this Amendment
No. 1 to the Schedule 13D, is hereby incorporated herein by reference as though
fully set forth herein.
The Standstill Agreement, attached as "Exhibit C" to this Amendment No.
1 to the Schedule 13D, is hereby incorporated herein by reference as though
fully set forth herein.
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<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. "Exhibit A" is the Equity Agreement - Summary of Terms, dated June 2, 1999,
by and between Synthonics Technologies, Inc. and Alex Sandel, and the
related Assignment, dated June 2, 1999, by Alex Sandel for the benefit of
Argoquest 7, LLC. The Agreement, attached as "Exhibit A" to the Schedule
13D filed by the Reporting Person on June 11, 1999, is hereby incorporated
herein by reference as though fully set forth herein.
2. "Exhibit B" is the Subscription Agreement, dated June 2, 1999, by and
between Synthonics Technologies, Inc. and Argoquest 7, LLC.
3. "Exhibit C" is the Standstill Agreement, dated June 2, 1999, by and
between Synthonics Technologies, Inc. and Argoquest 7, LLC.
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 30, 1999
Argoquest 7, LLC
/S/ ALEX SANDEL
--------------------------
By: Alex Sandel
Its: Manager
The original statement shall be signed by each person on whose behalf
the statement is filed or his authorized representative. If the statement is
signed on behalf of a person by his authorized representative (other than an
executive officer or general partner of this filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statements, provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name any title of each person who signs the statement shall be typed or
printed beneath his signature.
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE
FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
Page 9 of 8
"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., 31324 Via Colinas, Suite 106, Westlake
Village, California 91362.
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.
<PAGE>
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,
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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
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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.
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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.
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(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 Via Colinas, Suite 106, Westlake
Village California 91362, 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.
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9.7 Except with respect to (i) agreements relating to the services
of Mr. Lou Weiss, 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.
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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.
<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/ ALEX SANDEL
- ------------------------------------------------------------------------
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. MICHAEL BUDD Dated: June 2, 1999
- -------------------------------------- -----------------
"Exhibit C"
STANDSTILL AGREEMENT
June 2, 1999
Alex Sandel
25136 Anza Drive
Valencia, CA 91355
Jason Barzilay
25136 Anza Drive
Valencia, CA 91355
Argoquest 7, LLC
25136 Anza Drive
Valencia, CA 91355
Gentlemen:
In connection with your investment in Synthonics Technologies, Inc., (the
"COMPANY") pursuant to that certain that certain Subscription Agreement, dated
as of June 2, 1999 by and between the Company and you. (the "SUBSCRIPTION
AGREEMENT") you agree as follows:
1. For a period commencing on the date hereof and extending through the
fifth anniversary of the date of this letter, you will not, nor will
you permit any of your "AFFILIATES" or "ASSOCIATES" (as such terms are
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), directly or indirectly (except as
provided in Paragraph 2 below), (i) except as a result of a stock
split, stock dividend or similar recapitalization by the Company,
directly or indirectly acquire, offer to acquire, or agree to acquire
by purchase, individually or by joining a partnership, limited
partnership, syndicate or other "GROUP" (as such term is used in
Section 13(d)(3) of the Exchange Act, such term to have such meaning
throughout this letter) (any such act, to "ACQUIRE"), any securities
of the Company entitled to vote in the election of directors of the
Company (collectively, "VOTING SECURITIES"), any securities directly
or indirectly convertible into or exchangeable for Voting Securities,
any direct or indirect
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rights, warrants or options to acquire any Voting Securities or any
right to vote any Voting Securities if, immediately after such
acquisition, you and your affiliates and associates collectively would
"BENEFICIALLY OWN" (as defined in Rules 13d-3 and 13d-5 of the
Exchange Act) in excess of 20% of the fully diluted voting power of
the Company's outstanding Voting Securities; (ii) make, or in any way
participate in, directly or indirectly, any "SOLICITATION" of
"PROXIES" (as such terms are defined or used in Regulation 14A under
the Exchange Act) or become a "PARTICIPANT" in any "ELECTION CONTEST"
(as such terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to the Company, or initiate, propose or otherwise
solicit stockholders of Company for the approval of one or more
stockholder proposals with respect to the Company or induce or attempt
to include any other person to initiate any stockholder proposal;
(iii) deposit any Voting Securities into a voting trust or subject
them to any voting agreement or other agreement or arrangement with
respect to the voting of such Voting Securities; (iv) otherwise act,
directly or indirectly, alone or in concert with others, to seek to
control the management, Board of Directors, policies or affairs of the
Company, or solicit, propose, seek to effect or negotiate with any
other person with respect to any form of business combination
transaction with the Company or any affiliate thereof, or any
restructuring, recapitalization or similar transaction with respect to
the Company or any affiliate thereof, solicit, make or propose or
encourage or negotiate with any other person with respect to, or
announce an intent to make, any tender offer or exchange offer for any
Voting Securities, or disclose an intent, purpose, plan or proposal
with respect to the Company or any Voting Securities inconsistent with
the provisions of this letter, including an intent, purpose, plan or
proposal that is conditioned on or would require the Company to waive
the benefit of or amend any provision of this letter, or assist,
participate in, facilitate, encourage or solicit any effort or attempt
by any person to do or seek to do any of the foregoing; or (v)
encourage or render advice to or make any recommendation or proposal
to any person, or directly or indirectly participate, aid and abet or
otherwise induce any person, to engage in any of the actions
prohibited by this paragraph 1 (including this clause (v)) or to
engage in any actions inconsistent with such prohibitions, including
the accumulation of voting securities with any intent or objective
inconsistent with this paragraph 1.
2. Notwithstanding the provisions of paragraph 1 above to the contrary,
you and your affiliates and associates may purchase or otherwise
acquire beneficial ownership of any Voting Securities if you and/or
your affiliates or associates are specifically invited or permitted in
writing to do so by the Board of Directors of the Company.
3. Alex Sandel and Jason Barzilay hereby make the following
representations: (i) Alex Sandel represents that as of the date
hereof, he is the owner of 50% of the membership interests of
Argoquest 7, LLC and (ii) Jason Barzilay represents that as of the
date hereof he is the owner of 50% of the membership interests of
Argoquest 7, LLC.
Page 2
<PAGE>
4. For purposes of this letter, all calculations of the fully diluted
outstanding Voting Securities shall assume the conversion or exchange
of all outstanding securities convertible into or exchangeable for
Voting Securities and the exercise of all outstanding rights, warrants
and options to purchase Voting Securities regardless of whether such
rights of conversion, exchange or purchase are then exercisable.
5. This letter shall be governed and construed in accordance with the
internal, substantive laws of the State of California without regard
to conflict of laws principles. No failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise of any such right, power or
privilege. This letter shall be binding upon, and inure to the benefit
of each of the parties hereto and their respective successors and
assigns. In addition to all other rights and remedies which either
party hereto may have hereunder, at law, in equity, by statute or
otherwise, the prevailing party in any litigation to enforce the
provisions of this letter shall be entitled to recover attorneys' fees
and expenses and court costs. This letter may be modified only by an
agreement in writing signed by all parties hereto. This letter
constitutes the final agreement of the parties concerning the matters
herein and supersedes all prior and contemporaneous agreements and
understandings, whether oral or written, between them respecting the
subject matter hereof. If any of the provisions of this letter are
determined to be illegal, invalid or otherwise unenforceable, in whole
or in part, they shall be deemed severable from, and shall in no way
affect the validity or enforceability of, the remaining provisions of
this letter.
6. You hereby recognize, acknowledge and agree that the agreements and
undertakings set forth herein relate to matters that are of a special,
unique and extraordinary character which gives them a peculiar and
special value impossible of replacement, and for the breach of which
the non-breaching party cannot reasonably or adequately be compensated
in damages, and that any breach by you of any of the terms or
provisions hereof will cause the Company irreparable injury and harm.
Therefore you hereby agree that, in addition to any and all rights and
remedies which the Company may have at law, in equity, by statute or
otherwise, the Company shall be entitled to injunctive or other
equitable relief to prevent the continuing breach by you of each and
all of the terms and provisions hereof or to otherwise secure the
enforcement of each and all of the terms and provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
Please acknowledge your agreement to the foregoing by countersigning
this letter and the enclosed copy in the space provided below and returning the
executed copy to us.
Very truly yours,
SYNTHONICS TECHNOLOGIES, INC.
/s/ F. MICHAEL BUDD
--------------------------
By: F. MICHAEL BUDD
-----------------------
Its: PRESIDENT
----------------------
Received and consented to
the 2nd day of June, 1999
/s/ ALEX SANDEL
- -----------------------------
Alex Sandel
/s/ JASON BARZILAY
- -----------------------------
Jason Barzilay
ARGOQUEST 7, LLC
/s/ ALEX SANDEL
- -----------------------------
By: Alex Sandel
Its: General Manager
