UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 0-26790
eSynch Corporation
--------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 87-0461856
------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
4600 Campus Drive
Newport Beach, CA 92660
----------------------------------------
(Address of principal executive offices)
(949) 833-1220
------------------------------------------------
(Issuer's telephone number, including area code)
INNOVUS CORPORATION
-------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
The number of common shares outstanding at November 24, 1998: 6,554,829.
(after the effect of the 10-for-1 reverse stock split on November 9, 1998)
TABLE OF CONTENTS
PART 1. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet (Unaudited) -
September 30, 1998 . . . . . . . . . . . . . . . . . . . . 1
Condensed Consolidated Statements of Operations
(Unaudited) - for the Three and Nine Months Ended
September 30, 1998 and 1997 . . . . . . . . . . . . . . . .2
Condensed Consolidated Statements of Cash Flows
(Unaudited) - for the Nine Months Ended September
30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements (Unaudited) . . .4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation . . . . . . . . . . . . .6
PART II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . 9
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . .12
PART 1 FINANCIAL INFORMATION
Item I - Financial Statements
ESYNCH CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 11,065
Deferred tax asset. . . . . . . . . . . . . . . . . . . . . . . 2,600
----------
Total Current Assets. . . . . . . . . . . . . . . . . . . . . 13,665
Property and Equipment, net. . . . . . . . . . . . . . . . . . . 69,670
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,094
---------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,429
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . $ 748,939
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 16,221
Accrued income taxes. . . . . . . . . . . . . . . . . . . . . . 39,550
Notes payable - accrued salaries and wages. . . . . . . . . . . 156,030
Employee loans payable. . . . . . . . . . . . . . . . . . . . . 162,039
Capital lease obligations . . . . . . . . . . . . . . . . . . . 768
Preferred dividends payable . . . . . . . . . . . . . . . . . . 32,682
----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . 1,156,229
----------
Stockholders' Deficit
Preferred stock - $0.001 par value; 1,000,000 shares
authorized; no shares outstanding . . . . . . . . . . . . . . -
Common stock - $0.001 par value; 20,000,000 shares
authorized; 5,745,954 shares issued and outstanding . . . . 5,746
Additional paid-in capital. . . . . . . . . . . . . . . . . . . (154,022)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (923,524)
---------
Total Stockholders' Deficit . . . . . . . . . . . . . . . . . (1,071,800)
---------
Total Liabilities and Stockholders' Deficit. . . . . . . . . . . $ 84,429
=========
See the accompanying notes to the condensed financial statements.
-1-
<PAGE>
ESYNCH CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . $ - $ 67,613 $ 15,293 $ 423,874
--------- --------- -------- ---------
Costs and Operating Expenses
Costs of products and services sold - 58,362 9,940 102,823
Selling and marketing 6,573 19,973 14,570 52,956
General and administrative. . . . . 348,479 211,855 723,498 381,146
--------- --------- -------- ---------
Total Costs and Operating Expenses 355,052 290,190 748,008 536,925
--------- --------- -------- ---------
Operating Loss . . . . . . . . . . . (355,052) (222,577) (732,715) (113,051)
--------- --------- -------- ---------
Other Income (Expense)
Interest income . . . . . . . . . . 6,805 4,623 13,458 413
Interest expense . . . . . . . . . (3,627) 2,013 (5,571) (4,442)
--------- --------- --------- ---------
Other Income (Expense), Net . . 3,178 6,636 7,887 (4,029)
--------- --------- -------- ---------
Net Loss . . . . . . . . . . . . . . $(351,874) $(215,941) $(724,828) $(117,080)
========= ========= ========= =========
Basic and Diluted Loss Per
Common Share. . . . . . . . . . . . $ (0.07) $ (0.05) $ (0.16) $ (0.03)
========= ========= ========= =========
Weighted average number of common
shares used in per share
calculation 5,061,804 3,997,570 4,543,645 3,997,570
========= ========= ========= =========
<FN>
See the accompanying notes to the condensed financial statements.
</FN>
</TABLE>
-2-
<PAGE>
ESYNCH CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended September 30,
---------------------
1998 1997
--------- ---------
Cash Flows from Operating Activities
Net income (loss) . . . . . . . . . . . . . . . . . . $(724,828) $ (117,080)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization. . . . . . . . . . . 29,834 6,581
Changes in assets and liabilities net of effects
from purchase of Innovus:
Accounts receivable . . . . . . . . . . . . . . . 54,767 10,238
Inventories. . . . . . . . . . . . . . . . . . . - 46,008
Accounts payable and accrued expenses. . . . . . 223,221 20,791
Other. . . . . . . . . . . . . . . . . . . . . . - 28,979
--------- ---------
Net Cash Provided by (Used in) Operating
Activities (417,006) (4,483)
--------- ---------
Cash Flows From Investing Activities
Acquisition of property and equipment . . . . . . . . - (18,631)
--------- ---------
Net Cash Used in Investing Activities. . . . . . . - (18,631)
--------- ---------
Cash Flows From Financing Activities
Proceeds from borrowing . . . . . . . . . . . . . . . 428,071 29,924
--------- ---------
Net Cash Provided by Financing Activities . . . . 428,071 29,924
--------- ---------
Net Increase in Cash and Cash Equivalents. . . . . . . 11,065 6,810
Cash and Cash Equivalents at Beginning of Period . . . - 680
--------- ---------
Cash and Cash Equivalents at End of Period . . . . . . $ 11,065 $ 7,490
========= =========
Noncash Investing and Financing Activities
On May 1, 1998, convertible notes payable in the amount of $465,932 were
converted into stock of Intermark, which was subsequently exchanged for
and converted into 604,069 shares of common stock of the Company. On
August 5, 1998, the Company and Intermark Corporation consummated a
business combination which is accounted for as the reorganization of
Intermark. The Company was deemed for accounting purposes to have issued
1,215,375 shares of common stock to the Innovus Corporation shareholders
in exchange for net liabilities in the amount of $617,268, comprised of
$46,669 of equipment and the assumption of $663,937 of liabilities. On
November 9, 1998, the outstanding common stock was reverse split on a
1-for-10 basis, and on or before the reverse stock split, 80,286 shares
of Series H preferred stock were converted, purusant to their terms, into
approximately 4,516,087 shares of common stock. The financial statements
have been adjusted for the effects of the reverse stock split and
conversion of the preferred stock into common stock for all periods
00presented.
See the accompanying notes to the condensed financial statements.
-3-
<PAGE>
ESYNCH CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of Intermark Corporation ("Intermark") for
all periods presented and the accounts of eSynch Corporation (formerly
Innovus Corporation) from the date of its acquisition on August 5, 1998.
These entities are collectively referred to as "the Company." All
significant intercompany transactions and balances have been eliminated in
consolidation.
Nature of Operations - Intermark was incorporated under the laws of the
State of California in October 1995. Intermark's operations consist of
retail and turnkey sales of software and related marketing services.
Intermark has developed an Electronic Software distribution system through
the Internet; consequently, the Company's ability to collect amounts due
from customers is affected by economic fluctuations in the computer
industry.
Reorganization - Innovus Corporation (now eSynch Corporation) ("Innovus"),
a publicly held Delaware corporation, had discontinued its prior operations
by May 1998 when it entered into an Agreement and Plan of Share Exchange
(the "Agreement") with Intermark. Innovus had 1,215,375 common shares
outstanding on August 5, 1998 when the Agreement was consummated. Under the
terms of the Agreement, the shareholders of Intermark exchanged all of
their common stock of Intermark for 103,367 shares of common stock and
78,706 shares of Series H preferred stock of Innovus and Intermark was
reorganized into a newly-formed subsidiary of Innovus. The Company
subsequently issued 1,580 shares of Series H preferred stock to third-
party service providers. All of the outstanding Series H preferred stock
was automatically converted into 4,516,087 common shares on November 9,
1998 upon the 1-for-10 reverse stock split. As a result, the Intermark
shareholders became the majority shareholders of the Company in a
transaction intended to qualify as a tax-free reorganization. The business
combination has been accounted for as the reorganization of Intermark
and the issuance of common stock for the net liabilities of Innovus in
the amount of $617,268.
Summary unaudited pro forma results of continuing operations for the nine
months ended September 30, 1998 and 1997, assuming the reorganization
occurred on January 1, 1998 and 1997, are as follows:
1998 1997
--------- ----------
Net Sales $ 15,293 $ 423,874
Loss from Continuing Operations $(884,553) $ (879,911)
Basic and Diluted Loss Per Common Share $ (0.16) $ (0.16)
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumption that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
-4-
<PAGE>
Interim Unaudited Financial Information - The accompanying condensed
financial statements have been prepared by the Company and are not audited.
In the opinion of management, all adjustments necessary for a fair
presentation have been included and consist only of normal recurring
adjustments except as disclosed herein. The financial position and results
of operations presented in the accompanying financial statements are not
necessarily indicative of the results to be generated for the remainder of
1998.
These financial statements have been condensed pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and disclosures normally included in financial statements have been
condensed or omitted. These financial statements should be read in
connection with Intermark's September 30, 1997 annual financial statements
included in the Company's Form 8-K dated August 5, 1998.
Revenue Recognition - The Company sells software products at fixed prices
for which the right to return is granted to the buyer. Accordingly, revenue
is recognized when the buyer has paid for the products and the amount of
future returns can be reasonably estimated. An allowance for sales returns
is recognized for the amount of future returns at the date the sale is
recognized. Cost of products sold is recognized at the date the sale is
recognized less an estimate for sales returns. Until the sale is
recognized, products purchased are accounted for as consigned product from
the publisher and the related cost is not reflected in the financial
statements.
Business Condition - The financial statements have been prepared on the
basis of the Company continuing as a going concern. The Company has
incurred losses from operations and negative cash flows from operating
activities and has accumulated a deficit at September 30, 1998 in the
amount of $(923,524). These conditions raise substantial doubt regarding the
Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
New Accounting Standards - The Financial Accounting Standard Board issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
in June 1998. This statement is effective for the year beginning January 1,
2000 and will not require retroactive restatement of prior period financial
statements. The Company does not believe the new statement will have any
impact on the financial statements but it has not completed its evaluation
of SFAS 133.
NOTE 2 - SUBSEQUENT EVENTS
Reverse Stock Split -- In connection with the reorganization agreement with
Innovus, the Board of Directors approved a 1-for-10 reverse stock split of
the Company's common stock which was approved by shareholders on October
27, 1998. Upon completion of the reverse stock split, all of the Series H
Preferred Stock was converted into common stock. The amounts herein have
been restated for the effects of the stock split and the conversion of the
Series H Preferred Stock for all periods presented.
SoftKat - On November 17, 1998, the Company signed and consummated an agreement
to acquire an entity known as SoftKat, Inc. in exchange for the issuance of
720,000 common shares, and 600,000 redeemable, convertible preferred
shares. Up to an additional 720,000 common shares are contingently issuable
based upon the difference between the market price of the common stock one
year from the date acquisition is consummated and a target market price of
$3.00 per share. Under the letter of intent, the Company will be required
to redeem 200,000 shares of the preferred stock at $1.00 per share upon
obtaining $1,500,000 of funding from any source and must further redeem an
additional 200,000 shares of preferred stock upon obtaining an additional
$3,000,000 of funding. The preferred stock, if issued, will have voting
rights equivalent to the number of common shares into which they could then
be converted, and have additional voting rights in respect to approval of any
issuance of a senior series of preferred shares, will have a liquidation
preference of $1.00 per share and will be convertible beginning on the first
anniversary of the acquisition at the lesser of $3.00 per share or the closing
bid price of the common stock on that date. If the acquisition is consummated,
the purchase price, based upon the fair value of the common and preferred
stock unconditionally issuable, has been preliminarily estimated to be
$1,410,000.
-5-
<PAGE>
Name Change - On October 27, 1998, the Company's shareholders approved and on
November 9, 1998, the Company effected, a name change to eSynch Corporation.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following discussion should be read in conjunction with the financial
statements and notes thereto found elsewhere herein. The discussion assumes
that the reader is familiar with or has access to the Company's financial
statements for the year ended December 31, 1997 found in the Company's Form
10-KSB/A.
The financial statements have been prepared on the basis of the Company
continuing as a going concern. The Company has incurred losses from
operations and negative cash flows from operating activities and has
accumulated a deficit at September 30, 1998 in the amount of $923,524. These
conditions raise substantial doubt regarding the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company had been engaged in the sale of multimedia authoring and
presentation software, with related application templates and media
packages. Due to lagging sales and lack of resources, the Company ceased its
development and marketing activities in late 1997. In May, 1998, the
Company signed an Agreement and Plan of Share Exchange with Intermark
Corporation ("Intermark"). Pursuant to the terms of the Intermark Agreement,
as amended, current Intermark shareholders would obtain securities
representing 77.5% of the Company's voting power. The Intermark Agreement
was consummated on August 5, 1998. The nine-month and the third-quarter
results, respectively, include the results of Intermark for the entire
period.
Results of Operations
During the nine months ended September 30, 1998, net sales were $15,293,
compared to $423,874 for the comparable period of the prior year.
The costs of products and services sold in the nine months ended September
30, 1998 and 1997 were $9,940 and $102,823, respectively.
-6-
<PAGE>
Operating loss for the nine months ended September 30, 1998 was $732,715
compared to an operating loss of $113,051 for the nine months ended
September 30, 1997. Comparison of the current period when the Company was
doing little other than attempting to determine a new business plan to the
first nine months of 1997 when the Company was actively attempting to market
its software is not necessarily meaningful.
Operating loss for the first nine months of 1998 reflects the full
amortization of software development costs at December 31, 1997.
Accordingly, amortization for the period consists only of $450 in
depreciation, compared to $424 amortization of software development costs in
the first nine months of 1997.
Revenue Recognition
The Company sells software products at fixed prices for which the right
to return is granted to the buyer. Accordingly, revenue is recognized when
the buyer has paid for the products and the amount of future returns can
be reasonably estimated. An allowance for sales returns is recognized for
the amount of future returns at the date the sale is recognized. Cost of
products sold is recognized at the date the sale is recognized less an
estimate for sales returns. Until the sale is recognized, products
purchased are accounted for as consigned product from the publisher and
the related cost is not reflected in the financial statements.
The Company incurred $5,571 and $4,442 in net interest expense during the
nine months ended September 30, 1998 and 1997, respectively.
The Company sustained net loss applicable to common shares of $724,828 for
the nine months ended September 30, 1998 compared to a net loss of $117,080
for the nine months ended September 30, 1997.
Liquidity and Capital Resources
At September 30, 1998 the Company had $11,065 of cash and cash equivalents
and a deficit in working capital (current liabilities in excess of current
assets) of $1,142,564.
On August 5, 1998, the Intermark transaction was consummated.
The Company has ceased the operations of Innovus Multimedia. It is
contemplated that Innovus Multimedia will be dissolved and its software
sold, with the proceeds used to defray existing indebtedness of the
subsidiary.
The Company had been relying upon short-term borrowings from affiliates and
others, as well as increases in accounts payable owed to vendors.
Management's efforts to obtain additional equity financing were successful
to some degree. The Company borrowed $210,000 from six accredited investors
during the third quarter in exchange for convertible promissory notes that
on November 9, 1998 were automatically converted into an aggregate of
284,667 shares of common stock.
The Company estimates that during the third quarter it was using
approximately $98,500 more cash each month than was generated by operations.
-7-
<PAGE>
At September 30, 1998, the Company had no long term liabilities. This
reflects a previous sale of the Company's building, relieving the Company
from the first and second mortgages, as well as the sale of telephone
equipment subject to a lease obligation, although the Company remains
contingently responsible for such lease in the event of a default by the
transferee. The remaining liabilities which might be considered long term
have been classified as current liabilities due to the Company's financial
condition.
The Company has determined that Innovus Multimedia cannot continue
operations, and has determined to liquidate Innovus Multimedia. The result
of the liquidation will be that the assets of Innovus Multimedia will be
sold to pay a portion of the amounts due creditors of Innovus Multimedia,
and no assurance is possible that such assets could be sold at all.
The Company has settled and resolved a portion of the indebtedness of
Innovus Multimedia, and intends to continue to do so in connection with the
dissolution of Innovus Multimedia. Funding to settle indebtedness was made
available by Intermark in connection with the Intermark transaction.
Management's plans also include private equity financing for purposes of
development and marketing of the products acquired in the Intermark
transaction, and for potential acquisitions of other complementary products
and businesses. No assurance can be made that such financing shall be
forthcoming in sufficient amounts, and the Company may be required to delay
or change its plans absent sufficient financing.
Risk Factors
Statements regarding the Company's plans, expectations, beliefs, intentions
as to future sales of software, future capital resources and other
forward-looking statements presented in this Form 10-QSB constitute forward
looking information within the meaning of the Private Securities Litigation
Reform Act of 1995. There can be no assurance that actual results will not
differ materially from expectations. Investors are cautioned not to ascribe
undue weight to such statements. In addition to matters affecting the
Company's industry generally, factors which could cause actual results to
differ from expectations include, but are not limited to (i) sales of the
Company's software may not rise to the level of profitability; (ii) due to
the rapidly changing and intensely competitive nature of the industry,
competitors may introduce new products with significant competitive
advantages over the Company's products; (iii) the Company may not have
sufficient resources, including any future financing it is able to obtain,
to sustain marketing and other operations; (iv) the Company may be unable to
attract and retain sufficient management and technical expertise, or may
lose key employees; (v) the Company's contractual or legal efforts to
protect its confidential information or intellectual property may be
inadequate or ineffective to provide protection, and the Company may be
unable financially to pursue legal remedies that may be available; (vi) the
Company's selection, due diligence, execution, and integration of
acquisitions may not prove effective or reasonable; (vii) the Company may
suffer in material respects from the direct or indirect effects of the "Year
2000" problem on public utilities, telecommunications networks, customers,
vendors, service providers, and the economy or financial markets generally;
(viii) the Company may suffer from other technical or communications
problems, such as power outages, system failures, system crashes, or
hacking; and (ix) the Company may be subjected to unknown risks and
uncertainties, or be unable to assess risks and uncertainties as may exist.
-8-
<PAGE>
PART II
Item 1 - Legal Proceedings
During the quarter, the Company obtained a release of a judgment
that arose from a lawsuit filed on November 26, 1997 by Programmer's
Paradise against Innovus Multimedia in the Third Judicial District Court
of Salt Lake County, Utah. The complaint alleged that Innovus owed
Programmer's Paradise $15,887.80 plus interest and costs. On January 21,
1998, a judgment was entered against Innovus in the amount of $16,500.43.
The plaintiff and judgment creditor agreed to accept approximately $3,200
in full satisfaction of the judgment.
During the quarter, the Company settled a lawsuit filed on February
3, 1998 by Blenheim Group USA, Inc. , which filed a Complaint against
Innovus Multimedia in the Municipal Court of the San Francisco Judicial
District, State of California. The complaint alleged that Innovus
Multimedia owed $19,800 for exhibit space booked but not used in the
1997 PC Expo exhibition. The Company paid $6,000 in return for the
dismissal of the lawsuit with prejudice.
Item 2 - Changes in Securities
(a) In September 1998, 8,906 shares of Series H Preferred Stock were
voluntarily converted into 500,962 shares of common stock, as reclassified
by the November 9, 1998 1-for-10 reverse stock split ("Reverse Split").
(c) The following securities were issued by the Company during the quarter
ended September 30, 1998 without registration under the Securities Act of 1933:
(i) The Company issued 21,500 shares, as adjusted by the Reverse Split,
of its common stock upon conversion of or in exchange for shares of its
Series G Preferred Stock. The conversions and exchanges were made by a
limited number of accredited investors solely in exchange for outstanding
securities of the Company. No commissions or similar fees were paid. The
Company believes the transactions were exempt from registration pursuant to
Sections 4(2) and 3(a)(9) of the Securities Act of 1933.
(ii) During the quarter, the Company issued $210,000 of its convertible
notes to six accredited investors. The Company believes the transactions
were exempt from registration pursuant to Section 4(2) of the Securities Act
of 1933. Subsequently, in connection with the Reverse Split, the notes were
automatically converted into 180,000 shares of common stock, as reclassified
by the Reverse Split.
(iii) During the quarter, the Company issued 1,580 shares of Series H
Preferred Stock to service providers. The Company believes the transactions
were exempt from registration pursuant to Section 4(2) of the Securities Act
of 1933. Subsequently, in connection with the Reverse Split, the notes were
automatically converted into 88,875 shares of common stock, as reclassified
by the Reverse Split.
(iv) At September 30, 1998, the only Preferred Stock outstanding was
71,380 shares of Series H Preferred Stock, which were subsequently, on
November 9, 1998, as a result of the Reverse Split, automatically converted
into 4,015,125 shares of common stock, as reclassified by the Reverse Split.
-9-
<PAGE>
Item 5 - Other Information
On November 17, 1998, the Company, IN-US Softkat Acquisition Corporation, a
wholly-owned subsidiary of the Company, and Softkat, Inc., a California
corporation, executed, delivered, and consummated a merger agreement to
acquire SoftKat Corporation. Under the agreement, 720,000 shares of common
stock of the Company were issued to the shareholders of SoftKat and 600,000
shares of Series I Preferred Stock of the Company were issued to
subordinated note holders of Softkat. In addition, the former shareholders
of Softkat have a contingent right to receive up to 720,000 additional
shares of the Company's common stock, depending upon the trading price of
the common stock during the 30-trading-day period ending November 16, 1999.
The Company's Series I Preferred Stock is redeemable at a price of $1.00 per
share at the option of the Company at any time, subject to legal
restrictions on redemption or restrictions in loan or other agreements, and
is required to be redeemed in certain amounts in certain events related to
receipt of funding by Innovus. The Series I Preferred Shares become
convertible into common stock of the Company at of November 17, 1999, or
earlier if the Company receives a specified amount of funding prior to such
time. The exercise price will be based on a formula, equal to the lesser of
$3.00 per share of common stock, or the average closing bid price for the
common stock over the 10-trading-day period ending November 16, 1999.
Name Change - On October 27, 1998, the Company's shareholders approved a
name change to eSynch Corporation, effective upon the effectiveness of the
filing of an amendment to the Company's Certificate of Incorporation with
the State of Delaware. The name change became effective November 9, 1998
concurrent with the 1 for 10 reverse stock split.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits.
Those exhibits previously filed with the Securities and Exchange
Commission as required by Item 601 of Regulation S-K, are incorporated
herein by reference in accordance with the provisions of Rule 12b-32.
Exhibit No. Description of Exhibit
----------- ----------------------
2.1(1) Agreement and Plan of Share Exchange dated as of
May 8, 1998 among the Company; Intermark
Corporation, a California corporation; and the
Exchanging Securityholders of Intermark
Corporation. Omitted from this Form 8-K filing
are the following schedules or attachments to
the agreement identified immediately above:
(A) Form of Certificate of Designation of
Series H Convertible Preferred Stock;
(B) Intermark Corporation Financial Statements
(Unaudited) for its 1997 Fiscal Year;
(C) Confidentiality Agreement dated March 1998
between the Company and Intermark Corporation;
-10-
<PAGE>
(D) Disclosure Schedule of Intermark
Corporation;
(E) Disclosure Schedule of the Company.
2.2(2) First Amendment, dated as of June 17, 1998, of
Agreement and Plan of Share Exchange dated as of
May 8, 1998 among the Company; Intermark
Corporation, a California corporation; and the
Exchanging Securityholders of Intermark
Corporation
2.3(2) Second Amendment, dated as of July 30, 1998, of
Agreement and Plan of Share Exchange dated as of
May 8, 1998 among the Company; Intermark
Corporation, a California corporation; and the
Exchanging Securityholders of Intermark
Corporation
3(i).1(3) Restated Certificate of Incorporation of the Company
4.10(2) Certificate of Designation - Series H Preferred Stock
4.11 Certificate of Designation - Series I Preferred Stock
4.12 Certificate of Elimination - Series A Preferred Stock
4.13 Certificate of Elimination - Series C Preferred Stock
4.14 Certificate of Elimination - Series D Preferred Stock
4.15 Certificate of Elimination - Series E Preferred Stock
4.16 Certificate of Elimination - Series F Preferred Stock
4.17 Certificate of Elimination - Series G Preferred Stock
4.18 Certificate of Elimination - Series H Preferred Stock
10.4 Registration Rights Agreement dated August 4, 1998
among the Company and those holders of the Company's
stock listed in Exhibit A thereto
10.5 Form of Stock Option Agreement dated April 24, 1998
between Intermark Corporation and each of Thomas
Hemingway, T. Richard Hutt and James Budd
10.6 Instrument of Option Assumption dated August 4,
1998 between the Company and each of the optionees
named in Exhibit 10.5, among others, resulting in
the Company's assumption of options as follows:
Thomas Hemingway 331,541 shares of common stock at $.83 each
T. Richard Hutt 132,616 shares of common stock at $.83 each
James Budd 132,616 shares of common stock at $.83 each
27 Financial Data Schedule
(1) Incorporated by reference to the same-numbered exhibit to the Form 8-K
filed May 12, 1998 by the Company with the Securities and Exchange Commission.
(2) Incorporated by reference to the same-numbered exhibit to the Form 8-K
filed August 20, 1998 by the Company with the Securities and Exchange
Commission.
(3) Incorporated by reference to Exhibit A to the definitive proxy statement
on Schedule 14A filed October 7, 1998 by the Company with the Securities and
Exchange Commission.
(b) Reports on Form 8-K
-11-
<PAGE>
During the period covered by this report the Company filed a Form 8-K on
August 20, 1998 reporting under Items 1, 2 and 5 the consummation of the
acquisition transaction between the Company and Intermark Corporation, a
California corporation, pursuant to the Agreement and Plan of Share
Exchange. No financial statements were filed with such report, but they
were filed by amendment under Item 7 on Form 8-K/A on October 19, 1998.
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: November 20, 1998
eSynch Corporation
By: /S/ Tom Hemingway
------------------------------------
Tom Hemingway, Chief Executive Officer
(Authorized Officer)
By: /S/ Kirit Gordia
------------------------------------
Kirit Gordia, Controller
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of September 30, 1998, and the statement of operations for the nine
months ended September 30, 1998, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> 11,065
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,065
<PP&E> 179,778
<DEPRECIATION> (110,108)
<TOTAL-ASSETS> 84,429
<CURRENT-LIABILITIES> 1,156,229
<BONDS> 0
0
0
<COMMON> 5,746
<OTHER-SE> (1,077,546)
<TOTAL-LIABILITY-AND-EQUITY> 84,429
<SALES> 15,293
<TOTAL-REVENUES> 15,293
<CGS> 9,940
<TOTAL-COSTS> 9,940
<OTHER-EXPENSES> 738,068
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,571
<INCOME-PRETAX> (724,828)
<INCOME-TAX> 0
<INCOME-CONTINUING> (724,828)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (724,828)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
CERTIFICATE OF DESIGNATION OF
SERIES I CONVERTIBLE PREFERRED STOCK
OF
ESYNCH CORPORATION,
A DELAWARE CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
The undersigned, Thomas C. Hemingway and T. Richard Hutt,
hereby certify that:
I. They are the duly elected and acting President and
Secretary, respectively, of ESYNCH Corporation, a Delaware
corporation (the "Company").
II. The Certificate of Incorporation of the Company
authorizes 1,000,000 shares of preferred stock, par value $.001
per share, of which none remain outstanding and no previous
certificate of designation of any series of preferred stock
remains in existence. Other than such preferred stock and the
common stock of the Company, the Company has no other stock which
is either outstanding, issued or authorized.
III. The following is a true and correct copy of resolutions
duly adopted by the Board of Directors by written consent on
November 16__, 1998, which constituted all requisite action on the
part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board
of Directors") is authorized to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in
each such series, and to fix the designations, powers, preferences
and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof; and
WHEREAS, the Board of Directors desires, pursuant to its
authority as aforesaid, to designate a new series of preferred
stock, set the number of shares constituting such series and fix
the rights, preferences, privileges and restrictions of such series;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
hereby designates a new series of preferred stock and the number
of shares constituting such series and fixes the rights,
preferences, privileges and restrictions relating to such series
as follows:
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of
Preferred Stock shall be designated as the Series I Convertible
Preferred Stock (the "Preferred Stock"), and the number of shares
so designated shall be 600,000. The par value of each share of
Preferred Stock shall be $.001. Each share of Preferred Stock
shall have a stated value of $1.00 per share (the "Stated Value").
Section 2. DIVIDENDS. The holders of shares of Preferred
Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly,
additional shares of Common Stock of this Corporation) on the
Common Stock of this Corporation, when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative and no
undeclared or unpaid dividend shall bear interest. No dividends,
payment or other distribution of any type (including share
repurchases, stock dividends and returns of capital) shall be paid
on or with respect to any Common Stock of the Company during any
fiscal year of the Company unless a dividend is simultaneously
paid with respect to all outstanding shares of Preferred Stock
(including the amount of any dividends paid pursuant to the above
provisions of this Section 2) in an amount for each such share of
Preferred Stock equal to the aggregate amount of such dividends
for all shares of Common Stock into which each such share of
Preferred Stock could then be converted as if the Preferred Stock
were able to convert and did convert into Common Stock, and
without regard to the number of shares of authorized and unissued
Common Stock reserved for conversion.
Section 3. VOTING RIGHTS. Except as otherwise provided
herein and as otherwise provided by law, the Preferred Stock shall
vote together as a single class with the Common Stock with each
share of Preferred Stock having the same number of votes as all
shares of Common Stock into which each such share of Preferred
Stock could then be converted. However, so long as any shares of
Preferred Stock are outstanding, the Company shall not, without
the affirmative vote of the holders of a majority of the shares of
the Preferred Stock then outstanding, voting as a separate class,
(i) alter or change the powers, preferences or rights given to the
Preferred Stock or any other class or series of stock of the
Company , (ii) authorize, create, issue or reissue any class or
series of stock ranking as to voting, dividends or distribution of
assets upon a Liquidation (as defined below) senior to or prior to
the Common Stock or the Preferred Stock, or agree to do any of the
foregoing, or (iii) authorize or adopt any agreement for issuance
of any shares of any series of stock that are senior to or on a
parity with the Preferred Stock as to dividends, liquidation
rights or redemption rights.
Section 4. LIQUIDATION. Upon any liquidation, dissolution
or winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the holders of shares of Preferred Stock shall be
entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, before any distribution or payment
shall be made to the holders of any Junior Securities, an amount
for each share of Preferred Stock equal to the greater of (I) the
Stated Value, plus an amount equal to any accrued but unpaid
dividends per share, but without interest, or (II) the amounts
that would be payable on the number of shares of Common Stock into
which such share could be converted as if the Preferred Stock were
able to convert and did convert into Common Stock, and without
regard to the number of shares of authorized and unissued Common
Stock reserved for conversion, and if the assets of the Company
shall be insufficient to pay in full the greater of such amounts,
then the entire assets to be distributed shall be distributed
among the holders of Preferred Stock ratably in accordance with
the respective amounts that would be payable on such shares if all
amounts payable thereon were paid in full. A sale, conveyance or
disposition of all or substantially all of the assets of the
Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the
voting power of the Company is disposed of shall be deemed a
Liquidation; PROVIDED that, a consolidation or merger of the
Company with or into any other company or companies shall not be
treated as a Liquidation, but instead shall be subject to the
provisions of Section 5(c)(vii). The Company shall mail written
notice of any such liquidation, not less than 60 days prior to the
payment date stated therein, to each record holder of Preferred
Stock.
Section 5. CONVERSION.
(a) Each share of Preferred Stock shall be
convertible into that number of shares of Common Stock equal to
the Conversion Ratio (as defined in Section 7) at the option of
the holder in whole or in part at any time after the earlier (the
"Conversion Ratio Date") to occur of (a) the first anniversary of
the Original Issue Date (the "Anniversary Date") or (b) the date
of the Second Funding (as defined in Section 6), subject only to
prior redemption of shares of Preferred Stock as provided in
Section 6. The holder shall effect conversions by surrendering
the certificate or certificates representing the shares of
Preferred Stock to be converted to the Company, together with the
form of conversion notice attached hereto as EXHIBIT A (the
"Conversion Notice") in the manner set forth in Section (i).
Each Conversion Notice shall specify the number of shares of
Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the
date the Holder delivers such Notice by facsimile (the "Conversion
Date"). Subject to Section 5(b), and the terms of the Conversion
Notice as attached hereto, each Conversion Notice, once given,
shall be irrevocable. If the holder is converting less than all
shares of Preferred Stock represented by the certificate or
certificates tendered by the holder with the Conversion Notice,
the Company shall promptly deliver to the holder a certificate for
such number of shares as have not been converted.
(b) Not later than ten (10) Business Days after the
Conversion Date, the Company will deliver to the holder (i) a
certificate or certificates which shall be free of restrictive
legends and trading restrictions (other than those then required
by law), representing the number of shares of Common Stock being
acquired upon the conversion of shares of Preferred Stock and (ii)
one or more certificates representing the number of shares of
Preferred Stock not converted; PROVIDED, HOWEVER that the Company
shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon conversion of any shares of
Preferred Stock until certificates evidencing such shares of
Preferred Stock are either delivered for conversion to the Company
or any transfer agent for the Preferred Stock or Common Stock, or
the holder notifies the Company that such certificates have been
lost, stolen or destroyed and provides a bond (or other adequate
security reasonably acceptable to the Company) satisfactory to the
Company to indemnify the Company from any loss incurred by it in
connection therewith. The Company shall, upon request of the
holder, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this
Section 5(b) electronically through the Depository Trust
Corporation or another established clearing corporation performing
similar functions. In the case of a conversion pursuant to a
Conversion Notice, if such certificate or certificates are not
delivered by the date required under this Section 5(b), the holder
shall be entitled by written notice to the Company at any time on
or before such holder's receipt of such certificate or
certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return the certificates
representing the shares of Preferred Stock tendered for conversion.
(c) (i) The conversion price for each share of
Preferred Stock (the "Conversion Price") shall be equal to the
lesser of (x) $3.00 and (y) either (i) the average of closing bid
price for the Common Stock on the OTC Bulletin Board (or automated
quotation system of a registered securities association or
national securities exchange upon which such stock is then
principally traded) on each of the ten Trading Days ending on the
day immediately preceding the Conversion Ratio Date, or (ii) if
the Common Stock is not then quoted on the OTC Bulletin Board (or
automated quotation system of a registered securities association
or national securities exchange), then at the opening bid price
for the Common Stock on the first day the Common Stock is
subsequently quoted on the OTC Bulletin Board (or automated
quotation system of a registered securities association or
national securities exchange). Further, the holders of Preferred
Stock shall not trade in the Common Stock with the purpose or
effect of manipulating the Trading Price of the Common Stock
through the Anniversary Date.
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its
Junior Securities payable in shares of its capital stock (whether
payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital
stock of the Company, the Conversion Price designated in Section
5(c)(i) shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding before
such event and of which the denominator shall be the number of
shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 5(c)(ii) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to
all holders of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the
greater of (A) the Conversion Price prior to the record date
mentioned below or (B) the Per Share Market Value at the record
date mentioned below, the Conversion Price designated in Section
5(c)(i) shall be multiplied by a fraction, of which the
denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants plus the number of shares
which the aggregate offering price (based on the minimum possible
offering price if such price cannot be determined at the time of
issuance) of the total number of shares so offered would purchase
at the greater of the Conversion Price or such Per Share Market
Value. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such rights or warrants. However, upon the expiration of
all rights or warrants to purchase Common Stock the issuance of
which resulted in an adjustment in the Conversion Price designated
in Section 5(c)(i) pursuant to this Section 5(c)(iii), if any such
right or warrant shall expire and shall not have been exercised,
the Conversion Price designated in Section 5(c)(i) shall
immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which
it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section 5
after the issuance of such rights or warrants) had the adjustment
of the Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually
exercised.
(iv) Subject to any restriction or limitation on
distributions by the Company set forth in this Certificate or
under applicable law, if the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders
of Common Stock (and not to holders of Preferred Stock) evidences
of its indebtedness or assets or rights or warrants to subscribe
for or purchase any security (excluding those referred to in
Section 5(c)(iii) above) then in each such case the Conversion
Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such
distribution by a fraction of which (I) the denominator shall be
the greater of (A) the Conversion Price in effect immediately
prior to the record date or (B) the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and
of which (II) the numerator shall be the difference between (X) an
amount equal to the greater of (A) the Conversion Price in effect
immediately prior to the record date or (B) the Per Share Market
Value of Common Stock determined as of the record date mentioned
above, in either case minus (Y) the then fair market value at such
record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of
Common Stock as determined by the Board of Directors in good
faith; PROVIDED, HOWEVER that in the event of a distribution
exceeding ten percent (10%) of the net assets of the Company, such
fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of
a majority in interest of the shares of Preferred Stock; and
PROVIDED, FURTHER that the Company, after receipt of the
determination by such Appraiser shall have the right to select an
additional Appraiser, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser.
In either case the adjustments shall be described in a statement
provided to all holders of Preferred Stock of the portion of
assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date
mentioned above.
(v) All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as the
case may be. These adjustment thresholds shall be adjusted
downward, but not upward, in the event of stock splits, stock
dividends or any similar events.
(vi) Whenever the Conversion Price is adjusted
pursuant to Section 5(c)(ii),(iii), (iv) or (v), the Company shall
promptly mail to each holder of Preferred Stock, a notice setting
forth the Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.
(vii) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into
another person, the sale or transfer of all or substantially all
of the assets of the Company or any compulsory share exchange
pursuant to which the Common Stock is converted into other
securities, cash or property, the holders of the Preferred Stock
then outstanding shall have the right thereafter to convert such
shares only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common
Stock following such reclassification, consolidation, merger,
sale, transfer or share exchange, and the holders of the Preferred
Stock shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock of the
Company into which such shares of Preferred Stock could have been
converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange would have
been entitled, without regard to an insufficient number of shares
of authorized and unissued Common Stock reserved for conversion.
The terms of any such consolidation, merger, sale, transfer or
share exchange shall include such terms so as to continue to give
to the holder of Preferred Stock the right to receive the
securities or property set forth in this Section 5(c)(vii) upon
any conversion following such consolidation, merger, sale,
transfer or share exchange. This provision shall similarly apply
to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(viii) If:
a. the Company shall declare a dividend (or
any other distribution) on its Common Stock; or
b. the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; or
c. the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any
rights; or
d. the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock of the Company (other than a subdivision or
combination of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the
Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; or
e. the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding-up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Preferred Stock, and
shall cause to be mailed to the holders of Preferred Stock at
their last addresses as they shall appear upon the stock books of
the Company, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if
a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding-up; PROVIDED,
HOWEVER, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice.
(d) If at any time conditions shall arise by reason
of action taken by the Company which in the opinion of the Board
of Directors are not adequately covered by the other provisions
hereof and which might materially and adversely affect the rights
of the holders of Preferred Stock (different than or distinguished
from the effect generally on rights of holders of any class of the
Company's capital stock) or if at any time any such conditions are
expected to arise by reason of any action contemplated by the
Company, the Company shall mail a written notice briefly
describing the action contemplated and the material adverse
effects of such action on the rights of the holders of Preferred
Stock at least 30 calendar days prior to the effective date of
such action, and an independent reputable appraiser selected by
the holders of majority in interest of the Preferred Stock shall
give its opinion as to the adjustment, if any (not inconsistent
with the standards established in this Section 5), of the
Conversion Price (including, if necessary, any adjustment as to
the securities into which shares of Preferred Stock may thereafter
be convertible) and any distribution which is or would be required
to preserve without diluting the rights of the holders of shares
of Preferred Stock; PROVIDED, HOWEVER, that the Company, after
receipt of the determination by such appraiser, shall have the
right to select an additional independent reputable appraiser, in
which case the adjustment shall be equal to the average of the
adjustments recommended by each such appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the
receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; PROVIDED, HOWEVER, that
no such adjustment of the Conversion Price shall be made which in
the opinion of the appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Conversion Price to
more than the Conversion Price then in effect.
(e) The Company covenants that it will use its best
efforts to cause a sufficient number of shares of Common Stock, or
as large a portion thereof as possible, to be authorized and
unissued, and shall at all times thereafter reserve and keep
available out of its authorized and unissued Common Stock solely
for the purpose of issuance upon conversion of Preferred Stock as
herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the holders of
Preferred Stock, such number of shares of Common Stock as shall be
issuable (taking into account the adjustments and restrictions of
Section 5(b) and Section 5(d) hereof) upon the conversion of all
outstanding shares of Preferred Stock. The Company covenants that
all shares of Common Stock that shall be so issuable shall, upon
issuance, be duly and validly authorized, issued and fully paid
and nonassessable.
(f) Upon a conversion hereunder the Company shall not
be required to issue stock certificates representing fractions of
shares of Common Stock, but may if otherwise permitted, make a
cash payment in respect of any final fraction of a share based on
the greater of the Per Share Market Value at such time or the
product of the Redemption Price multiplied by the Conversion
Ratio. If the Company elects not, or is unable, to make such a
cash payment, the holder of a share of Preferred Stock shall be
entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(g) The issuance of certificates for shares of Common
Stock on conversion of Preferred Stock shall be made without
charge to the holders thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of
such certificate; provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares
of Preferred Stock so converted and the Company shall not be
required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(h) Shares of the Series I Preferred Stock converted
into Common Stock shall be canceled and shall have the status of
authorized but unissued shares of preferred stock, par value $.001.
(i) Each Conversion Notice shall be given by
facsimile and by mail, postage prepaid, addressed to the attention
of the Chief Financial Officer of the Company at the facsimile
telephone number and address of the principal place of business of
the Company. Any such notice shall be deemed given and effective
upon the earliest to occur of (i)(a) if such Conversion Notice is
delivered via facsimile at the facsimile telephone number
specified in this Section 5(i) prior to 10:59 p.m. (Pacific Time)
on any date, such date or such later date as is specified in the
Conversion Notice, and (b) if such Conversion Notice is delivered
via facsimile at the facsimile telephone number specified in this
Section 5(i) after 10:59 p.m. (Pacific Time) on any date, the next
date or such later date as is specified in the Conversion Notice,
(ii) five days after deposit in the United States mail, or (iii)
if delivered in another way, upon actual receipt by the party to
whom such notice is required to be given.
Section 6. REDEMPTION.
(a) The Preferred Stock shall be subject to
redemption at the option of the Company at any time, in whole but
not in part, at a redemption price (the "Redemption Price") equal
to one dollar ($1.00) per share of Preferred Stock (subject to
adjustment if the Preferred Stock of the Company shall be changed
into a different number of shares, whether by recapitalization,
reclassification or otherwise, and then and in each such event the
holder of shares of Preferred Stock shall have the right
thereafter to receive upon redemption such same amount aggregately
receivable immediately prior to reorganization, reclassification
or other change of the number of shares of Preferred Stock
apportioned among the number of shares into which such shares of
Preferred Stock are changed). In addition, the Company shall be
required to redeem the Preferred Stock at the Redemption Price per
share as follows: (a) the Company must redeem Preferred Stock
having a Redemption Price equal in the aggregate to $200,000, pro
rata according to the liquidation value of the shares of Acquiror
Preferred Stock held by each holder thereof, promptly following
the consummation of any single source of funding, or any sources
of funding in the aggregate, for which the gross proceeds any time
following the Original Issue Date, to the Company and any of its
direct or indirect subsidiaries equals or exceeds $1,500,000 in
cash (the "First Funding"), and (b) the Company must redeem
Preferred Stock having a Redemption Price equal in the aggregate
to $200,000, pro rata according to the liquidation value of the
shares of Preferred Stock held by each holder thereof, promptly
following the consummation, any time following the Original Issue
Date, of any single source of funding, or any sources of funding
in the aggregate, in each case subsequent to the First Funding,
for which the gross proceeds to the Company and any of its direct
or indirect subsidiaries equals or exceeds $3,000,000 in cash (the
"Second Funding"), provided that if either (or both) of the First
Funding or the Second Funding is consummated prior to the Original
Issue Date, the redemption shall not be commenced until
immediately following the Original Issue Date.
(b) The call for redemption may be made only upon
notice to each holder of Preferred Stock. Notice of any proposed
redemption pursuant to this Section of shares of Preferred Stock
shall be sent by reputable overnight courier to each record holder
of the shares of Preferred Stock to be redeemed at least ten (10)
but not more than ninety (90) days prior to the Redemption Date.
Each such notice shall specify (i) the Redemption Date, (ii) the
Redemption Price, (iii) the place for payment and for delivering
the stock certificate(s) and transfer instrument(s) in order to
receive the Redemption Price, (iv) the shares of Preferred Stock
to be redeemed, and (v) the then effective Conversion Price and
that the right, if any, of holders of shares of Preferred Stock
being redeemed to exercise their conversion right shall terminate
as to such shares at the close of business on the fifth business
day preceding the Redemption Date (provided that no default by the
Company in the payment of the applicable Redemption Price
(including any accrued and unpaid dividends) shall have occurred
and be continuing. Any notice sent in such manner shall be
conclusively deemed to have been duly given regardless of whether
such notice is in fact received. In order to facilitate the
redemption of the Preferred Stock, the Board of Directors may fix
a record date for determination of holders of Preferred Stock to
be redeemed, which shall not be more than sixty days prior to the
Redemption date with respect thereto.
(c) Payment of Redemption Price.
(i) Methods of Payment. The Redemption Price for the
shares being redeemed may be payable by the Company's check
payable to the order of the person whose name appears on the
certificate or certificates therefor as the owner thereof, or to
such payee as such owner may designate in writing to the Company
not later than the fifth business day prior to the Redemption
Date. Payment by check shall be sent on the Redemption Date by
first class, certified mail, postage prepaid by the Company to
such owner or payee, as the case may be. The Company also may
deposit the amount of the Redemption Price with a bank or trust
company designated in the Company's notice of redemption,
irrevocably in trust for the benefit of the holder.
(ii) Condition To Payment. The holder of any shares
of Preferred Stock redeemed upon any exercise of the Company's or
such holder's redemption right shall not be entitled to receive
payment of the Redemption Price for such shares until such holder
shall cause to be delivered to the Company at its then principal
executive office or any other place specified in a redemption
notice given by the Company (i) the certificate(s) representing
such shares of Preferred Stock and (ii) transfer instrument(s)
satisfactory to the Company and sufficient to transfer such shares
of Preferred Stock to the Company free of any adverse interest, in
the manner and at the place designated by the Company, by no later
than the second (2nd) Business Day preceding the Redemption Date.
In the event fewer than all of the shares represented by such
certificate are redeemed, a new certificate representing the
unredeemed shares shall be issued to the holder of such shares.
(iii) Redemption from Certain Funds. Notwithstanding
any provisions herein to the contrary, the Company shall not pay
or set apart any amount for the redemption of any Preferred Stock,
or pay any amount for the repurchase of any Preferred Stock, in
excess of the amounts allowed by applicable corporations laws
(hereinafter called the "Available Funds").
(d) Effect of Redemption Notice. At the close of
business on the Redemption Date for any share of Preferred Stock,
such share shall (provided the Redemption Price (including any
accrued and unpaid dividends to the Redemption Date) of such
shares has been paid or properly provided for) be deemed to cease
to be outstanding and all rights of any person other than the
Company in such share shall be extinguished on the Redemption Date
for such share (including all rights to receive future dividends
with respect to such share) except for the right to receive the
Redemption Price (including any accrued and unpaid dividends to
the Redemption Date), without interest, for such share in
accordance with the provisions of this Section, subject to
applicable escheat laws. No interest shall accrue on the
Redemption Price of any share of Preferred Stock after the
Redemption Date.
(e) Effect of Prior Conversion. In the event that
any shares of Preferred Stock shall be converted into Common Stock
prior to the Redemption Date pursuant to Section 5, then (i) the
Company shall not have the right to redeem such shares and (ii)
any funds which shall have been deposited for the payment of the
Redemption Price for such shares shall be returned to the Company
immediately after such conversion (subject to declared dividends
payable to holders of shares of Preferred Stock on the record date
for such dividends being so payable, to the extent set forth in
Section 5 hereof, regardless of whether such shares are converted
subsequent to such record date and prior to the Redemption Date).
Section 7. DEFINITIONS. For the purposes hereof, the
following terms shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking
institutions in the state of New York are authorized or required
by law or other government actions to close.
"Common Stock" means shares now or hereafter authorized of
the class of Common Stock, par value $.001, of the Company and
stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which
the numerator is Stated Value and of which the denominator is the
Conversion Price at such time.
"Junior Securities" means the Common Stock and all other
equity securities of the Company.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Preferred Stock regardless of the
number transfers of any particular shares of Preferred Stock and
regardless of the number of certificates which may be issued to
evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a)
the closing bid price per share of the Common Stock on such date
on the Nasdaq SmallCap Market or other national securities
exchange on which the Common Stock has been listed or if there is
no such price on such date, then the closing bid price on such
national securities exchange or market on the date nearest
preceding such date, or (b) if the Common Stock is not listed on
the Nasdaq SmallCap Market or any national securities exchange or
market, the closing bid for a share of Common Stock in the
over-the-counter market, as reported by the Nasdaq Stock Exchange
at the close of business on such date, or (c) if the Common Stock
is not quoted on the Nasdaq Stock Exchange, the closing bid price
for a share of Common Stock in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting
prices), or (d) if the Common Stock is no longer reported by the
National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the
opening bid price on the next Trading Day on which the price of
the Common Stock is reported.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Trading Day" means (a) a day on which the Common Stock is
traded on the Nasdaq SmallCap Market or principal national
securities exchange or market on which the Common Stock has been
listed, or (b) if the Common Stock is not listed on the Nasdaq
SmallCap Market or any stock exchange or market, a day on which
the Common Stock is traded in the over-the-counter market, as
reported by the Nasdaq Stock Market, or (c) if the Common Stock is
not quoted on the Nasdaq Stock Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
RESOLVED FURTHER, that the President and Secretary of the
Company be, and they hereby are, authorized and directed to
prepare, execute, verify, and file in Delaware, a Certificate of
Designation in accordance with these resolutions and as required
by law.
IN WITNESS WHEREOF, Innovus Corporation has caused its
corporate seal to be hereunto affixed and this certificate to be
signed by Thomas C. Hemingway, its President, and attested by T.
Richard Hutt, its Secretary, this 16th day of November, 1998.
ESYNCH CORPORATION
THOMAS C. HEMINGWAY
----------------------------
Thomas C. Hemingway, President
Attest:
By: T. RICHARD HUTT
--------------------------
T. Richard Hutt, Secretary
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert the number of
shares of Series I Convertible Preferred Stock indicated below,
into shares of Common Stock, par value U.S. $.001 per share (the
"Common Stock"), of ESYNCH Corporation (the "Company") according
to the conditions hereof, as of the date written below. If shares
are to be issued in the name of a person other than undersigned,
the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions
as reasonably requested by the Company in accordance therewith.
No fee will be charged to the Holder for any conversion, except
for such transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion:
Number of shares of Preferred
Stock to be Converted:
Applicable Conversion Price:
Signature:
Name:
Address:
INTERMARK CORPORATION
STOCK OPTION AGREEMENT
Type of Option (check one):
[ ] Incentive [ ] Nonqualified
This Stock Option Agreement (the "Agreement") is entered into as of
April 24, 1998, by and between INTERMARK CORPORATION, a California
corporation (the "Company") and (the "Optionee") pursuant
to the Company's 1997 Stock Incentive Plan (the "Plan").
Grant of Option. The Company hereby grants to Optionee an option (the
"Option") to purchase all or any portion of a total of _________________
(__________) shares (the "Shares") of the Common Stock of the Company at a
purchase price of _______________ (_____________) per share (the "Exercise
Price"), subject to the terms and conditions set forth herein and the
provisions of the Plan. If the box marked "Incentive" above is checked,
then this Option is intended to qualify as an "incentive stock option" as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). If this Option fails in whole or in part to qualify as an
incentive stock option, or if the box marked "Nonqualified" is checked, then
this Option shall to that extent constitute a nonqualified stock option.
Vesting of Option. The right to exercise this Option shall vest
immediately, and this Option shall be exercisable from time to time in whole
or in part.
Term of Option. Optionee's right to exercise this Option shall
terminate upon the first to occur of the following:
the expiration of ten (10) years from the date of this Agreement;
the expiration of three (3) months from the date of termination
of Optionee's Continuous Service if such termination occurs for any reason
other than permanent disability, death, voluntary resignation or for
"cause"; provided, however, that if Optionee dies during such three-month
period the provisions of Section 3(e) below shall apply;
the expiration of one (1) month from the date of termination of
Optionee's Continuous Service if such termination occurs due to voluntary
resignation; provided, however, that if Optionee dies during such one-month
period the provisions of Section 3(e) below shall apply;
(d) the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to permanent
disability of the Optionee (as defined in Section 22(e)(3) of the Code);
(e) the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to Optionee's death
or if death occurs during either the three-month or one-month period
following termination of Optionee's Continuous Service pursuant to Section
3(b) or 3(c) above, as the case may be; or
(f) in the event Optionee's Continuous Service is terminated by the
Company for "cause," defined hereto to mean the performance of those acts
identified in Section 2924 of the California Labor Code, then this Option,
whether or not exercisable on the date of termination, shall terminate
immediately and become void and of no effect.
As used herein, the term "Continuous Service" means (i) employment by
either the Company or any parent or subsidiary corporation of the Company,
or by a corporation or a parent or subsidiary of a corporation issuing or
assuming a stock option in a transaction to which Section 424(a) of the Code
applies, which is uninterrupted except for vacations, illness (except for
permanent disability, as defined in Section 22(e)(3) of the Code), or leaves
of absence which are approved in writing by the Company or any of such other
employer corporations, if applicable, (ii) service as a member of the Board
of Directors of the Company until Optionee resigns, is removed from office,
or Optionee's term of office expires and he or she is not reelected, or
(iii) so long as Optionee is engaged as a consultant or service provider to
the Company or other corporation referred to in clause (i) above.
4. Exercise of Option. On or after the vesting of any portion of
this Option in accordance with Section 2 above, and until termination of
this Option in accordance with Section 3 above, the portion of this Option
which has vested may be exercised in whole or in part by the Optionee (or,
after his or her death, by the person designated in Section 5 below) upon
delivery of the following to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement and
states the number of Shares then being purchased (but no fractional Shares
may be purchased);
(b) a check or cash in the amount of the Exercise Price (or payment
of the Exercise Price in such other form of lawful consideration as the
Administrator may approve from time to time under the provisions of Section
5.3 of the Plan);
(c) a check or cash in the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under federal,
state or other applicable tax laws with respect to the taxable income, if
any, recognized by the Optionee in connection with the exercise of this
Option (unless the Company and Optionee shall have made other arrangements
for deductions or withholding from Optionee's wages, bonus or other
compensation payable to Optionee, or by the withholding of Shares issuable
upon exercise of this Option or the delivery of Shares owned by the Optionee
in accordance with Section 10.1 of the Plan, provided such arrangements
satisfy the requirements of applicable tax laws); and
(d) a letter, if requested by the Company, in such form and
substance as the Company may require, setting forth the investment intent of
the Optionee, or person designated in Section 5 below, as the case may be.
5. Death of Optionee; No Assignment. The rights of the Optionee
under this Agreement may not be assigned or transferred except by will or by
the laws of descent and distribution, and may be exercised during the
lifetime of the Optionee only by such Optionee. Any attempt to sell,
pledge, assign, hypothecate, transfer or dispose of this Option in
contravention of this Agreement or the Plan shall be void and shall have no
effect. If the Optionee's Continuous Service terminates as a result of his
or her death, and provided Optionee's rights hereunder shall have vested
pursuant to Section 2 hereof, Optionee's legal representative, his or her
legatee, or the person who acquired the right to exercise this Option by
reason of the death of the Optionee (individually, a "Successor") shall
succeed to the Optionee's rights and obligations under this Agreement.
After the death of the Optionee, only a Successor may exercise this Option.
6. Representations and Warranties of Optionee.
(a) Optionee represents and warrants that this Option is being
acquired by Optionee for Optionee's personal account, for investment
purposes only, and not with a view to the distribution, resale or other
disposition thereof.
(b) Optionee acknowledges that the Company may issue Shares upon the
exercise of the Option without registering such Shares under the Securities
Act of 1933, as amended (the "Act"), on the basis of certain exemptions from
such registration requirement. Accordingly, Optionee agrees that his or her
exercise of the Option may be expressly conditioned upon his or her delivery
to the Company of an investment certificate including such representations
and undertakings as the Company may reasonably require in order to assure
the availability of such exemptions, including a representation that
Optionee is acquiring the Shares for investment and not with a present
intention of selling or otherwise disposing thereof and an agreement by
Optionee that the certificates evidencing the Shares may bear a legend
indicating such non-registration under the Act and the resulting
restrictions on transfer. Optionee acknowledges that, because Shares
received upon exercise of an Option may be unregistered, Optionee may be
required to hold the Shares indefinitely unless they are subsequently
registered for resale under the Act or an exemption from such registration
is available.
(c) Optionee acknowledges receipt of a copy of the Plan and
understands that all rights and obligations connected with this Option are
set forth in this Agreement and in the Plan.
(d) Optionee hereby acknowledges that, in addition to certain
restrictive legends that the securities laws of the state in which Optionee
resides may require, each certificate representing the Shares may be
endorsed with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER
FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE
SECURITIES ACT OF 1933, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
7. Adjustments Upon Changes in Capital Structure. In the event
that the outstanding shares of Common Stock of the Company are hereafter
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend (in excess of two
percent (2%)) or other change in the capital structure of the Company, then
appropriate adjustments shall be made by the Administrator to the number of
Shares subject to the unexercised portion of this Option and to the Exercise
Price per share, in order to preserve, as nearly as practical, but not to
increase, the benefits of the Optionee under this Option, in accordance with
the provisions of Section 4.2 of the Plan. No fractional share shall be
issued under this Option or upon any such adjustment.
8. Mergers, Reorganizations, Etc. Upon the effective date of the
dissolution or liquidation of the Company or upon the sale of substantially
all of its assets, or a merger, consolidation, acquisition of property or
shares, separation or reorganization of the Company with one or more
entities, corporate or otherwise, as a result of which the Company is not
the surviving corporation (other than one in which 50% or more of the
outstanding capital stock of the surviving corporation is held by the
Company's current stockholders), or if the Company is the surviving entity
and the ownership of the outstanding capital stock of the Company following
the transaction changes by 50% or more as a result of such transaction, this
Option shall automatically accelerate immediately prior to the consummation
of such transaction. Unless a provision is made in writing in connection
with such transaction for (a) the assumption of this Option or the
substitution for this Option of a new option of comparable value covering
shares of a successor corporation, with appropriate adjustments as to the
number and kind of shares and the Exercise Price, in which event this Option
or the new option substituted therefor shall continue in the manner and
under the terms so provided, or (b) the substitution for this Option of a
program or plan to provide rights to Optionee to receive, on exercise of
such rights, the type and amount of consideration Optionee would have
received had he or she exercised this Option prior to such transaction and
less the aggregate Exercise Price therefor, then, if such provision is not
made in such transaction, then the Administrator shall cause written notice
of the proposed transaction to be given to Optionee not less than fifteen
(15) days prior to the anticipated effective date of the proposed
transaction, during which period Optionee may exercise any unexercised
portion of this Option.
9. No Employment Contract Created. Neither the granting of this
Option nor the exercise hereof shall be construed as granting to the
Optionee any right with respect to continuance of employment by the Company
or any of its subsidiaries. The right of the Company or any of its
subsidiaries to terminate at will the Optionee's employment at any time
(whether by dismissal, discharge or otherwise), with or without cause, is
specifically reserved.
10. Rights as Shareholder. The Optionee (or transferee of this
option by will or by the laws of descent and distribution) shall have no
rights as a shareholder with respect to any Shares covered by this Option
until the date of the issuance of a stock certificate or certificates to him
or her for such Shares, notwithstanding the exercise of this Option.
"Market Stand-Off" Agreement. Optionee agrees that, if requested by
the Company or the managing underwriter of any proposed public offering of
the Company's securities, Optionee will not sell or otherwise transfer or
dispose of any Shares held by Optionee without the prior written consent of
the Company or such underwriter, as the case may be, during such period of
time, not to exceed 180 days following the effective date of the
registration statement filed by the Company with respect to such offering,
as the Company or the underwriter may specify.
12. Stop-Transfer Notices.
Optionee understands and agrees that, in order to ensure compliance
with the restrictions referred to herein, the Company may issue appropriate
"stop-transfer" instructions to its transfer agent, if any, and that, if the
Company transfers its own securities, it may make appropriate notations to
the same effect in its own records.
13. Interpretation. This Option is granted pursuant to the terms of
the Plan, and shall in all respects be interpreted in accordance therewith.
The Administrator shall interpret and construe this Option and the Plan, and
any action, decision, interpretation or determination made in good faith by
the Administrator shall be final and binding on the Company and the
Optionee. As used in this Agreement, the term "Administrator" shall refer
to the committee of the Board of Directors of the Company appointed to
administer the Plan, and if no such committee has been appointed, the term
Administrator shall mean the Board of Directors.
14. Notices. Any notice, demand or request required or permitted to
be given under this Agreement shall be in writing and shall be deemed given
when delivered personally or three (3) days after being deposited in the
United States mail, as certified or registered mail, with postage prepaid,
and addressed, if to the Company, at its principal place of business,
Attention: the Chief Financial Officer, and if to the Optionee, at his or
her most recent address as shown in the records of the Company.
15. Annual and Other Periodic Reports. During the term of this
Agreement, the Company will furnish to the Optionee copies of all annual and
other periodic financial and informational reports that the Company
distributes generally to its shareholders.
16. Governing Law. The validity, construction, interpretation, and
effect of this Option shall be governed by and determined in accordance with
the laws of the State of California.
17. Severability. Should any provision or portion of this Agreement
be held to be unenforceable or invalid for any reason, the remaining
provisions and portions of this Agreement shall be unaffected by such holding.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one instrument.
19. Attorneys' Fees. If any party shall bring an action in law or
equity against another to enforce or interpret any of the terms, covenants
and provisions of this Agreement, the prevailing party in such action shall
be entitled to recover reasonable attorneys' fees and costs.
20. Entire Agreement. This Agreement and the plan constitute the
entire agreement between the parties with respect to the subject matter
hereof and supersede all prior or contemporaneous written or oral agreements
and understandings of the parties, either express or implied.
21. Amendment. This Agreement may not be amended, waived,
discharged, or terminated other than by a written agreement of the parties.
22. General. The Company shall at all times during the term of the
Option reserve and keep available such number of Shares as will be
sufficient to satisfy the requirements of this Option Agreement, shall pay
all original issue and transfer taxes with respect to the issue and transfer
of Shares pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith, and will from time to time
use its best efforts to comply with all laws and regulations, which, in the
opinion of counsel for the Company, shall be applicable thereto.
IN WITNESS WHEREOF, the parties have executed this Stock Option
Agreement as of the date first above written.
INTERMARK CORPORATION
By: TOM HEMINGWAY
------------------------
Tom Hemingway, President
By: T. RICHARD HUTT
-------------------------
T. Richard Hutt, Secretary
"OPTIONEE"
OPTIONEE SIGNATURE
(Signature)
OPTIONEE NAME
(Type or print name)
CERTIFICATE OF ELIMINATION
OF
SERIES H PREFERRED STOCK
OF
ESYNCH CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
ESYNCH CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that the following resolutions respecting Series H
Preferred Stock were duly adopted by the Corporation's Board of Directors:
RESOLVED, that no shares of the Corporation's Series H
Preferred Stock are outstanding and that no shares of the
Series H Preferred Stock will be issued subject to the
certificate of designations previously filed with respect to
the Series H Preferred Stock; and
FURTHER RESOLVED, that the officers of the Corporation are
directed to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware setting forth
these resolutions in order to eliminate from the Corporation's
certificate of incorporation all matters set forth in the
certificate of designations and the certificate of increase
with respect to the Series H Preferred Stock.
In witness whereof, the Corporation has caused this Certificate to
be signed by its duly authorized officer this 10th day November, 1998.
ESYNCH CORPORATION
By: THOMAS C. HEMINGWAY
-------------------------------
Thomas C. Hemingway, President
INSTRUMENT OF OPTION ASSUMPTION
INNOVUS CORPORATION, a Delaware corporation, hereby irrevocably
assumes and agrees to perform each and every Option Agreement dated as
of August 4, 1998 between Intermark Corporation, a California
corproation ("Intermark") and each of the respective persons listed on
Exhibit A (each an "Optionee"), representing all of the outstanding
options to purchase Common Stock, without par value, of Intermark
("Intermark Common Stock"), and agrees to be bound by and perform the
terms and conditions thereof, with the adjustments and substitutions as
follows:
1. Shares of Innovus Series H Preferred Stock ("Innovus Shares")
are hereby substituted for Intermark Common Stock in a number of
0.02357625872407 per one (1) share of Intermark Common Stock, rounded
to the nearest whole share.
2. The exercise price per Innovus Share shall be the result of
dividing the exercise price per share of Intermark Common Stock by
0.02357625872407, rounded to the nearest whole cent.
3. In accordance with the foregoing terms, each Option Agreement
shall continue in full force and effect in accordance with its terms
and be and become a binding and enforceable agreement between the
Optionee and Innovus.
IN WITNESS WHEREOF, this Option Assumption has been executed this
4th day of August, 1998 by a duly authorized officer.
INNOVUS CORPORATION
By: DAVID MOCK
----------------------------
David Mock,
Chief Financial Officer
and Chairman of the Board
ACCEPTED ON BEHALF OF THE OPTIONEES:
By: TOM HEMINGWAY
----------------------------------
Tom Hemingway, Attorney-in-Fact
EXHIBIT A
Tom Hemingway
James Budd
Dick Hutt
Nick Yocca
David Lyons
Terry Murphy
Greg Clark
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as
of this 4th day of August, 1998, by and among INNOVUS CORPORATION, a
Delaware corporation (the "Company"), and those holders of the
Company's Series H Preferred Stock ("Preferred Stock") as listed in
Exhibit A hereto (each individually, a "Holder" and collectively, the
"Holders")
R E C I T A L S
A. Pursuant to the Agreement And Plan Of Share Exchange
(the "Acquisition Agreement"), as amended, made as of the 5th day of
May, 1998, by and among the Company, INTERMARK CORPORATION, a
California corporation ("Intermark"), and the security holders of
Intermark identified on the signature pages thereto (the "Acquisition
Agreement"), the Company is, on the date hereof, issuing to the Holders
1,033,669 shares of the Company's Common Stock and an aggregate of
78,706 shares of Preferred Stock convertible into an aggregate of
44,272,125 shares of the Company's Common Stock, subject only to their
being sufficient authorized and unissued shares of Common Stock for
issuance upon conversion (the Company's Common Stock, including shares
of a successor issuer, reclassified shares, or shares received in
exchange for such shares in a reorganization of the Company, herein
called the "Common Stock").
B. It is a condition to the obligations of the Holders
under the Acquisition Agreement that this Agreement be executed by the
parties hereto, and the parties are willing to execute this Agreement
and to be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the Company and the Holders agree as follows:
REGISTRATION
1. DEFINITIONS
As used herein:
1.1 The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or
ordering of the effectiveness of such registration statement
1.2 The term "Registrable Shares" means and includes the Common
Stock held by the Holders as of the date of this Agreement or issued or
issuable upon conversion of the Preferred Stock. In the event that any
Holder desires to convert any shares of Preferred Stock and
insufficient shares of Common Stock are reserved for issuance upon such
conversion at any time on or after the expiration of one year after the
date hereof, all of the Holders shall have registration rights with
respect to the Preferred Stock equal to the registration rights with
respect to the Common Stock, and all rights of Holders with respect to
Common Stock shall become rights with respect to Preferred Stock and/or
Common Stock.
1.3 The term "Ownership Percentage" means and includes, with
respect to each Holder requesting inclusion of Registrable Shares in an
offering pursuant to this Agreement, the number of Registrable Shares
held by such Holder divided by the aggregate of (i) all Registrable
Shares held collectively by the Holders requesting registration in such
offering and (ii) the total number of all other securities entitled to
registration pursuant to agreements with the Company and held by others
participating in the offering.
1.4 The term "Securities Act" means the Securities Act of 1933,
as amended.
2. REGISTRATION RIGHTS
2.1 "PIGGY BACK" REGISTRATION. If at any time the Company shall
determine to register under the Securities Act (including pursuant to a
demand of any shareholder of the Company exercising registration
rights) any of its Common Stock (except shares to be issued solely in
connection with any acquisition of any entity or business, shares
issuable solely upon exercise of stock options, or shares issuable
solely pursuant to employee benefit plans), it shall send to each
Holder written notice of such determination and, if within ten (10)
days after receipt of such notice, such Holder shall so request in
writing, the Company shall use its best efforts to include in such
registration statement all or any part of the Registrable Shares that
such Holder requests to be registered, except that if, in connection
with the first underwritten public offering under the Securities Act of
Common Stock to be issued by the Company after the date of this
Agreement, the managing underwriter shall impose a limitation on the
number of shares of Common Stock included in any such registration
statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, and such limitation is imposed
as provided herein among the holders of such Common Stock having an
incidental ("piggy back") right to include such Common Stock in the
registration statement, then, to the extent any Registrable Shares
remain available for registration after the underwriter's cut-back (the
"Available Shares"), the Company shall be obligated to include in such
registration statement, with respect to the requesting Holder, only the
product of (i) the number of Available Shares and (ii) such Holder's
Ownership Percentage, as that term is defined in Section 1.3.
Notwithstanding the foregoing, such a reduction or cut-back shall be
made by the underwriter with respect to all of the holders of Common
Stock having rights to include such Common Stock in the registration
statement, as follows: the underwriter shall reduce or cut-back a
number of the Holders' Registrable Shares based on reducing all
holder's shares to be included to an amount that is proportionate to
such holder's respective Ownership Percentage. If any Holder
disapproves of the terms of such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. No
incidental right under this Section 2.1 shall be construed to limit any
registration required under Section 2.2.
2.2 REGISTRATION ON FORM S-3. In addition to the rights
provided to the Holders in Section 2.1 above, if a registration of
Registrable Shares under the Securities Act can be effected on Form S-3
(or any similar form promulgated by the Securities and Exchange
Commission (the "Commission")), the Company will use its best efforts
to effect qualification and registration under the Securities Act on
said Form S-3 of all or such portion of the Registrable Shares as the
Holder or Holders shall specify. Notwithstanding the foregoing, the
Company shall not be required to register any Registrable Shares on
Form S-3 pursuant to a demand by the Holders thereof (i) which would
constitute an aggregate offering of less than $500,000; (ii) within 180
days of a prior registration; or (iii) more than twice during any
calendar year. Notwithstanding anything contained in this Section 2.2
to the contrary, if the Company furnishes to the Holders requesting any
registration rights pursuant to this Section 2.2 a certificate signed
by the President of the Company stating that, in the good faith
judgment of the Board of Directors of the Company, such registration
would be detrimental to the Company and that it is in the best
interests of the Company to defer the filing of a registration
statement, then the Company shall have the right to defer the filing of
a registration statement with respect to such offering for a period of
not more than 120 days from receipt by the Company of the request by
the initiating Holder; PROVIDED, HOWEVER, that the Company may not
exercise such right more than two times, nor may the Company exercise
such right consecutively.
2.3 EFFECTIVENESS. The Company will use its best efforts
to maintain the effectiveness of any registration statement pursuant to
Section 2.2 hereof and from time to time will amend or supplement such
registration statement and the prospectus contained therein as and to
the extent necessary to comply with the Securities Act and any
applicable state securities statute or regulation.
2.4 INDEMNIFICATION OF HOLDERS. In the event that the Company
registers any of the Registrable Shares under the Securities Act, the
Company will indemnify and hold harmless each Holder and each
underwriter of the Registrable Shares so registered (including any
broker or dealer through whom such shares may be sold) and each person,
if any, who controls such Holder or any such underwriter within the
meaning of Section 15 of the Securities Act from and against any and
all losses, claims, damages, expenses or liabilities, joint or several,
to which they or any of them become subject under the Securities Act or
under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse each such Holder, each such
underwriter and each such controlling person, if any, for any legal or
other expenses reasonably incurred by them or any of them in connection
with investigating or defending any actions whether or not resulting in
any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the registration statement, in any preliminary or amended preliminary
prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented by the Company)
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading or any
violation by the Company of any rule or regulation promulgated under
the Securities Act applicable to the Company and relating to action or
inaction required of the Company in connection with such registration,
unless such untrue statement or omission was made in such registration
statement, preliminary or amended, preliminary prospectus or prospectus
in reliance upon and in conformity with information furnished in
writing to the Company in connection therewith by such Holder, any such
underwriter or any such controlling person expressly for use therein;
PROVIDED, HOWEVER, that the Company's obligations hereunder shall be
limited to an amount equal to the proceeds received by the Company
pursuant to such registration. Promptly after receipt by any Holder,
any underwriter or any controlling person of notice of the commencement
of any action in respect of which indemnity may be sought against the
Company, such Holder, or such underwriter or such controlling person,
as the case may be, will notify the Company in writing of the
commencement thereof, and, subject to the provisions hereinafter
stated, the Company shall assume the defense of such action (including
the employment of counsel, who shall be counsel reasonably satisfactory
to such Holder, such underwriter or such controlling person, as the
case may be), and the payment of expenses insofar as such action shall
relate to any alleged liability in respect of which indemnity may be
sought against the Company. Such Holder, any such underwriter or any
such controlling person shall have the right to employ separate counsel
in any such action and to participate in the defense thereof but the
fees and expenses of such counsel shall not be at the expense of the
Company unless the employment of such counsel has been specifically
authorized by the Company. The Company shall not be liable to
indemnify any person for any settlement of any such action effected
without the Company's consent. The Company shall not, except with the
approval of each party being indemnified under this Section 2.5,
consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to the parties being so indemnified of a release from all
liability in respect to such claim or litigation.
2.5 INDEMNIFICATION OF COMPANY. In the event that the Company
registers any of the Registrable Shares under the Securities Act, each
Holder of the Registrable Shares so registered will indemnify and hold
harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each underwriter of the
Registrable Shares so registered (including any broker or dealer
through whom any of such shares may be sold) and each person, if any,
who controls the Company within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act or under any other statute
or at common law or otherwise, and, except as hereinafter provided,
will reimburse the Company and each such director, officer, underwriter
or controlling person for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or
defending any actions whether or not resulting in any liability,
insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement, in any preliminary or amended preliminary prospectus or in
the prospectus (or the registration statement or prospectus as from
time to time amended or supplemented) or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith
by such holder of Registrable Shares, expressly for use therein;
PROVIDED, HOWEVER, that such Holder's obligations hereunder shall be
limited to an amount equal to the proceeds to such Holder of the
Registrable Shares sold in such registration. Promptly after receipt
of notice of the commencement of any action in respect of which
indemnity may be sought against such Holder, the Company will notify
such Holder in writing of the commencement thereof, and such Holder
shall, subject to the provisions hereinafter stated, assume the defense
of such action (including the employment of counsel, who shall be
counsel satisfactory to the Company) and the payment of expenses
insofar as such action shall relate to the alleged liability in respect
of which indemnity may be sought against such Holder. The Company and
each such director, officer, underwriter or controlling person shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such
counsel shall not be at the expense of such Holder unless employment of
such counsel has been specifically authorized by such Holder.
Notwithstanding the two preceding sentences, if the action is one in
which the Company may be obligated to indemnify any Holder pursuant to
Section 2.5, the Company shall have the right to assume the defense of
such action, subject to the right of such holders to participate
therein as permitted by Section 2.5. Such Holder shall not be liable
to indemnify any person for any settlement of any such action effected
without such Holder's consent. Such Holder shall not, except with the
approval of the Company, consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof
the giving by the claimant or plaintiff to the party being so
indemnified of a release from all liability in respect to such claim or
litigation.
2.6 EXCHANGE ACT REGISTRATION. So long as the Company is
required to file information with the Commission under either of
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company will use its best efforts to
file on a timely basis with the Commission all information such
information that the Commission requires, and, so long as it is
required to file such information, shall use its best efforts to take
all action that may be required as a condition to the availability of
Rule 144 under the Securities Act (or any successor exemptive rule
hereinafter in effect) with respect to the Company's Common Stock. The
Company shall furnish to any Holder forthwith upon request (i) a
written statement by the Company as to its compliance with the
reporting requirements of Rule 144, (ii) a copy of the most recent
annual or quarterly report of the Company as filed with the Commission,
and (iii) any other reports and documents that a Holder may reasonably
request in availing itself of any rule or regulation of the Commission
allowing a Holder to sell any such Registrable Shares without
registration.
2.7 FURTHER OBLIGATIONS OF THE COMPANY. Whenever the
Company is required hereunder to register Registrable Shares, it agrees
that it shall also do the following:
(a) Furnish to each selling Holder such copies of each
preliminary and final prospectus and any other documents that such
Holder may reasonably request to facilitate the public offering of its
Registrable Shares;
(b) Use its best efforts to register or qualify the
Registrable Shares to be registered pursuant to this Agreement under
the applicable securities or "blue sky" laws of such jurisdictions as
any selling holder may reasonably request; PROVIDED, HOWEVER, that the
Company shall not be obligated to qualify to do business in any
jurisdiction where it is not then so qualified or to take any action
that would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by the
registration statement in any jurisdiction where it is not then so
subject;
(c) Furnish to each selling Holder a copy of the signed
opinion of counsel for the Company, dated the effective date of the
registration statement;
(d) Permit each selling Holder or his counsel or other
representatives to inspect and copy such corporate documents and
records as may reasonably be requested by them; and
(e) Furnish to each selling Holder, upon request, a copy
of all documents filed and all correspondence from or to the Commission
in connection with any such offering unless confidential treatment of
such information has been requested of the Commission.
2.8 EXPENSES. In the case of a registration under Sections 2.1
or 2.2, the Company shall bear all costs and expenses of each such
registration, including, but not limited to, printing, legal and
accounting expenses, Commission filing fees and "blue sky" fees and
expenses; PROVIDED, HOWEVER, that the Company shall have no obligation
to pay or otherwise bear (i) any portion of the fees or disbursements
of more than one counsel for the selling Holders in connection with the
registration of their Registrable Shares, (ii) any portion of the
underwriter's commissions or discounts attributable to the Registrable
Shares being offered and sold by the Holders, or (iii) any of such
expenses if the payment of such expenses by the Company is prohibited
by the laws of a state in which such offering is qualified and only to
the extent so prohibited; and PROVIDED FURTHER, that, in the event any
registration under the Securities Act is initiated by any Holders
pursuant to Section 2.2 of this Agreement and such registration is
thereafter withdrawn or terminated by such Holders for reasons other
than the occurrence of one or more events regarding the Company, which
event or events may have a material adverse effect upon the business or
prospects of the Company, and such Holders learn of such event or
events after the date of the demand registration and prior to the date
of withdrawal or termination by them and such withdrawal or termination
occurs with reasonable promptness thereafter, then the Company shall
have no obligation to pay or otherwise bear any fees, expenses or other
costs arising out of or relating to such registration.
2.9 TRANSFER OF REGISTRATION RIGHTS. The registration rights of
the Holders under this Agreement may be transferred by any Holder by
gift or sale, or upon death or permanent incapacity to his guardian,
conservator, executor, administrator, trustees or beneficiaries of his
will, spouse, children, stepchildren, grandchildren, parents, siblings
or legal dependents, to a trust of which the beneficiary or
beneficiaries of the corpus and the income shall be such a person or
persons or the Holders, to a partnership of which the partners shall be
such a person or persons or the Holder or to another Holder.
2.10 NO SUPERIOR RIGHTS. The Company will not, without the consent of
the Holders, grant registration rights to any Person that are superior
to the rights granted hereunder.
2.11 MARKET STAND-OFF AGREEMENT. Provided that all Holders are
treated equally and substantially all executive officers and directors
of the Company are also so bound, no Holder shall, to the extent
requested by the Company or any managing underwriter of the Company,
sell or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any Registrable Shares during a period
(the "Stand-Off Period") equal to 180 days following the effective date
of a registration statement of the Company filed under the Securities
Act (or such shorter period as the Company or managing underwriter may
authorize) except for securities sold as part of the offering covered
by such registration statement in accordance with the provisions of
this Agreement. In order to enforce the foregoing covenant, the
Company may impose stock transfer restrictions with respect to the
Registrable Shares of each Holder until the end of the Stand-Off Period.
3. ASSIGNABILITY
This Agreement shall be binding upon and inure to the benefit of
the respective heirs, successors and assigns of the parties hereto.
4. LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
5. AMENDMENT
Any modification, amendment, or waiver of this Agreement or any
provision hereof shall be in writing and executed by Holders of not
less than [75] percent of the Registrable Shares; provided however,
that no such modification, amendment or waiver shall reduce the
aforesaid percentage of Registrable Shares without the consent of the
record of beneficial Holders of no less than [90] percent of the
Registrable Shares.
6. CONFLICT
In the event of any conflict between the terms of this Agreement
and the Acquisition Agreement, the terms of this Agreement shall control.
7. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall
constitute one instrument.
8. NOTICE
Any notices and other communications required or permitted under
this Agreement shall be effective if in writing and delivered
personally or sent by telecopier, Federal Express or registered or
certified mail, postage prepaid, addressed as follows:
If to the Company: David Mock Tom Hemingway
P.O. Box 20201 4600 Campus Drive
Jackson, WY 83001 Newport Beach, CA 92660
Fax: (949) 833-1204
with a copy to: Paul Shaphren
Callister, Nebeker & McCullough
Gateway Tower E., Ste 900
10 East South Temple
Salt Lake City, UT 94133
If to the Holders, to: The names and addresses set forth on Exhibit A
hereto.
Unless otherwise specified herein, such notices or other
communications shall be deemed effective (a) on the date delivered, if
delivered personally, (b) two business days after being sent, if sent
by Federal Express, (c) one business day after being sent, if sent by
telecopier with confirmation of good transmission and receipt, and (d)
three business days after being sent, if sent by registered or
certified mail. Each of the parties herewith shall be entitled to
specify another address by giving notice as aforesaid to each of the
other parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
"THE COMPANY"
INNOVUS CORPORATION,
a Delaware corporation
By: DAVID MOCK
-------------------
"THE HOLDERS"
TOM HEMINGWAY
--------------------
Tom Hemingway, Attorney in Fact for the Holders
EXHIBIT A
LIST OF HOLDERS
Preferred Shares
------------------
<TABLE>
<S> <C> <C> <C>
Name Common Shares Escrow Balance
James Budd 256,157 660 18,844
Thomas Hemingway 256,157 660 18,844
T. Richard Hutt 256,157 660 18,844
Detra Mauro 32,020 83 2,356
Tom Kirk 9,339 24 687
CJ D'Angelo 24,015 62 1,767
Kirit Goradia 18,678 48 1,374
Robin Cruse 9,339 24 687
Brian Bae 2,668 7 196
Jennifer Nagel 2,668 7 196
Lawrence Tyson 16,010 41 1,178
Terry Murphy 3,335 9 245
Greg Clark 3,335 9 245
Bobby Orbach 2,668 7 196
Global Marketing 1,067 3 79
Partners, Inc.
Nick Yocca 5,337 14 393
Bill Kesselring 6,671 17 491
Don Gray 1,601 4 118
Matthew Minardi 1,001 3 74
Terry Dorsey 18,345 47 1,350
Sam D'Angelo 3,335 9 245
Charles F. Marks 834 2 61
Dale Max Boyko 3,335 9 245
John Schmitz, Jr. 1,668 4 123
James Cruse 834 2 61
Karen Emmett 1,668 4 123
Delores E. Vierila, Trustee 3,335 9 245
Allan Budd, Trustee 3,335 9 245
Gary Noe 834 2 61
John Saunders 5,271 14 388
Jinx Racquoy 1,668 4 123
Professional Community 6,671 17 491
Scott Jackson 13,342 34 981
Roger and Denise Work 6,671 17 491
Guy Emmons 6,671 17 491
John Gunnison 3,335 9 245
Gayle Gunnison 2,668 7 196
Wallie M. Meyer 5,337 14 393
Nutridata 1,601 4 118
Douglas L. Fiaute 13,342 34 981
Bradley Fiene 21,346 55 1,570
Totals: 1,033,669 2,665 76,041
</TABLE>
Address for Notices to Holders: Exchanging Securityholders c/o Tom
Hemingway, Attorney-in-Fact, Intermark Corporation, 4600 Campus Drive,
Newport Beach, CA 92660 Fax: (949) 833-1204
CERTIFICATE OF ELIMINATION
OF
SERIES A PREFERRED STOCK
OF
INNOVUS CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
INNOVUS CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that the following resolutions respecting Series A Preferred
Stock were duly adopted by the Corporation's Board of Directors:
RESOLVED, that no shares of the Corporation's Series A Preferred
Stock are outstanding and that no shares of the Series A
Preferred Stock will be issued subject to the certificate of
designations previously filed with respect to the Series A
Preferred Stock; and
FURTHER RESOLVED, that the officers of the Corporation are
directed to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware setting forth these
resolutions in order to eliminate from the Corporation's
certificate of incorporation all matters set forth in the
certificate of designations with respect to the Series A
Preferred Stock.
In witness whereof, the Corporation has caused this Certificate to be
signed by its duly authorized officer this 15th day July, 1998.
INNOVUS CORPORATION
By: TERRY HAAS
-----------------------------
Terry Haas, President
CERTIFICATE OF ELIMINATION
OF
SERIES C PREFERRED STOCK
OF
INNOVUS CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
INNOVUS CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that the following resolutions respecting Series C Preferred
Stock were duly adopted by the Corporation's Board of Directors:
RESOLVED, that no shares of the Corporation's Series C Preferred
Stock are outstanding and that no shares of the Series C
Preferred Stock will be issued subject to the certificate of
designations previously filed with respect to the Series C
Preferred Stock; and
FURTHER RESOLVED, that the officers of the Corporation are
directed to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware setting forth these
resolutions in order to eliminate from the Corporation's
certificate of incorporation all matters set forth in the
certificate of designations with respect to the Series C
Preferred Stock.
In witness whereof, the Corporation has caused this Certificate to be
signed by its duly authorized officer this 15th day July, 1998.
INNOVUS CORPORATION
By: TERRY HAAS
---------------------------
Terry Haas, President
CERTIFICATE OF ELIMINATION
OF
SERIES D PREFERRED STOCK
OF
INNOVUS CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
INNOVUS CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that the following resolutions respecting Series D Preferred
Stock were duly adopted by the Corporation's Board of Directors:
RESOLVED, that no shares of the Corporation's Series D Preferred
Stock are outstanding and that no shares of the Series D
Preferred Stock will be issued subject to the certificate of
designations previously filed with respect to the Series D
Preferred Stock; and
FURTHER RESOLVED, that the officers of the Corporation are
directed to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware setting forth these
resolutions in order to eliminate from the Corporation's
certificate of incorporation all matters set forth in the
certificate of designations with respect to the Series D
Preferred Stock.
In witness whereof, the Corporation has caused this Certificate to be
signed by its duly authorized officer this 15th day July, 1998.
INNOVUS CORPORATION
By: TERRY HAAS
--------------------
Terry Haas, President
CERTIFICATE OF ELIMINATION
OF
SERIES E PREFERRED STOCK
OF
INNOVUS CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
INNOVUS CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that the following resolutions respecting Series E Preferred
Stock were duly adopted by the Corporation's Board of Directors:
RESOLVED, that no shares of the Corporation's Series E Preferred
Stock are outstanding and that no shares of the Series E
Preferred Stock will be issued subject to the certificate of
designations previously filed with respect to the Series E
Preferred Stock; and
FURTHER RESOLVED, that the officers of the Corporation are
directed to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware setting forth these
resolutions in order to eliminate from the Corporation's
certificate of incorporation all matters set forth in the
certificate of designations with respect to the Series E
Preferred Stock.
In witness whereof, the Corporation has caused this Certificate to be
signed by its duly authorized officer this 15th day July, 1998.
INNOVUS CORPORATION
By: TERRY HAAS
------------------
Terry Haas, President
CERTIFICATE OF ELIMINATION
OF
SERIES F PREFERRED STOCK
OF
INNOVUS CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
INNOVUS CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that the following resolutions respecting Series F Preferred
Stock were duly adopted by the Corporation's Board of Directors:
RESOLVED, that no shares of the Corporation's Series F Preferred
Stock are outstanding and that no shares of the Series F
Preferred Stock will be issued subject to the certificate of
designations previously filed with respect to the Series F
Preferred Stock; and
FURTHER RESOLVED, that the officers of the Corporation are
directed to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware setting forth these
resolutions in order to eliminate from the Corporation's
certificate of incorporation all matters set forth in the
certificate of designations with respect to the Series F
Preferred Stock.
In witness whereof, the Corporation has caused this Certificate to be
signed by its duly authorized officer this 15th day July, 1998.
INNOVUS CORPORATION
By: TERRY HAAS
-------------------
Terry Haas, President
CERTIFICATE OF ELIMINATION
OF
SERIES G PREFERRED STOCK
OF
INNOVUS CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
INNOVUS CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that the following resolutions respecting Series G Preferred
Stock were duly adopted by the Corporation's Board of Directors:
RESOLVED, that no shares of the Corporation's Series G Preferred
Stock are outstanding and that no shares of the Series G
Preferred Stock will be issued subject to the certificate of
designations previously filed with respect to the Series G
Preferred Stock; and
FURTHER RESOLVED, that the officers of the Corporation are
directed to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware setting forth these
resolutions in order to eliminate from the Corporation's
certificate of incorporation all matters set forth in the
certificate of designations with respect to the Series G
Preferred Stock.
In witness whereof, the Corporation has caused this Certificate to be
signed by its duly authorized officer this 15th day July, 1998.
INNOVUS CORPORATION
By: TERRY HAAS
--------------------
Terry Haas, President
