SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")
For the Fiscal Year Ended June 30, 1997 Commission file number: 33-15097-D
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SYNAPTIX SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
Colorado 84-1045715
(State of other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
2450 South Shore Boulevard, Suite 210
League City, Texas 77573
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (281) 334-0405
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. Yes No X
The Registrant had 15,493,700 shares of $.003 par value Common Stock
issued and outstanding at October 10, 1997. The aggregate market value of the
voting stock held by non-affiliates of the Registrant on that date, computed by
reference to the average of the bid and asked prices of the Common Stock as of
October 10, 1997, was approximately $1,175,625.
The Registrant's revenues for its most recent fiscal year were $4,710.
Total Pages Including cover 106
Exhibit Index Page 33
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PART I
ITEM 1. BUSINESS
General
Synaptix Systems Corporation, formerly known as Basic Natural
Resources, Inc. (the "Company"), was incorporated in the State of Colorado in
December 1986 under the name Euram Capital Corporation and became a public
company in August 1987. Although the Company is a reporting company under the
Securities and Exchange Act of 1934, and its stock is listed on the OTC Bulletin
Board, at the current time it is the equivalent of a start-up company in the
process of developing new software products. Presently, the Company has a
significant working capital deficiency and management is unable to assure that
it will be able to raise new capital to allow the Company to continue as a
going-concern. For further information, see "Liquidity and Capital Resources."
The Company was originally organized for the purpose of acquiring
business opportunities and, if successful in that regard, in developing and
operating the entities acquired. By June 30, 1995, the Company had divested
itself of all of its assets and had ceased operations. In December, 1996,
approximately 90% of the then issued and outstanding shares of stock of the
Company were acquired by Alan W. Harvey, its then current President and CEO, in
connection with an intended acquisition of assets owned by Swallen Investments
Corp. Among the assets acquired were computer programs under development (the
"Software") which the Company believes can be developed and marketed
successfully. However, the Company cannot assure that it will be successful in
this endeavor even if working capital is available to the Company. Swallen
Investments Corp. obtained the assets from a lender that acquired the assets
through foreclosure of a loan to Synaptix, Inc., a Texas corporation ("Old
Synaptix.") The acquisition price for the assets was three million shares of
stock of the Company.
Background of the Company
The Company was incorporated in the State of Colorado in December 1986,
under the name Euram Capital Corporation. The Company became a public company in
August 1987 when it completed an offering of "Units", consisting of one share of
Common Stock and one Class A Warrant to Purchase the Common Stock of Euram
Capital Corporation, pursuant to a Registration Statement on Form S-18 that was
filed with the Securities and Exchange Commission on August 6, 1987.
The Company was originally organized for the purpose of acquiring
business opportunities and, if successful in that regard, in developing and
operating the entities acquired. Prior to December 1991, the business of the
Company consisted primarily of evaluating companies for acquisition and
participation in two joint ventures related to the development, marketing, sale,
and licensing of proprietary computer software and consulting services.
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In November 1988, the Company entered into a joint venture agreement
(the "Euram Joint Venture") with Logistical Systems Techniques, Inc., a Delaware
corporation doing business as Cosmos Imaging Systems ("Cosmos"), for the
development and marketing of four software imaging programs. This agreement was
rescinded in March 1990. On August 1, 1990, the Company entered into a new joint
venture agreement to market, distribute, sell, and license certain of Cosmos'
line of proprietary computer imaging software and consulting services (the
"Euram/Cosmos Joint Venture"). The Company invested approximately $377,000 in
Cosmos, in the form of capital contributions and loans, to complete the
development of Cosmos' software programs, and to begin a national marketing
program. Effective October 20, 1990, the Company entered into a joint venture
agreement with SC Special Computer Corporation GmbH ("SC Joint Venture") to
complete the final development and to initiate the commercial marketing of
software programs developed by SC Special Computer Corporation GmbH.
Upon approval of the shareholders of record at the Company's annual
meeting on December 27, 1990, the name of the Company was changed from Euram
Capital Corporation to Basic Natural Resources, Inc. On February 28, 1991, the
Company, along with Cosmos, entered into an agreement with Dynatech Computer
Systems ("Dynatech"), a Massachusetts corporation, to sell all of the Company's
rights, title, and interest in and to the Euram/Cosmos Joint Venture to
Dynatech.
On December 27, 1991, the Company substantially altered the nature and
extent of its business by completing the purchase of 93% of the issued and
outstanding common stock of Diversified Land & Exploration Co., a Utah
corporation, and its subsidiaries (collectively "Diversified") in exchange for
approximately 292,000,000 shares of the Company's Common Stock. At that time,
the Company abandoned the Euram/Cosmos Joint Venture and the SC Joint Venture.
Following the purchase and exchange of shares, Diversified became a subsidiary
of the Company.
As a result of the Company's acquisition of Diversified in December
1991, the Company became a natural resources corporation, with natural gas
processing and transportation operations or interests in eight states. The
Company's business activities included natural gas gathering, processing,
transportation and marketing services, and the ownership, development and
production of oil, natural gas and natural gas liquids for its own account. The
Company also invested in other mineral properties such as gold, silver and
gypsum.
In March 1992, the Company's management elected to change the Company's
accounting period to coincide with the fiscal year end date of June 30, the date
utilized by Diversified, the Company's predominate operating business. During
the year ended June 30, 1995, the Company entered into a settlement agreement
with a shareholder group to return 659,547 shares of the common stock of the
Company owned by entities of certain individual officers and directors and
removed Diversified as a subsidiary of the Company. Following the disposition of
Diversified in June 1995, the Company ceased operations related to the oil and
gas segment.
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Acquisition of Software
In December, 1996, approximately 90% of the then issued and outstanding
shares of stock of the Company were acquired by Alan W. Harvey, its then current
President and CEO, in connection with an intended acquisition of assets owned by
Swallen Investments Corp. Among the assets that were acquired were three
computer programs under development (the "Software") which the Company believes
can be developed and marketed successfully. Swallen Investments Corp. obtained
the assets from a lender who in turn acquired the assets through foreclosure of
a loan to Synaptix, Inc., a Texas corporation ("Old Synaptix.") The Company
acquired these assets for three million shares of the Company's common stock.
Products and Services
Among the assets that the Company acquired are two software products,
FieldExpress and TnExpress. The Company is also developing a new computer
program code-named "EAGLE", based upon code that was acquired in the purchase of
assets from Swallen Investments Corp.
Field Express Software
FieldExpress is a software product for job forecasting, electronic data
feeds from remote job sites and development of data regarding company wide
committed costs and forecasting. Although the Company is currently unable to
commit any funds to further develop and market this product, management believes
that the Company may be able to license FieldExpress to an established software
company marketing "canned" accounting software packages.
TnExpress Software
TnExpress ("TnE") is designed to be a simplified time sheet and expense
entry system feeding standard accounting packages such as Oracle Financials,
Lawson and SAP. The Company is currently unable to commit any funds to further
develop and market this product.
EAGLE Software
The principal reason for acquiring the assets from Swallen Investments
Corp. was to obtain rights to certain incomplete software code related to EAGLE,
a wireless communication software program currently under development.
The current development objective of EAGLE is to allow mobile computer
users the ability to develop and utilize mobile applications, i.e. data, screens
and reports, all without having to know anything more than how to "drag and
drop" fields onto a screen. These applications share data from PC to PC, PC to
the Web, PC to Handheld, and PC to Laptop.
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EAGLE is expected to be a true freeform database with the flexibility
to handle complex data or simple concepts like a contact manager. EAGLE is
designed to utilize most communication technologies available today, or in the
future, including radio modems, the cellular data network, dial-up, local area
networks and the Internet. EAGLE is designed to operate on Windows 95, Windows
NT, or Windows CE compatible devices.
For customers who need access to their data while on the road, the
current EAGLE product is expected to allow the user to simply open the screen
canvas for their Nokia 9000, or Cassiopeia, or other hand held wireless device,
drop the fields they need to access while out of the office onto the canvas,
give it a name, and slip back into run mode. The next time the user's handheld
personal computer or Smartphone communicates with his office, the form will be
available inside the user's hand held version of EAGLE. In the event that the
user forgets his or her laptop PC or his or her hand held PC is not working, the
user will still have access to EAGLE. The Web engine inside the EAGLE server can
deliver data to the user or anyone else running a browser. With this variety of
options available, the user's data is expected to be available from virtually
anywhere on the globe.
It is intended that the benefits of EAGLE should include drastically
reduced development times, access to the user's data from virtually anywhere,
and wireless access to a company's most valuable asset - its information. EAGLE
is designed to allow for seamless sharing of information between a corporate
information system, a PC at home and a smart cell telephone while on the road.
EAGLE has been constructed to allow the user to develop the free-form design of
databases, as well as the ability to automatically create JAVA code which would
allow the user to access his information from anywhere on the Internet. EAGLE
has been designed to allow for work flow processing of information as it
circulates through the organization, thereby providing an effective software
program for the user while en route.
In the event that the Company is successful in its efforts to raise new
capital and further develop Eagle, an event that the Company cannot confirm at
this time, the Company expects to ship the EAGLE software with a variety of
built-in templates for contact management, stock quotes, airline reservations,
e-mail, sales leads, and the like during the second quarter of 1998.
Research and Development
At this time, the current version of the Eagle software is available in
BETA test format only. To achieve profitable operations, the Company, alone or
with others, must successfully develop, introduce, market, and sell the software
products. There can be no assurance that the software products will be
successfully developed, or will be successfully marketed in the future, that the
Company will realize future revenues, or that sales will prove profitable. The
Company's products and operations are in development and are subject to the
risks inherent in the development of computer software, including unforeseen
problems, delays, expenses, and complications frequently encountered in the
development and commercialization of products, the dependence on and attempts to
apply new and rapidly changing technology, and the competitive environment of
the software industry. Many of these events may be beyond the Company's control,
such as unanticipated
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development requirements and further funding. There can be no assurance that the
Company's product development efforts will be successfully completed. Further,
there can be no assurance that the software products, if successfully developed,
will attain acceptance by computer users.
Competition
The Company is engaged in business activities that are intensely
competitive and rapidly changing. The Company believes that the principal
competitive factors in the business in which it operates are relative to price
and performance, product availability, technical expertise, adherence to
industry standards, financial stability, service support and reputation. Price
competition has intensified in the marketplace with respect to software product
sales, and is likely to continue to intensify. Upon completion of the
development of the software products, and introduction to the marketplace, the
price competition could materially adversely affect the Company's financial
condition and results of operations in the future. There can be no assurance
that the Company will be able to compete successfully with existing or new
competitors. The Company's competitors would include other software developers,
and may include major computer products and telephone equipment manufacturers,
and distributors. Other competitors could include established national, regional
and local resellers, systems integrators, telephone systems dealers, and other
computer/telephone integration software suppliers. Some of the Company's
potential competitors have longer operating histories and financial, sales,
marketing, technical and other competitive resources which are substantially
greater than those of the Company. As a result, the Company's competitors may be
able to adapt more quickly to changes in customer needs or to devote greater
resources than the Company to sales and service of its software products. Such
competitors could also attempt to increase their presence in the Company's
markets by forming strategic alliances with other competitors of the Company,
offer new or improved software products and services to the Company's customers
or increase their efforts to gain and retain market share through competitive
pricing.
Business Strategy
The Company plans to seek additional financing to generate sufficient
working capital over the next 12 months to complete the development of its
Software and to commence production and marketing. The Company may seek such
financing from venture capital sources or from a subsequent public issuance of
stock. The Company anticipates that working capital expenditures, including
costs of the development of the Eagle product, will be approximately $1.2
million during fiscal 1998.
Financing and Working Capital
The Company is in the development stage and has generated no operating
revenues. To date, the Company has been principally engaged in research and
development, preliminary product design work, and evaluation studies. The
Company does not expect to have its first product commercially available for at
least six months. At June 30, 1997, the Company had a deficit of $5,175,147, and
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a negative working capital balance of $90,173. Operating losses have continued
to date. The Company does not anticipate generating revenue until at least the
last quarter of 1998, if at all, and will continue to incur operating losses
until at least 1998 (and potentially thereafter) as the Company increases
expenditures for product development, U.S. and international patent prosecution
and enforcement, manufacturing, and marketing. There is no assurance that the
Company will be successful in raising equity and continuing as a going concern.
Sales and Marketing
The Company does not have significant experience in sales, marketing,
or distribution. To market the software products directly, the Company must
develop a marketing and sales force with technical expertise and supporting
distribution capability. Alternatively, the Company may seek to obtain the
assistance of enterprises with a large distribution system and a large direct
sales force. There can be no assurance that the Company will be able to
establish sales and distribution.
Rapid Technological Change
The business in which the Company competes is characterized by rapid
technological change and frequent introduction of new products and product
enhancements. The Company's success depends in large part on its ability to
identify and obtain products that meet the changing requirements of the
marketplace. There can be no assurance that the Company will be able to identify
and offer products necessary to remain competitive or avoid losses related to
obsolete inventory and drastic price reductions. The software products may
compete in the future for market share with alternate currently available
software products for remote communication and transmission of data. Potential
purchasers of the Company's software products may determine that currently
available programs of other software publishers are sufficient for their remote
computing needs. In addition, competition may arise from products currently in
development, or developed in the future, by other companies. Many of the current
and potential competitors are likely to have substantially greater capital
resources, research and development staffing, and facilities than the Company.
Patents, Trademarks, Licenses
If the Company succeeds in fully developing the Software, the Company's
ability to compete effectively will depend in large part upon its ability, as
yet unproven, to obtain patent and/or copyright protection for the Software,
maintain confidentiality of its trade secrets and know-how, and operate without
infringing upon the proprietary rights of third parties. There can be no
assurance that any such patents or copyrights will provide the Company with any
competitive advantages or will not be challenged by any third parties or that
patents or copyrights issued to others will not have an adverse effect on the
ability of the Company to conduct its business. In addition, there can be no
assurance that any of the Company's patents or copyrights would be held valid by
a court of law of competent jurisdiction or, if held valid, that the Company
will have sufficient economic resources
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to enforce its rights. If patents or copyrights that contain competitive or
conflicting claims that ultimately may be determined to be valid are issued to
other companies, there can be no assurance that the Company would be able to
obtain a license to any of such patents or copyrights.
The Company also relies on its trade secrets and proprietary know-how.
The Company has been, and will continue to be, required to disclose its trade
secrets and proprietary know-how not only to employees and consultants, but also
to potential corporate partners, collaborators, and contract manufacturers.
There can be no assurance that any confidentiality agreements that the Company
may enter into with such persons will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets and
proprietary know-how will not otherwise become known or be independently
discovered by competitors.
Employees
The Company has entered into an agreement with an employment agency
whereby all of the Company's staff are employed through the employment agency
and are considered to be contract employees. In accordance with this
arrangement, the employment agency provides health insurance benefits coverage,
workers compensation, and is also responsible for withholding State and Federal
taxes. As of October 20, 1997, the Company employed 8 full-time contract
employees. Of these, 1 was employed in management, 6 in technical production
positions, and 1 was employed in administration. All employees are required to
sign confidentiality agreements with the Company. The loss to the Company of the
services of any of the technical personnel could have a material adverse effect
upon the Company's future operations. The Company's success also may depend on
its ability to attract and retain other qualified technical and management
personnel. The Company competes for such persons with other companies, academic
institutions, government entities, and other organizations, some of which may
have substantially greater capital resources and facilities than the Company.
There can be no assurance that the Company will be successful in recruiting or
retaining personnel of the requisite caliber or in adequate numbers to enable it
to conduct its business as proposed. Furthermore, the Company's possible future
expansion into activities requiring additional expertise in regulatory
clearance, manufacturing, and marketing will place increased demands on the
Company's resources and management skills. The Company believes that its ability
to recruit and retain highly skilled and experienced technical, sales and
management personnel has been, and will continue to be, critical to its ability
to protect its proprietary and trade secret information. The Company believes
other factors, such as the technical expertise and knowledge of the Company's
management and technical personnel, and the timeliness and quality of support
services provided by the Company, to be more significant in maintaining the
Company's competitive position. The Company's lack of working capital increases
the risk that key employees will be attracted to other business opportunities.
Effective October 17, 1997, the Company's Chief Executive Officer and
President resigned from the Company. Until the Company is successful in
identifying and recruiting a replacement Chief Executive Officer and President,
the Company's Vice President and Chief Financial Officer is acting additionally
as Chief Executive Officer and President.
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Consulting Agreements
The Company signed an agreement, effective August 6, 1997, with a
management services and financial advisor. Terms of the agreement call for the
advisor, in addition to assisting the Company with management and operations, to
assist the Company in raising up to $5 million in investment capital. The
advisor is to be paid $30,000 per month for six months and also receive 5% of
the capital raised by the Company. If $2 million is raised, the financial
advisor is to receive 250,000 shares of the Company's common stock which will be
registered on Form S-8. In January 1998, the advisor is to be issued 5% of the
outstanding stock of the Company at that date.
ITEM 2. DESCRIPTION OF PROPERTY
Facilities
The Company does not own any real property and currently leases its
existing facilities. The Company leases its principal executive offices in
League City, Texas, which consist of approximately 5,000 square feet of space of
administrative offices. The lease is for a one-year term, and will expire on
December 1, 1997. Management does not anticipate the expansion of its offices in
the near future, and, in the event that the Company is successful in raising new
capital, it intends to renew the lease for an additional one-year period under
the current terms and conditions.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. To management's knowledge, the
Company is not currently involved in any legal proceedings and is not aware of
any legal proceeding threatened against it.
A former legal firm employed by the Company is in the process of
obtaining a default judgment against the Company for unpaid fees of about
$12,000. The $12,000 is reflected in accounts payable, and management is in the
process of settling this matter.
Certain shareholders of the Company are also shareholders of Synaptix
Systems Corporation ("Synaptix Florida"), a Florida corporation not affiliated
with the Company. Synaptix Florida was formed in 1996 by Alan Harvey, the former
president of the Company, with the intention of acquiring the Old Synaptix
assets and developing the software. Funds were raised by Synaptix Florida from
third-party investors for this purpose, although to the Company's best knowledge
Synaptix Florida never entered into any actual agreement to acquire the Old
Synaptix assets from the owner.
In December 1996, Mr. Harvey acquired control of the Company and contracted
with Swallen Investment Corp. to acquire the Old Synaptix assets. Mr. Harvey, in
his personal capacity, represented to certain Synaptix Florida shareholders that
they would receive stock in the Company in place of their Synaptix Florida
shares; these representations and the existence of
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Synaptix Florida were not disclosed to the Board of Directors by Mr. Harvey
until June, 1997. At that time, the Company wrote to the shareholders of
Synaptix Florida to inquire as to their interest in exchanging their shares for
Company stock, in anticipation of a projected merger of the two companies. No
offer to exchange shares was made at that time. Since that date, the Company
learned that Synaptix Florida had substantial undisclosed liabilities and has
abandoned plans to merge the companies. The Company has not issued any shares of
its stock to any Synaptix Florida shareholders in exchange for any Synaptix
Florida shares.
Synaptix Florida is not currently conducting any operations. Alan
Harvey remains the president of that company. The funds raised by Synaptix
Florida apparently were expended in anticipation of acquisition of the assets.
Mr. Harvey has alleged, on behalf of Synaptix Florida, that some portion of
these funds were loaned or otherwise contributed to the Company. The Company
cannot confirm any such loans or contributions of funds from Synaptix Florida.
The Company has determined that potential claims by Synaptix Florida or
its shareholders could be asserted against Alan Harvey, and potentially against
the Company as well, in connection with the Company's acquisition of the Old
Synaptix assets and the alleged loans or contribution of Synaptix Florida funds
to the Company, although the Company does not believe that any such claim would
be upheld as against it. In order to settle any such claims, Mr. Arley L.
Harvey, Alan Harvey's father, has agreed to have Variable Resources, Inc., a
company controlled by Arley L. Harvey, acquire all rights to any derivative
claims from the shareholders of Synaptix Florida in exchange for shares of the
Company's stock held by Variable Resources, and to provide the Company with a
complete release. In addition, in September, 1997, the Company entered into a
separate Release Agreement with Synaptix Florida, settling all claims for
alleged loans or contributions of funds to the Company and providing for a
general release of claims between the two companies. As a result of these
actions, Management does not believe that these potential claims will have any
material adverse effect upon the Company.
ITEM 4. SUBMISSION OR MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders
during the fourth quarter of the year ended June 30, 1997.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
The Company's common stock is traded on the NASDAQ OTC
Electronic Bulletin Board under the symbol "SYTS". The Company's common stock
commenced trading on June 6, 1997, but had not traded for the period December
31, 1993 through June 5, 1997. As of October 14, 1997, there were approximately
131 beneficial owners of the Company's common stock The following table sets
forth, for the quarterly periods indicated, the range of high and low closing
prices for the Company's common stock, as reported by the NASDAQ OTC Electronic
Bulletin Board.
High Low
1997
March 31, 1997................................. 0.00 .00
June 30, 1997.................................. 2.875 .00
September 30, 1997............................. 3.25 2.25
The closing price of the Company's common stock on October 10, 1997 was
$3.125.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on the
Common Stock. The payment of dividends in the future will depend on the
Company's earnings, if any, capital requirements, operating and financial
position and general business conditions. The Company intends to retain any
future earnings for reinvestment in its business and does not intend to pay cash
dividends in the foreseeable future. The Company has not entered into any
agreement which restricts its ability to pay dividends on its Common Stock in
the future. See "Management's Discussion and Analysis and Results of
Operations."
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the audited
financial statements included elsewhere herein. Except for the historical
information contained herein, the matters discussed in this Annual Report are
forward-looking statements that involve a number of risks and uncertainties.
There are certain important factors and risks, including the rapid change in
hardware and software technology, market conditions, the anticipation of growth
of certain market segments and the positioning of the Company's products and
services in those segments, the timing of the product announcements, the release
of new or enhanced products, the introduction of competitive products and
services by existing or new competitors and the significant risks associated
with the acquisition of new products, product rights, technologies, businesses,
the management of growth, the Company's ability to attract and retain highly
skilled technical, managerial and sales and marketing personnel, and the other
risks detailed from time to time in the Company's SEC reports, including reports
on Form 10-KSB and Form 10-QSB, that could cause results to differ materially
from those anticipated by the statements made herein.
Introduction
Synaptix is a development stage company. The Company's products are not
directed to the retail consumer market. The Company anticipates that it will be
able to provide systems integration and networking services in addition to the
sale of its products. These system integration services will include consulting,
maintenance, training and the installation of hardware on which to implement the
Company's software's products. The following discussion is included to describe
the Company's financial position and results of operations for each of the three
years in the period ended June 30, 1997. The financial statements and notes
thereto contain detailed information that should be referred to in conjunction
with this discussion.
Acquisition of Software Products
In May 1997, the Company completed the acquisition of assets consisting
of three computer programs under development, in addition to equipment and
property from Swallen Investments Corp. The acquisition price for the assets was
three million shares of the Company's common stock. The acquisition was
accounted for as an asset purchase. Accordingly, the purchase price was
allocated to the assets acquired based upon their estimated historical cost at
the date of acquisition determined by management.
Results of Operations
Comparison of Fiscal Year Ended June 30, 1997 to Fiscal Year Ended June 30,
1996
The Company recorded a net loss of $348,225, or a ($ .14) loss per
share for the fiscal year ended June 30, 1997, compared with a net loss of
$66,182, or a ($1.74) loss per share for the fiscal
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year ended June 30, 1996. The Company incurred general and administrative
expenses of $408,775 related to administrative costs in the transition of the
Company from being non-operational to a company in the development stage of a
software technology company. A portion of loss was associated with the
acquisition costs of the three software programs, which were acquired through
the issuance of 3,000,000 shares of the Company's common stock. In addition,
during the fiscal year ended June 30, 1997, the Company registered common stock
pursuant to an Employee Stock Compensation Plan and issued stock in lieu of
compensation, thereby reducing debt.
Revenues
The Company did not record any meaningful revenues for the fiscal years
ended June 30, 1997 or 1996. During this time, the Company borrowed funds to pay
for working capital expenditures and the loans were forgiven, effective June 30,
1997. The Company plans to seek additional financing to obtain necessary working
capital to complete development of its Software and to commence production and
marketing. Management anticipates that the Company's funding requirements will
be in the range of $3 to $5 million. The Company may seek such financing from
venture capital sources or from a subsequent public issuance of stock.
Financial Condition
The Company is currently in a development stage, and the information,
financial statements and notes to the financial statements have been prepared on
the premise that it will be successful in raising additional capital and
continue as a going concern. The Company intends to rely on further equity
offerings and loans to generate sufficient working capital over the next 12
months to complete the Eagle project and introduce it to the market. The Company
anticipates that working capital expenditures, including costs of the
development of the Eagle product, will be approximately $1.2 million during
fiscal 1998.
General and Administrative Expenses
General and administrative expenses were approximately $409,000 and
$69,000 for the fiscal years ended June 30, 1997 and 1996, respectively, an
increase of approximately $340,000. The increase of approximately $340,000 was
attributable partly to expenses incurred for consulting to ascertain to whether
the Company's products were viable to further justify further development.
Administrative expenses included increases attributable to an increase in
management personnel, as well as administrative, legal and accounting expenses.
In addition, the Company incurred expenses associated with the identification
and qualification of, and the efforts related to the acquisition of the software
products.
Research and development expenses were nominal in fiscal 1997. During
fiscal 1996, the Company was non-operational. The Company currently has 8
full-time contract employees.
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Loss from Operations
The Company had an operating loss of approximately $404,000 in fiscal
1997 and approximately $69,000 in fiscal 1996. The 1997 loss was the result of
the operating expenses incurred as the Company was transformed from a
non-operational oil and gas company and the Company began to implement its
business plan to enter into the computer technology industry through the
acquisition of software products in the development stage. The net loss incurred
in 1997 would have been greater than $348,225 had certain shareholders and
others not forgiven $75,840 in advances and loans to the Company.
The Company expects that operating results will fluctuate as a result
of a number of factors, including: whether the Company will continue as a going
concern, the timing of new product and service introductions by the Company, as
well as by its competitors, changes in the Company's level of operating
expenses, including the Company's expenditures for software product development
and promotional programs, the size and timing of customer orders for its
products and services, development, production or quality problems on the part
of the Company, competition in the computer software market and the general
state of the global and national economies. The market demand for commercial
software products and services can be significantly affected by uncertain
economic cycles. Many of the factors that may affect the Company's operating
results and demand for products and services based on its technologies cannot be
predicted, may not exhibit a consistent trend, or are substantially beyond the
Company's control. Fluctuations in operating results can also be expected to
result in volatility in the price of the Company's common stock.
Interest and Other Expense
The Company incurred approximately $20,000 in interest and other
expenses during fiscal 1997 and $81 in fiscal 1996. The increase in fiscal 1997
was the result of an EPA settlement related to the Company's prior operations in
the oil & gas industry.
Income Taxes
The Company had no income tax expense. As of June 30, 1997, the Company
had net operating loss carryfowards of approximately $3,404,000. The utilization
of net operating carryforwards will be limited as determined pursuant to
applicable provisions of the Internal Revenue Code and U. S. Treasury
regulations thereunder.
14
<PAGE>
Net Loss
The Company had a net loss of approximately $348,000 in fiscal 1997 and
a net loss of approximately $69,000 in fiscal 1996. The net loss in fiscal 1997
was attributable to $20,000 in other expenses primarily attributable to an EPA
settlement, as well as non-recurring operating expenses and an increase in
administrative operating expenses. Non-recurring operating expenses included
costs of $187,500 associated with development of the Company's web site and fees
related to determining future viability of the Company. Operating expenses
included approximately $221,500 in administrative expenses for additional
staffing, legal fees, rent, and expenses related to the implementation of the
acquisition of assets. These increases in expenditures in administrative
expenses were anticipated under the Company's operating plan following the
acquisition of the software products.
Liquidity and Capital Resources
At June 30, 1997, the Company had a working capital deficiency of
approximately $91,000, compared to a working capital deficiency of approximately
$41,000 at June 30, 1996. Subsequent to June 30, 1997, the Company's working
capital deficiency has continued to increase. The cash balance at June 1997 was
approximately $1,000 and at June 30, 1996, was approximately $0.
Cash used by operations during the year totaled approximately $59,000
in 1997 and $54,000 in 1996. Cash used in investing activities in 1997 was
approximately $23,000. Cash provided by financing activities in 1997 totaled
$83,000, which included the proceeds from private offerings.
Prior to June 30, 1997, the Company had raised approximately $20,000
through the sale of its shares of common stock.
The Company holds promissory notes from investors in the amount of
$200,000 which are due and payable on November 15, 1997. These funds will be
used for working capital purposes in connection with existing obligations of the
Company, and future expenses to be incurred in the research and development of
the Eagle software product, and for general corporate purposes. There is no
assurance that the Company will obtain adequate financing or access to capital
to continue as a going concern.
Year ended June 30, 1996 compared to Year ended June 30, 1995
During the fiscal year ended June 30, 1996, the Company had no active
operations, $0 in cash, a working capital deficit of $41,209, and accumulated
losses of $4,826,922. Mr. Samuel L. Skipper held the positions of Sole Director,
Chairman, President, Chief Executive Officer and Chief Financial Officer for the
period August 1995 through December 23, 1996. The Company was considering
entering into the business of computer technology, and is also considering a
change in management. The Company continued to seek acquisition and merger
candidates with an emphasis
15
<PAGE>
in the area of computer related technologies. Management believes that an
acquisition of this nature will provide an opportunity to enhance shareholder
value.
Liquidity and Capital Resources
At June 30, 1996, the Company maintained a negative liquidity position.
The Company had ceased all operations and was looking for an acquisition
candidate.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The reports of the Company's Independent Public Accountants, Financial
Statements and Notes to Financial Statements appear herein as noted below:
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditor's Report.....................................................................................17
Balance Sheets, June 30, 1997 and 1996...........................................................................18
Statements of Operations for the Years ended June 30, 1997, 1996 and 1995........................................19
Statements of Changes in Stockholders' Equity (Deficit) for the Years ended
June 30, 1997, 1996 and 1995............................................................................20
Statements of Cash Flows for the Years ended June 30, 1997, 1996 and 1995........................................21
Notes to Financial Statements ...................................................................................22
</TABLE>
16
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
The Stockholders and
The Board of Directors
Synaptix Systems Corporation
(A Development Stage Company)
We have audited the accompanying balance sheets of Synaptix Systems Corporation
(a development stage company) as of June 30, 1997 and 1996, and the related
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the years ended June 30, 1997, 1996, and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Synaptix Systems Corporation (a
development stage company) as of June 30, 1997 and 1996 and the results of its
operations and its cash flows for the years ended June 30, 1997, 1996, and 1995
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the financial statements, the
Company has a working capital deficiency of $90,713 as of June 30, 1997, and has
incurred accumulated losses of $5,175,147 at that date. As discussed in Note 9,
the Company's ability to generate sufficient cash flows to meet its obligations
and sustain its operations cannot be determined at this time. These
uncertainties raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 9. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
October 7, 1997, except Note 13 which is dated October 17, 1997.
17
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
BALANCE SHEETS
June 30, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
------------------ ----------------
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 989 $ 0
Prepaid expenses 72,770 0
------------------ ----------------
TOTAL CURRENT ASSETS 73,759 0
PROPERTY, PLANT & EQUIPMENT
(Note 1 and Schedules V and VI) 100,873 0
------------------ ----------------
TOTAL ASSETS $ 174,632 $ 0
================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 163,373 $ 28,009
Loans payable (Note 10) 0 13,200
Current portion of long-term lease (Note 7) 1,099 0
Income taxes payable 0 0
------------------ ----------------
TOTAL CURRENT LIABILITIES 164,472 41,209
Long-term lease (Note 7) 1,239 0
Contingent liability (Note 11) 0 0
------------------ ----------------
TOTAL LIABILITIES 165,711 41,209
STOCKHOLDERS' EQUITY (DEFICIT) (Note 8)
Preferred stock - $1 par value 10,000,000 shares authorized; 0
shares of Series A Voting Preferred Stock outstanding at June
30, 1997 and 174,865 shares outstanding at June 30, 1996, and 0
shares of Series A Convertible Preferred Stock outstanding at
June 30, 1997, and
June 30, 1996. 0 174,865
Common stock - $.003 par value 25,000,000 shares authorized;
15,473,700 shares issued and outstanding at June 30, 1997 and
39,668 shares issued and
outstanding at June 30, 1996. 46,421 119
Additional paid-in capital 5,337,647 4,610,729
Retained (deficit) (5,175,147) (4,826,922)
Stock subscription receivable (Note 6) (200,000) 0
------------------ ----------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 8,921 (41,209)
------------------ ----------------
$ 174,632 $ 0
================== ================
</TABLE>
See accompanying notes to these financial statements.
18
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Years ended June 30, 1997, 1996, and 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- ------------------- ------------------
<S> <C> <C> <C>
Revenues $ 4,710 $ 0 $ 0
Costs and Expenses
General and administrative expenses 408,775 69,403 68,644
Interest 0 81 225
-------------------- ------------------- ------------------
Total Costs and Expenses 408,775 69,484 68,869
-------------------- ------------------- ------------------
Income (loss) from
Continuing Operations: (404,065) (69,484) (68,869)
Other Income (Expense):
EPA settlement (Note 11) (20,000) 0 0
Debt forgiveness (Note 4) 75,840 0 71,952
Investment income (loss) 0 3 17
-------------------- ------------------- ------------------
Net other income 55,840 3 71,969
-------------------- ------------------- ------------------
Income (Loss)
Before Income Taxes (348,225) (69,481) 3,100
Income tax expense (benefit) 0 (3,299) 0
-------------------- ------------------- ------------------
Net Income (Loss) $ (348,225) $ (66,182) $ 3,100
==================== =================== ==================
Income (Loss) Per Share
(Continuing Operations) $ (.14) $ (1.74) $ .07
==================== =================== ==================
</TABLE>
See accompanying notes to these financial statements.
19
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Years ended June 30, 1997, 1996, and 1995
<TABLE>
<CAPTION>
Total
Additional Retained Stockholders'
Common Preferred Paid-In Earnings Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
---------- ----------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1994 46,492 $ 139 174,865 $ 174,865 $ 4,446,541 $(4,763,840) $ (142,295)
Common stock issued to
pay liabilities 833 3 124,165 124,168
Common stock canceled (10,991) (33) 33
Net income 3,100 3,100
---------- ----------- ---------- ---------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1995 36,334 109 174,865 174,865 4,570,739 (4,760,740) (15,027)
Common stock sold for cash 3,334 10 39,990 40,000
Net loss (66,182) (66,182)
---------- ----------- ---------- ---------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1996 39,668 119 174,865 174,865 4,610,729 (4,826,922) (41,209)
Sale of restricted common stock
for cash 1,217,500 3,652 3,652
Issuance of restricted common stock
for expenses 58,334 175 20,825 21,000
Issuance of common stock for
preferred shares 174,865 525 (174,865) (174,865) 174,340
Sale of common stock (Regulation
S) for stock subscription (Note 6)2,000,000 6,000 194,000
Sale of common stock (S-8) for
cash and services 6,750,000 20,250 251,500 271,750
Sale of restricted common stock for
cash, assets, and expenses 2,250,000 6,750 27,000 33,750
Issuance of restricted common stock
for assets and expenses 3,000,000 9,000 69,203 78,203
Cancellation of restricted stock (16,667) (50) (9,950) (10,000)
Net loss (348,225) (348,225)
---------- ----------- ---------- ---------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1997 15,473,700 $ 46,421 0 $ 0 $ 5,337,647 $(5,175,147) $ 8,921
========== =========== ========== ========== =========== =========== ==========
</TABLE>
See accompanying notes to these financial statements.
20
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Years ended June 30, 1997, 1996, and 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- ------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (348,225) $ (66,182) $ 3,100
Adjustments to reconcile net income (loss) to net cash
provided (used) in operating activities:
Stock issued for expenses 251,403 0 0
Debt forgiveness (75,840) 0 0
Changes in assets and liabilities:
Prepaid expenses (21,695) 0 0
Income taxes payable 0 (3,299) 0
Accounts payable and accrued liabilities 135,364 15,637 (3,098)
------------- ------------- ------------
Net Cash Provided (Used) in Operating Activities (58,993) (53,844) 2
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of equipment (22,658) 0 0
------------- ------------- ------------
Net Cash Used by Investing Activities (22,658) 0 0
CASH FLOWS FROM
FINANCING ACTIVITIES:
Loan proceeds 62,640 13,200 0
Sale of common stock 20,000 40,000 0
------------- ------------- ------------
Net Cash Provided by Financing Activities 82,640 53,200 0
------------- ------------- ------------
Net Increase (Decrease) in Cash 989 (644) 2
CASH AT BEGINNING OF YEAR 0 644 642
------------- ------------- ------------
CASH AT END OF YEAR $ 989 $ 0 $ 644
============= ============= ============
SUPPLEMENTAL CASH
FLOW INFORMATION:
Interest paid $ 0 $ 81 $ 225
Income taxes paid 0 0 0
------------- ------------- ------------
$ 0 $ 81 $ 225
============= ============= ============
</TABLE>
SUPPLEMENTAL OPERATING ACTIVITIES:
312,500 shares of stock were issued for prepaid expenses of $34,825.
SUPPLEMENTAL INVESTING ACTIVITIES:
3,000,000 shares of stock were issued for $75,878 of equipment. $2,338 of
equipment was obtained by entering into a capital lease in the amount of $2,338.
See accompanying notes to these financial statements.
21
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1997
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was originally incorporated in Colorado on December
31, 1986 as Euram Capital Corporation ("Euram"), and became a
public company in August 1987. The Company was originally
organized for the purpose of acquiring business opportunities. In
1990, the Company changed its name to Basic Natural Resources,
Inc. ("BNR") and acquired 95% of the outstanding stock of
Diversified Land & Exploration ("DL&E") and subsidiaries
("Diversified"), a provider of engineering, accounting, and
operating services to the oil and gas industry. On April 9, 1997,
the Company changed its name to Synaptix Systems Corporation.
The Company and its former subsidiaries were previously engaged in
the business of acquiring, exploring, and developing real estate,
minerals, oil, and gas. The Company was concentrating its efforts
in Oklahoma, Texas, Kansas, Illinois, Indiana, Colorado, Wyoming,
and Louisiana.
Synaptix' newest software program, currently in development and
code-named "Eagle", allows HPC (Handheld Personal Computer) users
to collect data in the field, enter this data into a forms-based
format, and automatically send that data to another location using
wireless telecom connections. Eagle is unique. Where most HPC
software transmits e-mail, paging messages, stock quotes and the
like, Eagle manages forms based on text, such as sales orders,
call reports, emergency medical information, and any other time
critical data. Further, with FormsDesign, an Eagle module, the
user may create company specific form sets in a matter of minutes.
Additionally, using an integrated "intelligent agent", Eagle may
be used to query remotely located databases such as Oracle,
Informix or Sybase and retrieve form sensitive information in the
field. Eagle is expected to sell for $106 per license in
quantities of 10,000. Potential customers are digital data service
providers and include GTE and AT&T.
Synaptix' other product, FieldExpress, is a complete forms-based
field data collection and management system useful in managing
large amounts of disparate data. FieldExpress is customized for
each client and is intended for use in large (Fortune 500)
companies. A typical FieldExpress user might be a company
investing $100 million or more in a new petrochemical plant where
contractor costs must be monitored on a daily or weekly basis and
all reporting uses the same forms-based submissions. A typical
FieldExpress integrated solution requires an initial client
investment of $250,000 - $400,000.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful
lives of the assets, principally three to seven years.
Income Taxes
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences,
and operating loss carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of
the deferred tax assets will not be realized. The deferred tax
asset and valuation allowance at June 30, 1997 were both $52,000.
Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment. As of
June 30, 1997, temporary differences arose primarily from
differences in the timing of recognizing expenses for financial
reporting and income tax purposes. Such differences include
depreciation.
Net Income Per Share Amounts
Net income per common share amounts are computed based on the
weighted average number of common shares outstanding as follows:
1997 1996 1995
---------- --------- ---------
Weighted average common
shares outstanding 2,506,606 37,938 46,429
========== ========= =========
Weighted average shares for all years presented reflect a 1-for-60
reverse split which was approved on January 10, 1997.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
22
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting Standards Not Yet Adopted
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting
for Stock Based Compensation (SFAS 123). The Company was required
to adopt the provisions of this statement for years beginning
after December 15, 1995. This statement encourages, but does not
require, all entities to adopt a fair value based method of
accounting for employee stock options or similar equity
instruments. However, it also allows an entity to continue to
measure compensation cost for those plans using the
intrinsic-value method of accounting prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25). Entities electing to remain with the
accounting in APB 25 must make pro forma disclosures of net income
and earnings per share as if the fair value based method of
accounting defined in this statement had been applied. The Company
is continuing to measure compensation costs in accordance with APB
25 and provide the disclosures required by SFAS 123. There were no
applicable disclosures for fiscal 1997. During fiscal 1997,
4,000,000 shares of common stock were registered for the
compensation plan and 3,750,000 shares were issued under the plan
and valued based on the services received.
Cash and Equivalents
For purposes of reporting cash flows, the Company considers all
cash accounts which are not subject to withdrawal restrictions or
penalties, and certificates of deposit with original maturities of
90 days or less to be cash or cash equivalents.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company believes that since it is now engaged in a new line of
business, it is in the development stage as of June 30, 1997.
NOTE 3: ACQUISITIONS / DISPOSITIONS
On May 15, 1997, the Company issued 3,000,000 shares of its
restricted common stock to acquire many fixed assets, software
products, and rights from Swallen Investments Corp. ("Swallen").
Prior to the items being owned by Swallen, the items had been
owned by Synaptix, Inc. ("Synaptix Texas"), a Texas entity
controlled by Alan W. Harvey, the Company's President at the time
of the acquisition. The transaction was valued at $78,203, which
represented the approximate historical cost of the assets and
rights when held by Synaptix Texas.
NOTE 4: RELATED PARTY TRANSACTIONS
During the year ended June 30, 1995, the Company recorded $70,452
of debt forgiveness income from related parties. The amount
represents actual funds given to the Company or other amounts paid
on behalf of the Company.
During the year ended June 30, 1996, the Company's President was
paid $43,348 in consulting fees.
During the year ended June 30, 1997, the Company's President, or
entities controlled by him, received 5,967,500 shares of the
Company's common stock for $20,000 cash and services valued at
$7,402.
During fiscal 1997, debt in the amount of $75,840 was forgiven by
related parties. The amount represents cash given to the Company.
NOTE 5: INCOME TAXES
During the years ended June 30, 1997, 1996 and 1995, the Company
did not operate in states where a minimum tax is imposed, or the
tax is immaterial to the financial statements and has not been
recorded.
As of June 30, 1997, the Company has available for Federal income
tax purposes net operating loss carryforwards of approximately
$3,404,000 expiring through 2012. The Company most likely will not
be able to utilize the carryover incurred prior to fiscal 1997 due
to change of ownership and the requirement for the continuation of
the same type of business activities.
Components of income tax (expense) are as follows:
Current
Federal $ 0
State 0
--------------
0
Deferred
Federal 0
State 0
0
--------------
$ 0
==============
23
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1997
NOTE 5: INCOME TAXES (continued)
A reconciliation of the provision for income tax expense with the
expected income tax computed by applying the federal statutory
income tax rate to income before provision for income taxes is as
follows:
June 30, 1997
Income tax computed at federal
statutory tax rate $ (118,000)
State taxes (net of federal benefit) 0
Differences related to net loss 118,000
-----------------
$ 0
=================
NOTE 6: STOCK SUBSCRIPTION RECEIVABLE
During fiscal 1997, the Company sold 2,000,000 shares of
Regulation "S" stock for $200,000, evidenced by promissory notes
due in November of 1997.
NOTE 7: COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its corporate offices, and certain office
equipment and furniture under several operating lease agreements.
The Company is obligated to pay certain repairs, maintenance and
insurance in connection with certain leases. Rental expense was
$46,223, $250 and $0 for the years ended June 30, 1997, 1996, and
1995 respectively. Future rent expense under the one year office
lease is $32,500 of which $32,500 was prepaid at June 30, 1997 and
$5,203 on an equipment lease. The lease on the office is renewable
for an additional twelve months at $6,500 per month if mutually
agreed by both parties. The lease is with an entity that owns
about 5% of the Company's common stock. During 1997, 750,000
shares of common stock were issued to the entity for rent/prepaid
rent in the amount of $78,000. The Company also has under lease
office equipment which is capitalized. The capitalized amount is
$2,338. Future minimum lease payments are as follows:
Year ending: June 30, 1998 $ 1,430
June 30, 1999 1,430
-----------------
2,860
Less amounts representing interest (303)
Less amount representing sales tax (219)
Net minimum lease payments $ 2,338
=================
Current portion $ 1,099
Long-term portion 1,239
-----------------
$ 2,338
=================
Litigation
From time to time, the Company is involved in various legal
proceedings arising in the ordinary course of business. To
management's knowledge, the Company is not currently involved in
any legal proceedings and is not aware of any legal proceedings
threatened against it.
A former legal firm employed by the Company is in the process of
obtaining a default judgment against the Company for unpaid fees
of about $12,000. The $12,000 is reflected in accounts payable,
and management is in the process of settling this matter.
Certain shareholders of the Company are also shareholders of
Synaptix Systems Corporation ("Synaptix Florida"), a Florida
corporation not affiliated with the Company. Synaptix Florida was
formed in 1996 by Alan Harvey, the former president of the
Company, with the intention of acquiring the Old Synaptix assets
and developing the software. Funds were raised by Synaptix Florida
from third-party investors for this purpose, although to the
Company's best knowledge Synaptix Florida never entered into any
actual agreement to acquire the Old Synaptix assets from the
owner.
In December 1996, Mr. Harvey acquired control of the Company and
contracted with Swallen Investment Corp. to acquire the Old
Synaptix assets. Mr. Harvey, in his personal capacity, represented
to certain Synaptix Florida shareholders that they would receive
stock in the Company in place of their Synaptix Florida shares;
these representations and the existence of Synaptix Florida were
not disclosed to the Board of Directors by Mr. Harvey until June,
1997. At that time, the Company wrote to the shareholders of
Synaptix Florida to inquire as to their interest in exchanging
their shares for Company stock, in anticipation of a projected
merger of the two companies. No offer to exchange shares was made
at that time. Since that date, the Company learned that Synaptix
Florida had substantial undisclosed liabilities and has abandoned
plans to merge the companies. The Company has not issued any
shares of its stock to any Synaptix Florida shareholders in
exchange for any Synaptix Florida shares.
24
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1997
NOTE 7: COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
Synaptix Florida is not currently conducting any operations. Alan
Harvey remains the president of that company. The funds raised by
Synaptix Florida apparently were expended in anticipation of
acquisition of the assets. Mr. Harvey has alleged, on behalf of
Synaptix Florida, that some portion of these funds were loaned or
otherwise contributed to the Company. The Company cannot confirm
any such loans or contributions of funds from Synaptix Florida.
The Company has determined that potential claims by Synaptix
Florida or its shareholders could be asserted against Alan Harvey,
and potentially against the Company as well, in connection with
the Company's acquisition of the Old Synaptix assets and the
alleged loans or contribution of Synaptix Florida funds to the
Company, although the Company does not believe that any such claim
would be upheld as against it. In order to settle any such claims,
Mr. Arley L. Harvey, Alan Harvey's father, has agreed to have
Variable Resources, Inc., a company controlled by Arley L. Harvey,
acquire all rights to any derivative claims from the shareholders
of Synaptix Florida in exchange for shares of the Company's stock
held by Variable Resources, and to provide the Company with a
complete release. In addition, in September, 1997, the Company
entered into a separate Release Agreement with Synaptix Florida,
settling all claims for alleged loans or contributions of funds to
the Company and providing for a general release of claims between
the two companies. As a result of these actions, Management does
not believe that these potential claims will have any material
adverse effect upon the Company.
During the year ended June 30, 1994, a shareholder group brought
an action against two individuals who were Officers and Directors
of the Company. As part of the settlement, the Investors agreed to
drop all claims if the individuals left the Company, returned the
Company's stock owned by entities of the individuals, and took
Diversified Land and Exploration and subsidiaries out of the
Company. During 1995, 10,991 shares of the Company's common stock
were canceled as part of the settlement agreement.
Contract Service Agreements
The Company has contract service agreements with eight people. The
agreements are one or two years in length. Future approximate
expected payments for the years ending June 30, 1998, 1999, and
2000 are $451,000, $212,000, and $9,000.
The eight people also have the option to purchase a total of
31,000 shares of the Company's common stock at a price of $.15 per
share during the period beginning November 21, 1997 and ending
November 21, 2000, and 31,000 shares at $.15 per share during the
period beginning April 23, 1998 and ending April 23, 2001.
Consulting Agreement
The Company signed an agreement, effective August 1, 1997, with a
management services and financial advisor. Terms of the agreement
call for the advisor, in addition to assisting the Company with
management and operations, to assist the Company in raising up to
$5 million in investment capital. The advisor is to be paid
$30,000 per month for six months and also receive 5% of the
capital raised by the Company. If $2 million is raised, the
advisor is to receive 250,000 shares of the Company's common stock
which will be registered on Form S-8. In January 1998, the advisor
is to be issued 5% of the outstanding stock of the Company at that
date.
NOTE 8: STOCKHOLDERS' EQUITY
In fiscal 1989, the Company effected a two-for-one split of its
Common Stock and reduced the par value per share from $.0001 to
$.00005. In fiscal 1991, the Company effected a one-for-fifty
reverse split of its Common Stock. In fiscal 1995 the Company
effected a one-for-five reverse split of its Common Stock. In
fiscal 1997 the Company effected a one-for-sixty reverse split of
its common stock and increased the par value per share from
$.00005 to $.003. All share and per share amounts in the
accompanying financial statements and notes have been adjusted to
reflect the stock splits.
Preferred Stock
The Company has 10,000,000 shares of $1.00 par value Preferred
Stock authorized for issuance. Such preferred stock can be divided
into classes or series at the discretion of the Board of
Directors. Prior to June 30, 1997, the Company had designated two
(2) classes: Series A Preferred Stock: $1.00 par value Voting
Preferred Stock, consisting of 174,865 shares (the "Voting
Preferred Shares"); and $1.00 par value Series A Convertible
Preferred Stock (the "Convertible Preferred Shares"), consisting
of 2,000,000 shares. At June 30, 1997, no preferred shares are
outstanding.
The Voting Preferred Shares are callable and redeemable at the
option of the Company. In addition to the cash redemption price of
$1.00 per share, holders of the Voting Preferred Shares are
entitled to two shares of Common Stock for each of the Voting
Preferred Shares redeemed. Holders of the Voting Preferred Shares
are entitled to vote on all matters to be voted upon by the
shareholders, have a liquidation preference of $1.00 per share
before any winding-up of the Company, and are entitled to
25
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1997
NOTE 8: STOCKHOLDERS' EQUITY (continued)
Preferred Stock
such dividends as may be declared by the Board of Directors. The
Voting Preferred Shares have no preemptive rights or sinking fund
provisions. During fiscal 1997, the Company canceled all 174,865
outstanding shares of Series A voting Preferred Stock by issuing
174,865 shares of Common Stock. The Preferred Stock shareholders
waived all of the other rights associated with the Preferred
Stock.
The Convertible Preferred Shares carry the same preferences and
rights as the Voting Preferred Shares except that the Convertible
Preferred Shares have no voting rights, are callable and
redeemable, at the option of the Company, at a redemption price of
$10.00 per share in cash or in shares of Common Stock of the
Company, and are convertible by the holders into two (2) shares of
the Company's Common Stock commencing as of the date of issuance
and continuing thereafter for a period ending on the second
anniversary of such issue date.
Common Stock
During the year ended June 30, 1995, the Company issued 833 shares
of common stock to settle $124,168 of accounts payable.
During the year ended June 30, 1996, the Company sold 3,334 shares
of common stock for $40,000 cash.
During the year ended June 30, 1997, the Company issued 174,865
shares of common stock to retire 174,865 shares of Preferred
Stock, and sold or issued 15,259,167 shares of common stock for
$20,000 cash, $251,403 of expenses, $110,703 of assets, and
$200,000 in the form of promissory notes for subscribed stock.
NOTE 9: GOING CONCERN CONSIDERATION
The financial statements have been prepared in accordance with
generally accepted accounting principles which contemplate
continuation of the Company as a going concern. However, the
Company has a working capital deficiency of $90,713 and presently
has a retained deficit of $5,175,147. In addition, the Company has
used, rather than provided, cash in operations with a
corresponding adverse effect upon liquidity.
The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts
or amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.
The Company's continued existence as a going concern is dependent
upon the success of future operations and its ability to generate
cash flow to meet its obligations on a timely basis. Although it
cannot be assumed that the Company will be able to continue as a
going concern in view of its weakened financial condition,
management believes that sources of working capital will be found
that will allow the Company to continue as a going concern. The
Company believes sales of its common stock should provide working
capital in the future.
NOTE 10: LOANS PAYABLE
At June 30, 1996, the Company owed $13,200 to an entity for funds
advanced to the Company. The loan has no stated interest rate and
is due on demand. The loan was forgiven during fiscal 1997.
NOTE 11: CONTINGENT LIABILITY
The Company was involved in a lawsuit in Texas related to
environmental problems. The Company's counsel negotiated to settle
the matter for $10,000 cash and 16,667 shares of the Company's
restricted common stock. The stock was issued prior to June 30,
1997 and the $10,000 is reflected in accounts payable. The Company
does not expect to incur further liabilities in regard to this
matter.
NOTE 12: STOCK OPTION PLANS
During fiscal 1997, the Company established an incentive stock
option and non-statutory stock option plan. 4,000,000 shares of
common stock were registered. During fiscal 1997, Mr. Alan W.
Harvey exercised 3,000,000 options at $.005 per share. At June 30,
1997, there are 62,000 options outstanding at an exercise price of
$.15 per share. See Note 7 for further details.
The Company also established an employee stock compensation plan
and registered 4,000,000 shares of its common stock. During fiscal
1997, 3,750,000 shares were issued.
NOTE 13: SUBSEQUENT EVENTS
On October 17, 1997, the Company's Chief Executive Officer and
President resigned. The Company does not expect his resignation to
adversely affect the Company. The Board of Directors is in the
process of identifying new officers for appointment.
26
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
The following table sets forth the name, principal occupation,
age and, if applicable, the year in which the individual first became a director
for each nominee, and all persons nominated or chosen to become directors,
together with all positions and offices with the Company held by each such
person and term or period during which each nominee has served, for election as
a director at the Annual Meeting of Shareholders to be held on December 16,
1997.
Name and Principal Served as a
Occupation Age Director Since
Edward S. Fleming, Vice President, 41 December 1996
Chief Financial Officer and Director (1)
Mark F. Walz, Director (2) 40 December 1996
Matthew Hutchins(3) 42 Not applicable
Daniel Gillett(4) 35 Not applicable
(1) Mr. Fleming is currently Acting President, in addition to his
position as Vice President, Chief Financial Officer, and
Director. Mr. Fleming was elected to serve as Vice President
and Chief Financial Officer on December 23, 1996. From 1993 to
the present, Mr. Fleming has held the position of Geologic
Science Advisor to the Astronaut Office, Johnson Space Center,
and was primarily responsible for the planning, coordination
and evaluation of military and civilian manned space
observations of the Earth, including the management of all
Army personnel assigned to the Space Center. He has an
extensive background in systems administration of the SUN and
UNIX programs, as well as experience in a wide variety of
sophisticated remote sensing software packages. Prior to 1993,
Mr. Fleming held a succession of various leadership positions
of national and military prominence while serving as an
officer in the United States Army for more than 20 years.
(2) Mr. Walz was elected to serve as a member of the Board of
Directors on December 23, 1996. Mr. Walz has held the position
of Chief Financial Officer for Inliner Americas, Inc., a
leading company engaged in the development, application and
international licensing of proprietary trenchless pipeline
rehabilitation processes, since January 1997. Prior to that
time, Mr. Walz held the positions of Vice President -
Financial Accounting and Controller for the period October
1995 through December 1996, and November 1994 through
September 1995, respectively. Mr. Walz held various management
positions with CRSS, Inc., prior to joining Inliner Americas,
Inc., most recently as Controller of CRSS Architects, Inc.,
and as Assistant Director of Internal Audit. He has also held
various management positions with Arthur Andersen & Co. and
Ernst & Young for a combined period of more than nine years.
Mr. Walz is a Certified Public Accountant.
(3) Matthew Hutchins, a nominee for director, is a founding
principal of, and from 1995 to the present has been the chief
executive officer of, The Tiger Group, L.L.C., a full-service
strategic business development consulting firm formed in 1995
and located in Dallas, Texas. The Tiger Group specializes in
market expansion and strategic business development for its
clients. From 1990 to 1994, Mr. Hutchins was employed by
SpectraVision, Inc., a publicly held company engaged in the
business of video entertainment and interactive services for
the lodging and hospitality industry, as Vice President -
International and a member of the senior executive staff, with
responsibility for all aspects of SpectraVision's
international operations. From 1990 to 1994, Mr. Hutchins
additionally held the positions of Vice President, Chief Legal
Officer and Corporate Secretary at SpectraVision. Mr. Hutchins
is an attorney at law admitted to practice in the State of
Texas.
27
<PAGE>
(4) Dan Gillett, a nominee for director, has been an affiliate of The
Tiger Group, L.L.C. since July, 1997, and has been a partner in
MG Capital, a Dallas-based financial advisory firm, since May,
1995. From 1989 to 1995, Mr. Gillett served in the Investment
Banking Department of CS First Boston, where he held the position
of Vice President. Mr. Gillett has also served in various
positions with PepsiCo, Inc. and Price Waterhouse. Mr. Gillett
received his MBA from Harvard Business School in 1989.
Meetings of the Board of Directors
Standing Committees. The Company does not have any Standing Committees,
which would consist of an audit, compensation or nominating committee. No
director serves as a member of the Board of Directors of any other company with
a class of securities registered under the Securities Act of 1934, as amended,
or which is registered as an investment company under the Investment Company Act
of 1940.
Attendance at Board Meetings. During the last fiscal year, the Board of
Directors of the Company held three (3) special meetings. The Board of Directors
consisted of three directors during the last fiscal year ended June 30, 1997.
All directors attended all board meetings.
Compensation of Directors
On October 13, 1997, the board of directors resolved to
compensate the sole non-employee director by granting him an option under the
Company's 1997 Employee Stock Option Plan to purchase up to 200,000 shares of
the Company's common stock at an option price of $.20 per share. Such option was
granted in consideration for services rendered as a non-employee director for
the period December 1996 through October 1997. In addition, non-employee
directors will be reimbursed for reasonable expenses incurred in connection with
any meetings.
Executive Officers
The executive officers of Synaptix Systems Corporation,
together with the years in which such Officers were named to their present
office, are as follows:
<TABLE>
<CAPTION>
Positions held with Year Named to
Name Age the Company Present Position
<S> <C> <C> <C>
Alan W. Harvey 37 Former Chairman, President, December 1996
Chief Executive Officer(1) to October 1997
Edward S. Fleming 41 Vice President and Chief Financial December 1996
Officer
Christine N. Croneau 34 Secretary (2) December 1996
Samuel M. Skipper 38 Chairman, President and Chief August 1995 to
Executive Officer, Director (3) December 1996
</TABLE>
(1) Mr. Harvey resigned as a director and officer of the Company on October 17,
1997. Mr. Harvey was elected to serve as Chairman of the Board, President
and Chief Executive Officer effective as of December 23, 1996. Prior to
joining the Company, Mr. Harvey held the position of Vice President -
Development of Synaptix, a company that provides management consulting
services with an emphasis in the marketing and development of Oracle
Financials and Oracle EIS solutions through large system integrators to
non-Fortune 1000 companies. From 1992 to 1993, Mr. Harvey held the position
of Oil & Gas Practice Director at Oracle Corporation, and was responsible
for comprehensive consulting and vertical software integration services, as
well as the creation and development of Oracle's Environmental Information
System. From 1991 to 1992, Mr. Harvey served as Director of MIS at Exlog
Inc., a subsidiary of Baker Hughes, and was responsible for the
implementation of an MIS strategic plan to implement Oracle Financials
worldwide.
(2) Ms. Croneau was appointed to serve as Secretary of the Company
on December 15, 1996. During the past five years, Ms. Croneau
has held various management positions with Lockheed-Martin
Services, Inc. in Houston, Texas, and most recently held the
position of Senior Engineer/Biomedical Engineer. Prior to that
time, Ms. Croneau held the position of Research Assistant at
Baylor College of Medicine.
(3) Mr. Skipper served as Chairman of the Board, President and
Chief Executive Officer for the period August 1995 through
December 23, 1996.
Each of the Executive Officers serves at the pleasure of the
Board of Directors.
28
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning
compensation for services in all capacities awarded to, earned by, or paid to,
the Company's Chief Executive Officer during the fiscal year ended June 30, 1997
and for the period through October 28, 1997. The Company did not compensate any
other of its executive officers, on an annual basis, in excess of $60,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Name and Principal Other Annual All other
Position Year Salary Bonus Compensation Compensation
<S> <C> <C> <C> <C> <C>
($) ($) ($) ($)
Alan W. Harvey, former 1997 $10,596 0 0 0
Chairman, President and
Chief Executive Officer
</TABLE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Incentive Stock Option Plan and Non-Statutory Stock Option Plan
The Company has adopted an Incentive Stock Option Plan and a
Non-Statutory Stock Option Plan (together, the "Option Plan"), and has
registered the stock reserved for the plan pursuant to a Registration Statement
on Form S-8, filed with the Securities and Exchange Commission. The Option Plan
provides that the Company may award stock options to employees, including
non-employee directors of the Company. The Company intends to make such awards
to employees in order to induce qualified persons to accept employment with the
Company, and to reward key personnel of the Company in lieu of cash bonuses. A
total of four million shares of the Company's Common Stock has been reserved for
issuance pursuant to the Compensation Plan. Of this amount, three million shares
have been awarded to Alan W. Harvey, and were exercised immediately.
Employee Stock Compensation Plan
The Company has adopted an Employee Stock Compensation Plan
(the "Compensation Plan"), and has registered the stock reserved for the plan
pursuant to a Registration Statement on Form S-8, filed with the Securities and
Exchange Commission. The Compensation Plan provides that the Company may issue
stock awards to employees, including consultants who have provided bona fide
services to the Company not connected to any financing activities. The Company
intends to make such awards to employees and consultants for services rendered
on behalf of the Company, in lieu of cash payments otherwise owing to these
individuals, and to make future awards as the Board of Directors determines in
order to induce qualified persons to accept employment with the Company, and to
reward key personnel of the Company in lieu of cash bonuses. A total of four
million shares of the Company's Common Stock has been reserved for issuance
pursuant to the Compensation Plan.
In May, 1997, the Company issued 3,750,000 shares of the Company's common stock
pursuant to this plan for services rendered and expenses paid.
Other Compensation of Executive Officers
During fiscal 1997, the Company provided travel and
entertainment expenses to its executive officers and key employees. The
aggregate amount of such compensation, as to any executive officer or key
employee, did not exceed the lesser of $25,000 or 10% of the cash compensation
paid to such executive officer or key employee, nor did the aggregate amount of
such other compensation exceed 10% of the cash compensation paid to all
executive officers or key employees as a group.
29
<PAGE>
On January 10, 1997, Alan W. Harvey was granted an option to
purchase up to 1,750,000 shares of common stock under the Company's 1997
Non-Statutory Stock Option Plan, in addition to being granted a straight option
to purchase up to 3,000,000 shares of the Company's common stock on May 17,
1997. Mr. Harvey exercised his option to purchase up to 1,750,000 and 3,000,000
shares of the Company's common stock at an exercise price of $.005 per share on
May 17, 1997. Of the shares exercised under the options, 1,750,000 shares are
held in the name of Variable Resources, Inc., 750,000 shares were held in the
name of Alan W. Harvey, 750,000 shares are held in the name of Highbrook
Management Corp., 750,000 shares were gifted to Tropicana International, Inc.,
and 750,000 shares were gifted to Youngstown Worldwide, Inc. Arley L. Harvey,
father of Alan W. Harvey, is the Corporate Agent for Tropicana International,
Inc. and Youngstown Worldwide, Inc. Arley L. Harvey and Alan W. Harvey, as a
group, may be deemed to be a controlling person of Synaptix by virtue of their
share ownership.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the
grant of options under the Company's 1997 Non-Statutory Stock Option Plan and
Incentive Stock Option Plan during the fiscal year ended June 30, 1997, and
subsequent to fiscal year end.
<TABLE>
<CAPTION>
Number of Percent of total
Securities options granted Market Price Grant
underlying to employees in Exercise or on Grant Expiration Date
options granted fiscal year base price Date Date Value(1)
<S> <C> <C> <C> <C> <C> <C>
Name (#) (%) ($/Share) ($/Share)
Alan W. Harvey 4,750,000 88.59 $.005 N/A 5/1/2002 $14,250
</TABLE>
(1) The options shown were exercised immediately upon grant, and prior to
commencement of trading in the Company's stock.
Aggregated Option Exercises in Last Fiscal Year and FYE Option Values
<TABLE>
<CAPTION>
Number of securities Value of unexercised
Shares underlying unexercised in-the-money options
acquired Value options at fiscal year-end at fiscal year-end
Name on Exercise Realized Exercisable/unexercisable Exercisable/unexercisable
<S> <C> <C> <C> <C>
(#) ($) (#) ($)
Alan W. Harvey 4,750,000 $14,250(1) 0/0 0/0
</TABLE>
(1) The options shown were exercised immediately upon grant, and prior to
commencement of trading in the Company's stock.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
the beneficial ownership of the Company's Common Stock as of October 28, 1997,
by each person or entity known to the Company to own beneficially 5% or more of
the outstanding shares of Common Stock, and the beneficial ownership of the
Company's Common Stock, and all directors and executive officers as a group. No
director or executive officer personally owns any of the Company's Voting
Preferred Stock.
30
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of Percent Percent of Total
Name and Address of Beneficial of Outstanding
Title of Class Beneficial Owner Interest Class Voting Securities
- --------------- ------------------------------- --------------- ----------- ---------------------
<S> <C> <C> <C> <C>
$.003 par value Alan W. Harvey(1) 1,865,500(D) 12.04% 12.04%
Common Stock 2450 South Shore Drive
Suite 210
League City, Texas 77573
$.003 par value Swallen Investments Corp. 3,000,000(D) 19.36% 19.36%
Common Stock 7507 Dawn Mist Court
Sugarland, Texas 77479
$.003 par value Variable Resources, Inc.(1) 1,750,000(I) 11.29% 11.29%
Common Stock P.O. Box 1338
League City, Texas 77479
$.003 par value Omaha Capital Corp. 1,000,000(D) 6.45% 6.45%
Common Stock 233 College Street
Suite 151
Toronto, Ontario M5T 3R5
$.003 par value Georgia Capital Corp. 1,000,000(D) 6.45% 6.45%
Common Stock 2938 Dundas St. West
Suite 70567
Toronto, Ontario M6P 1Y8
$.003 par value Highbrook Management 750,000(I) 4.84% 4.84%
Common Stock Corp.(1)
$.003 par value Youngstown Worldwide, 750,000(I) 4.84% 4.84%
Common Stock Ltd.(2)
$.003 par value Tropicana International 750,000(I) 4.84% 4.84%
Common Stock Corp.(2 )
$.003 par value Edward S. Fleming(3) 350,000(D) 2.26% 2.26%
Common Stock
$.003 par value Mark F. Walz(4) 200,000(D) 1.29% 1.29%
Common Stock
All directors and
officers as a group,
including the entities
named above(2) 550,000 3.55% 3.55%
</TABLE>
Unless otherwise indicated in the footnotes below, each person
or entity has sole voting and dispositive power over the
shares indicated.
(1) Alan W. Harvey beneficially holds directly 1,865,000 shares of
common stock in his name, and indirectly holds 1,750,000
shares as corporate agent of Variable Resources, Inc., and
indirectly holds 750,000 shares of common stock as corporate
agent of Highbrook Management Corp. Arley L. Harvey and Alan
Harvey, as a group, may be deemed to be a controlling person
of Synaptix by virtue of their share ownership. See "EXECUTIVE
COMPENSATION AND OTHER INFORMATION -- Option Grants in Last
Fiscal Year."
(2) Arley L. Harvey beneficially holds indirectly, 750,000 shares
as corporate agent of Tropicana International Corp., and
750,000 shares of Youngstown Worldwide, Ltd., which shares
were gifted to Arley L. Harvey from Alan W. Harvey. Arley L.
Harvey and Alan Harvey, as a group, may be deemed to be a
controlling person of Synaptix by virtue of their share
ownership.
(3) Edward S. Fleming was granted an option to purchase up to 350,000 shares of
the Company's common stock under the Company's 1997 Employee Stock Option
Plan at an option price of $.20 per share in consideration of services
rendered as an officer and director of the Company for the period December
1996 through October 1997.
31
<PAGE>
(4) Mark F. Walz was granted an option to purchase up to 200,000 shares of the
Company's common stock under the Company 1997 Employee Stock Option Plan at
an option price of $.20 per share in consideration of services rendered as
a director of the Company for the period December 1996 through October
1997.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
No executive officer, director, stockholder known to the
Company to own, beneficially or of record, more than 5% of the Company's Common
Stock, or any member of the immediate family of any of those persons has engaged
since the beginning of the Company's last fiscal year ended June 30, 1997,or
proposes to engage in the future, in any transaction or series of similar
transactions with the Company, directly or indirectly through a separate entity,
in which the amount involved exceeded or will exceed $60,000.
No director of the Company has served during the last fiscal
year or currently serves as a partner or executive officer of any investment
banking firm that performed services for the Company during the last fiscal year
ended June 30, 1997, or that the Company proposes to have perform services
during the current year. The Company knows of no other relationship between any
director and the Company substantially similar in nature and scope to those
described above.
Certain Business Relationships
Certain shareholders of the Company are also shareholders of
Synaptix Systems Corporation ("Synaptix Florida"), a Florida corporation not
affiliated with the Company. Synaptix Florida was formed in 1996 by Alan Harvey,
the former president of the Company, with the intention of acquiring the Old
Synaptix assets and developing the software. Funds were raised by Synaptix
Florida from third-party investors for this purpose, although to the Company's
best knowledge Synaptix Florida never entered into any actual agreement to
acquire the Old Synaptix assets from the owner.
In December 1996, Mr. Harvey acquired control of the Company
and contracted with Swallen Investment Corp. to acquire the Old Synaptix assets.
Mr. Harvey, in his personal capacity, represented to certain Synaptix Florida
shareholders that they would receive stock in the Company in place of their
Synaptix Florida shares; these representations and the existence of Synaptix
Florida were not disclosed to the Board of Directors by Mr. Harvey until June,
1997. At that time, the Company wrote to the shareholders of Synaptix Florida to
inquire as to their interest in exchanging their shares for Company stock, in
anticipation of a projected merger of the two companies. No offer to exchange
shares was made at that time. Since that date, the Company learned that Synaptix
Florida had substantial undisclosed liabilities and has abandoned plans to merge
the companies. The Company has not issued any shares of its stock to any
Synaptix Florida shareholders in exchange for any Synaptix Florida shares.
Synaptix Florida is not currently conducting any operations.
Alan Harvey remains the president of that company. The funds raised by Synaptix
Florida apparently were expended in anticipation of the acquisition of the
assets. Mr. Harvey has alleged, on behalf of Synaptix Florida, that some portion
of these funds were loaned or otherwise contributed to the Company. The Company
cannot confirm any such loans or contributions of funds from Synaptix Florida.
The Company has determined that potential claims by Synaptix
Florida or its shareholders could be asserted against Alan Harvey, and
potentially against the Company as well, in connection with the Company's
acquisition of the Old Synaptix assets and the alleged loans or contribution of
Synaptix Florida funds to the Company, although the Company does not believe
that any such claim would be upheld as against it. In order to settle any such
claims, Mr. Arley L. Harvey, Alan Harvey's father, has agreed to have Variable
Resources, Inc., a company controlled by Arley L. Harvey, acquire all rights to
any derivative claims from the shareholders of Synaptix Florida in exchange for
shares of the Company's stock held by Variable Resources, and to provide the
Company with a complete release. In addition, in September, 1997, the
32
<PAGE>
Company entered into a separate Release Agreement with Synaptix Florida,
settling all claims for alleged loans or contributions of funds to the Company
and providing for a general release of claims between the two companies. As a
result of these actions, Management does not believe that these potential claims
will have any material adverse effect upon the Company.
Indebtedness of Management.
During the Company's last fiscal year, no executive officer,
director, any member of the immediate family or any of those persons, any
corporation or organization for which any of those persons serve as an executive
officer or partner or which they own directly or indirectly 10% or more of its
equity securities, or any trust or other estate in which any of the Company's
executive officers or directors have a substantial beneficial interest or for
which they serve as a trustee or in a similar capacity, has owed the Company at
any time since the beginning of its last fiscal year more than $60,000.
Termination and Change In Control Arrangements.
The Company has no compensatory plan or arrangement with
respect to its Executive Officers that would result from the resignation,
retirement or termination of any Executive Officer's employment with the
Company, from a change in control of the Company, or from a change in an
Executive Officer's responsibilities following a change in control of the
Company.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K.
1. List of Documents
Report of Independent Auditors......................................17
Balance Sheets at June 30, 1997 and 1996............................18
Statements of Operations for the years ended June 30, 1997,
1996, and 1995.............................................19
Statements of Changes in Stockholders' Equity (Deficit) for the
years ended June 30, 1997, 1996, and 1995..................20
Statements of Changes of Cash Flows for the years ended
June 30, 1997, 1996, and 1995..............................21
Notes to Financial Statements.......................................22
2. Financial Statement Schedules
The following financial statement schedules of Synaptix
Systems Corporation are included in PART III, ITEM 13(a):
Report of Independent Certified Public Accountants on
Supplementary Financial Information........................36
Schedule V - Property, Plant, and Equipment.........................37
Schedule VI - Accumulated Depreciation and Amortization
of Property, Plant, and Equipment..........................38
All other Schedules have been omitted, since the required
information is not present or is not present in amounts sufficient to require
submission of the Schedule, or because the information required is included in
the financial statements and notes to the financial statements thereto.
33
<PAGE>
3. Reports on Form 8-K.
The Company filed the following reports on Form 8-K during the
fiscal year ended June 30, 1997 and subsequent thereto:
A Form 8-K was filed on June 16, 1997 announcing the
acquisition of assets from Swallen Investments Corp.
A Form 8-K was filed on October 30, 1997 announcing the
resignation of Allen W. Harvey as a director and officer of
the Company.
4. Exhibits
Exhibit
Number Description
<TABLE>
<CAPTION>
<S> <C>
2 Asset Purchase Agreement by and between Swallen Investments
Corp. and Synaptix Systems Corporation, dated May, 1997. .........................39
3(a) Amendment to Articles of Incorporation (1)
3(b) Bylaws (1)
4(a) Statement of Series Shares(1)
4(b) Form of Warrant Agent Agreement and Form of Warrant Certificate(2)
4(c) Form of Class A and Class B Common Stock Purchase Warrants(3)
10(a) Synaptix Systems Corporation 1997 Incentive and Non-Statutory
Stock Option Plan(4)
10(b) Form of Synaptix Systems Corporation Employee Stock Option Agreement(4)
10(c) Synaptix Systems Corporation 1997 Employee Stock Compensation Plan(5)
10(d) Promissory Note by and between Synaptix Systems Corporation and
Omaha Capital Corp................................................................53
10(e) Promissory Note by and between Synaptix Systems Corporation and
Georgia Capital Corp..............................................................54
10(f) Consulting Agreement by and between The Tiger Group, L.L.C. and
Synaptix Systems Corporation, dated August 6, 1997................................55
10(g) Employment agreements.............................................................60
10(h) Settlement agreement and release by and between Synaptix Systems
Corporation and Alan W. Harvey....................................................100
</TABLE>
27 Financial Data Schedule
(1) Incorporated herein by reference to Exhibit of same number in
Registrant's Report on Form 14A, dated December 30 , 1996.
(2) Incorporated herein by reference to Exhibit of same number in
Registrant's Registration Statement on Form S-18 (No. 33-15097-D) filed
with the Securities and Exchange Commission, dated August 7, 1987.
(3) Incorporated herein by reference to Exhibit No. 10.1 of Registrant's
Annual Report on Form 10-K for the year ended March 31, 1988.
(4) Incorporated herein by reference to Form S-8 Registration, as filed
with the Securities and Exchange Commission on May 12, 1997.
(5) Incorporated herein by reference to Form S-8 Registration, as filed
with the Securities and Exchange Commission on May 9, 1997.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
SYNAPTIX SYSTEMS CORPORATION
(Registrant)
By: /s/
Edward S. Fleming
Acting President,
Vice President and Chief Financial Officer
Dated: October 31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in their capacities indicated and on the dates indicated.
Name Title Date
/S/ Acting President, October 31, 1997
Edward S. Fleming Vice President and Chief
Financial Officer and Director
/S/ Director October 31, 1997
Mark F. Walz
35
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
- ------------------------------------------------------------------------------
The Stockholders and
The Board of Directors
Synaptix Systems Corporation
(A Development Stage Company)
Our audit of the basic financial statements presented in the preceding section
of this report was made primarily to form an opinion on such financial
statements taken as a whole. The additional information, contained in the
following pages, is not considered essential for the fair presentation of the
financial position of Synaptix Systems Corporation (a development stage
company), the results of its operations or cash flows in conformity with
generally accepted accounting principles. The following information consisting
of Schedule V and Schedule VI is included to comply with reporting requirements
of the Securities and Exchange Commission. Such data was subjected to the audit
procedures applied in the audit of the basic financial statements and in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
October 7, 1997
36
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions at End
of Period at Cost Retirement of Period
------------------ ------------------ ----------------- ------------------
Year ended June 30, 1995
<S> <C> <C> <C> <C>
Leasehold improvements $ 0 $ 0 $ 0 $ 0
Computer equipment/
software 0 0 0 0
Fixtures & equipment 0 0 0 0
------------------ ------------------ ----------------- ------------------
$ 0 $ 0 $ 0 $ 0
================== ================== ================= ==================
Year ended June 30, 1996
Leasehold improvements $ 0 $ 0 $ 0 $ 0
Computer equipment/
software 0 0 0 0
Fixtures & equipment 0 0 0 0
------------------ ------------------ ----------------- ------------------
$ 0 $ 0 $ 0 $ 0
================== ================== ================= ==================
Year ended June 30, 1997
Leasehold improvements $ 0 $ 1,984 $ 0 $ 1,984
Computer equipment/
software 0 47,246 0 47,246
Fixtures & equipment 0 51,643 0 51,643
------------------ ------------------ ----------------- ------------------
$ 0 $ 100,873 $ 0 $ 100,873
================== ================== ================= ==================
</TABLE>
37
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions at End
of Period at Cost Retirement of Period
------------------ ------------------ ----------------- ------------------
Year ended June 30, 1995
<S> <C> <C> <C> <C>
Leasehold improvements $ 0 $ 0 $ 0 $ 0
Computer equipment/
software 0 0 0 0
Fixtures & equipment 0 0 0 0
------------------ ------------------ ----------------- ------------------
$ 0 $ 0 $ 0 $ 0
================== ================== ================= ==================
Year ended June 30, 1996
Leasehold improvements $ 0 $ 0 $ 0 $ 0
Computer equipment/
software 0 0 0 0
Fixtures & equipment 0 0 0 0
------------------ ------------------ ----------------- ------------------
$ 0 $ 0 $ 0 $ 0
================== ================== ================= ==================
Year ended June 30, 1997
Leasehold improvements $ 0 $ 0 $ 0 $ 0
Computer equipment/
software 0 0 0 0
Fixtures & equipment 0 0 0 0
------------------ ------------------ ----------------- ------------------
$ 0 $ 0 $ 0 $ 0
================== ================== ================= ==================
</TABLE>
No depreciation was taken due to the fact all assets were placed in service late
in the fourth quarter of the year.
38
<PAGE>
ASSET PURCHASE AGREEMENT Exhibit 2
This Asset Purchase Agreement (this "Agreement") is made and entered
into as of May ___, 1997 by and between SYNAPTIX SYSTEMS CORPORATION, a Colorado
corporation (the "Buyer"), and SWALLEN INVESTMENTS CORP., a Nevada corporation
(the "Seller"), with respect to the following:
R E C I T A L S
A. Seller is an investment company that has acquired all of the assets
of Synaptix Systems Corporation, a defunct corporation (Old Synaptix), from
Guaranty Mortgage Corp., the lender that foreclosed upon said assets. Seller
desires to sell all of the Old Synaptix assets to Buyer in exchange for the
issuance by Buyer to Seller of shares of Buyer's common stock.
B. Old Synaptix was in the business of developing and selling software
programs for computer, and had partially developed or completed three programs,
entitled "FieldExpress", "TnExpress" and "INTERACT". Buyer desires to obtain all
right, title and interest in and to these software programs from Seller,
together with all assets of Old Synaptix acquired by Seller which in any way
relate thereto.
C. The parties desire to accomplish this purchase and sale of the Old
Synaptix assets in accordance with the terms and conditions contained in this
Agreement.
A G R E E M E N T
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
Article 1. Definitions
1.1 "Acquired Assets" means all right, title, and interest in and to
all of the assets of Old Synaptix relating to or used in Old Synaptix's
business, including all of the following:
(a) all current assets, if any, including cash, accounts
receivable, orders received, orders pending, prepaid expenses which can be
assigned to Buyer (and excepting those set forth on Schedule 1.1(a) of the
Disclosure Schedules), and allowances as of the closing date, less notes
receivable, and less such amount of cash as may be required for payment of
taxes, vacation pay and other expenses, not assumed by Buyer, incurred prior to
Closing to be paid after Closing, as set forth on Exhibit A hereto;
(b) all files, customer lists, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, studies, reports, and other
printed or written materials relating to the business of Seller, except for
checks, payroll records, records of accounts payable and receivable, financial
books and records, and corporate books and records of prior years not relating
to the current operations of the Business of Seller;
(c) all intellectual property rights (including patents,
trademarks, copyrights, trade secrets, know-how, computer programs, computer
code, plans, drawings and files) relating to the Seller's software product lines
and all components thereof, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions, together with the names and designs
"Synaptix Systems", "FieldExpress", "TnExpress", and "INTERACT";
39
<PAGE>
(d) all fixed assets, including machinery, equipment,
furniture, fixtures, tools, patterns, tooling and testing apparatus used by Old
Synaptix in its business;
(e) all current inventories of raw materials and supplies,
manufactured and purchased parts, goods in process and finished goods which are
the property of Seller and relate to the business of Old Synaptix;
(f) all agreements, contracts (except insurance contracts),
instruments, Security Interests, guaranties, other similar arrangements, and
rights thereunder relating to Old Synaptix's business;
(g) except as otherwise provided in this Agreement, claims,
deposits, prepayments, refunds, causes of action, causes in action, rights of
recovery, rights of set off, and rights of recoupment;
(h) goodwill, to the extent that there is any; and
(i) franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies, to the extent that they may be assigned
or transferred to Buyer.
1.2 "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
1.3 "Business of Old Synaptix" has the meaning set forth in Recital A
above.
1.4 "Buyer" has the meaning set forth in the preface above.
1.5 "Closing" has the meaning set forth in Section 2(d) below.
1.6 "Closing Date" has the meaning set forth in Section 2(d) below.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Disclosure Schedule" has the meaning set forth in Section 3
below.
1.9 "Intellectual Property" means any and all (a) inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, inventor
certificates and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c)
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, computer
programs, program code (whether compiled or uncompiled, and in whatever
programming language), technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (e) computer software (including data and
related documentation), (f) other proprietary rights, and (g) copies and
tangible embodiments thereof (in whatever form or medium).
1.10 "Knowledge and Belief" means actual knowledge coupled with a good
faith belief in the accuracy of the actual knowledge.
40
<PAGE>
1.11 "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.12 "Ordinary Course of Business" means the ordinary course of the
Business of Seller consistent with past custom and practice (including with
respect to quantity and frequency).
1.13 "Parties" means Buyer and Seller herein, collectively.
1.14 "Party" means either the Buyer or the Seller herein.
1.15 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
1.16 "Purchase Price" has the meaning set forth in Section 2.2
below.
1.17 "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest.
1.18 "Seller" has the meaning set forth in the preface above.
Article 2. Basic Transaction
2.1 Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Article 2.
2.2 Purchase Price. The Purchase Price for the Acquired Assets shall
consist of three million shares of common stock of Buyer, par value $0.003,
which when issued shall be fully paid and non-assessable.
2.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Buyer commencing at
11:00 a.m. local time on the next business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date").
2.4 Deliveries at the Closing. At the Closing,
(a) the Seller will deliver to the Buyer the various
certificates, instruments, and documents referred to in Section 6.2
below;
(b) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 6.1
below;
(c) the Seller will execute, acknowledge (if appropriate), and
deliver to the Buyer:
(i) Assignment and Bill of Sale, Patent Assignment and
Trademark Assignment in the forms attached hereto as Exhibits
B-1, B-2 and B-3; and
(ii) such other instruments of sale, transfer, conveyance,
and assignment as the Buyer and its counsel reasonably may
request;
41
<PAGE>
(d) the Buyer will deliver to the Seller the consideration specified
in Section 2.2 above.
2.5 Allocation. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) in accordance with the
allocation schedule attached hereto as Exhibit C.
Article 3. Representations and Warranties of the Seller
3.1 Seller's Representations. The Seller represents and warrants to
Buyer that the statements contained in this Article 3 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article 3), and as
set forth in the disclosure schedule accompanying this Agreement and initialed
by the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Article 3.
3.2 Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.3 Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of the Seller has duly
authorized the execution, delivery, and performance of this Agreement by the
Seller. This Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions.
3.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments referred to in Section 2 above), will (i) violate any
statute, regulation, rule, judgment, order, ruling or other restriction of any
governmental agency, or court to which the Seller is subject or any provision of
the charter or bylaws of Seller, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, or other instrument to which the
Seller is a party or by which it is bound or to which any of the Acquired Assets
is subject (or result in the imposition of any Security Interest upon any of the
Acquired Assets). Seller is not required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
3.5 Brokers' Fees. Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.6 Title to Acquired Assets. Seller has good and marketable title to
the Acquired Assets, free and clear of all Security Interests and restrictions
on transfer.
3.7 Legal Compliance. To the best of Seller's Knowledge and Belief,
Seller and its predecessors have complied with all applicable laws relating to
the operation of the Business of Old Synaptix (including rules, regulations,
codes, judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof), and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against Seller alleging any failure so to
comply.
3.8 Intellectual Property.
42
<PAGE>
(a) The Seller owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the Business of Old Synaptix as
previously conducted by Old Synaptix. Each item of Intellectual Property owned
or used by Seller and Old Synaptix immediately prior to the Closing hereunder
will be owned or available for use by the Buyer on identical terms and
conditions immediately subsequent to the Closing hereunder.
(b) To the best of Seller's Knowledge and Belief, neither
Seller nor Old Synaptix has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and none of the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Seller is aware of or
has ever received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including any
claim that Seller must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of any of the directors and
officers (and employees with responsibility for Intellectual Property matters)
of the Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights included in the Acquired Assets.
(c) Schedule 3.8 of the Disclosure Schedules identifies each
patent or registration which has been issued to Seller or any predecessor of
Seller with respect to any of the Intellectual Property, identifies each pending
patent application or application for registration which the Seller has made
with respect to any of the Intellectual Property, and identifies each license,
agreement, or other permission which the Seller has granted to any third party
with respect to any of the Intellectual Property (together with any exceptions).
The Seller has delivered to the Buyer correct and complete copies of all such
patents, registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and complete copies
of all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Schedule 3.8 of the Disclosure Schedules also
identifies each trade name or unregistered trademark, trade dress and design
used by the Seller. As to each item of Intellectual Property required to be
identified in Section 3.8 of the Disclosure Schedule:
(i) to the best of Seller's Knowledge and Belief, the
Seller possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or
other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of Seller and the directors and officers
of the Seller, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) Seller has not granted any license or similar
right with respect to any of the Intellectual Property to any
third party.
(d) Schedule 3.8 of the Disclosure Schedules identifies each
item of Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission. The Seller has
delivered to the Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each such item, the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect, no
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or default or permit
termination, modification, or acceleration thereunder.
(e) To the Knowledge and Belief of the Seller and the
directors and officers of the Seller, the Buyer will not interfere with,
infringe upon, misappropriate, or otherwise come into
43
<PAGE>
conflict with, any Intellectual Property rights of third parties as a result of
the continued operation of the Business of Seller as presently conducted.
3.9 Tangible Assets. Except as set forth on Schedule 3.9 of the
Disclosure Schedules, the Seller owns all machinery, equipment, and other
tangible assets necessary for the conduct of the Business of Old Synaptix as
previously conducted. Except as set forth on Schedule 3.9, each such tangible
asset is free from defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (ordinary wear and tear excepted), and is suitable for the purposes for
which it was used. Schedule 3.9 contains an accurate list and a substantially
complete description as of the Closing Date of all the personal property of
Seller used by Old Synaptix in the conduct of the Business of Old Synaptix. All
assets used by Old Synaptix in the operation of the Business of Old Synaptix are
either owned by Seller or leased under an agreement indicated on Schedule 3.9
3.10 Inventory. The inventory of the Seller consists of raw materials,
goods in process, and finished goods, all of which is merchantable and fit for
the purpose for which it was procured or manufactured, and none of which is
obsolete, damaged, or defective.
3.11 Contracts. Schedule 3.11 of the Disclosure Schedules lists the
following contracts and other agreements affecting the Acquired Assets to which
the Seller is a party:
(a) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
the Seller, or involve consideration in excess of $1,000.00; and
(b) any agreement concerning confidentiality or noncompetition.
The Seller has delivered to the Buyer a correct and complete copy of
each written agreement listed in Schedule 3.11 of the Disclosure Schedules and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Schedule 3.11. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect following the consummation of the transactions
contemplated hereby (including the assignments and transfers of interest
contemplated hereby); (C) no party to any such agreement is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
3.12 Litigation. Schedule 3.12 of the Disclosure Schedules sets forth
each instance in which the Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of the directors and officers (and employees with responsibility for
litigation matters) of the Seller, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the actions, suits
proceedings, hearings, and investigations set forth in Schedule 3.12 of the
Disclosure Schedules could affect the Acquired Assets.
3.13 Product Warranty. Each of the products manufactured, sold,
leased, or delivered by the Seller has been in conformity with all applicable
contractual commitments and all express and implied warranties, and the Seller
has no Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Seller. No
product manufactured, sold, leased, or delivered by the Seller or any
predecessor of Seller is
44
<PAGE>
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale. Schedule 3.13 of the Disclosure Schedules
includes copies of the standard terms and conditions of sale of the Seller
(containing applicable guaranty, warranty, and indemnity provisions).
3.14 Product Liability. To the best of the Seller's Knowledge and
Belief, Seller has no Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Seller or any
predecessor of Seller.
3.16 Current Customers. Schedule 3.16 contains a complete list of all
current customers of Seller as of the Closing Date, and except as set forth on
Schedule 3.16 the Seller is not aware that any such customer intends to
discontinue making purchases from Seller of Seller's products.
3.17 Disclosure. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 3 not misleading.
Article 4. Representations and Warranties of the Buyer
4.1 The Buyer represents and warrants to the Seller that the
statements contained in this Article 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 4), except as otherwise set forth in the
Disclosure Schedule. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Article
4.
4.2 Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.3 Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of the Buyer has duly
authorized the execution, delivery, and performance of this Agreement by the
Buyer. This Agreement constitutes the valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms and conditions.
4.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments referred to in Section 2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Buyer is subject or any provision of its charter or bylaws or
(ii) conflict with, result in a breach of, constitute a default under, result in
then of, create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. The Buyer does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above).
4.5 Brokers' Fees. Except as set forth on Schedule 4.5, the Buyer has
no Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement for
which the Seller could become liable or obligated.
45
<PAGE>
Article 5. Pre-Closing Covenants
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
5.1 General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article 6 below).
5.2 Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its best efforts to obtain any third party
consents, that the Buyer may reasonably request in connection with the matters
referred to in Section 3.3 above. Each of the Parties will give any notices to,
make any filings with, and use its best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3.4 and Section 4.4 above.
5.3 Operation of Business. The Seller will not engage in any practice,
take any action, or enter into any transaction in respect of the Acquired Assets
outside the Ordinary Course of Business.
5.4 Preservation of the Acquired Assets. The Seller will use its best
efforts to keep the Acquired Assets substantially intact.
5.5 Full Access. The Seller will permit representatives of the Buyer
to have full access during normal business hours, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, personnel, books, records, contracts, and documents of or pertaining
to the Acquired Assets and the Business of Old Synaptix.
5.6 Notice of Developments. Each Party will give prompt written notice
to the other Party of any material adverse development causing a breach of any
of its own representations and warranties in Articles 3 and 4 above. No
disclosure by any Party pursuant to this Section 5.6, however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
5.7. Waiver of Compliance with Bulk Sale Provisions. Buyer is waiving
compliance with the provisions of Division 6 of the Uniform Commercial Code
relating to bulk sales.
Article 6. Conditions to Obligation to Close
6.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions, any of which may
be waived by Buyer prior to the Closing in its sole discretion:
(a) except as otherwise set forth in this Agreement, the
representations and warranties set forth in Article 3 above shall be true and
correct in all material respects at and as of the Closing Date;
(b) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) the Seller shall have procured all of the third party consents
specified in Section 5.2 above;
(d) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, or foreign jurisdiction or
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before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the statements to
be rescinded following consummation, or (C) affect adversely the right of the
Buyer to own the Acquired Assets and to operate the former Business of Old
Synaptix, (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(e) the Seller shall have delivered to Buyer a fully executed
subscription agreement in the form attached a Exhibit D hereto;
(f) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in Section 6.1(a)
through (d) is satisfied in all respects;
(g) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 if it
executes a writing so stating at or prior to the Closing.
6.2 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) except as otherwise set forth in this Agreement, the
representations and warranties set forth in Article 4 above shall be true and
correct in all material respects at and as of the Closing Date;
(b) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction [or before any arbitrator]
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(d) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Section 6.2(a)
through (c) is satisfied in all respects; and
(e) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 6.2 if it
executes a writing so stating at or prior to the Closing.
Article 7. Indemnification
7.1 Indemnity by Seller. For a period of five (5) years from the date
of Closing Seller shall save, defend, indemnify, protect and hold harmless Buyer
and Buyer's affiliates, directors, officers, shareholders, employees, agents,
representatives, successors and assigns (each an "Indemnified Buyer Party")
against any and all claims, losses, liabilities, damages, expenses
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(including, without limitation, attorney's fees and costs of defense including
expert and consultant fees) which may be asserted against, incurred or required
to be paid by an Indemnified Buyer Party by reason or on account of:
(a) any representation or warranty made by Seller herein being untrue
or incorrect;
(b) any failure of Seller to observe or perform its covenants
and agreements set forth herein or in any agreement entered into pursuant to
this Agreement, except for the Noncompete Agreement of even date herewith, which
shall be subject to its own terms only;
(c) any products liability or similar claim for injury to
person or property which arises out of or is based upon any theory of tort,
negligence, strict liability, failure to warn, or express or implied
representation, warranty, agreement or guarantee, or otherwise, or which is
imposed or asserted to be imposed by operation of law or statute, including,
without limitation, any claim seeking recovery for consequential damage, lost
revenue or income, special or incidental damages, or punitive damages in
connection with any service performed or product manufactured, sold or leased by
or on behalf of Seller on or prior to the Closing; or
(d) the Seller's ownership of the Acquired Assets and any
conduct of the Business of Old Synaptix prior to the Closing Date.
7.2 Indemnity by Buyer. Buyer shall save, defend, indemnify, protect
and hold harmless for an unlimited duration of time the Seller and its
affiliates, employees, agents, representatives, successors and assigns (each an
"Indemnified Seller Party") against any and all claims, losses, liabilities,
damages, expenses (including, without limitation, attorney's fees and costs of
defense including expert and consultant fees) which may be asserted against,
incurred or required to be paid by an Indemnified Seller Party by reason or on
account of:
(a) any representation or warranty made by Buyer herein being untrue
or incorrect;
(b) any failure by Buyer to observe or perform its covenants
and agreements herein or in any agreement entered into pursuant to this
Agreement;
(c) any products liability or similar claim for injury to
person or property which arises out of or is based upon any theory of tort,
negligence, strict liability, failure to warn, or express or implied
representation, warranty, agreement or guarantee, or otherwise, or which is
imposed or asserted to be imposed by operation of law or statute, including,
without limitation, any claim seeking recovery for consequential damage, lost
revenue or income, special or incidental damages, or punitive damages in
connection with any service performed or product manufactured, sold or leased by
or on behalf of Buyer on or after the Closing; or
(d) the Buyer's ownership of the Acquired Assets and its
conduct of the Business of Old Synaptix subsequent to the Closing Date.
7.3 Indemnity Procedures.
(a) In the event that any claim or demand for which Seller
would be liable to an Indemnified Buyer Party hereunder is asserted against or
sought to be collected from an Indemnified Buyer Party, the Indemnified Buyer
Party shall promptly notify Seller of such claim or demand, specifying the
nature of such claim or demand and the amount or the estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of the final
amount of such claim or demand or the correctness thereof) (the "Claim Notice").
Seller shall have fifteen (15) business days from the personal delivery or
mailing of the Claim Notice (the "Notice Period") to notify the Indemnified
Buyer Party (i) whether or not Seller disputes liability to the Indemnified
Buyer Party hereunder with respect to such claim or demand and (ii),
notwithstanding any such dispute, whether or not such Seller desires, at its
sole cost and expense, to defend the Indemnified Buyer Party against such claim
or demand.
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(b) Subject to the provisions of Section 7.1, in the event
that Seller notifies the Indemnified Buyer Party within the Notice Period that
Seller desires to defend the Indemnified Buyer Party against such claim or
demand then, except as hereinafter provided, Seller shall have the right to
defend the Indemnified Buyer Party by appropriate proceedings; provided,
however, that Seller shall not, without the prior written consent of the
Indemnified Buyer Party, consent to the entry of any judgment against the
Indemnified Buyer Party or enter into any settlement or compromise. If any
Indemnified Buyer Party desires to participate in any such defense or
settlement, it may do so at its sole cost and expense. If Seller fails to defend
any such claim or demand, then, in addition to any other remedy, the Indemnified
Buyer Party may settle (provided it shall give Seller not less than fifteen (15)
business days prior written notice of the terms thereof and permit Seller then
to undertake such defense) or defend such claim or demand through counsel of its
own choosing and may recover from Seller the amount of such settlement, demand,
or any judgment or decree, and its attorneys' fees, experts' fees and costs. If
Seller elects to defend the Indemnified Buyer Party and such Seller receives a
bona fide written settlement offer that Seller desires to accept, such Seller
shall notify the Indemnified Buyer Party of such settlement offer within ten
(10) business days after receipt of such offer. Within fifteen (15) business
days after receipt of such notice from Seller, the Indemnified Buyer Party, at
its option, shall notify Seller in writing either that the Indemnified Buyer
Party consents to the terms and conditions of the settlement, or that the
Indemnified Buyer Party desires to take control of the defense or settlement of
such claim or demand. If the Indemnified Buyer Party notifies Seller that it
desires to take control of the defense or settlement of such claim or demand,
then the total amount of Seller's liability hereunder with respect to such third
party claim shall be limited to the amount of the bona fide settlement offer and
the legal fees, experts' fees and costs incurred prior to the date the
Indemnified Buyer Party takes control of the defense or settlement of such claim
or demand.
(c) If Seller elects not to defend the Indemnified Buyer Party
against such claim or demand, whether by not giving the Indemnified Buyer Party
timely notice as provided above or otherwise, then the amount of any such claim
or demand shall be conclusively deemed to be a liability of Seller hereunder. If
a claim or demand is defended by the Indemnified Buyer Party (but no Indemnified
Buyer Party shall have any obligation to defend any such claim or demand), then
that portion thereof as to which such defense is unsuccessful shall be
conclusively deemed to be a liability of Seller hereunder.
(d) In the event an Indemnified Buyer Party should have a
claim against Seller hereunder that does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Buyer Party shall promptly send a Claim Notice with respect to such
claim to Seller. If Seller does not notify the Indemnified Buyer Party within
the Notice Period that such Seller disputes such claim, the amount of such claim
shall be conclusively deemed a liability of Seller hereunder.
(e) All claims for indemnification by an Indemnified Seller
Party under this Agreement shall be asserted and resolved under the procedures
set forth above substituting in the appropriate place "Indemnified Seller Party"
for "Indemnified Buyer Party" and variations thereof, and "Buyer" for "Seller"
and variations thereof.
7.4 Condition Precedent to Indemnification Obligation of Seller. The
indemnification obligation of Seller pursuant to Section 7.1 above shall not
take effect until the cumulative amount of losses for which such indemnification
is made exceeds in the aggregate Five Thousand Dollars ($5,000) (the "Basket
Amount") in excess of any applicable insurance coverage (if any), and then only
to the extent of such excess over such applicable insurance coverage.
Additionally, any claim for indemnification which relates in any way to a
prepayment, chose in action or cause of action assigned or transferred to Buyer
as part of the Acquired Assets may be offset against any recovery received or
obtained by Buyer from such prepayment, chose in action or cause of action.
Further, any claim for indemnification which relates in any way to any
infringement or claim of infringement of any intellectual property right may be
offset against any recovery received or obtained by Buyer from any remedies
against infringements transferred to Buyer by Seller
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7.6 Arbitration.
(a) Issues. Except as otherwise specifically provided, all
claims and disputes between the Parties to this Agreement concerning the
performance of this Agreement or its interpretation shall be submitted to
arbitration in accordance with this Section 7.6.
(b) Terms of Arbitration. All matters subject to arbitration
under this Section 7.5 shall be submitted to arbitration in accordance with the
Rules of the American Arbitration Association ("AAA"), except as otherwise
provided herein. Arbitration shall be brought upon the written notice of one
party to the other of a demand for arbitration, including a recitation of the
claim or dispute for which arbitration is sought. The arbitration shall be
before an Arbitrator jointly selected by the Parties from a list of arbitrators
prepared by AAA. If the Parties cannot agree on a single Arbitrator within
fifteen (15) days of receipt of a demand for arbitration, then the arbitration
shall be before a panel of three Arbitrators. Each Party shall immediately
select a single arbitrator from the said list and notify the other party of such
party's selection. Within ten (10) days thereafter, these two Arbitrators shall
select a third Arbitrator from the said list. If they fail to select a third
Arbitrator, then the third Arbitrator shall be designated by AAA. If either
party fails to designate an Arbitrator, then the claim or dispute shall be
submitted to arbitration before a panel of three Arbitrators chosen by AAA.
(c) Place. The hearing and disposition of claims and disputes
shall take place in Harris County, Texas.
(d) Remedies. All awards shall be made on the majority vote of
the Arbitrators. In addition to other remedies, the Arbitrators are authorized
to award either party a sum to compensate the party for time and expense of the
arbitration if they determine that arbitration was demanded without reasonable
cause. In such event, the Arbitrators may also assess the costs for the
arbitration proceeding against the party that demanded arbitration. In all
cases, the costs of the arbitration proceeding shall be assessed against the
party against whom the arbitration award is determined, or against both parties
if the determination is against both.
(e) Discovery. To the extent not otherwise provided in the
Rules of AAA, the Parties shall have all rights of discovery provided for under
Texas law, and discovery disputes may be resolved by the Arbitrator or one of
the three Arbitrators appointed for that purpose by AAA.
(f) Final Award. The award in the arbitration proceeding shall
be final and binding on the parties, and judgment on such award may be entered
in any court having competent jurisdiction.
7.7 Survival. All representations and warranties contained in or made
pursuant to this Agreement or in any agreement, certificate, document or
statement delivered pursuant hereto shall survive the Closing for a period of
five (5) years from the date thereof.
Article 8. Miscellaneous
8.1 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.2 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire, full and complete agreement between the
Parties with respect to the subject matter hereof, and supersedes any prior
understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
8.3 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party
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may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.5 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Buyer: Synaptix Systems Corporation
Marina Plaza, Suite 210
2450 South Shore Blvd.
League City, Texas 77573
Attn.: President
If to Seller: Swallen Investments Corp.
==============================
Attn.: President
Telephone:
Facsimile:
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
8.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas. Each Party to this
Agreement consents to personal jurisdiction in the State of Texas and
voluntarily submits to the jurisdiction of the courts of Texas in any action or
proceeding with respect to this Agreement, including the federal district courts
located in Texas.
8.8 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
8.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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8.10 Expenses. Buyer and Seller shall each bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
8.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
8.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
Buyer: SYNAPTIX SYSTEMS CORPORATION
By: ____________________________________
Alan W. Harvey, President
Seller: SWALLEN INVESTMENTS CORP.
By: ____________________________________
Title: __________________________________
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PROMISSORY NOTE Exhibit 10(d)
$100,000 May 15, 1997
FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in the
amounts stipulated, the undersigned,
OMAHA CAPITAL CORP.
PROMISES TO PAY TO THE ORDER OF
SYNAPTIX SYSTEMS CORPORATION
the sum of One Hundred Thousand ($100,000) Dollars in lawful money of the United
States of America, and to pay interest on the unpaid sum from the date of the
Note until maturity at the rate of 0.0% per annum, payable as stipulated.
This Note is payable as follows:
Principal is due on or before November 15, 1997.
It is agreed that time is of the essence of this agreement, and that in
the event of default in the payment when due, the holder of this Note may
declare the entirety of the Note immediately due and payable without notice, and
failure to exercise this option shall not constitute a waiver on the part of the
holder of the right to exercise it at any other time.
This Note was made in consideration for the sale of shares in
connection with a registration statement to purchase 1,000,000 shares of common
stock at $.10 per share, between Maker and Synaptix Systems Corporation. If
Maker defaults in payment, then the Shares purchased shall be returned.
The undersigned hereby agrees to pay all expenses incurred, including
an additional 10% on the amount of principal and interest due as attorney's
fees, all of which shall become a part of the principal, if this Note is placed
in the hands of an attorney for collection, or if collected by suit or through
the probate, bankruptcy or any other legal proceedings.
Each maker, surety and endorser waives demand, grace, notice,
presentment for payment, and protest and agrees and consents that this Note and
the liens securing its payment, may be renewed, and the time of payment extended
without notice, and without releasing any of the parties.
By: /s/ Shawn Leon
President
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PROMISSORY NOTE Exhibit 10(e)
$100,000 May 15, 1997
FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in the
amounts stipulated, the undersigned,
GEORGIA CAPITAL CORP.
PROMISES TO PAY TO THE ORDER OF
SYNAPTIX SYSTEMS CORPORATION
the sum of One Hundred Thousand ($100,000) Dollars in lawful money of the United
States of America, and to pay interest on the unpaid sum from the date of the
Note until maturity at the rate of 0.0% per annum, payable as stipulated.
This Note is payable as follows:
Principal is due on or before November 15, 1997.
It is agreed that time is of the essence of this agreement, and that in
the event of default in the payment when due, the holder of this Note may
declare the entirety of the Note immediately due and payable without notice, and
failure to exercise this option shall not constitute a waiver on the part of the
holder of the right to exercise it at any other time.
This Note was made in consideration for the sale of shares in
connection with a registration statement to purchase 1,000,000 shares of common
stock at $.10 per share, between Maker and Synaptix Systems Corporation. If
Maker defaults in payment, then the Shares purchased shall be returned.
The undersigned hereby agrees to pay all expenses incurred, including
an additional 10% on the amount of principal and interest due as attorney's
fees, all of which shall become a part of the principal, if this Note is placed
in the hands of an attorney for collection, or if collected by suit or through
the probate, bankruptcy or any other legal proceedings.
Each maker, surety and endorser waives demand, grace, notice,
presentment for payment, and protest and agrees and consents that this Note and
the liens securing its payment, may be renewed, and the time of payment extended
without notice, and without releasing any of the parties.
By: /s/ Jack Green
President
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The Tiger Group, L.L.C. Exhibit 10(f)
- ----------------------------------------------------------------------------
900 Jackson Street
Suite 450, LB 14
Dallas, Texas 75202
Ph: 972.713.6268
Fax: 972.380.9093
August 6, 1997
Mr. Alan Harvey
Chairman, CEO & President
Synaptix Systems Corporation
2450 South Shore Boulevard
Suite 2 1 0
League City, TX 77573
Dear Alan:
This letter confirms our understanding that Synaptix Systems Corporation
("Synaptix" or the "Company") has engaged The Tiger Group, L.L.C. and its
affiliates ("Tiger", "we" or "us") to act as its financial advisor with
respect to (a) the raising of capital; and (b) various management and business
development tasks as generally outlined in the Business Development Services
Proposal dated July 21, 1997 (the "Business Development Proposal").
As part of this engagement, we will:
(a) Assist Synaptix in initially raising up to $5 million in investment
capital through the following:
1. Develop a transaction memorandum to be supplied to prospective
investors. 2. Contact investors identified by Synaptix (and
potential investors known to Tiger, such investment by these
investors, if any, to be covered by a future engagement
agreement). 3. Meet with investors identified by Synaptix (and
potential investors known to Tiger, such investment by these
investors, if any, to be covered by a future engagement
agreement).
4. Structure the transaction.
5. Assist in the performance of investor due diligence as
appropriate. 6. Draft the initial term sheet and make revisions
as appropriate.
7. Negotiate transaction.
8. Close the transaction.
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As compensation for the services performed in (a), we shall be paid a cash
success fee of 5 % of the capital invested in the company upon the closing of
each transaction. In addition, should the total invested amount be at least $2
million, we shall be paid an additional stock success fee of 250, 000 shares
of common stock. The cash successfee is due and payable at the closing of the
financing and shall be a condition to closing any such transaction. The stock
success fee, if any, is understood to be for consulting services and is due
and payable within 15 days of the closing of the transaction; said shares, if
any, to be issued in fully registered form through the filing with the SEC of
Form S-8. All of the expenses of Tiger related to these duties shall be
reimbursed by the Company within 30 days of submission, however, until such
time as the initial $30,000 monthly payment is made under (b) below, major
expenses such as airfare and hotel accommodations shall be paid directly by
the Company.
(b) Assist Synaptix in the performance of management and business
development services as outlined in the Business Development Proposal,
except that, based on decisions reached jointly by Synaptix and us,
certain of these duties will not be required and certain other
reasonable duties may be required. The "spirit" of this agreement is
that all reasonable requests for management and business development
services made by the Company shall be performed by us during the period
of this engagement.
As compensation for the services performed in (b), we shall be paid a monthly
cash retainer of $30,000 due and payable on the 1st day of every month
beginning August 1, 1997, it being understood, however, that until a funding
of at least $150,000 is completed by the Company, the first month's retainer
shall be delayed. In addition, at the conclusion of the first six month period
(January 31, 1998), we shall be issued common stock equal to 5% of the fully
diluted shares of the Company outstanding as of that date, the value of such
shares to be agreed to by both the Company and us. Such shares are understood
to be payment for consulting services and are to required to be issued by
February 15, 1998 in fully registered form through the filing with the SEC of
Form S-8. All expenses of Tiger related to these duties shall be reimbursed by
the Company within 30 days Of submission; however, until such time as the
initial $30,000 monthly payment is made, major expenses such as airfare and
hotel accommodations shall be paid directly by the Company.
Each of the performance steps (a) through (b) above are considered separate
projects and the compensation outlined under each list of tasks shall be due and
payable under the terms as outlined in each compensation paragraph. In no case
shall compensation due under any one of the steps (a) through (b) individually,
be dependent on or related to performance of any other tasks or the compensation
due and payable under any of the other steps (a) through (b).
Initials
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In connection with our engagement, the Company will furnish us with all
information concerning the Company which is necessary to perform the tasks
outlined in (a) through (b) above. In addition the Company will provide us with
reasonable access to the Company personnel that are required to complete this
assignment. Tiger will rely solely upon such information supplied by the
Company, without assuming any responsibility for independent investigation or
verification thereof. All non-public information concerning the Company which is
given to us will be used solely in the course of performance of our services
hereunder and will be treated confidentially by us for so long as it remains
nonpublic. Except as otherwise required by law, we will not disclose this
information to a third party without the Company's consent.
No advice rendered by Tiger, whether formal or informal, may be disclosed, in
whole or in part, or summarized, excerpted from or otherwise referred to without
our prior written consent.
As part of this agreement, the Company grants us the right to serve as an
advisor in all its efforts to raise investment capital, either debt or equity,
for a period of two years. As compensation for serving as an advisor to the
Company we will receive a fee to be negotiated and defined under a separate
letter agreement, but in no case shall the fee be less than 5% of the capital
invested in the Company. This advisory fee will be due and payable at the time
of the closing of the financing.
Since we will be acting on behalf of the Company in connection with its
engagement hereunder, the Company and Tiger have entered into a separate letter
agreement, dated the date hereof, providing for the indemnification by the
Company of Tiger and all its related persons, affiliates and entities. The
indemnity provisions in the separate letter agreement referred to above shall
apply to the engagement contemplated pursuant to this agreement and any such
additional engagement and shall remain in full force and effect regardless of
any completion, modification or termination of Tiger's engagement.
Should the Company not receive at least $150,000 in investment by September 15,
1997 and should the Company be in arrears two months for the payment of the cash
retainer due under section (b) above, Tiger may elect to terminate this
agreement; provided, however, that the two monthly cash retainers shall still be
due and payable upon the Company receiving at least $150,000 in funding.
In addition, either party to this agreement may terminate this agreement at any
time after January 31, 1998 upon 30 days written notice to the other parties,
such notice to be delivered by registered mail. However, termination of this
agreement does not negate (i) any obligation of the Company to issue the shares
due and payable under (a) or (b) above, if any; (ii) any reimbursement of
expenses still outstanding; (iii) the Company's obligation to utilize Tiger as
its advisor on any future financings for the defined two year period; and (iv)
any Company obligations under the indemnity provisions in the separate letter
agreement referred to above regardless of any completion, modification or
termination of Tiger's engagement.
Initials
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To: Matthew Hutchins
Daniel A. Gillett
The Tiger Group, L.L.C.
900 Jackson Street
Suite 450-LB 14
Dallas, TX 75202
Date: August 6, 1997
In connection with your engagement (the "engagement") to advise and assist us
with a strategic advisory assignment as described in the separate engagement
letter, we agree to indemnify and hold harmless The Tiger Group, L.L.C. and its
employees, assigns and associates (collectively, "Indemnified Persons"), from
and against, and we agree that no Indemnified Person shall have any liability to
us or our owners, parents, affiliates, security holders or creditors for, any
losses, claims, damages or liabilities (including actions or proceedings in
respect thereof) (collectively, "Losses") (a) related to or arising out of (i)
our actions or failures to act (including statements or omissions made, or
information provided, by us or our agents) or (ii) actions or failures to act by
an Indemnified Person with our consent or in reliance on our actions or failures
to act, or (b) otherwise related to or arising out of the engagement or your
performance thereof, except that this clause (b) shall not apply to any Losses
that are finally judicially determined to have resulted primarily from your bad
faith or gross negligence.
We will reimburse each Indemnified Person for all expenses (including reasonable
fees and disbursements of counsel) as they are incurred by such Indemnified
Person in connection with investigating, preparing for or defending any action,
claim, investigation, inquiry, arbitration or other proceeding ("Action")
referred to above (or enforcing this agreement or any related engagement
agreement), whether or not in connection with pending or threatened litigation
in which any Indemnified Person is a party, and whether or not such Action is
initiated or brought by you. We further agree that we will not settle or
compromise or consent to the entry of any judgment in any pending or threatened
Action in respect of which indemnification may be sought hereunder (whether or
not an Indemnified Person is a party therein) unless we have given you
reasonable prior written notice thereof and used all reasonable efforts, after
consultation with you, to obtain an unconditional release of each Indemnified
Person from all liability arising therefrom. In the event we are considering
entering into one or a series of transaction involving a merger of other
business combination or a dissolution or liquidation of all or a significant
portion of our assets, we shall promptly notify you in writing. If requested by
The Tiger Group, L.L.C. and/or its associates, we shall then establish
alternative means of providing for our obligations set forth herein on terms and
conditions reasonably satisfactory to The Tiger Group, L.L.C. and/or its
associates.
If multiple claims are brought against you in any Action with respect to at
least one of which indemnification is permitted under applicable law and
provided for under this agreement, we agree that any judgment, arbitration
award, or other monetary award shall be conclusively deemed to be based on
claims as to which indemnification is permitted and provided for. Solely for the
purpose of enforcing this agreement, we hereby consent to personal jurisdiction
and to service and venue in any court in which any claim which is subject to
this agreement is brought by or against any Indemnification Person.
The provisions of this agreement shall apply to the engagement (including
related activities prior to the date hereof) and any modification thereof and
shall remain in full force and effect regardless of the completion or
termination of the engagement. This agreement and any other agreements relating
to the engagement shall be governed by and construed in accordance with the laws
of the State of Texas, without regard to conflicts of law principles. Venue for
any litigation between the parties to this agreement shall be Dallas County,
Texas.
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Very truly yours,
Synaptix Systems Corporation
By: /s/ Alan W. Harvey
Alan W. Harvey
Title: President & CEO
Accepted and Agreed:
The Tiger Group, L.L.C.
By: /s/ Matthew Hutchins
Title: CEO
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EMPLOYMENT AGREEMENT Exhibit 10(g)
EMPLOYMENT AGREEMENT, dated as of June 02, 1997 between SYNAPTIX
SYSTEMS CORPORATION, a Colorado corporation (the "Employer"), and CRAIG HAMILTON
(the "Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for one (1) year, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
a Software Engineer and shall have such duties and responsibilities as the
Software Engineer of the Employer, or such other management employee of Employer
as may be authorized by the President, may from time to time prescribe,
including, but not limited to, designing, devising, writing and developing
software code and providing related software development services to Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote his full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
his duties hereunder. The Employee shall have the option to further his
education at his discretion without the Employer considering it a conflict of
his Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of SIXTY THOUSAND DOLLARS
($60,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
a. Options to purchase 2,500 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
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b. Options to purchase 2,500 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code-named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect his duties or
shall be adjudicated civilly liable for any material breach of his duties as an
employee or of his fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform his services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete his duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to six month's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long period, and disclosure of
any of the items to anyone other than Employer's officers, agents, or authorized
employees will cause Employer irreparable injury:
61
<PAGE>
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during his employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
he deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
his signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
7.07 Return of Secret and Confidential Material Upon Termination of
Employment. Upon termination of Employee's employment for any reason, Employee
at once
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<PAGE>
will return to Employer all of Employer's trade secret and confidential material
that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at his home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which he or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
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<PAGE>
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan W. Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Craig Hamilton
Craig Hamilton
64
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 9, 1997 between SYNAPTIX SYSTEMS
CORPORATION, a Colorado corporation (the "Employer"), and DARYL ALLISON (the
"Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for one (1) year, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
a Software Engineer and shall have such duties and responsibilities as the
Software Engineer of the Employer, or such other management employee of Employer
as may be authorized by the President, may from time to time prescribe,
including, but not limited to, designing, devising, writing and developing
software code and providing related software development services to Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote his full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
his duties hereunder. The Employee shall have the option to further his
education at his discretion without the Employer considering it a conflict of
his Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of SIXTY FIVE THOUSAND DOLLARS
($65,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
65
<PAGE>
a. Options to purchase 2,500 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
b. Options to purchase 2,500 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code-named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect his duties or
shall be adjudicated civilly liable for any material breach of his duties as an
employee or of his fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform his services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete his duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to six month's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long
66
<PAGE>
period, and disclosure of any of the items to anyone other than Employer's
officers, agents, or authorized employees will cause Employer irreparable
injury:
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during his employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
he deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
his signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
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<PAGE>
7.07 Return of Secret and Confidential Material Upon
Termination of Employment. Upon termination of Employee's employment for any
reason, Employee at once will return to Employer all of Employer's trade secret
and confidential material that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at his home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which he or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
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8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan W. Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Daryl Allison
Daryl Allison
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 9, 1997 between SYNAPTIX SYSTEMS
CORPORATION, a Colorado corporation (the "Employer"), and GREG GLOVER (the
"Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for one (1) year, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
a Software Engineer and shall have such duties and responsibilities as the
Software Engineer of the Employer, or such other management employee of Employer
as may be authorized by the President, may from time to time prescribe,
including, but not limited to, designing, devising, writing and developing
software code and providing related software development services to Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote his full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
his duties hereunder. The Employee shall have the option to further his
education at his discretion without the Employer considering it a conflict of
his Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of SIXTY FIVE THOUSAND DOLLARS
($65,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
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a. Options to purchase 2,500 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
b. Options to purchase 2,500 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code-named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect his duties or
shall be adjudicated civilly liable for any material breach of his duties as an
employee or of his fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform his services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete his duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to six month's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long
71
<PAGE>
period, and disclosure of any of the items to anyone other than Employer's
officers, agents, or authorized employees will cause Employer irreparable
injury:
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during his employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
he deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
his signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
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<PAGE>
7.07 Return of Secret and Confidential Material Upon
Termination of Employment. Upon termination of Employee's employment for any
reason, Employee at once will return to Employer all of Employer's trade secret
and confidential material that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at his home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which he or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
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<PAGE>
8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan W. Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Greg Glover
Greg Glover
74
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of August 11, 1997 between SYNAPTIX
SYSTEMS CORPORATION, a Colorado corporation (the "Employer"), and Kelly Randels
(the "Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for two (2) years, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
a Software Engineer and shall have such duties and responsibilities as the
Software Engineer of the Employer, or such other management employee of Employer
as may be authorized by the President, may from time to time prescribe,
including, but not limited to, designing, devising, writing and developing
software code and providing related software development services to Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of her ability and experience, she will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote her full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
her duties hereunder. The Employee shall have the option to further her
education at her discretion without the Employer considering it a conflict of
her Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of SEVENTY FIVE THOUSAND DOLLARS
($75,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
75
<PAGE>
a. Options to purchase 10,000 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
b. Options to purchase 10,000 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code- named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect her duties or
shall be adjudicated civilly liable for any material breach of her duties as an
employee or of her fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform her services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete her duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to one year's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long
76
<PAGE>
period, and disclosure of any of the items to anyone other than Employer's
officers, agents, or authorized employees will cause Employer irreparable
injury:
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during her employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
she deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
her signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
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<PAGE>
7.07 Return of Secret and Confidential Material Upon
Termination of Employment. Upon termination of Employee's employment for any
reason, Employee at once will return to Employer all of Employer's trade secret
and confidential material that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at her home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which she or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
78
<PAGE>
8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Kelly Randels
KELLY RANDELS
79
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 19, 1997 between SYNAPTIX SYSTEMS
CORPORATION, a Colorado corporation (the "Employer"), and LESLIE VARGAS (the
"Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for one (1) year, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
Assistant to the CEO and President of Synaptix Systems Corporation and Executive
Administrator of Synaptix Systems Corporation. Duties consist of assisting the
President and CEO with the day to day responsibilities of running their office.
Additionally, as Executive Administrator, the Employee is responsible for
managing all company operations both administrative as well as financial and any
other services required by the Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of her ability and experience, she will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote her full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
her duties hereunder. The Employee shall have the option to further her
education at her discretion without the Employer considering it a conflict of
her Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of THIRTY EIGHT THOUSAND DOLLARS
($38,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
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<PAGE>
a. Options to purchase 3,000 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
b. Options to purchase 3,000 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code-named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect her duties or
shall be adjudicated civilly liable for any material breach of her duties as an
employee or of her fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform her services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete her duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to one year's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long
81
<PAGE>
period, and disclosure of any of the items to anyone other than Employer's
officers, agents, or authorized employees will cause Employer irreparable
injury:
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during her employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
she deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
her signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
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<PAGE>
7.07 Return of Secret and Confidential Material Upon
Termination of Employment. Upon termination of Employee's employment for any
reason, Employee at once will return to Employer all of Employer's trade secret
and confidential material that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at her home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which she or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
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8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Leslie Vargas
LESLIE VARGAS
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 9, 1997 between SYNAPTIX SYSTEMS
CORPORATION, a Colorado corporation (the "Employer"), and MIKE BURDEOS (the
"Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for one (1) year, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
a Software Engineer and shall have such duties and responsibilities as the
Software Engineer of the Employer, or such other management employee of Employer
as may be authorized by the President, may from time to time prescribe,
including, but not limited to, designing, devising, writing and developing
software code and providing related software development services to Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote his full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
his duties hereunder. The Employee shall have the option to further his
education at his discretion without the Employer considering it a conflict of
his Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of SEVENTY THOUSAND DOLLARS
($70,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
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a. Options to purchase 2,500 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
b. Options to purchase 2,500 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code-named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect his duties or
shall be adjudicated civilly liable for any material breach of his duties as an
employee or of his fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform his services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete his duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to six month's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long
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period, and disclosure of any of the items to anyone other than Employer's
officers, agents, or authorized employees will cause Employer irreparable
injury:
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during his employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
he deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
his signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
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7.07 Return of Secret and Confidential Material Upon
Termination of Employment. Upon termination of Employee's employment for any
reason, Employee at once will return to Employer all of Employer's trade secret
and confidential material that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at his home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which he or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
88
<PAGE>
8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan W. Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Mike Burdeos
Mike Burdeos
89
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 10, 1997 between SYNAPTIX
SYSTEMS CORPORATION, a Colorado corporation (the "Employer"), and MARK ORR (the
"Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for one (1) year, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
a Software Engineer and shall have such duties and responsibilities as the
Software Engineer of the Employer, or such other management employee of Employer
as may be authorized by the President, may from time to time prescribe,
including, but not limited to, designing, devising, writing and developing
software code and providing related software development services to Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote his full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
his duties hereunder. The Employee shall have the option to further his
education at his discretion without the Employer considering it a conflict of
his Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of FORTY FIVE THOUSAND DOLLARS
($45,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
90
<PAGE>
a. Options to purchase 3,000 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
b. Options to purchase 3,000 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code-named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect his duties or
shall be adjudicated civilly liable for any material breach of his duties as an
employee or of his fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform his services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete his duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to six month's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long
91
<PAGE>
period, and disclosure of any of the items to anyone other than Employer's
officers, agents, or authorized employees will cause Employer irreparable
injury:
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during his employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
he deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
his signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
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<PAGE>
7.07 Return of Secret and Confidential Material Upon
Termination of Employment. Upon termination of Employee's employment for any
reason, Employee at once will return to Employer all of Employer's trade secret
and confidential material that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at his home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which he or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
93
<PAGE>
8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan W. Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Mark Orr
Mark Orr
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 19, 1997 between SYNAPTIX SYSTEMS
CORPORATION, a Colorado corporation (the "Employer"), and ROBERT TUCKER (the
"Employee").
1. TERM OF AGREEMENT
1.01 Term. The Employer hereby employs the Employee and the
Employee hereby accepts employment with the Employer commencing on the date
first written above and continuing for two (2) years, unless this Agreement is
terminated earlier as hereinafter provided (the "Term").
2. DUTIES OF EMPLOYEE
2.01 Description of Duties. The Employee is hereby employed as
a Product Development Director and shall have such duties and responsibilities
as the Product Development Director of the Employer, or such other management
employee of Employer as may be authorized by the President, may from time to
time prescribe, including, but not limited to, designing, devising, writing, and
developing software code and providing related software development services to
Employer.
2.02 Loyal and Conscientious Performance of Duties. The
Employee agrees that, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
required of him either expressly or implicitly by the terms of this Agreement.
2.03 Devotion of Time. During the Term, the Employee shall
devote his full energies, abilities and productive time in rendering the
services called for under this Agreement and agrees to be available to perform
such services as the Employer may reasonably require from time to time. The
Employee may not engage in any other business or professional activity, with or
without compensation, if such business or professional activity in any way
hinders the Employee's ability, or infringes on the time necessary, to perform
his duties hereunder. The Employee shall have the option to further his
education at his discretion without the Employer considering it a conflict of
his Devotion of Time. Employer, at its option, will reimburse tuition and other
related educational expenses.
3. COMPENSATION OF EMPLOYEE
3.01 Base Salary. As compensation for the services rendered by
the Employee hereunder, the Employee shall be entitled to receive a base salary
computed at a guaranteed annual minimum rate of EIGHTY THOUSAND DOLLARS
($80,000.00). The Employer may, at its option and in its sole discretion, pay
additional amounts as additional salary to the Employee. Any payments to be made
in accordance with this paragraph 3 shall be payable in equal installments in
accordance with Employer's usual practice and shall be pro-rated for any partial
employment period.
3.02 Incentive Stock Options. As an incentive to Employee,
Employer will grant to Employee stock options in the following amounts upon the
occurrence of the following events:
95
<PAGE>
a. Options to purchase 5,000 shares of the Employer's
common stock upon the completion of the Beta release
of the Software Program code-named "Eagle, and its
roll out at the Fall 1997 Comdex exhibition; and
b. Options to purchase 5,000 shares of the Employer's
common stock upon the release for sale of the final
version of the Software Program code-named "Eagle.
4. OTHER BENEFITS
The Employee shall be entitled to all benefits established by
the Employer for its employees, including such benefits as vacation, sick leave,
and stock bonus plans, in accordance with the Employer's normal policies.
5. REIMBURSEMENT OF BUSINESS EXPENSES
The Employer shall promptly reimburse the Employee for all
reasonable business expenses in accordance with its usual procedure for such
reimbursements.
6. TERMINATION OF EMPLOYMENT
6.01 Termination by Agreement of the Parties. Employee's
employment may be terminated at any time upon mutual agreement of Employer and
Employee.
6.02 Termination for Cause. If the Employee shall commit a
crime which involves moral turpitude and which has the effect of injuring the
business or reputation of the Employer or shall habitually neglect his duties or
shall be adjudicated civilly liable for any material breach of his duties as an
employee or of his fiduciary duties to the Employer, the Employer may, at its
option, terminate this Agreement by giving 10 days' written notice of
termination to the Employee, without prejudice to any other remedy to which the
Employer may be entitled either at law, in equity or pursuant to this Agreement.
6.03 Permanent Disability. If the Employee is unable to
perform his services hereunder by reason of sickness, physical or mental
disability or any other reason for a period of more than six months, and, as
determined by the board of directors of the Employer, it reasonably appears that
the Employee will be unable to complete his duties under this Agreement, the
Employer shall have no further obligations under this Employment Agreement,
except as may be required under Employer's benefit plans for its employees.
6.04 Death. If the Employee dies, this Agreement shall
terminate immediately on the date of death, except for the payment of any life
insurance provided pursuant to this Agreement.
6.05 Termination on Change in Management. In the event that
Employee's employment is terminated as a result of a change in the management of
Employer, then in that event Employee shall be entitled to a severance payment
equal to one year's base salary.
7. INTELLECTUAL PROPERTY RIGHTS.
7.01 Acknowledgment That Certain Papers, Lists, Processes,
Etc., Are Trade Secrets. Employee acknowledges that the following items used in
Employer's business are secret, confidential, unique, and valuable, were
developed by Employer at great cost and over a long
96
<PAGE>
period, and disclosure of any of the items to anyone other than Employer's
officers, agents, or authorized employees will cause Employer irreparable
injury:
a. Software source code, programs, run routines, designs, and look and feel
components of the foregoing;
b. customer lists, call lists, and other confidential customer data;
c. Memoranda, notes, records, and other confidential technical data;
d. Sketches, plans, drawings, and other confidential research and development
data; and/or
e. Manufacturing processes and the composition of Employer's products.
7.02 Agreement Not to Disclose Information. Employee will not
disclose to anyone, other than Employer's officers, agents, or authorized
employees, unless otherwise directed in writing by Employer's Board of
Directors, any of the items listed in Paragraph 3 or any of Employer's other
confidential information or trade secrets, whether developed before or after the
date of this Agreement.
7.03 Information Developed by Employee. The restrictions
contained in this Agreement include confidential information and trade secrets
developed by Employee while employed by Employer.
7.04 Notice to Employer of Invention or Development. Employee
will promptly advise Employer of each invention, discovery, idea, or improvement
(collectively, "Invention"), whether or not patentable, that is made or
conceived by Employee, either alone or with others, during the term of
Employee's employment and directly or indirectly related to Employee's work and
investigations or resulting from or suggested by any work Employee might do for
Employer at Employer's request. Employee will promptly submit to Employer a
written disclosure of each Invention describing its nature, use, and operation.
7.05 Assignment of Rights in Inventions. Employee will,
without further consideration, assign to Employer or Employer's nominee all of
Employee's right, title, and interest in each Invention, whether or not
patentable, and will, at all times during his employment, and will assist
Employer or Employer's nominee in every proper way (but entirely at Employer's
or Employer's nominee's own expense) to obtain, for Employer's or Employer's
nominee's own benefit, patents or other forms of protection for each Invention
in any and all countries. From time to time on request, Employee will execute
all papers and do all proper things that may reasonably be required to protect
and maintain the rights of Employer or Employer's nominee in an Invention,
whether or not patented. Employee understands and agrees that all information
relating to each Invention shall be considered proprietary and a trade secret of
Employer. Inventions created for school related projects are not subject to this
provision. Employee understands that the Employer will entertain the
possibilities of licensing such school related projects from the Employee should
he deem it beneficial to the Employer.
7.06 Exclusion From Agreement of Prior Inventions. Employee
has listed on Schedule A attached to this Agreement all unpatented inventions,
including a brief description of each, made or conceived by Employee prior to
his signing this Agreement. These inventions are excluded from the operation of
this Agreement, and Employer has no rights in them.
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7.07 Return of Secret and Confidential Material Upon
Termination of Employment. Upon termination of Employee's employment for any
reason, Employee at once will return to Employer all of Employer's trade secret
and confidential material that is in Employee's possession or control.
7.08 Provisions Binding After Employment Ends. The provisions
of Articles 7.01, 7.02,7.07 shall not terminate upon the termination of
Employee's employment, but the terms and conditions shall be binding upon
Employee following the termination of Employee's employment, regardless of the
reason for such termination.
8. GENERAL PROVISIONS
8.01 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties hereto.
8.02 Severability. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.03 Law Governing Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
8.04 Notices. Any notice hereunder shall be deemed
sufficiently given by one party to the other if in writing and if and when
delivered or tendered, either in person or by depositing it in the United States
mail, certified, with postage prepaid, and addressed to the Employer at its
principal place of business or to the Employee at his home address as it then
appears in the files of the Employer.
8.05 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation
thereof, shall be settled by arbitration in Houston, Texas in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
8.06 Attorneys' Fees and Costs. In the event of any
arbitration hereunder, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which he or it may be entitled.
8.07 Assignability. The rights and duties of either party
hereunder shall not be assignable by either party, except that this Agreement
and all rights and obligations hereunder may be assigned by the Employer to, and
assumed by, any corporation or other business entity which succeeds to all or
substantially all of the assets and business of the Employer through merger,
consolidation, acquisition of assets or other corporate reorganization.
98
<PAGE>
8.08 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties thereto and, in the case of the
Employer, its successors and assigns.
This Agreement is executed on the day and year first above written.
EMPLOYER: SYNAPTIX SYSTEMS CORPORATION
By: /s/ Alan W. Harvey
Alan W. Harvey, President
EMPLOYEE: /s/ Robert Tucker
Robert Tucker
99
<PAGE>
SETTLEMENT AGREEMENT AND RELEASE Exhibit 10(h)
This Settlement Agreement and Release (this "Agreement") is made and entered
into as of the 17th day of October, 1997, by and between SYNAPTIX SYSTEMS
CORPORATION, a Colorado corporation, together with any and all predecessor
entities and corporations (collectively, "Synaptix"); and ALAN W. HARVEY, an
individual ("Harvey").
RECITALS
A. Synaptix is a company engaged in the business of developing and
marketing computer programs. Harvey is an officer, director and shareholder of
Synaptix.
B. The parties to this Agreement intend and desire to effect and
accomplish a full and final settlement of the claims and issues existing between
them arising out of Harvey's employment by Synaptix, his services as an officer
and director of Synaptix, and his actions in connection with his activities
pertaining to Synaptix.
C. Subject to the terms and conditions of this Agreement, the parties
to this Agreement now desire to enter into a full and complete settlement of all
disputes by providing certain payments, taking certain actions and entering into
certain covenants as set forth below to completely discharge any and all claims
and potential claims between them.
AGREEMENT
NOW THEREFORE, it is agreed by and between the parties as follows:
1. Resignation of Harvey. Harvey hereby unconditionally resigns as
President, Chief Executive Officer and a director of Synaptix, effective the day
immediately succeeding the day Synaptix's 1996 Form 1O-K is filed with the
Securities Exchange Commission.
2. Assignment and Quitclaim. Harvey hereby unconditionally assigns and
quitclaims to Synaptix his entire right, title and interest, to the extent any
such exists, in and to any and all equipment hardware, apparatus and computer
software programs developed by, or on behalf of, Harvey or Synaptix, including,
without limitation, such programs more commonly known as INTERACT (or EAGLE),
FieldExpress, and TnE Express, including, without limitation, any and all rights
to underlying source code, machine code, and compiled or uncompiled versions of
the same (the "Programs"). Coincident with the execution of this Agreement,
Harvey shall deliver, or cause to be delivered, to Synaptix all copies of the
Programs in his possession or control, or delivered to others through or on
behalf of him, together with all copies made thereof, and shall not retain, or
cause to be retained, any such copies for any purpose whatsoever. A violation of
this Section 3 shall be deemed a material breach of this Agreement by Harvey
entitling Synaptix to collect monetary damages, the right to offset any sums or
stock due and owing to Harvey, and equitable relief, including, without
limitation, an injunction without the necessity of posting a bond.
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3. Noncompetition Agreement.
5.1 Definitions. The following terms shall have the meanings
set forth below:
(a) "Business of the Company" shall mean the development, manufacture,
marketing and sale of software programs of the type exemplified, in whole
or in part, by the Programs. A more complete definition of the software
will be provided at a later date and agreed to by both parties.
(b) "Company's Products" shall mean the Programs and any enhancements,
derivations, modifications, and subsequent versions thereto or thereof.
(c) "Company" shall include Synaptix and any parent, subsidiary,
predecessor, successor or affiliate of Synaptix engaged in, or
substantially in, the Business of the Company.
5.2 Noncompetition. Harvey acknowledges that the Business of
the Company has been, or intended to be, carried on in the jurisdictions set
forth on Schedule A hereto and will be marketed worldwide (the "Territory").
Harvey covenants that, in the Territory, he will not, for a period of three (3)
years from the date hereof (the "Term"), directly or indirectly, without the
prior written consent of Synaptix, which consent may be withheld in its sole and
absolute discretion, acquire, participate in, or cause any corporation or other
business entity owned in whole or in part by him or associated with, to acquire,
any business which directly competes with the Business of the Company so long as
Synaptix engages, in whole or in part, in that activity. Harvey further
covenants that, in the Territory, he will not, for such three (3) year period,
without the prior written consent of the Company, which consent may be withheld
in its sole and absolute discretion, engage in any business (whether as an
employee, owner, security holder, creditor or otherwise) which competes,
directly or indirectly, with the Business of the Company. Except as an employee,
agent, director, officer or affiliate of a publicly traded corporation, and
otherwise not in contravention of the terms of this Section 5.2, a passive
investment by Harvey in equity securities in any publicly traded corporation,
which ownership does not exceed 5% of the outstanding stock of such corporation,
will not constitute a violation of this provision.
5.3 Customers and Personnel. For a period of three (3) years
from the date hereof, Harvey covenants not to solicit, or cause to be solicited,
the employment of any person employed by Synaptix.
5.4 Nondisclosure. From the date of this Agreement, Harvey
covenants not to at any time disclose or use to his advantage any material or
confidential information or trade secrets, whether patentable or not, acquired
from or, in connection with or belonging to Synaptix prior to or after the date
hereof, including, without limitation, any part of the Programs. A violation of
this Section 5.4 shall be deemed a material breach of this Agreement by Harvey
entitling Synaptix to collect monetary damages, the right to offset any sums or
stock due and owing to Harvey, and equitable relief, including, without
limitation, an injunction without the necessity of posting a bond.
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6. Representations and Warranties of Parties. Each party hereby represents
and warrants to each other party as follows:
6.1 He or it has not transferred, assigned or otherwise
subrogated or conveyed, or cause to be transferred, assigned, or otherwise
subrogated or conveyed, any of his or its interest in any of the claims which
are the subject matter of this Agreement to any person or entity not a party to
this Agreement; additionally, in the case of Harvey, he has not transferred, or
cause to be transferred, by operation of law or otherwise, any right, title or
interest in the shares of stock to be delivered to Synaptix by Harvey pursuant
to Section 2 hereof, or any interest of any kind whatsoever in the Programs
described in Section 3 hereof;
6.2 He or it has obtained all such approvals and
authorizations as are necessary or appropriate to the execution, delivery and
performance of this Agreement by it, including the consents of shareholders,
directors, partners or joint ventures, where applicable, and this Agreement has
been validly executed and delivered by him or it and is binding upon and
enforceable against him or it in accordance with its terms;
6.3 Except for the parties to this Agreement, he or it has no
knowledge that any other person or entity has any right or interest in or to the
subject matter of this Agreement; and
6.4 Harvey expressly represents and warrants that he has good
and marketable title to the shares of stock being conveyed pursuant to Section 2
hereof, free and clear of all claims, liens, interests and encumbrances.
6.5 Harvey has delivered, or caused to be delivered, to
Synaptix all copies of the Programs in his possession or control, and there is
not other person, not subject to a confidentially agreement with Synaptix, to
whom Harvey has delivered a copy of the Programs, in whole or in part, or any of
them.
6.6 Each party to this Agreement hereby indemnifies and holds
the other party harmless from and against any liability, loss, claims, demands,
damages, costs or expenses incurred, or attorneys' fees paid, by the other party
as a result of the incorrectness of any of their respective representations and
warranties contained in paragraphs 6.1 through 6.5, inclusive, of this Section.
7. Covenants and Releases. For valuable consideration as
recited above and the receipt of which is hereby acknowledged, the parties to
this Agreement covenant and promise as follows:
7.1 Definitions. For purposes of this section, the term "party" or
"parties" shall mean:
(a) on the one hand, Harvey, together with his respective agents,
heirs, successors, personal representatives and assigns; and
(b) on the other hand, Synaptix, together with its respective past and
present officers (other than Harvey), directors, agents, employees,
servants, successors and assigns.
The use of the term "party" or "parties" herein shall be inclusive, and usage of
the singular shall in every case also incorporate the collective meaning set
forth above.
102
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7.2 Mutual Releases. Except for the performance of the
undertakings set forth herein each party to this Agreement does hereby release
and forever discharge each other party from any and all claims, demands,
damages, actions, causes of action, defenses and liabilities, of any kind
whatsoever, whether in law or in equity, whether contractual, common law,
statutory, federal, state or otherwise, whether known or unknown, whether
suspected to exist or not, which the parties now have, had or hereafter may have
or claim to have, by reason of any acts, omissions, transactions, or occurrences
prior to the date hereof arising out of Harvey's employment by Synaptix and his
actions as an officer and director of the company.
7.3 General Release. Harvey may have claims by reason of acts,
omissions, transactions or occurrences prior to the date hereof against the
Company, of which, at the time this Agreement is executed, Harvey has no
knowledge or suspicion. Except for the performance of the undertakings expressly
set forth herein. Harvey hereby agrees and represents that this Agreement is
specifically intended to, and does, extend to any and all such claims that are
based upon or arise out of the employment of him by Synaptix and his actions as
an officer and director of the company, whether or not known, claimed, or
suspected by such party and, therefore, Harvey hereby expressly waives any
statutory protection with respect to the limited claims described in this
sentence against unknown claims, regardless of whether or not knowledge of such
unknown claims may have materially affected Harvey's decision.
7.4 No Admission of Liability. The parties to this Agreement,
and each of them, agree and acknowledge that nothing contained in this
Agreement, nor the settlement which led to it, is intended to be, nor shall it
be deemed, construed or treated in any respect as, an admission of liability.
7.5 Scope of Release. This Agreement shall apply to and be
binding upon the respective officers, directors, agents, employees, servants,
successors, attorneys, heirs and assigns, if any, of each party to this
Agreement.
8. Cooperation by Harvey. Harvey agrees that he shall fully cooperate
with Synaptix in defenses against claims for loss, claims, demands, damages, and
costs or expenses incurred arising out of or in any way whatsoever connected
with Synaptix, Inc., a Texas corporation, Synaptix Systems Corporation, a
Colorado corporation, or Synaptix Systems Corporation, a Florida corporation, or
the affairs of either.
9. Miscellaneous.
9.1 Attorneys' Fees. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
9.2 Authority. Each person signing this document on behalf of a party
hereto warrants that he has been duly authorized by such party to do so.
9.3 Legal Counsel. Each party hereto hereby acknowledges the receipt of
advice of legal counsel prior to the execution hereof.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
together constitute a
103
<PAGE>
single agreement, and this agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto.
9.5 Continuing Obligations. None of the releases contained
herein shall be construed .to release any party from any obligation arising
hereunder or under the Consulting Agreement.
9.6 Confidentiality. The parties agree that they shall each
keep the terms of this Settlement Agreement confidential, and shall not disclose
the same to any third party except as may be required by law or judicial
process.
9.7 Fees and Expenses. Each party will pay their respective
fees, expenses and disbursements incurred in connection with the subject matter
of this Agreement and any amendments thereto.
9.8 Notices. All notices of communication required or
permitted hereunder must be in writing and will be deemed to have been duly
given if delivered personally, mailed by United States certified or registered
mail, postage prepaid, return receipt requested, mailed by overnight courier, or
sent by facsimile transmission (provided that any such facsimile transmission is
promptly confirmed by delivering or mailing the original executed notice by one
of the other methods provided for in this Subsection), to the parties at the
following addresses:
(a) If to Synaptix, addressed to:
Synaptix Systems Corporation
2450 South Shore Blvd., Suite 210
League City, Texas 77573
Attn: Edward S. Fleming, Vice President
Facsimile No.: (281) 334-0306
(b) If to Harvey, addressed to:
Alan W. Harvey
Facsimile No.: (281)---
Any such notice or communication that is addressed as provided in this
Subsection will be deemed given (a) upon delivery, if delivered personally, (b)
on the third business day after deposit in a regular depository of the United
States mail, if delivered by United States mail, (c) on the day of transmission,
if delivered by facsimile transmission, provided that confirmation is promptly
sent, unless such transmission is sent after 3:00 p.m., local time of the
receiving party, or on a day which is not a business day of the receiving party,
in which case such transmission will be deemed given on the first business day
after the transmission, and (d) on the first business day of the receiving party
after the delivery to the courier, if delivered by overnight courier. Any party
from time to time may change its address for the purpose of this provision by
furnishing a notice in accordance with this Subsection, but no such notice will
be deemed to have been given until it is actually received by the party sought
to be charged with the contents thereof.
9.9 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of law embodied therein that might refer construction of such
provisions to the laws of another jurisdiction.
104
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9.10 Captions. The captions in this Agreement are for
convenience of reference only, and shall not be considered a part hereof or be
given any effect in the construction or interpretation of this Agreement.
9.11 Severability. If any provision of this Agreement is
invalid, illegal -or unenforceable, the balance of this Agreement shall remain
in full force and effect and this Agreement shall be construed in all respects
as if such invalid, illegal or unenforceable provision were omitted.
9.12 Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes any prior written or oral agreements
or understandings between them concerning the subject matter set forth above.
There are no representations, warranties, covenants, promises, agreements,
arrangements, or understandings, oral or written, express or implied between the
parties hereto relating to the subject matter set forth above which have not
been fully expressed herein. The terms and provisions of this Agreement may be
altered, amended or modified only by a written instrument executed by the party
sought to be bound by such alteration, amendment or modification.
9.13 Binding Effect. This Agreement shall be binding on, and
shall inure to the benefit of, the parties to it and their respective heirs,
legal representatives, successors, and assigns. No party shall transfer or
assign any rights or obligations hereunder without the prior written consent of
the other party thereto.
105
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Settlement Agreement
and Release on the date first set forth above.
"Synaptix:"
SYNAPTIX SYSTEMS CORPORATION "Harvey:"
By: /s/ Alan W. Harvey
Edward S. Fleming, Vice President Alan W. Harvey
APPROVED AS TO FORM AND CONTENT
Robert C. Norton, Esq.
Rodi, Pollock, Pettker, Galbraith
& Cahill, A Law Corporation
Attorneys for Synaptix Systems
Corporation
APPROVED AS TO FORM AND CONTENT
Attorneys for Alan W. Harvey
106
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Synaptix Systems Corporation fiscal year ended June 30,
1997 financial statements and is qualified in its entirety by
reference to such financial
statements.
</LEGEND>
<CIK> 0000817125
<NAME> SYNAPTIX SYSTEMS CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 989
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 73,759
<PP&E> 100,873
<DEPRECIATION> 0
<TOTAL-ASSETS> 174,632
<CURRENT-LIABILITIES> 164,472
<BONDS> 0
0
0
<COMMON> 46,421
<OTHER-SE> (37,500)
<TOTAL-LIABILITY-AND-EQUITY> 174,632
<SALES> 4,710
<TOTAL-REVENUES> 4,710
<CGS> 0
<TOTAL-COSTS> 408,775
<OTHER-EXPENSES> 20,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (348,225)
<INCOME-TAX> 0
<INCOME-CONTINUING> (404,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,225)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
