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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JUNE 12, 1996
(Date of Report)
Commission file number 0-25736
SYNCRONYS SOFTCORP
(Name of Small Business Issuer as specified in Its Charter)
NEVADA 33-0653223
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3958 INCE BOULEVARD
CULVER CITY, CA 90232
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (310) 842-9203
TOTAL PAGES IN THIS REPORT: 41
EXHIBITS ARE INDEXED AT PAGE 5
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FORWARD-LOOKING STATEMENTS
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS FORM 8-K ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE SET FORTH IN SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS
AND UNCERTAINTIES INCLUDE, WITHOUT LIMITATION, THE COMPANY'S DEPENDENCE ON THE
TIMELY DEVELOPMENT, INTRODUCTION AND CUSTOMER ACCEPTANCE OF PRODUCTS (INCLUDING
SOFTRAM), THE IMPACT OF COMPETITION AND DOWNWARD PRICING PRESSURES, THE ABILITY
TO RAISE ANY NEEDED CAPITAL, THE EFFECT OF CHANGING ECONOMIC CONDITIONS, RISKS
IN TECHNOLOGY DEVELOPMENT AND THE EFFECTS OF OUTSTANDING LITIGATION. OTHER
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET
FORTH IN SUCH FORWARD-LOOKING STATEMENTS INCLUDE THE RISKS AND UNCERTAINTIES
DETAILED IN THE COMPANY'S MOST RECENT FORM 10-KSB AND 10-QSB AND ITS OTHER
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME.
ITEM 5. OTHER INFORMATION.
Completion of Private Placement of $13 Million Aggregate Principal Amount of
Debentures
As set forth in the documents attached as exhibits hereto, Syncronys
Softcorp, a Nevada Corporation (the "Company") completed a $13 million private
placement on May 22, 1996. The net proceeds from the offering have been
delivered to San Francisco-based Wells Fargo Bank as Escrow Agent to secure the
Debentures, and funds will be released from escrow only for certain specified
purposes, including Company expansion through new product development and
marketing, the formation of strategic alliances or acquisitions and general
working capital purposes.
The private placement consists of a combination of Convertible
Debentures and Warrants to purchase the Company's Common Stock, $.0001 par
value. The Convertible Debentures were issued at 100 percent of principal
amount and carry an interest rate of ten percent, with interest deferred until
the earliest of the date of conversion, redemption or May 17, 1999. The
Debentures are initially convertible beginning in 45 days into the Company's
Common Stock, $.0001 par value, at the lesser of $5.50 per share or eighty five
percent of the market price of the Company's Common Stock, $.0001 par value, at
the time of conversion.
Each Convertible Debenture carries a Warrant entitling its Holder to
initially purchase a number of shares of the Company's Common Stock, $.0001 par
value, equal to the aggregate principal amount of such Debenture divided by
$5.50. Warrants are not exercisable for 105 days from the date of issuance,
have a five-year term and are exercisable at a purchase price of $5.50 per
share.
The Securities in this offering were issued to accredited investors
and have not been registered under the Securities Act of 1933 and may not be
offered or sold in the United States absent registration or an applicable
exemption from such registration requirements.
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ITEM 7. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------- -----------
<S> <C>
10.1 Subscription Agreement
10.2 Form of Debenture
10.3 Form of Investor Warrant
</TABLE>
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Issuer
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SYNCRONYS SOFTCORP
(REGISTRANT)
Date: June 12, 1996 /s/ Barbara Velline
-------------------------------------
Vice President - Finance & Controller
(Chief Financial Officer)
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EXHIBIT INDEX
The Following Exhibits are hereby filed as part of this Current Report on Form
8-K:
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------ ----------- ------
<S> <C> <C>
10.1 Subscription Agreement 6
10.2 Form of Debenture 25
10.3 Form of Investor Warrant 34
</TABLE>
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EXHIBIT 10.1
SYNCRONYS SOFTCORP
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THE DEBENTURES AND WARRANTS BEING SUBSCRIBED FOR HEREIN AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEBENTURES AND EXERCISE OF THE WARRANTS HAVE
NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
("THE COMMISSION") UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S ("REGULATION S") PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO U.S.
PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS,
SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN SUCH SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED
BY ANY U.S. FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT REVIEWED, PASSED UPON,
CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT OR ANY
INFORMATION PROVIDED BY THE COMPANY TO POTENTIAL INVESTORS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the "Agreement") is
executed by the undersigned (the "Subscriber") in connection with the offering
(the "Offering") and subscription by the undersigned for 10% Convertible
Debentures (the "Debentures") of SYNCRONYS SOFTCORP, a Nevada corporation (the
"Company"), due on May 17, 1999, and offered in denominations of at least Fifty
Thousand Dollars ($50,000.00) and integral multiples of Ten Thousand Dollars
($10,000.00) in excess thereof up to a maximum aggregate principal amount of
Thirteen Million Dollars ($13,000,000.00). Each Debenture is accompanied by a
warrant or warrants to purchase a number of common shares of the Company equal
to the original aggregate principal amount of the Debenture divided by the
Fixed Conversion Price as defined in the Debenture (the "Warrants"), at an
exercise price equal to $5.50 per share, exercisable beginning one hundred five
(105) days after the Last Closing (as defined in Section 2.1 below), and having
a five (5) year term. The terms of the Debentures, including the terms on
which the Debentures may be converted into common stock, $.0001 par value of
the Company (the "Common Stock"), are set forth in the Debenture, substantially
in the form attached hereto as Exhibit A. The terms of the Warrants including
the terms on which the Warrants may be exercised for Common Stock, are set
forth in the Warrant, in the form attached hereto as Exhibit B. The
solicitation of this subscription and, if accepted by the Company, the offer
and sale of debentures and accompanying Warrants, are being made in reliance
upon the provisions of Regulation S. The Debentures, the Warrants and the
shares of Common Stock issuable upon conversion or exercise thereof (the
"Shares") are sometimes referred to herein collectively as the "Securities."
The Subscriber wishes to subscribe for Debentures in the amount set forth in
Section 19 and the accompanying Warrants in accordance with the terms and
conditions of the form of Debenture, the Warrants and this Agreement.
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It is agreed as follows:
1. Offer to Subscribe; Purchase Price; Closing; Placement Fees; and
Conditions to Subscriber's Obligations.
1.1 Offer to Subscriber; Purchase Price. Subject to satisfaction
of the conditions to Closing set forth below, the Subscriber
hereby subscribes for and agrees to purchase the aggregate
principal amount of Debentures with the appropriate number of
accompanying Warrants (as determined above) for a purchase
price set forth in Section 19 of this Agreement.
1.2 Closing. The closing of the sale and purchase of the
Debentures and accompanying Warrants ("Closing") will occur
upon (i) the satisfaction of all conditions described in this
Agreement, (ii) the sale in this Offering of at least Three
Million Dollars ($3,000,000.00) of aggregate principal amount
of Debentures (the "Minimum Amount"), and no more than
Thirteen Million Dollars ($13,000,000.00) of aggregate
principal amount of Debentures (the "Maximum Amount"), and
(iii) the satisfaction (or waiver) of all conditions required
by the Escrow Agreement ("Escrow Agreement"), defined as the
agreement among the Company, Swartz Investments, LLC
("Placement Agent") and First Union National Bank ("Escrow
Agent") regarding this Offering. As soon as subscriptions for
at least the Minimum Amount have been accepted by the Company,
in accordance with the terms of this Agreement, the Company
shall close on the Minimum Amount. Thereafter, the Company
may, at its option, conduct one or more additional Closings
until the Maximum Amount has been reached.
1.3 Placement Fees. The parties hereto acknowledge that the
Placement Agent for this Offering will be compensated by the
Company in cash and warrants to purchase Common Stock of the
Company. The Placement Agent has acted solely as placement
agent in connection with the Offering by the Company of the
Debentures and Warrants pursuant to this Agreement. The
information and data contained in the Disclosure Documents (as
defined in Section 2.2 below) including, but not limited to,
the Risk Factors (as discussed in Section 2.3 below) have not
been subjected to independent verification by Placement Agent,
and no representation or warranty is made by Placement Agent
as to the accuracy or completeness of the information
contained in the Disclosure Documents, including any Risk
Factors, or any tax advice or legal advice.
1.4 Conditions to Subscriber's Obligations. The Subscriber's
obligations hereunder are further conditioned upon the
following:
(i) the following documents have been deposited with the
Company's Escrow Agent: the Registration Rights
Agreement, substantially in the form attached hereto
as Exhibit C (executed by the Company), the Opinion of
Counsel, substantially in the form attached hereto as
Exhibit D (signed by Company's counsel), the
Irrevocable Instructions to Transfer Agent,
substantially in the form attached hereto as Exhibit E
(executed by Company and transfer agent), the
Subscriber's Debenture(s) executed by the Company,
substantially in the form attached hereto as Exhibit
A, and the Subscriber's Warrant(s) executed by the
Company, substantially in the form attached hereto
as Exhibit B;
(ii) the Company has entered into an Escrow and Pledge
Agreement (substantially in the form attached hereto
as Exhibit F) ("Escrow and Pledge Agreement") whereby
the proceeds of this Offering will be subject to a
security interest in favor of the Subscribers and
will be disbursed only in accordance with the terms
thereof;
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(iii) the Common Stock issuable upon conversion of the
Debenture and exercise of the Warrants has been
listed on the OTC Bulletin Board, subject to official
notice of issuance;
(iv) the representations and warranties of the Company are
true and correct in all material respects as of the
Closing as if made on such date, and the Company
shall deliver an officer's certificate, signed by at
least one officer of the Company, to such effect to
the Escrow Agent;
(v) there have been no material adverse changes in the
Company's business prospects or financial condition
since the date of the Company's balance sheet dated
March 31, 1996 contained in the Disclosure Documents
(as defined below in Section 2.2); and
(vi) the Company shall have reserved for issuance upon
conversion of the Debentures and exercise of the
accompanying Warrants a sufficient number of shares
of Common Stock which number of shares shall
initially be Eight Million (8,000,000) shares.
2. Subscriber's Representations and Covenants; Access to Information;
Independent Information; And Independent Investigation.
The Subscriber hereby makes the following representations and
warranties to the Company (which shall be true at the signing of this
Agreement, as of Closing, and as of any such later date as contemplated
hereunder) and agrees with the Company that:
2.1 Offshore Transaction. The Subscriber represents and warrants
to the Company that (i) Subscriber is not a U.S. person ("U.S.
person") as that term is defined in Rule 902(o) of Regulation
S (a copy of which definition is attached as Exhibit G)
including, without limitation if a corporation or partnership,
(a) it is organized under the laws of a jurisdiction other
than the United States and (b) if organized by a U.S. person
principally for the purpose of investing in securities not
registered under the Act, it was organized or incorporated and
is owned by accredited investors (as defined in Rule 501(a) of
Regulation D under the Act) who are not natural persons,
estates or trusts; (ii) the Securities were not offered to the
Subscriber in the United States and at the time of execution
of this Subscription Agreement the Subscriber was physically
outside the United States; (iii) the Subscriber is purchasing
the Securities for its own account and not on behalf of or for
the benefit of any U.S. person and the sale and resale of the
Securities have not been prearranged with any U.S. person or
buyer in the United States; (iv) the Subscriber agrees, and to
the knowledge of the Subscriber, without any independent
investigation, each distributor, if any, participating in the
offering of the Securities, has agreed, that all offers and
sales of the Securities prior to the expiration of a period
commencing on the date of the last closing of a sale and
purchase of Debentures (the "Last Closing") and ending forty
(40) days thereafter (the "Restricted Period") shall not be
made to U.S. persons or for the account or benefit of U.S.
persons and shall otherwise be made in compliance with the
provisions of Regulation S; (v) subscriber is not an
underwriter, dealer, or other person who is participating,
pursuant to a contractual arrangement, in the distribution of
the Securities offered or sold in reliance on Regulation S;
and (vi) Subscriber is not an underwriter of the Securities
within the meaning of Section 2(11) of this Act.
2.2 Subscriber's Independent Investigation. The Subscriber, in
offering to subscribe for The Securities hereunder, has relied
solely upon an (i) independent investigation made by it and
its representatives, if any, and (ii) the representations,
warranties and disclosure statements of the Company set forth
herein and in the Disclosure Documents (as defined below).
Subscriber, prior to the date hereof, has been given access to
and the opportunity to examine all material contracts and
documents of the Company which have been filed as exhibits to
the Company's filings made under the
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Securities Exchange Act of 1934, as amended (the "Exchange
Act"), through publicly available means. Subscriber has been
provided with copies of the Company's (i) Annual Report on
Form 10-KSB for the year ended June 30, 1995; (ii) Quarterly
Reports on Form 10-QSB for the quarters ended September 30,
1995, December 31, 1995 and March 31, 1996; (iii) Risk
Factors, attached as Exhibit H (iv) Capitalization Table,
attached as Exhibit I and (v) Use of Proceeds, attached as
Exhibit J; (collectively, the "Disclosure Documents"). In
making its investment decision to purchase the Debentures and
accompanying Warrants, the Subscriber is not relying on any
oral or written representations or assurances from the Company
or any other person or any representation of the Company or
any other person (including, without limitation, statements
made in the analyst report, dated May 3, 1996, sent to
Subscriber by Placement Agent which was not prepared by the
Company, and the Company makes no representation as to the
accuracy or completeness of the information or any statement
contained therein) other than as set forth in this Agreement
(including the Exhibits hereto), or the Disclosure Documents.
The Subscriber is an accredited investor as defined in Rule
501 of Regulation D, a copy of which definition is attached
hereto as Exhibit K. Subscriber has had the opportunity to ask
questions of and receive answers from Company regarding the
terms and conditions of the Offering of the Securities; and
any information so requested has been made available to the
full and complete satisfaction of the Subscriber; provided,
however, the parties acknowledge that neither such review nor
any other due diligence investigation conducted by the
Subscriber shall in any way affect, limit or modify the
Company's representations and warranties contained herein or
the Subscriber's right to rely thereon and on the information
contained in the Disclosure Documents.
2.3 Subscriber's Economic Risk. The Subscriber understands and
acknowledges that an investment in the Securities involves a
high degree of risk. Subscriber acknowledges that there are
limitations on the liquidity of the Securities. The
Subscriber represents that the Subscriber is able to bear the
economic risk of an investment in the Securities, including a
possible total loss of investment. In making this statement,
the Subscriber hereby represents and warrants to the Company
that the Subscriber has adequate means of providing for the
Subscriber's current needs and contingencies; that Subscriber
is able to afford to hold the Securities for an indefinite
period; and that Subscriber further represents Subscriber has
such knowledge and experience in financial and business
matters that the Subscriber is capable of evaluating the
merits and risks of the investment in the Securities to be
received by the Subscriber. Further, the Subscriber
represents, as of the date of signing this Agreement, that the
Subscriber has no present need for liquidity in the Securities
and the Subscriber is willing to accept such investment risks.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency, or
similar agency of any other country, has reviewed, approved,
passed upon or made any recommendation or endorsement of the
Company, the Offering or the subscription for or merits of an
investment in the Securities.
2.5 No Directed Selling Efforts in Regard to this Transaction. To
the knowledge of the Subscriber, without any independent
investigation, neither the Company, Placement Agent, nor any
distributor participating in the Offering (if any), nor any
person acting for the Company, Placement Agent or any such
distributor, has conducted any "directed selling efforts" in
the United States as the term "directed selling efforts" is
defined in Rule 902(b) of Regulation S, which, in general,
means any activity undertaken for the purpose of, or that
could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the
Securities being offered in reliance on Regulation S. Such
activity includes, without limitation, the mailing of printed
material to investors residing in the United States, the
holding of promotional seminars in the United States, and the
placement of advertisements with radio or television stations
broadcasting in the United States or in publications with a
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general circulation in the United States, that refers to the
offering of the Securities in reliance on Regulation S.
2.6 Company's Reliance on Representations of Subscribers. This
Agreement is made by the Company with each Subscriber in
reliance upon such Subscriber's representations and covenants
made in this Section 2, which reliance by his, her or its
execution of this Agreement the Subscriber hereby confirms.
2.7 Securities Not Registered Under the Act or Any State Act.
Subscriber understands that the Debentures, the Warrants and
the Common Stock issuable upon conversion of the Debentures
and exercise of the Warrants have not been registered under
the Act or any state securities laws ("State Acts") and are
being offered and sold pursuant to Regulation S based in part
upon the representations of Subscriber contained herein. The
Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants does, however, carry certain
registration rights as set forth in the Registration Rights
Agreement, substantially in the form of Exhibit C (see Section
7.4 below) executed by the parties hereto.
2.8 No Public Solicitation. Subscriber knows of no public
solicitation or advertisement of an offer in connection with
the proposed issuance and sale of the Securities.
2.9 Investment Intent. Subscriber is acquiring the Debentures and
Warrants to be issued and sold hereunder (and the Shares
issuable upon conversion of the Debentures and exercise of the
Warrants) for his, her or its own account (or a trust account
if such Subscriber is a trustee) for investment and not as a
nominee and not with a present view to the distribution
thereof. Subscriber understands that Subscriber must bear the
economic risk of this investment indefinitely unless such
Debentures, such Warrants or such Shares are registered
pursuant to the Act and any applicable State Acts, or an
exemption from such registration is available, and that the
Company has no present intention of registering any such sale
of the Debentures, the Warrants or Shares other than as
contemplated by the Registration Rights Agreement. Subscriber
represents and warrants to the Company, as of the date of this
Agreement, that Subscriber has no present plan or intention to
sell the Debentures, the Warrants or the Shares in the United
States at any predetermined time, and has made no
predetermined arrangements to sell the Debentures, the
Warrants or the Shares. Subscriber covenants that neither
Subscriber nor its affiliates nor any person acting on its or
their behalf has entered, has the intention of entering, or
will enter into any put option, short position or other
similar instrument or position in the U.S. with respect to the
Debentures, the Warrants or the Shares anytime after the
earlier of (i) the time Subscriber first received the term
sheet (the "Term Sheet") concerning this Offering and (ii) the
time that Subscriber was first notified by Placement Agent of
the existence of the Offering (the earlier of which is
referred to as the "Time of Notification of the Offering")
until the end of the Restricted Period, or for the intended
purpose of lowering the price at which the Debentures are
convertible into Shares.
2.10 Subscriber Not to Sell or Transfer Securities in Violation of
the Securities Laws. Subscriber covenants that he, she or it
will not knowingly make any sale, transfer or other
disposition of the Debentures, the Warrants or the Shares in
violation of (1) the Act (including Regulation S), the
Exchange Act, any applicable State Acts or the rules and
regulations of the Commission or of any state securities
commissions or similar state authorities promulgated under any
of the foregoing, or (2) any applicable securities laws of
jurisdictions outside the United States and the rules and
regulations thereunder, or (3) the terms of this Agreement.
2.11 Subscriber's Power and Authority. Subscriber has the full
power and authority to execute, deliver and perform this
Agreement. This Agreement, when executed and delivered by
Subscriber, will constitute a valid and legally binding
obligation of Subscriber, enforceable in accordance with its
terms.
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2.12 Signatory's Representation. The signatory to this Agreement
hereby represents and warrants that he, she or it is either:
(a) not a U.S. person (as defined in Regulation S), and
is not located in the U.S. at the time of signing
this Agreement, or
(b) a professional fiduciary of Subscriber (as described
in Section (o)(2) through (o)(4) of Rule 902 of
Regulation S), acting solely in his capacity as
holder of such account, as a fiduciary, executor,
administrator, or trustee, and has completed and
signed the accompanying Certificate (Exhibit L) and
forwarded it to Placement Agent.
2.13 No Tax Advice From Company or Its Agents. Subscriber has
reviewed with his, her or its own tax advisors the foreign,
U.S. federal, state and local tax consequences of this
investment, and the transactions contemplated by this
Agreement. Subscriber is relying solely on such advisors with
respect to tax advice, and not on any statements or
representations of the Company, Placement Agent or any of
their agents and understands that Subscriber (and not the
Company) shall be responsible for the Subscriber's own tax
liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
2.14 No Legal Advice from Company or Its Agents. Subscriber
acknowledges that he, she, or it has had the opportunity to
review this Agreement and the transactions contemplated by
this Agreement with his, or her or its own legal counsel.
Subscriber is relying solely on such counsel with respect to
legal advice, and not on any statements or representations of
the Company, Placement Agent or any of their agents for legal
advice with respect to this investment or the transactions
contemplated by this Agreement, except for the
representations, warranties and covenants set forth herein and
the opinion provided for in paragraph 7.3 herein.
2.15 Offering Material Statements. Subscriber acknowledges that
all offering materials and documents received by it in
connection with the offers and sales of the Securities
included statements to the effect of those contained in the
first legend set forth on the first page of this Agreement.
2.16 No Scheme to Evade Registration. Subscriber's acquisition of
the Securities is not a transaction (or any element of a
series of transactions) that is part of a plan or scheme by
Subscriber to evade the registration provisions of the Act.
3. Resales of Securities by Subscriber.
Subscriber acknowledges, covenants and agrees that the Securities may
and will only be resold by it in the U.S. (a) in compliance with Regulation S
and applicable State Acts, if any; or (b) pursuant to an exemption from
registration under the Act other than Regulation S; or (c) pursuant to an
effective and current Registration Statement under the Act. In addition, in
connection with any resale of the Debentures or Warrants in accordance with
clause (a) or (b), above, the Subscriber will deliver to the Company and will
cause the purchaser to deliver to the Company the documents described in
Section 3.1 and 3.2 below, respectively:
3.1. Documents to be Delivered for Offshore Regulation S Resales.
If any Debenture or Warrant is being resold to an offshore
purchaser in compliance with Regulation S:
1. Sales Agreement, executed by Subscriber and purchaser
(substantially in the form of Exhibit M);
2. Seller Representation Letter to Offshore Purchaser
(substantially in the form of Exhibit N);
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3. Purchaser Representation Letter (substantially in the
form of Exhibit O);
4. Assignment (substantially in the form of Exhibit P); and
5. Seller's Instruction Letter (substantially in the form
of Exhibit Q).
3.2 Documents to be Delivered for Resales into the United States. If
any Debenture or Warrant is being resold to a purchaser in the
U.S. pursuant to an exemption from registration under the Act:
1. Sales Agreement, executed by both Subscriber and
purchaser (substantially in the form of Exhibit M);
2. Seller Representation Letter to U.S. Purchaser
(substantially in the form of Exhibit R);
3. Purchaser Representation Letter (substantially in the
Form of Exhibit O);
4. Assignment (substantially in the form of Exhibit P); and
5. Seller's Instruction Letter (substantially in the form
of Exhibit Q).
Upon receipt of the executed documents listed above, the Company
will effect the transfer of the Debentures or Warrants on the
Company's books and will issue and deliver new Debentures or
Warrants in the purchaser's name (and, in the case of a resale
pursuant to Section 3.2 after the Restricted Period, free of any
restrictive legend) within three (3) business days of such
receipt. The provisions of this Section 3 shall not apply to
subsequent resales of Debentures or Warrants that have
previously been sold by Subscriber in compliance with this
Section 3, and the Company shall or shall cause the Transfer
Agent to remove the Legend on any subsequent resale after the
Restricted Period.
4. Legends; Subsequent Sale of Securities.
4.1 Debenture Legend. Upon issuance, the Debenture shall bear a
legend substantially in the form of the first legend set forth
on the first page of this Agreement and any other legend or
legends as reasonably required to comply with the state, U.S.
federal, or foreign law.
4.2 Removal of Debenture Legend for Pledge With a Margin Account.
Upon the submission, at any time after the expiration of forty
(40) days after the Last Closing, by Subscriber of a written
request for removal of the restrictive legend for the purpose of
a bona fide pledge or deposit of Debentures with a margin
account, together with the Debentures for which legend removal
is being requested and a Certificate substantially in the form
of Exhibit S, the Company shall immediately reissue the
Debentures without any restrictive legend, and the Company shall
irrevocably instruct its designated transfer agent ("Transfer
Agent") to do so, assuming that there are no changes in the
material facts set forth in Section 2 of this Agreement or
applicable law from the date hereof until the date of such
submission. Except for the requirements otherwise set forth in
this Agreement, and assuming there are no changes after the date
hereof in the material facts set forth in Section 2 of the
Agreement (other than subsections which by their terms would be
inapplicable at such time) or applicable law, no action other
than as set forth in this Section 4.2 shall be required of the
Subscriber to remove the restrictive legend (unless such pledge
or deposit would constitute a violation of securities law).
7
Syncronys Subscription Final
<PAGE> 8
4.3 The Shares Obtained Upon Conversion.
(a) No Restrictive Legend. Assuming that there are no
changes in the material facts set forth in Section 2
of this Agreement (other than subsections which by
their terms would be inapplicable at such time) or
applicable law from the date hereof until the Date of
Conversion (as that term is defined in the
Debentures) of the Debentures by Subscriber, the
Shares so obtained shall not bear any restrictive
legend, nor shall any stop order be placed on the
books of the Transfer Agent, provided that the
Subscriber delivers to the Company a Notice of
Conversion and Resale in the form attached hereto as
Exhibit T (the "Notice of Conversion").
(b) Subscriber's Rights in the Event Shares Issued with a
Restrictive Legend. In the event that the Company
issues Shares with a restrictive legend upon
Conversion by the Subscriber and there have been no
changes in the material facts set forth in Section 2
of this Agreement (other than subsections which by
their terms would be inapplicable at such time) or
applicable law from the date hereof until the Date of
Conversion, then Subscriber, at its option, may
require the Company immediately to either (i) redeem
the Debentures submitted for conversion at the
redemption price determined under Section 5(a)(i) of
the Debentures or (ii) demand (without any other
Subscriber's participation) that the Company file a
registration statement under the Act covering the
registration of the Common Stock which has been
issued with such restrictive legend and the Common
Stock issuable upon conversion of such Subscriber's
remaining Debentures then outstanding pursuant to the
terms of the Registration Rights Agreement; provided,
however, that nothing hereunder shall affect any
other Subscriber's rights under the terms of the
Registration Rights Agreement.
(c) Issuance of Additional Shares. In the event that the
applicable Conversion Price, as that term is defined
in the Debenture (the "Resubmission Conversion
Price") for (i) the date that such registration
statement demanded under Section 4.3(b) above becomes
effective, or (ii) the date that the Company reissues
and delivers to Subscriber such Shares without
restrictive legend, whichever is earlier (the
"Resubmission Date"), is less than the applicable
Conversion Price on the date that the Subscriber
initially submitted such Debentures for conversion,
then the Company shall issue additional Shares of
Common Stock to Subscriber equal in number to the
difference between the number of Shares initially
issued upon conversion and the number of Shares to
which the Subscriber would have been entitled had the
Resubmission Conversion Price been in effect on such
Resubmission Date.
(d) Payment for Failure to Register. The Company shall
pay to a Subscriber who has demanded registration
under Section 4.3(b) an amount equal to five percent
(5%) per month of the aggregate principal amount of
such Subscriber's Debentures which were outstanding
immediately prior to the delivery of the Notice of
Conversion contemplated under Section 4.3(a),
compounded monthly and accruing daily, payable in
cash by the fifth (5th) day of the month following
such demand and the fifth (5th) day of each month
thereafter that (i) a registration statement demanded
under Section 4.3(b) is not effective, or (ii) the
Company has not re-issued and delivered to Subscriber
Shares without a restrictive legend, whichever is
earlier.
4.4 Warrant Shares. The Warrants are not exercisable for a period
of one hundred five (105) days after issuance, and the Common
Stock issuable upon exercise of the Warrants ("Warrant
Shares") shall not bear a restrictive legend.
8
Syncronys Subscription Final
<PAGE> 9
4.5 The Company's Instructions to Transfer Agent. The Company
will issue to its Transfer Agent an irrevocable instruction
letter (the "Irrevocable Instructions to Transfer Agent")
substantially in the form of Exhibit E to convert the
Subscriber's Debentures to Common Stock (in accordance with
the Debenture and so long as Section 4.3 is complied with,
free of any restrictive legend) upon receipt of a valid Notice
of Conversion from a Subscriber and the original Debentures,
and such other documents as are required by this Agreement or
the Debenture. The Company shall similarly irrevocably
instruct its transfer agent to issue Warrant Shares without
restrictive legend upon exercise assuming that the holder of
the Warrant Shares delivers an exercise form substantially in
the form of Exhibit A to the Warrant. The Company covenants
and agrees that, in the event the Company's agency
relationship with its Transfer Agent should be terminated for
any reason prior to a date which is five (5) years after the
Last Closing, the Company shall immediately appoint a new
transfer agent, and shall require that such transfer agent
execute, and agree to be bound by the terms of, the same
Irrevocable Instructions to Transfer Agent.
5. Capital Raising Limitations; Rights of First Refusal.
5.1 Capital Raising Limitations. The Company shall not issue any
Common Stock or any other securities convertible into or
exercisable for Common Stock for cash in private capital
raising transactions ("Future Offerings") for a period
beginning on the date hereof and ending one hundred five (105)
days after the Last Closing without obtaining the prior
written approval of Subscribers holding a majority of the
purchase price of Debentures then outstanding, which approval
will not be unreasonably withheld. The Subscriber shall
respond to Company, in writing, via facsimile, during the
three (3) business day period following receipt of a written
request for approval of a proposed Future Offering, and such
response shall indicate whether or not Subscriber approves of
such proposed Future Offering. If Subscriber fails to respond
within such three (3) business day period, such Subscriber
shall be deemed to approve the proposed Future Offering.
5.2 Subscriber's 180 Day Right of First Refusal. The Company will
not conduct any Future Offerings for a period beginning on the
date hereof and ending one hundred eighty (180) days after the
Last Closing without delivering to the Subscriber, at least
seven (7) days prior to the closing of such issuance, written
notice via facsimile and via overnight or two (2) day courier
describing the proposed issuance and the terms upon which such
securities are being issued. The Subscriber shall respond to
Company in writing via facsimile during the three (3) business
day period following receipt of written notice and shall
indicate whether or not the Subscriber will purchase the
securities being offered in the Future Offerings on the same
terms as contemplated by such Future Offerings and in the
amount set forth below (the limitations referred to in this
and the immediately preceding sub-section are collectively
referred to as the "Capital Raising Limitation").
5.3 Amount of Subscriber's Right of First Refusal. The amount of
securities which a Subscriber is entitled to purchase in such
a Future Offering shall be a number obtained by multiplying
the aggregate amount of securities being offered in the Future
Offering by a fraction, the numerator of which is the purchase
price of the Debentures purchased by the Subscriber pursuant
to this Agreement and the denominator of which is the
aggregate dollar amount of Debentures placed in this Offering.
5.4 Exceptions to the Capital Raising Limitation. The Capital
Raising Limitation shall not apply to any transaction
involving the Company's commercial banking arrangements or
issuances of securities in connection with a merger,
consolidation or purchase or sale of assets, or in connection
with or as part of the same transaction as a joint venture or
other acquisition or disposition of a business, a product or a
license by the Company or exercise of options by employees,
consultants or directors or any
9
Syncronys Subscription Final
<PAGE> 10
transaction with a strategic corporate partner. The Capital
Raising Limitation also shall not apply to the issuance of
securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding
as of the date of the Last Closing, or to the grant of
additional options or warrants, or the issuance of additional
securities, under any Company stock option, or restricted
stock plan. Additionally, the Capital Raising Limitation
shall not apply to any public offerings undertaken by the
Company. The Capital Raising Limitation also shall not apply
to any issuance of securities in connection with the
settlement of any lawsuits currently pending against the
Company; provided, however, that such securities must be
restricted securities with registration rights commencing no
earlier than one (1) year after the Last Closing.
6. Representations and Warranties of Company.
The Company hereby makes the following representations and warranties
to the Subscribers (which shall be true at the signing of this Agreement, as of
Closing, and as of any such later date as contemplated hereunder) and agrees
with the Subscribers that:
6.1 Organization, Good Standing, and Qualification. The Company
is a corporation duly organized, validly existing and in good
standing under the laws of state of Nevada and has all
requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted.
The Company is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on the business
or properties of the Company and its subsidiaries taken as a
whole. The Company is not the subject of any pending or, to
its knowledge, threatened investigation or administrative or
legal proceeding by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the
Securities and Exchange Commission involving an issue of more
than Ten Thousand Dollars ($10,000.00) which have not been
disclosed in the Disclosure Documents referred to in Section
2.2 above.
6.2 Corporate Condition. The Company's condition was, in all
material respects, as described in the Disclosure Documents at
the respective dates thereof, including without limitation the
reports filed pursuant to the Exchange Act and described in
Section 2.2. There has been no material adverse change in the
Company's business, financial condition or prospects since
March 31, 1996. The Company's business and financial condition
is as set forth in the Disclosure Documents, taken as a whole,
except for changes in the ordinary course of business and
normal year-end adjustments that are not, in the aggregate,
materially adverse to the Company. The financial statements
contained in the Disclosure Documents have been prepared in
accordance with generally accepted accounting principles,
consistently applied, and fairly present the financial position
and results of operation and cash flows of the Company on a
consolidated basis, for the periods then ended. Without
limiting the foregoing, there are no material liabilities,
contingent or actual, that are not disclosed in the Disclosure
Documents, taken as a whole. The Company has paid all material
taxes which are due, except for taxes which it reasonably
disputes. There is no material claim, litigation, or
administrative proceeding pending, or to the best of the
Company's knowledge, threatened against the Company, except as
disclosed in the Disclosure Documents. This Agreement and the
Disclosure Documents, taken as a whole, do not contain any
untrue statement of a material fact and do not omit to state
any material fact required to be stated therein and herein
necessary to make statements contained therein and herein not
misleading in the light of the circumstances under which they
were made.
6.3 Authorization. All corporate action on the part of the
Company by its officers, directors and shareholders necessary
for the authorization, execution and delivery of this
Agreement, the Registration Rights Agreement, the Irrevocable
Instructions to Transfer Agent, the Escrow Agreement, the
Escrow and Pledge Agreement, the performance of all
obligations of the Company hereunder and the authorization,
10
Syncronys Subscription Final
<PAGE> 11
issuance and delivery of the Debentures and Warrants being
sold hereunder and issuance (and reservation for issuance) of
the Common Stock obtainable on conversion of the Debentures
and exercise of the Warrants will have been taken by Closing,
and this Agreement, the Registration Rights Agreement, the
Irrevocable Instructions to Transfer Agent, the Escrow
Agreement, the Escrow and Pledge Agreement will constitute at
Closing and thereafter valid and legally binding obligations
of the Company, enforceable in accordance with their terms,
subject to general principles of equity and public policy.
The Company has obtained all consents and approvals required
for it to execute, deliver, and perform this Agreement. The
Company is not in violation of or default under any provisions
of its Articles of Incorporation or By-laws, as amended and in
effect on and as of the date of this Agreement, or of any
material provision of any instrument or contract to which it
is a party or by which it is bound or of any material
provision of any federal or state judgment, writ, decree,
order, statute, rule or governmental regulation applicable to
the Company except where such violation, default and/or
conflict would have no material adverse affect on the
Company's business prospects or financial condition, or on the
transaction contemplated herein. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a
default under any such provision, instrument or contract or an
event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company, in each instance
which would have a material adverse effect on the Company's
business or prospects.
6.4 Valid Issuance of Securities. The Debentures and Warrants,
when issued, sold and delivered in accordance with the terms
hereof for the consideration expressed herein, will be validly
issued and binding obligations of the Company, enforceable in
accordance with their terms, and, based in part upon the
representations of the Subscriber in this Agreement, will be
issued in compliance with all applicable U.S. federal and
state securities laws. The Common Stock issuable upon
conversion of the Debentures or exercise of the Warrants, when
issued in accordance with the terms of the Debentures and the
Warrants, shall be duly and validly issued and outstanding,
fully paid and nonassessable, and based in part on the
representations and warranties of Subscriber of the Debentures
and accompanying Warrants, will be issued in compliance with
all applicable U.S. federal securities laws and State Acts.
The Shares will be issued free of any preemptive right. The
Company currently has at least Eight Million (8,000,000)
shares reserved for issuance upon conversion of the Debentures
or exercise of the Warrants.
6.5 Current Public Information. The Company represents and
warrants to the Subscriber that the Company is a "reporting
issuer" as defined in Rule 902(1) of Regulation S and it has a
class of securities registered under Section 12(b) or 12(g) of
the Exchange Act or is required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act, and has filed all the
materials required to be filed as reports pursuant to the
Exchange Act for a period of at least twelve (12) months
preceding the date hereof (or for such shorter period as the
Company was required by law to file such material), and all
such filings have been made on a timely basis. The Company
undertakes to furnish the Subscriber with copies of such
information as may be reasonably requested by the Subscriber
prior to consummation of this Offering and, thereafter, as
long as Subscriber holds Debentures or Warrants.
6.6 No Securities Offered in U.S. or to any U.S. Person. The
Company represents that it has not offered the Debentures and
accompanying Warrants to the Subscriber in the U.S. or to any
person in the United States or any U.S. person (as defined in
Regulation S) unless such U.S. person is a professional
fiduciary of a non-U.S. person (as defined in Section (o) (2)
through (o) (4) of rule 902 of Regulation S).
11
Syncronys Subscription Final
<PAGE> 12
6.7 No Directed Selling Efforts in Regard to this Transaction.
Neither the Company, nor any person acting for the Company,
Placement Agent or any such distributor, has conducted any
"directed selling efforts" in the United States, as the term
"directed selling efforts" is defined in Rule 902(b) of
Regulation S, which in general, means any activity undertaken
for the purpose of, or that could reasonably be expected to
have the effect of, conditioning the market in the United
States for any of the Securities being offered in reliance
upon Regulation S. Such activity includes, without limitation,
the mailing of printed material to investors residing in the
United States, the holding of promotional seminars in the
United States, and the placement of advertisements with radio
or television stations broadcasting in the United States or in
publications with a general circulation in the United States,
that refers to the offering of the Securities.
6.8 Capitalization Structure of the Company. The capitalization
of the Company, after giving effect to the issuances of the
Securities in this Offering, is as set forth in Exhibit I as
of the date specified therein; provided that there are no
material changes to the capitalization of the Company from the
date set forth in Exhibit I to the date of Closing.
6.9 Termination Date of Offering. In no event shall the Last
Closing of a sale of a Debenture and Warrants occur later than
May 31, 1996, which date can be extended by up to ten (10)
days upon written approval by the Company and the Placement
Agent.
6.10 Use of Proceeds. As of the date hereof, the Company expects
to use the proceeds from this Offering (less fees and
expenses) for the purposes and in the approximate amounts as
set forth in Exhibit J hereto. These purposes and amounts are
estimates and are subject to change.
6.11 Intellectual Property. The Company has valid, unrestricted,
enforceable and exclusive patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology
and other intellectual property necessary to the conduct of
its business, as set forth in Schedule IP-1 (Section A). The
Company also has trade secrets necessary to the conduct of its
business which are necessarily secret and cannot be disclosed
to the Subscribers. The Company has granted licenses or has
assigned or otherwise transferred a portion of (or all of)
such valid, unrestricted, enforceable and exclusive patents,
trademarks, trademark registrations trade names, copyrights,
know-how, technology and other intellectual property necessary
to the conduct of its business, as set forth in Schedule IP-1
(Section B).
Company has been granted licenses or has been assigned or has
otherwise had transferred to it from other persons or entities
the use of patents, trademarks, trademark registrations, trade
names, copyrights, know-how, technology and/or other
intellectual property necessary to the conduct of its business
as set forth in Schedule IP-2.
To the best of the Company's knowledge, the Company is not
infringing on the intellectual property rights of any third
party, nor is any third party infringing on the Company's
intellectual property rights. There are no restrictions in
any agreements, licenses, franchises, or other instruments
that are necessary for the conduct of the Company's business
as presently conducted or as planned to be conducted in the
future.
6.12 Underwriter's Fees and Rights of First Refusal. The Company
is not obligated to pay any compensation or other fees, costs,
or related expenditures in cash or securities to any
underwriter, broker, agent or other representative other than
the Placement Agent in connection with this Offering. The
Company is not obligated to offer the securities offered
hereunder on a right of first refusal basis or otherwise to
any third parties
12
Syncronys Subscription Final
<PAGE> 13
including, but not limited to, current or former shareholders
of the Company, underwriters, brokers, agents or other third
parties.
7. Covenants of Company.
7.1 Independent Auditors. The Company shall, until at least five
(5) years after the date of the Last Closing, maintain as its
independent auditors an accounting firm authorized to practice
before the Commission.
7.2 Corporate Existence and Taxes. The Company shall, until at
least the earlier of five (5) years after the date of the
Last Closing or the conversion or redemption of all the
Debentures or exercise of all the Warrants purchased pursuant
to this Agreement maintain its corporate existence in good
standing (provided, however, that the foregoing covenant shall
not prevent the Company from entering into any merger or
corporate reorganization as long as the surviving entity in
such transaction, if not the Company, assumes the Company's
obligations with respect to the Debentures and accompanying
Warrants) and shall pay all its material taxes when due except
for taxes which the Company reasonably disputes.
7.3 Opinion of Counsel. Subscriber shall, upon purchase of the
Debentures and accompanying Warrants, receive an opinion
letter or letters from outside counsel to the Company,
substantially in the form(s) attached hereto as Exhibit D, to
the effect that (i) the Company is duly incorporated and
validly existing under the laws the state of Nevada; (ii) this
Agreement, the Registration Rights Agreement, the Irrevocable
Instructions to Transfer Agent, the Escrow Agreement, the
Escrow and Pledge Agreement, the issuance of the Debentures,
and the issuance of the Common Stock upon conversion of the
Debentures (and the reservation of a sufficient number of
shares of Common Stock into which the Debentures can be
converted) the issuance of the Warrants, and the exercise into
Common Stock upon exercise of the Warrants (and the
reservation of a sufficient number of Shares into which the
Warrants can be exercised) have been duly authorized by all
required corporate action assuming that there are sufficient
authorized and reserved shares of Common Stock, and, if there
is not a sufficient number of shares of Common Stock
authorized or reserved, the Company's Articles of
Incorporation and By-laws do not prohibit the authorization or
reservation of additional shares of Common Stock, and that all
such Shares, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; (iii) this
Agreement, the Registration Rights Agreement, the Irrevocable
Instructions to Transfer Agent, the Escrow Agreement and the
Escrow and Pledge Agreement constitute valid and binding
obligations of the Company, enforceable in accordance with
their terms, except as enforceability of any indemnification
provisions may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of laws
governing specific performance and other equitable remedies;
(iv) based upon the representations and warranties of the
Subscribers contained in the Regulation S Subscription
Agreements entered into in connection with the Offering, the
issuance of the Debentures and accompanying Warrants has been
effected in compliance with Regulation S, and the issuance of
the Shares upon conversion of the Debentures and exercise of
the Warrants in accordance with their terms by the Subscriber
(assuming that no commission or other remuneration is paid or
given, directly or indirectly, for soliciting such conversion)
will not be subject to the registration provisions of the Act;
and (v) the execution, delivery and performance of this
Agreement and the other agreements entered into in connection
herewith, does not conflict with or result in a breach of the
Company's Articles of Incorporation, By-laws, or any material
agreement known to Company's counsel, to which the Company is
a party or by which its property is bound or any judgment or
decree known to Company's counsel, to which the Company is
subject. Company's counsel may assume in the foregoing
opinion that the Disclosure Documents, taken as a whole, do
not omit to state a material fact or contain any misstatements
of material fact; provided that Company's
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Syncronys Subscription Final
<PAGE> 14
counsel has no reason to believe that such Disclosure
Documents contain any such omissions or misstatements.
7.4 Registration Rights. The Company will grant Subscriber the
registration rights covering the Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants
on the terms of the Registration Rights Agreement
substantially in the form attached hereto as Exhibit C.
7.5 Notification of Final Closing Date & Restricted Period by
Company. Within five (5) business days after the Last
Closing, the Company shall notify the Subscriber in writing
that the Last Closing has occurred, the date of the Last
Closing, the date upon which the forty (40) day Restricted
Period will terminate with respect to the Securities, the
dates that the subscribers are entitled to convert the
respective portions of their Debentures and exercise their
Warrants, the value of the Fixed Conversion Price, as that
term is defined in the Debenture, and the name and telephone
number of an administrative contact person at the Company whom
the Subscriber may contact regarding information related to
conversion of the Debenture and/or advance notice of
redemption as contemplated by the Debenture.
7.6 Payments for Late Conversion or Failure to Reserve Authorized
but Unissued Common Stock.
(a) Payments for Late Conversion. As set forth in the
Debenture, the Company shall use its best efforts to
issue and deliver, within two (2) business days after
the Subscriber has fulfilled all conditions and
submitted all necessary documents duly executed and
in the proper form required for conversion (the
"Deadline") (including the original Debenture(s)), to
such Holder of Debentures at the address of the
Holder on the books of the Company, a certificate or
certificates for the number of Shares of Common Stock
to which the Holder shall be entitled upon submission
of a notice of conversion. The Company understands
that a delay in the issuance of the Shares of Common
Stock beyond the Deadline could result in economic
loss to the Holder. As compensation to the Holder
for such loss, the Company agrees to pay late
payments to the Holder for late issuance of Shares
upon Conversion in accordance with the following
schedule (where "No. Business Days Late" is defined
as the number of business days beyond five (5)
business days from the date of receipt by the Company
of a notice of conversion and the Transfer Agent of
all necessary documentation duly executed and in
proper form required for conversion, including the
original Debentures to be converted, all in
accordance with the subscription documents):
<TABLE>
<CAPTION>
Late Payment For Each
$10,000 Of Debenture Principal
No. Business Days Late Amount Being Converted
<S> <C>
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
>10 $250 + $50 for each
Business Day Late beyond 10 days
</TABLE>
14
Syncronys Subscription Final
<PAGE> 15
To the extent that the failure of the Company to
issue the Common Stock pursuant to this Section 7.6
is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of
this Section 7.6(a) shall not apply but instead the
provisions of Section 7.6(b) shall apply.
The Company shall pay any payments incurred under
this Section 7.6(a) in immediately available funds
within three (3) business days from the date of
issuance of the applicable shares of Common Stock.
Nothing herein shall limit a Holder's right to pursue
actual damages for the Company's failure to issue and
deliver Common Stock to the Holder pursuant to the
terms of the Debenture.
(b) Payments for Failure to Reserve Authorized but
Unissued Common. If, at any time a Holder of
Debentures submits a Notice of Conversion (as defined
in the Debenture) or exercises its Warrants and the
Company does not have sufficient authorized but
unissued shares of Common Stock available to effect,
in full, a conversion of the Debentures under Section
4 of the Debenture or to issue the Common Stock upon
exercise of the Warrants (a "Conversion Default", the
date of such default being referred to herein as the
"Conversion Default Date"), the Company shall issue
to the Holder all of the shares of Common Stock which
are available, and the Notice of Conversion as to any
Debentures requested to be converted but not
converted or the exercise form as to any Shares of
Common Stock not issued upon exercise of the Warrants
(the "Unconverted Debentures or Unexercised Warrant
Shares") shall become null and void. The Company
shall provide notice of such Conversion Default
("Notice of Default") to all Holders of outstanding
Debentures or unexercised Warrants, by facsimile,
within one (1) business day of such default (with the
original delivered by overnight or two (2) day
courier). No Holder may submit a Notice of
Conversion or Warrant exercise form after receipt of
a Notice of Conversion Default until the date
additional shares of Common Stock are authorized by
the Company.
The Company agrees to pay to all Holders of
outstanding Debentures or Warrants payments for a
Conversion Default ("Conversion Default Payments") in
the amount of (N/365) x (.24) x the initial issuance
price of the outstanding Debentures held by each
Holder plus, if the Closing Bid Price (as defined in
the Debenture) on the Conversion Default Date exceeds
the exercise price of the Warrants ("Excess Value"),
the aggregate Excess Value of the outstanding Warrants
held by each Holder where N = the number of days from
the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a
sufficient number of shares of Common Stock to effect
conversion of all remaining Debentures and issuance of
Unexercised Warrant Shares. The Company shall send
notice ("Authorization Notice") to each Holder of
outstanding Debentures and Warrants, by facsimile,
within one (1) business day after the Authorization
Date (with the original delivered by overnight or two
(2) day courier) that additional shares of Common
Stock have been authorized, the Authorization Date and
the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default shall be
paid in cash or shall be convertible into Common Stock
at the Conversion Rate (as that term is defined in the
Debenture), at the Holder's option, payable as
follows: (i) in the event Holder elects to take such
payment in cash, cash payments shall be made to each
Holder of outstanding Debentures or outstanding
Warrants by the fifth (5th) day of the following
calendar month, or (ii) in the event Holder elects to
take such payment in stock, the Holder may convert
such payment amount into Common Stock at the
Conversion Rate at any time after the fifth (5th) day
of the calendar month following the month the
Authorization Notice was received, until the automatic
conversion date set forth in the Debenture. The
15
Syncronys Subscription Final
<PAGE> 16
Company will use its best effort to increase the
number of authorized shares as soon as practicable
following the Conversion Default. With Holder's
consent, shares reserved for issuance upon exercise
of such Holder's Warrants may be used to fulfill the
Company's obligation to issue Common Stock upon
Conversion if there are insufficient authorized
shares; provided, that payments required under this
Section 7.6(b) shall continue to apply until a
sufficient number of shares are authorized to effect
conversion of all remaining Debentures and issuance
of the Unexercised Warrant Shares.
Nothing herein shall limit the Subscriber's right to
pursue actual damages for the Company's failure to
maintain a sufficient number of authorized shares of
Common Stock.
7.7 Listing. The Company shall maintain the listing of the shares
of Common Stock on the OTC Bulletin Board or another national
securities exchange or quotation system.
7.8 Events of Default. The Company shall promptly upon Company's
knowledge of an Event of Default under the Debentures (as
defined therein) give notice of such Event of Default to
Subscribers.
8. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the state of New York, U.S.A. applicable to agreements made in and
wholly to be performed in that jurisdiction, except for matters arising under
the Act or the Exchange Act which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined only in either a federal
or state court sitting in the County of Los Angeles in the State of California,
U.S.A.
9. Entire Agreement; Written Amendments Required
This Agreement, the Debentures, the Registration Rights Agreement the
Irrevocable Instructions to Transfer Agent, the Escrow Agreement, the Escrow
and Pledge Agreement, the Warrants and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or
therein. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
10. Written Notices, Etc.
Any notice, demand or request required or permitted to be given by
either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally, or by
facsimile (with a hard copy to follow by either overnight or two (2) day
courier), addressed to the parties at the addresses and/or facsimile telephone
number of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing.
11. Execution in Counterparts Permitted
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one (1) instrument.
16
Syncronys Subscription Final
<PAGE> 17
12. Representations and Warranties Survive the Closing; Agreement is
Severable.
The Subscriber's and the Company's representations and warranties
shall survive the closing of the transaction notwithstanding any due diligence
investigation made by or on behalf of the party seeking to rely thereon. In
the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
13. Titles and Subtitles; Gender.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement. The use in this Agreement of a masculine, feminine or neuter
pronoun shall be deemed to include a reference to the others.
14. Exact Registered Name of Security Holder; Offshore Delivery
Instructions.
Subscriber agrees to provide Company with the exact name in which he,
she or it wishes the Securities to be registered by providing that information
on the accompanying signature page of this Agreement. Additionally, Subscriber
also agrees to provide Company with detailed delivery instructions to an
offshore addressee and will also provide that information on the accompanying
signature page of this Agreement.
15. Subscriber to Forward Original Signed Subscription Agreement to
Company.
Subscriber agrees to courier to Company his, her or its original inked
signed Subscription Agreement within two (2) days after faxing said signed
agreement to the Placement Agent.
16. Limitations on Assignment of this Agreement.
Neither party to this Agreement may assign this Agreement without the
written consent of the other (which may be withheld for any reason); provided,
however, that Subscriber may assign its rights to any accredited investor who
is a non-U.S. person controlled by, controlling or under common control with
the Subscribers or to any other accredited investor who is a non-U.S. person to
which it transfers Securities. Further, this provision does not limit the
Subscriber's right to transfer the Securities pursuant to the terms of the
Debenture, the Warrant and this Agreement.
17. Subscription and Wiring Instructions; Irrevocability.
(a) Subscriber shall send its signed Subscription Agreement by
facsimile to Placement Agent at (770) 640-7150, and shall send
its subscription funds by wire transfer, to the Escrow Agent
as follows:
First Union National Bank of Georgia
Attn: Rick Schaal
Corporate Trust Administration
999 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30309
Fax: 404-827-7305
17
Syncronys Subscription Final
<PAGE> 18
ABA Number: 053000219
Account Number: 465946
Attn: Claire Moore
Reference:
Acct Name: SYNCRONYS SOFTCORP/Swartz Investments, LLC
Ref: Subscriber's Name
Acct: 3072233078
Contact: Nicole Stefanini
404-827-7326
SWIFT Code: FUNBUS33
(b) The Subscriber hereby acknowledges and agrees, subject to the
provisions of any applicable laws providing for the refund of
subscription amounts submitted by the Subscriber, that this
Agreement is irrevocable and that the Subscriber is not
entitled to cancel, terminate or revoke this Agreement;
provided, however, that if the conditions to Closing are not
satisfied or if the Disclosure Documents, taken as a whole,
are discovered prior to Closing to contain statements which
are materially inaccurate, or omit statements of material
fact, the Subscriber may revoke or cancel this Agreement.
(c) This Agreement shall be accepted by the Company when the
Company countersigns this Agreement. The Subscriber hereby
confirms that the Company has full right in its sole
discretion to accept or reject the subscription of the
Subscriber, in whole or in part, provided that, if the Company
decides to reject such subscription, the Company must do so
promptly and in writing. In the case of rejection, the
Company will promptly return any rejected payments (together
with any interest earned on such rejected funds in the Escrow
account) and (if rejected in whole) copies of all executed
subscription documents (including without limitation this
Agreement) to Subscriber.
18. Indemnification.
The Company shall indemnify and hold harmless the Subscriber and the
Placement Agent and each of their officers, directors, employees, partners,
control persons and agents (a "Subscriber Indemnified Party") who is or may be
a party to any threatened, pending, or completed action, suit or proceeding of
any kind, against any losses, damages, liabilities and expenses (including
reasonable attorneys fees) suffered or incurred by a Subscriber Indemnified
Party and not otherwise reimbursed, arising from or due to the breach of any
representations or warranties made by the Company contained in this Agreement,
or any material omission or misstatement by Company contained in this Agreement
and the Disclosure Documents, taken as a whole.
The Subscriber shall indemnify and hold harmless the Company and each
of its officers, directors, employees, partners, control persons and agents (a
"Company Indemnified Party") who is or may be a party to any threatened,
pending, or completed action, suit or proceeding of any kind, against any
losses, damages, liabilities and expenses (including reasonable attorneys fees)
suffered or incurred by a Company Indemnified Party and not otherwise
reimbursed, arising from or due to the breach of any representation or warranty
made by the Subscriber contained in this Agreement.
[Intentionally Left Blank]
18
Syncronys Subscription Final
<PAGE> 19
19. Amount
The undersigned hereby subscribes for _______________________________
principal amount of Debentures and the appropriate number of accompanying
Warrants (as determined herein), and pays herewith funds in the amount of
__________________________ U.S. Dollars ($ ______ U.S.) on the terms and
conditions of this Agreement.
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below.
Dated this _______ day of _________________, 1996.
<TABLE>
<S> /SIG/ <C>
- ------------------------------------------- ----------------------------------------------------
Your Signature EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
(Please Print Exact Registered Name)
OFFSHORE DELIVERY INSTRUCTIONS:
- ------------------------------------------- ----------------------------------------------------
Name: Please Print Please type or print address where your
security is to be delivered.
ATTN:
-------------------------------------------
- ------------------------------------------- ----------------------------------------------------
Title/Representative Capacity (if applicable) Street Address
- ------------------------------------------- ----------------------------------------------------
Name of Company You Represent (if applicable) Street Address
- ------------------------------------------- ----------------------------------------------------
Place of Execution of this Agreement City, State or Province, Country
----------------------------------------------------
Offshore Postal Code
----------------------------------------------------
Phone Number (For Federal Express)
----------------------------------------------------
Facsimile Number (re: Notice)
</TABLE>
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE _______ DAY
OF __________ 1996.
SYNCRONYS SOFTCORP
By: /s/ RAINER POERTNER
-------------------------------------
(Signature)
Print Name: Rainer Poertner
Title: President
19
Syncronys Subscription Final
<PAGE> 1
EXHIBIT 10.2
THIS DEBENTURE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
DEBENTURE (COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE BEING OFFERED
PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S ("REGULATION S")
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No.__________ $____________ U.S.
SYNCRONYS SOFTCORP
10% CONVERTIBLE DEBENTURE DUE MAY 17,1999
THIS DEBENTURE is one of a duly authorized issue of Debentures of
SYNCRONYS SOFTCORP, a corporation duly organized and existing under the laws of
the State of Nevada (the "Company"), designated as its 10% Convertible
Debentures due May 17, 1999, in an aggregate principal amount not exceeding
Thirteen Million Dollars ($13,000,000.00 U.S.) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
___________________________________________, or any subsequent registered
holder hereof (the "Holder"), the principal sum of __________________ Dollars
($___________ U.S.), on or prior to May 17, 1999 (the "Maturity Date"), and
(continued on reverse)
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
SYNCRONYS SOFTCORP
Dated: May 17, 1996
By:
--------------------------------------
Rainer Poertner, President
<PAGE> 2
(Page 2 of 9 of 10% Convertible Debentures of SYNCRONYS SOFTCORP Due May 17,
1999)
to pay interest on the principal sum outstanding in arrears on the earlier of
the Date of Conversion (as defined in Section 4(c)(iv)below) or the Maturity
Date, at the rate of ten percent (10%) per annum. Accrual of interest on this
Debenture shall commence on the date that, in connection with the consummation
of the initial purchase of this Debenture from the Company, the escrow agent
first had in its possession funds representing full payment for this Debenture,
and shall continue to accrue until payment in full of the principal sum has
been made or duly provided for, or until the Date of Conversion, whichever is
earlier. The interest so payable will be paid on the Maturity Date or the Date
of Conversion, as the case may be. Such interest shall be paid to the person
and at the address in whose name this Debenture is registered on the records of
the Company regarding registration and transfers of the Debentures (the
"Debenture Register") on the business day immediately preceding the payment
date. The principal of, and interest on, this Debenture are payable, if
converted, in shares of Common Stock, or if redeemed, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts, to the person and at the address in whose
name this Debenture is registered on the Debenture Register on the business day
immediately preceding the payment date. The forwarding of such payment shall
constitute a payment of interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of the sum
or Common Shares so paid.
This Debenture is subject to the following additional provisions:
Section 1. Debenture Denominations. The Debentures are initially
issuable in denominations of at least Fifty Thousand Dollars ($50,000.00 U.S.)
and integral multiples of Ten Thousand Dollars ($10,000.00 U.S.) in excess
thereof. Upon conversion of a portion, but less than all, of this Debenture in
accordance with the terms hereof, a new debenture or debentures may be issued
to the Holder in a denomination equal to the exact amount of the unconverted
portion of this Debenture. No service charge will be made for registration of
transfer or exchange.
Section 2. Withholding. The Company shall be entitled to withhold from
all payments of principal of, and interest on, this Debenture any amounts
required to be withheld under the applicable provisions of the United States
income tax laws, or other applicable laws, at the time of such payments.
Holder shall, prior to any transfer hereof, deliver to the Company a completed
form W-8 for such transferee. The Holder shall pay any other taxes, charges,
or levies in connection with the issuance or transfer thereof.
Section 3. Sale, Transfer or Exchange. This Debenture has been issued
based upon investment representations of the original purchaser hereof and may
be transferred or exchanged only in compliance with the Act, including
Regulation S and any applicable state securities laws ("State Acts"). Any
Holder of this Debenture, by acceptance hereof, agrees to the representations,
warranties and covenants herein. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
Section 4. Conversion. The record Holder of this Debenture shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Rate. The record Holder
of this Debenture shall be entitled to convert, subject to the Company's right
of redemption set forth in Section 5(a), (x) up to one-third (1/3) of the
Debenture(s) (measured by the aggregate principal amount) initially issued to
such Holder beginning forty-five (45) days following the date of the last
closing of a purchase and sale of Debentures that occurs pursuant to the
offering of the Debentures by the Company (the "Last Closing Date") and at any
time thereafter; (y) an additional one-third (1/3) of the Debenture(s)
(measured by the aggregate principal amount) initially issued to such Holder
beginning seventy-five (75) days following the Last Closing Date and at any
time thereafter; and (z) all remaining Debentures beginning one hundred five
(105) days following the Last Closing Date (each of the time periods referenced
in subclause (x), (y) and (z) is hereinafter referred to singularly as a
"Conversion Gate"), at the office of the Company or its designated transfer
agent for the Debentures (the "Transfer Agent"), into that number of fully-paid
and non-assessable shares of Common Stock of the Company calculated in
accordance with the following formula (the "Conversion Rate"):
Number of shares issued upon conversion = (Principal + Interest)/Conversion
Price, where
o Principal = The principal amount of the Debenture(s) to be converted,
o Interest = Principal x (N/365) x .10, where
o N = the number of days between (i) the date that, in connection with
the consummation of the initial purchase of this Debenture from the Company,
the escrow agent first had in its possession funds representing full payment
for this Debenture, and (ii) the applicable Date of Conversion for the
Debenture(s) for which conversion is being elected, and
<PAGE> 3
(Page 3 of 9 of 10% Convertible Debentures of SYNCRONYS SOFTCORP Due May 17,
1999)
o Conversion Price = the lesser of (x) $5.50 (the "Fixed Conversion
Price"), or (y) 85% of the average Closing Bid Price, as that term is
defined below, of the Company's Common Stock for the ten (10) trading
days immediately preceding the Date of Conversion, as defined below
(the "Variable Conversion Price").
For purposes hereof, the term "Closing Bid Price" shall mean
the closing bid price on the over-the-counter market as reported by
OTC Bulletin Board or NASDAQ's National Market System or Small
Capitalization System ("NASDAQ"), or if then traded on a different
national securities exchange, the closing sales price on the principal
national securities exchange on which it is so traded and if not
available, the mean of the daily high and low sales prices on such
securities exchange on which it is so traded, or, if the actual
Closing Bid Price is not available on any such day on OTC Bulletin
Board or NASDAQ or such other exchange or market where traded, then
the Closing Bid Price on the immediately preceding reported date.
(b) Conversion at Market Price. Notwithstanding the
limitations on conversion set forth above, the record Holder of this Debenture
shall be entitled to convert, subject to the Company's right of redemption set
forth in section 5(a), the Debentures in whole or in part prior to the
applicable Conversion Gate (but no earlier than sixty (60) days following the
Last Closing Date), at the office of the Transfer Agent, into that number of
fully-paid and non-assessable shares of Common Stock of Company calculated in
accordance with the Conversion Rate set forth above; provided, however, that,
for purposes of the conversion pursuant to this subsection 4(b), the Conversion
Price shall equal the Closing Bid Price of the Company's Common Stock on the
Date of Conversion.
(c) Mechanics of Conversion. In order to convert the
Debentures into full shares of Common Stock, the Holder shall (i) fax a copy of
the fully executed notice of conversion ("Notice of Conversion") to the Company
at the office of the Company or the Transfer Agent, which notice shall specify
the principal amount of Debentures to be converted and shall contain a
calculation of the Conversion Rate (together with a copy of the first page of
each Debenture to be converted) on or prior to 11:59 p.m., New York City time
(the "Conversion Notice Deadline") on the Date of Conversion specified on the
Notice of Conversion and (ii) surrender the original Debenture(s) being
converted to a common courier for delivery to the office of the Company or the
Transfer Agent; provided, however, that the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless either the original Debentures are delivered to the Company
or the Transfer Agent as provided above, or the Holder notifies the Company or
the Transfer Agent that such Debenture(s) have been lost, stolen or destroyed.
Upon receipt by Company of a facsimile copy of a Notice of Conversion, Company
shall immediately send, via facsimile, confirmation of receipt of the Notice of
Conversion to Holder which shall specify that the Notice of Conversion has been
received and the name of a contact person at the Company whom the Holder should
contact regarding information related to the conversion. In the case of a
dispute as to the calculation of the Conversion Rate, the Company shall
promptly issue the number of Shares that are not disputed. Company shall
submit the disputed calculations to its outside accountant via facsimile within
three (3) days of receipt of Holder's Notice of Conversion. The Company shall
cause the accountant to perform the calculations and notify Company and Holder
of the results no later than forty-eight (48) hours from the time such
Accountant receives the disputed calculations. Accountant's calculation shall
be deemed conclusive absent manifest error.
(i) Lost or Stolen Debentures. Upon receipt by
the Company of evidence of the loss, theft, destruction or mutilation of this
Debenture, and (in the case of loss, theft or destruction) indemnity or
security reasonably satisfactory to the Company, and upon surrender and
cancellation of the Debentures, if mutilated, the Company shall execute and
deliver new Debenture(s) of like tenor and date.
(ii) Delivery of Common Stock upon Conversion. As
provided in the Subscription Agreement between the Holder and the Company
related to the purchase of the Debentures (the "Subscription Agreement"), the
Transfer Agent or the Company (as applicable) shall, no later than the close of
business on the second (2nd) business day after delivery to the Transfer Agent
or the Company (as applicable) of the Debenture(s) to be converted (or after
provision for security or indemnification, if required), issue a certificate
for the number of shares of Common Stock to which the Holder shall be entitled
as aforesaid and surrender such original Common Stock certificates to a common
courier for either overnight or (if delivery is outside the United States) two
(2) day delivery to the Holder at the address of the Holder on the books of the
Company.
(iii) No Fractional Shares. No fractional shares
of Common Stock shall be issued upon conversion of this Debenture. If any
conversion of the Debenture would create a fractional share of Common Stock or
a right to acquire a fractional share of Common Stock, such fractional shares,
on an aggregate basis, shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be, on an aggregate basis, the next lower
number of whole shares.
(iv) Date of Conversion. The date on which
conversion occurs (the "Date of Conversion") shall be deemed to be the date set
forth in such Notice of Conversion, provided (i) that the advance copy of the
Notice of Conversion is faxed to the Company on or before 11:59 p.m., New York
City time, on the Date of Conversion, and (ii) that the original Debentures to
be converted are surrendered by depositing such Debentures with a common
courier, as provided above, and received by the Transfer Agent or the Company
within five (5) business days from the Date of Conversion. The
<PAGE> 4
(Page 4 of 9 of 10% Convertible Debentures of SYNCRONYS SOFTCORP Due May 17,
1999)
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Date of Conversion. If the
original Debentures to be converted are not received by the Transfer Agent or
the Company within five (5) business days after the Date of Conversion or if
the facsimile of the Notice of Conversion is not received by the Company or the
Transfer Agent prior to the Conversion Notice Deadline, the Notice of
Conversion, at the Company's option, may be declared null and void.
(d) Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Debentures, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding Debentures; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding Debentures, the Company will immediately
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(e) Automatic Conversion. Each of the Debentures that
remains issued and outstanding on the date which is three (3) years after the
Last Closing Date automatically shall be converted into Common Stock on such
date at the Conversion Rate then in effect (calculated in accordance with the
formula in Section 4(a) above), and the date which is three (3) years after the
Last Closing Date shall be deemed the Date of Conversion with respect to such
conversion.
(f) Adjustment to Conversion Price.
(i) Adjustment to Fixed Conversion Price Due to
Stock Split, Stock Dividend, Etc. If at any time when the Debentures are
issued and outstanding, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend, or other similar event, the Fixed
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Fixed Conversion Price
shall be proportionately increased.
(ii) Adjustment to Variable Conversion Price. If,
at any time when Debentures are issued and outstanding, the number of
outstanding shares of Common Stock is increased or decreased by a stock split,
stock dividend, or other similar event, which event shall have taken place
during the reference period for determination of the Conversion Price for any
conversion of the Debentures, then the Variable Conversion Price shall be
calculated giving appropriate effect to the stock split, stock dividend,
combination, reclassification or other similar event for all five (5) trading
days immediately preceding the Date of Conversion.
(iii) Adjustment Due to Merger, Consolidation, Etc.
If at any time when the Debentures are issued and outstanding, there shall be
any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Company shall be changed into the same or a different number of
shares of another class or classes of stock or securities of the Company or
another entity or there is a sale of all or substantially all the Company's
assets, then the holders of the Debentures shall thereafter have the right to
receive upon conversion of the Debentures, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities and/or
other assets which the holder would have been entitled to receive in such
transaction had the Debentures been converted immediately prior to such
transaction, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the holders of the Debentures to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Debentures) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities thereafter deliverable upon the
exercise hereof. The Company shall not effect any transaction described in
this subsection 4(f)(iii) unless (a) it first gives thirty (30) business days
prior notice of such merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event (during which time the
Holder shall be entitled to convert its Debentures into Common Stock) and (b)
the resulting successor or acquiring entity (if not the Company) assumes by
written instrument the obligation of the Company under this Debenture including
this Section 4(f)(iii).
Section 5. Redemption or Forced Conversion by Company.
(a) Company's Right to Redeem upon Receipt of Notice of
Conversion. If the Conversion Price of the Company's Common Stock is less than
the Fixed Conversion Price (as defined in Section 4(a)), at the time of receipt
of a Notice of Conversion pursuant to Section 4, the Company shall have the
right, in its sole discretion, to redeem in whole or in part any Debentures
submitted for conversion, immediately prior to and in lieu of conversion
("Redemption Upon Receipt of Notice of Conversion"). If the Company elects to
redeem some, but not all, of the Debentures submitted for conversion, the
Company shall redeem from among the Debentures submitted by the various Holders
for conversion on the applicable date, a pro-rata amount from each such Holder
so submitting Debentures for conversion.
<PAGE> 5
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1999)
(i) Redemption Price Upon Receipt of a Notice of
Conversion. The redemption price for a redemption of this Debenture under this
Section 5(a) shall be calculated in accordance with the following formula:
(Principal + Interest) x Closing Bid Price on the Date of Conversion
Conversion Price
For the purposes of the above formula, "Principal", "Interest",
"Closing Bid Price", "Conversion Price" and "Date of Conversion" shall have the
meanings set forth in Section 4.
(ii) Mechanics of Redemption Upon Receipt of
Notice of Conversion. The Company shall effect each such redemption by giving
notice of its election to redeem, by facsimile within one (1) business day
following receipt of a Notice of Conversion from a Holder, with a copy by
overnight or two (2) day courier, to (A) the Holder of Debentures submitted for
conversion at the address and facsimile number of such Holder appearing in the
Company's register for the Debentures, and (B) the Company's Transfer Agent.
Such redemption notice shall indicate whether the Company will redeem all or
part of the Debentures submitted for conversion and the applicable redemption
price.
(b) Company's Right to Redeem at Its Election. At any
time, commencing one (1) year after the Last Closing Date, upon giving at least
thirty (30) business days prior written notice, the Company shall have the
right, in its sole discretion, to redeem ("Redemption at Company's Election"),
from time to time, any or all of the Debentures; provided that the Company
shall only be entitled to redeem Debentures in increments having an aggregate
principal amount of at least One Million Five Hundred Thousand Dollars
($1,500,000.00) (or the amount outstanding if the aggregate principal amount of
outstanding Debentures is less than One Million Five Hundred Thousand Dollars
($1,500,000.00)). If the Company elects to redeem some, but not all, of the
Debentures, the Company shall redeem a pro-rata amount from each Holder of the
Debentures.
(i) Redemption Price At Company's Election. The
"Redemption Price At Company's Election" shall be calculated as a percentage of
Stated Value, as that term is defined below, of the Debentures redeemed
pursuant to this Section 5(b), which percentage shall vary depending on the
Date of Redemption at Company's Election (as that term is defined in subsection
(ii) below), and shall be determined as follows:
<TABLE>
<CAPTION>
Date of Redemption at Company's Election Call Price
<S> <C>
12 months and 1 day to 18 months following Last Closing Date 130% of Stated Value
18 months and 1 day to 24 months following Last Closing Date 125% of Stated Value
24 months and 1 day to 30 months following Last Closing Date 120% of Stated Value
30 months and 1 day to 36 months following Last Closing Date 115% of Stated Value
</TABLE>
For purposes hereof, "Stated Value" shall mean the original principal
amount of the Debentures being redeemed, plus the unpaid interest being
redeemed, pursuant to this Section 5(b).
(ii) Mechanics of Redemption at Company's
Election. The Company shall effect each such redemption by giving at least
thirty (30) business days prior written notice ("Notice of Redemption at
Company's Election"), which notice may be given on or after thirty (30)
business days prior to twelve (12) months after the Last Closing Date, to (A)
the Holders of the Debentures selected for redemption, at the address and
facsimile number of such Holder appearing in the Company's register for the
Debentures and (B) the Transfer Agent, which Notice of Redemption at Company's
Election shall be deemed to have been delivered three (3) business days after
the Company's mailing (by overnight or two (2) day courier, with a copy by
facsimile) of such Notice of Redemption at Company's Election. Such Notice of
Redemption at Company's Election shall indicate the number of Debentures that
have been selected for redemption, the date which such redemption is to become
effective (the "Date of Redemption at Company's Election") and the applicable
Redemption Price at Company's Election, as defined in subsection (b)(i) above.
Notwithstanding the above, Holder may convert into Common Stock pursuant to
section 4, prior to the close of business on the Date of Redemption at
Company's Election, any Debenture which it is otherwise entitled to convert,
including those selected for Redemption at Company's Election pursuant to this
subsection 5(b); provided, however, that the Company shall still be entitled to
exercise its right to redeem upon receipt of a Notice of Conversion pursuant to
section 5(a).
(c) Company Must Have Immediately Available Funds or
Credit Facilities. The Company shall not be entitled to send any Redemption
Notice and begin the redemption procedure under either Section 5(a) or 5(b)
unless it has:
(i) the full amount of the applicable redemption
price, in cash, available in a demand or other immediately available account in
a bank or similar financial institution; or
(ii) immediately available credit facilities, in
the full amount of the applicable redemption price with a bank or similar
financial institution, or
<PAGE> 6
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(iii) an agreement with a standby underwriter
willing to purchase from the Company a sufficient number of shares of stock to
provide proceeds necessary to redeem any stock that is not converted prior to
redemption; or
(iv) a combination of the items set forth in (i),
(ii) and (iii) above, in the aggregate, in the full amount of the redemption
price.
(d) Payment of Redemption Price.
(i) Each holder submitting Debentures being
redeemed under subsection (b) above shall send their Debentures so redeemed to
the Company or the Transfer Agent, and the Company shall pay the applicable
redemption price to that Holder within five (5) business days of the date of
such receipt of the Debentures. The Company shall not be obligated to deliver
the redemption price unless the Debentures so redeemed are delivered to the
Company or the Transfer Agent, or, in the event one (1) or more Debentures have
been lost, stolen, mutilated or destroyed, unless the Holder has complied with
Section 4(c)(i).
(ii) If Company elects to redeem pursuant to
Section 5(a) hereof, and Company fails to pay Holder the redemption price
within the time frame as required by this Section 5(d), then Company shall
issue shares of Common Stock to any such Holder who has submitted a Notice of
Conversion in compliance with Section 4(c) hereof. The shares to be issued to
Holder pursuant to this provision shall be the number of shares determined
using a Conversion Price (as defined in Section 5 hereof) that equals the
lesser of (i) the Conversion Price on the date Holder sends its Notice of
Conversion to Company or Transfer Agent via facsimile or (ii) the Conversion
Price on the date the Transfer Agent issues Common Stock pursuant to this
Section 5(d)(ii).
(e) Company's Right to Force Conversion at Its Election.
(i) Forced Conversion. Any time commencing on
the date which is six (6) months following the Last Closing Date, if the
Closing Bid Price (as defined in Section 4 above) of the Company's Common Stock
equals or exceeds an amount equal to 150% of the Fixed Conversion Price (as
defined in Section 4(a) above) for the fifteen (15) consecutive trading days
prior to the date of the Notice of Conversion at Company's Election (as defined
below), then the Company shall have the right, in its sole discretion, to
require conversion of the Debentures ("Conversion at Company's Election") into
that number of fully-paid and non-assessable shares of Common Stock of the
Company calculated in accordance with the Conversion Rate set forth in Section
4(a). The date of the Notice of Conversion at Company's Election shall be the
Date of Conversion for purposes of a Conversion at Company's Election. During
any consecutive fifteen day trading period, the Company shall not be permitted
to require the conversion of Debentures having an aggregate principal amount of
more than Two Million Dollars ($2,000,000). The Company shall select a
pro-rata amount of outstanding Debentures to be converted under this Section
5(e)(i) based upon the original principal amount initially issued to each
Holder relative to the aggregate principal amount of all Debentures initially
issued to all such holders of outstanding Debentures.
(ii) Mechanics of Conversion at Company's
Election. Provided that the requirements of Section 5(e)(i) have been met, the
Company shall effect each such Conversion at Company's Election by giving
written notice ("Notice of Conversion at Company's Election"), on or prior to
11:59 p.m., New York City time, on the Date of Conversion, via facsimile and
via overnight or two (2) day delivery to (A) the Holders of the Debentures
selected for conversion, at the address and facsimile number of such Holder
appearing in the Company's register for Debentures and (B) the Transfer Agent.
Such Notice of Conversion At Company's Election shall indicate (i) the
principal amount of the Debentures that have been selected for conversion, (ii)
the date which such conversion is to become effective (the "Date of Conversion
At Company's Election"), and (iii) the Conversion Price.
(iii) Delivery of Forced Conversion Shares. Each
Holder receiving a Notice of Conversion at Company's Election shall send their
Debentures to be so converted, along with a Conversion and Resale Certificate
("Resale Certificate") substantially in the form attached as Exhibit T to the
Subscription Agreement, to the Company or its Transfer Agent, within twenty
(20) business days of receipt of same. Assuming there are no changes in the
material facts set forth in Section 2 of the Subscription Agreement (other than
subsections which by their terms would be inapplicable at such time) or
applicable law, other than changes which are not relevant or material, the
Transfer Agent or the Company shall, no later than the close of business on the
second (2nd) business day after delivery to the Transfer Agent or the Company
of the Debentures to be converted and the Resale Certificate, deliver a
certificate without a restrictive legend for the number of shares of Common
Stock to which the Holder shall be entitled to a common courier for either
overnight or (if delivery is outside the United States) two (2) day delivery to
the Holder at the address of the Holder on the books of the Company. The
Company shall not be obligated to deliver the Common Stock unless the
Debentures so converted are delivered to the Company or its Transfer Agent, or,
in the event one or more Debentures have been lost, stolen, mutilated or
destroyed, until the Holder has complied with Section 4(c)(i) hereof.
<PAGE> 7
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(f) Blackout Period. Notwithstanding the foregoing, the
Company may not either send out a redemption notice or a Notice of Conversion
at Company's Election or effect a redemption pursuant to subsection (b) above
or a forced conversion pursuant to subsection (e) above during a Blackout
Period (defined as a period during which the Company's officers or directors
would not be entitled to buy or sell stock because of their holding of material
non-public information), unless the Company shall first disclose the non-public
information that resulted in the Blackout Period; provided, however, that no
redemption or forced conversion shall be effected until at least fifteen (15)
days after the Company shall have given the Holder written notice that the
Blackout Period has been lifted.
Section 6. Holder's Right to Advance Notice of Company's Election to
Redeem.
(a) Holder's Right to Elect to Receive Notice of Cash
Redemption by Company. Holder shall have the right to require Company to
provide advance notice stating whether Company will elect to redeem Holder's
Debentures in cash, pursuant to Company's redemption rights discussed in
Section 5(a).
(b) Mechanics of Holder's Election Notice. Holder shall
send notice ("Election Notice") to Company and such other person(s) as the
Company may designate, via facsimile, stating Holder's intention to require
Company to disclose that if Holder were to exercise his, her or its right of
conversion (pursuant to section 4) whether Company would elect to redeem a
specific number of Holder's Debentures for cash in lieu of issuing Common
Stock. Company is required in good faith to disclose to Holder what action
Company would take if the Notice of Conversion is received within the
subsequent five (5) business day period, including the date Company receives
such Election Notice, as further discussed in subsection 6(c).
(c) Company's Response. Upon receipt by the Company of a
facsimile copy of an Election Notice, Company shall immediately send, via
facsimile, a confirmation of receipt of the Election Notice to Holder, which
shall specify that the Election Notice has been received and the name and
telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the requested advance notice. Company
must respond by the close of business on the next business day following
receipt of Holder's Election Notice (1) via facsimile and (2) via overnight or
two (2) day courier. The Company's response must state in good faith whether
it would redeem the shares, in whole or in part, or allow conversion into
shares without redemption. If Company does not respond to Holder within one
(1) business day via facsimile and overnight or two (2) day courier, Company
shall be required to issue to Holder Common Stock upon Holder's conversion
within the subsequent five (5) business day period of Holder's Election Notice.
However, if the Company's Common Stock price decreases so that under the
Conversion Rate the Company would be required to issue more than an additional
ten percent (10%) of shares of Common Stock than Holder was entitled to receive
at the time Holder sent Company its Election Notice, then Company shall no
longer be bound to convert Holder's Preferred Stock into Common Stock, but may
elect to redeem the Debentures for cash.
Section 7. No Voting Rights. This Debenture shall not entitle the Holder
hereof to any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company.
Section 8. Protective Provision. So long as Debentures are outstanding,
the Company shall not, without first obtaining the approval (by vote or written
consent, as provided by law) of both (i) the Holders of at least seventy-five
percent (75%) of the aggregate principal amount of Debentures then outstanding,
and (ii) seventy-five (75%) of the Holders of Debentures then outstanding,
alter or change the rights, preferences or privileges of the Debentures or of
any securities or debt instruments, senior in right of payment, so as to affect
adversely the Debentures.
Any Holders of the Debentures that did not agree to such alteration or
change (the "Dissenting Holders") shall have the right for a period of thirty
(30) business days to convert pursuant to the terms of this Debenture as they
exist prior to such alteration or change (notwithstanding the forty-five (45)
day, seventy-five (75) day, and one hundred five (105) day holding requirements
set forth in Section 4(a) hereof), or continue to hold their Debentures;
provided, however, that the Dissenting Holders may not convert anytime on or
before the fortieth (40th) day following the Last Closing Date.
Section 9. Status of Redeemed or Converted Debentures. After this
Debenture shall have been surrendered for conversion as herein provided or
notice of conversion shall have been given by the Holder pursuant to Section
4(a) herein (or redeemed pursuant to Section 5(a) or 5(b) herein), this
Debenture shall no longer be deemed to be outstanding and all rights with
respect to this Debenture, including, without limitation, the right to receive
interest hereon and the principal hereof, shall forthwith terminate as of the
Date of Conversion or the effective date of such redemption, except only the
right of the Holder hereof to receive shares of Common Stock in exchange for
such Debenture(s) (or, in the case of a redemption, the right to receive the
applicable redemption price).
Section 10. Events of Default. (i) Upon the occurrence of and during the
continuation of an Event of Default (as defined below) specified in subsections
(a), (b), (c) or (e) of this Section 10, upon the written notice of the Holders
of seventy-five percent (75%) of the outstanding principal amount of the
Debentures, and/or (ii) upon the occurrence of any Event of Default specified
in subsections (d) or (f) of this Section 10, the Company shall pay to the
Holder an amount equal
<PAGE> 8
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to the sum of (x) the unpaid principal amount of this Debenture plus (y) the
accrued and unpaid interest on the unpaid principal amount of this Debenture to
the date of payment and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment, or notice, all of
which hereby are expressly waived, together with all costs, including, without
limitation, legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or equity.
If the Company fails to pay any amounts due pursuant to this Section
10 within five (5) business days of such amounts being due and payable, then
the Holder shall have the right at any time, so long as the Company remains in
default, to require the Company, upon written notice, to immediately issue, in
lieu of such amounts, the number of shares of Common Stock of the Company equal
to the amounts owed by Borrower to the Company divided by the Conversion Price
then in effect.
The Company shall be required promptly upon its knowledge of an Event
of Default hereunder to give notice of such Event of Default to the Holder
hereof.
An "Event of Default" shall mean the following:
(a) Conversion. If the Company fails to issue shares of
Common Stock to any Holder upon exercise by the Holder of the conversion rights
of the Holder in accordance with the terms of this Debenture, fails to transfer
any certificate for shares of Common Stock issued to the Holder upon conversion
of this Debenture and when required by this Debenture or fails to remove any
restrictive legend on any certificate or any shares of Common Stock issued to
the Holder upon conversion of this Debenture as and when required by this
Debenture or any Subscription Agreement by and between Company and Holder and
any such failure shall continue uncured for fifteen (15) business days;
(b) Breach of Covenant. If the Company breaches any
material covenant or other material term or condition of this Debenture (other
than as specifically provided in subsection 10(a) hereof), or any Subscription
Agreement by and between Company and Holder (including the failure to have
enough stock available for issuance upon conversion), and the breach of which
would have a material adverse effect on the Company or the prospects of the
Company or a material adverse effect on the Holder or the rights of the Holder
with respect to this Debenture or the shares of Common Stock issuable upon
conversion of this Debenture and such breach continues for a period of fifteen
(15) business days after written notice thereof to the Company from the Holder;
(c) Breach of Representations and Warranties. Any
representation or warranty of the Company made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, any Subscription Agreement by and
between Company and Holder), shall be false or misleading in any material
respect when made and the breach of which would have a material adverse effect
on the Company or the prospects of the Company or a material adverse effect on
the Holder or the rights of the Holder with respect to this Debenture or the
shares of Common Stock issuable upon conversion of this Debenture;
(d) Receiver or Trustee. The Company or any subsidiary
of the Company shall make an assignment for the benefit of creditors, or apply
for or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a receiver or trustee
shall otherwise be appointed;
(e) Judgments. Any money judgment, writ or similar
process shall be entered or filed against the Company or any subsidiary of the
Company or any of its property or other assets for more than Five Hundred
Thousand Dollars ($500,000), and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder,
which consent will not be unreasonably withheld; or
(f) Bankruptcy. Bankruptcy, insolvency, reorganization
or liquidation proceedings or other proceedings for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the
Company or any subsidiary of the Company.
Section 11. Governing Law. This Debenture shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflicts of laws, except for matters arising under
the Act or the Securities Exchange Act of 1934, as amended, which matters shall
be governed by and construed in accordance with such laws.
Section 12. Business Day Definition. For purposes hereof, the term
"business day" shall mean any day on which banks are generally open for
business in the State of New York, USA and excluding any Saturday and Sunday.
Section 13. Notices. Any notice or other communication required or
permitted to be given hereunder shall be given as provided herein or delivered
against receipt if to (i) the Company at 3958 Ince Boulevard, Culver City, CA
90232, Attn: Mr. Rainer Poertner, Telephone No. (310) 842-9203, Telecopy No.
(310) 842-9014 and (ii) the Holder of this Debenture, to such holder at its
last address as shown on the Debenture Register (or to such other address as
the party shall have furnished
<PAGE> 9
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in writing as its new address to be entered on the Debenture Register (which
address must include a telecopy number) in accordance with the provisions of
this Section 13). Any notice or other communication needs to be made by
facsimile and delivery shall be deemed given, except as otherwise required
herein, at the time of transmission of said facsimile. Any notice given on a
day that is not a business day shall be effective upon the next business day.
Section 14. Waiver of any Breach to be in Writing. Any waiver by the
Company or the Holder hereof of a breach of any provision of the Debenture
shall not operate as, or be construed to be a waiver of any other breach of
such provision or of any breach of any other provision of the Debenture. The
failure of the Company or the Holder hereof to insist upon strict adherence to
any term of the Debenture on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of the Debenture. Any waiver must be
in writing.
Section 15. Unenforceable Provisions. If any provision of this Debenture
is invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons and
circumstances.
<PAGE> 1
EXHIBIT 10.3
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED BY OR ON BEHALF OF ANY U.S.
PERSON UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER,
SALE OR TRANSFER.
Warrant to Purchase
______________shares
WARRANT TO PURCHASE COMMON STOCK
OF
SYNCRONYS SOFTCORP
THIS CERTIFIES that________________________________or any subsequent
("Holder") hereof, has the right to purchase from SYNCRONYS SOFTCORP, a Nevada
corporation (the "Company"), up to __________________ fully paid and
nonassessable shares of the Company's Common Stock, $.0001 par value ("Common
Stock"), subject to adjustment as provided herein, at a price equal to the
Exercise Price as defined in Section 3 below, at any time beginning on August
30, 1996 and ending at 5:00 p.m., Atlanta, Georgia time, on May 17, 2001.
The Holder of this Warrant agrees with the Company that this Warrant
is issued and all rights hereunder shall be held subject to all of the
conditions, limitations and provisions set forth herein.
1. Date of Issuance.
This Warrant shall be deemed to be issued on May 17, 1996 ("Date of
Issuance").
2 . Exercise.
(a) Manner of Exercise. This Warrant may not be exercised, in
whole or in part, for a period of one hundred five (105) days from the Date of
Issuance. Thereafter, this Warrant may be exercised as to all or any lesser
number of full shares of Common Stock covered hereby upon surrender of this
Warrant, with the Exercise Form attached hereto duly executed, together with
the full Exercise Price (as defined in Section 3) for each share of Common
Stock as to which this Warrant is exercised, at the office of the Company, 3958
Ince Boulevard, Culver City, CA 90232, Attention: President, Telephone No.
(310) 842-9203, Telecopy No. (310) 842-9014, or at such other office or agency
as the Company may designate in writing, by overnight mail, with an advance copy
of the Exercise Form attached as Exhibit A ("Exercise Form") by facsimile (such
surrender and payment of the Exercise Price hereinafter called the "Exercise of
this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall
be defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company within five (5) business days thereafter. The
original Warrant and Exercise Form must be received within five (5) business
days of the Date of Exercise, or the exercise may, at the
SYNCRONYS INVESTOR WARRANT (C-3)
<PAGE> 2
Company's option, be considered void. Alternatively, the Date of Exercise shall
be defined as the date the original Exercise Form is received by the Company,
if Holder has not sent advance notice by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon
its Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for
shares of Common Stock is issued shall, for all purposes, be deemed to have
become the Holder of record of such shares on the Date of Exercise of this
Warrant, irrespective of the date of delivery of such shares of Common Stock.
Nothing in this Warrant shall be construed as conferring upon the Holder hereof
any rights as a shareholder of the Company.
3 . Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price") shall equal $5.50 ("Initial
Exercise Price").
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: surrender of this Warrant at the principal
office of the Company together with notice of cashless election, in which event
the Company shall issue Holder a number of shares of Common Stock computed
using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average closing price of the Common Stock for
the five (5) trading days prior to the Date of Exercise of
this Warrant (the "Average Closing Price"), as reported by the
OTC Bulletin Board or National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or if the
Common Stock is not traded on the OTC Bulletin Board or
NASDAQ, the price in the over-the-counter market; provided,
however, that if the Common Stock is listed on a stock
exchange, the Market Price shall be the average Closing on
such exchange. If the Common Stock is/was not traded during
the five (5) trading days prior to the Date of Exercise, then
the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable)
days during such five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless
SYNCRONYS INVESTOR WARRANT (C-3)
<PAGE> 3
exercise transaction shall be deemed to have been acquired at the time this
Warrant was issued. Moreover, it is intended, understood and acknowledged that
the holding period for the Common Stock issuable upon exercise of this Warrant
in a cashless exercise transaction shall be deemed to have commenced on the
date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant may not
be exercised in a cashless exercise transaction if, on the Date of Exercise,
the shares of Common Stock to be issued upon exercise of this Warrant would
upon such issuance (x) be immediately transferable in the United States free of
any restrictive legend, including without limitation under Rule 144; (y) be
then registrable pursuant to Section 2 of that certain Registration Rights
Agreement dated on or about May 17, 1996 by and among the Company and certain
investors; or (z) otherwise be registered under the Securities Act of 1933, as
amended.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of
this Warrant, this Warrant may be transferred on the books of the Company, in
whole or in part, in person or by attorney, upon surrender of this Warrant
properly endorsed. This Warrant shall be canceled upon such surrender and, as
soon as practicable thereafter, the person to whom such transfer is made shall
be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and the Holder of this Warrant shall be entitled to
receive a new Warrant or Warrants as to the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the
exercise of this Warrant constitute "Registrable Securities" under that certain
Registration Rights Agreement dated on or about May 17, 1996 between the
Company and certain investors and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then the Holder hereof, upon
Exercise of this Warrant after the record date for the determination of Holders
of Common Stock entitled to receive such dividend, shall be entitled to receive
upon Exercise of this Warrant, in addition to the number of shares of Common
Stock as to which this Warrant is Exercised, such additional shares of Common
Stock as such Holder would have received had this Warrant been Exercised
immediately prior to such record date and the Exercise Price will be
proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at
any time effect a recapitalization, reclassification or other similar
transaction of such character that the shares of Common Stock shall be changed
into or become exchangeable for a larger or smaller number of shares, then upon
the effective date thereof, the number of shares of Common Stock which the
Holder hereof shall be entitled to purchase upon Exercise of this Warrant shall
be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock by reason of such
recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of shares,
proportionally increased. The Company shall give the Warrant Holder the same
notice it provides to holders of Common Stock of any transaction described in
this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to
Holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned
surplus or net profits for the current
SYNCRONYS INVESTOR WARRANT (C-3)
<PAGE> 4
or preceding year) then, in any such case, the Holder of this Warrant shall be
entitled to receive, upon exercise of this Warrant, with respect to each share
of Common Stock issuable upon such Exercise, the amount of cash or evidences of
indebtedness or other securities or assets which such Holder would have been
entitled to receive with respect to each such share of Common Stock as a result
of the happening of such event had this Warrant been Exercised immediately
prior to the record date or other date fixing shareholders to be affected by
such event (the "Determination Date") or, in lieu thereof, if the Board of
Directors of the Company should so determine at the time of such distribution,
a reduced Exercise Price determined by multiplying the Exercise Price on the
Determination Date by a fraction, the numerator of which is the result of such
Exercise Price reduced by the value of such distribution applicable to one
share of Common Stock (such value to be determined by the Board in its
discretion) and the denominator of which is such Exercise Price.
(d) Notice of Consolidation or Merger. If, for a valid business
purpose, the Company shall at any time (i) consolidate or merge with any other
corporation and the Company is not the surviving corporation, or (ii) transfer
all or substantially all of its assets, then the Company shall deliver written
notice to the Holder of such merger, consolidation or sale of assets at least
thirty (30) days prior to the record date for determining shareholders entitled
to vote on such merger, consolidation or sale of assets, and this Warrant shall
terminate and expire immediately prior to the closing of such merger,
consolidation or sale of assets.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a), (b)
or (c) of this Section 5, and thereafter shall mean said price as adjusted from
time to time in accordance with the provisions of said subsection. No such
adjustment under this Section 5 shall be made unless such adjustment would
change the Exercise Price at the time by $.01 or more; provided, however, that
all adjustments not so made shall be deferred and made when the aggregate
thereof would change the Exercise Price at the time by $.01 or more. No
adjustment made pursuant to any provision of this Section 5 shall have the
effect of increasing the total consideration payable upon Exercise of this
Warrant in respect of all the Common Stock as to which this Warrant may be
exercised.
(f) Adjustments: Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 5, the Holder of this Warrant shall, upon Exercise of this Warrant,
become entitled to receive shares and/or other securities or assets (other than
Common Stock) then, wherever appropriate, all references herein to shares of
Common Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions of
this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this Warrant,
the Holder hereof may purchase only a whole number of shares of Common Stock.
If, on Exercise of this Warrant, the Holder hereof would be entitled to a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
SYNCRONYS INVESTOR WARRANT (C-3)
<PAGE> 5
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted
therefor as herein above provided) as shall be sufficient for Exercise and
payment of the Exercise Price of this Warrant. The Company covenants and
agrees that upon Exercise of this Warrant, all shares of Common Stock issuable
upon such Exercise shall be duly and validly issued, fully paid, nonassessable
and not subject to preemptive rights, rights of first refusal or similar rights
of any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has
been issued in a transaction exempt from the registration requirements of the
Act by virtue of Regulation S. The Warrant may not be resold into the United
States, or to a U.S. person (as defined in Regulation S) for a period of forty
(40) days from the Date of Issuance, and thereafter, the Warrant and the Common
Stock issuable upon exercise of the Warrant may not be sold into the United
States or to a U.S. person (as defined in Regulation S) except pursuant to an
effective registration statement or an exemption to the registration
requirements of the Act and applicable state laws.
(b) Assignment. Assuming the conditions of (a) above
regarding registration or exemption have been satisfied, the Holder may sell,
transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in
part. Holder shall deliver a written notice to Company, substantially in the
form of the Assignment attached hereto as Exhibit B, indicating the person or
persons to whom the Warrant shall be assigned and the respective number of
warrants to be assigned to each assignee. The Company shall effect the
assignment within ten (10) days, and shall deliver to the assignee(s)
designated by Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of shares.
(c) Investment Intent. The Warrant and Common Stock
issuable upon conversion are intended to be held for investment purposes and
not with an intent to distribution, as defined in the Act.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and the Holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Company and the Holder of this
Warrant.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of New York,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
SYNCRONYS INVESTOR WARRANT (C-3)
<PAGE> 6
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by the
Holder of this Warrant to or on the Company shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, until another address is designated in writing by the
Company, 3958 Ince Boulevard, Attention: President, Telephone No. (310)
842-9203, Telecopy No. (310) 842-9014. Notices or demands pursuant to this
Warrant to be given or made by the Company to or on the Holder of this Warrant
shall be sufficiently given or made if sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed, to the address of the
Holder set forth in the Company's records, until another address is designated
in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
date first written above.
Dated as of___________________ 1996 SYNCRONYS SOFTCORP
By: _______________________________
Print Name: _______________________________
Title: _______________________________
SYNCRONYS INVESTOR WARRANT (C-3)
<PAGE> 7
EXHIBIT A
EXERCISE FORM
TO: SYNCRONYS SOFTCORP
The undersigned hereby irrevocably exercises the right to
purchase______________________ of the shares of Common Stock of SYNCRONYS
SOFTCORP, a Nevada corporation (the "Company"), evidenced by the attached
Warrant, and herewith makes payment of the Exercise Price with respect to such
shares in full, all in accordance with the conditions and provisions of said
Warrant.
1. The undersigned hereby represents and warrants to the Company as
follows:
(a) At least forty (40) days have passed since the date of the
issuance of the Warrant to the undersigned and the termination of the offering
in which the Warrant was distributed;
(b) The undersigned is not a U.S. person, as defined in Regulation
S, and is not exercising the Warrant on behalf of a U.S. person;
(c) The undersigned received the Warrant, and has kept the Warrant
since the date of receipt, outside of the U.S.;
(d) The person who made the financial decision on behalf of the
undersigned to exercise the Warrant was outside of the U.S. at the time of
making such decision;
(e) The common stock obtained on exercise of the Warrant will be
delivered to the undersigned at a location outside of the U.S.;
(f) The undersigned acknowledges that the Company's transfer agent
has been instructed not to issue common stock on exercise of this Warrant
unless the undersigned has certified that the statements contained in this
Exercise Form are true and correct as of the date of this Exercise Form.
2. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8 of the Warrant, and consents that the
following legend may be affixed to the stock certificates for the Common Stock
hereby subscribed for, if such legend is applicable:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any
provincial or state securities law, and may not be sold, transferred,
pledged, hypothecated or otherwise disposed of until either (i) a
registration statement under the Securities Act and applicable
provincial or state securities laws shall have become effective with
regard thereto, or (ii) an exemption from registration under the
Securities Act or applicable provincial or state securities laws is
available in connection with such offer, sale or transfer."
3. The undersigned requests that stock certificates for such shares be issued,
and a warrant representing any unexercised portion hereof be issued, pursuant
to the Warrant in the name of the Registered Holder and delivered to the
undersigned at the address set forth below:
Dated:
---------------------------------
Signature of Registered Holder
---------------------------------
Name of Registered Holder (Print)
---------------------------------
Non-U.S. Address
SYNCRONYS INVESTOR WARRANT (C-3)
<PAGE> 8
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant
hereby sells, assigns and transfers unto the person or persons below named the
right to purchase __________________ shares of the Common Stock of SYNCRONYS
SOFTCORP evidenced by the attached Warrant and does hereby irrevocably
constitute and appoint _____________attorney to transfer the said Warrant on
the books of the Company, with full power of substitution in the premises.
Dated:
-----------------------------------
Signature
Fill in for new Registration of Warrant:
- -----------------------------------------
Name
- -----------------------------------------
Address
- -----------------------------------------
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
SYNCRONYS INVESTOR WARRANT (C-3)
