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 June 30, 1999
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
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(Exact name of small business issuer as specified in its charter)
DELAWARE 87-0461856
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
15502 Mosher
Tustin, CA 92780
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(Address of principal executive offices)
(714) 258-1900
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(Issuer's telephone number, including area code)
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(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 No X
The number of common shares outstanding at August 13, 1999: 9,242,143
TABLE OF CONTENTS
PART I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet - June 30, 1999
(Unaudited)
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 1999 and 1998 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1999 and 1998 (Unaudited)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form
Signatures
PART I FINANCIAL INFORMATION
Item I - Financial Statements
ESYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1999
(UNAUDITED)
ASSETS
Current Assets
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,547
Inventory . . . . . . . . . . . . . . . . . . . . . . . 88,748
Other receivable. . . . . . . . . . . . . . . . . . . . 13,625
Prepaid expenses. . . . . . . . . . . . . . . . . . . . 119,791
-----------
Total Current Assets. . . . . . . . . . . . . . . . . 256,711
-----------
Property and Equipment, net . . . . . . . . . . . . . . . . 72,781
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . 70,807
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . 4,654,693
-----------
Total Assets. . . . . . . . . . . . . . . . . . . . . $ 5,054,992
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 1,774,880
Accrued liabilities. . . . . . . . . . . . . . . . . . . 1,171,559
Value of Common Stock to be Issued . . . . . . . . . . . 440,625
Notes payable. . . . . . . . . . . . . . . . . . . . . . 582,893
-----------
Total Current Liabilities . . . . . . . . . . . . . . 3,969,957
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . 459,153
Redeemable Preferred Stock - $0.001 par value; 600,000
shares authorized; 600,000 shares of Series I issued
and outstanding; liquidation preference - $600,000. . . . . 600
-----------
Stockholders' Equity
Preferred stock - $0.001 par value; 400,000 shares
authorized; none issued or outstanding. . . . . . . . . -
Common stock - $0.001 par value; 20,000,000 shares
authorized; 9,240,143 shares issued and outstanding . . 9,240
Additional paid-in capital . . . . . . . . . . . . . . . 10,938,145
Note receivable from shareholder . . . . . . . . . . . . (163,047)
Accumulated deficit. . . . . . . . . . . . . . . . . . . (10,159,056)
-----------
Total Stockholders' Equity. . . . . . . . . . . . . . 625,282
-----------
Total Liabilities and Stockholders' Equity. . . . . . . . . $ 5,054,992
===========
See the accompanying notes to the condensed consolidated financial
statements.
-1-
ESYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- ------------------------
1999 1998 1999 1998
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Net Product Sales. . . . . . .$ 252,882 $ 47,163 $ 661,732 $ 62,033
------------ ------------ ------------ ----------
Costs and Operating Expenses
Costs of products sold. . 88,726 77,922 368,423 171,553
General and administrative. 1,033,049 347,787 1,304,331 569,097
Stock Issued for Services . 866,210 - 1,313,926 -
Stock Based Compensation. . 1,817,347 - 1,817,347 -
Amortization of Goodwill. . 406,878 - 406,878 -
----------- ------------ ------------ ----------
Total Costs and Operating
Expenses . . . . . . . . 4,212,210 425,709 5,210,905 740,650
----------- ------------ ------------ ----------
Operating Loss . . . . . . . . (3,959,328) (378,546) (4,549,173) (678,617)
Other Income . . . . . . . . . 87,000 87,000
Interest expense . . . . . . . (15,012) (17,755) (45,629) (29,815)
----------- ------------ ------------ ----------
Net Loss . . . . . . . . $(3,887,340) $ (396,301) $ (4,507,802) $ (708,432)
=========== ============ ============= ===========
Basic and Diluted Loss Per
Common Share . . . . . . . . . $ ( 0.46) $ (4.44) $ (.57) $ (7.93)
=========== ============ ============ ==========
Weighted average number of
common shares used in per
share calculation. . . . . . 8,540,099 89,357 7,950,691 89,357
=========== ============ ============ ==========
<FN>
See the accompanying notes to the condensed consolidated financial statements.
</FN>
</TABLE>
-2-
ESYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------
1999 1998
---------- ----------
Cash Flows from Operating Activities
Net loss. . . . . . . . . . . . . . . . . . . . $(4,507,802) $ (708,432)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization. . . . . . . . 15,471 4,800
Amortization of goodwill . . . . . . . . . . 406,878 -
Stock issued for services. . . . . . . . . . 1,080,565 -
Liabilitiy for stock to be issued for
services . . . . . . . . . . . . . . . . 440,625 -
Stock issued for settlement of lawsuit . . . 26,456 -
Stock Based Compensation 1,817,347 -
Changes in operating assets and liabilities net
of effects of purchase of Kiss
Other receivables . . . . . . . . . . . . . (13,625) -
Inventory . . . . . . . . . . . . . . . . . (13,366) -
Prepaid expenses . . . . . . . . . . . . . . (81,469) -
Other assets . . . . . . . . . . . . . . . . (47,375) -
Accounts payable . . . . . . . . . . . . . . 213,170 243,903
Accrued liabilities. . . . . . . . . . . . . 86,330 225,000
----------- ----------
Net Cash Used in Operating Activities . . . . (576,795) (234,729)
----------- ----------
Cash Flows From Investing Activities
Proceeds from sale of SoftKat, net 50,000 -
Acquisition of property and equipment . . . . . (36,045) (771)
Kiss cash acquired. . . . . . . . . . . . . . . 49,233 -
----------- ----------
Net Cash Used in Investing Activities . . . . 63,188 (771)
----------- ----------
Cash Flows From Financing Activities
Stock issued for cash 150,000 -
Cash received on notes receivable issued for
common stock . . . . . . . . . . . . . . . . . 322,509 -
Proceeds from borrowing . . . . . . . . . . . . 359,500 235,500
Payments on notes payable . . . . . . . . . . . (285,268) -
--------- ---------
Net Cash Provided by Financing Activities. . 546,741 235,500
--------- ---------
Net Increase in Cash . . . . . . . . . . . . . . . 33,134 -
Cash at Beginning of Period. . . . . . . . . . . . 1,413 -
--------- ---------
Cash at End of Period. . . . . . . . . . . . . . . $ 34,547 $ -
========== =========
See the accompanying notes to the condensed consolidated financial
statements.
-3-
eSYNCH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS -- Intermark Corporation("Intermark")
was incorporated under the laws of the State of California in October 1995.
On August 5, 1998, Intermark was reorganized into Innovus Corporation, a
publicly-held shell corporation. By shareholder action, Innovus Corporation,
the parent company, changed its name to eSynch Corporation ("eSynch") on
November 9, 1998. On November 17, 1998, eSynch acquired SoftKat Inc.
("SoftKat"). On May 25, 1999, SoftKat was sold to a third-party. See Note 2.
On April 1, 1999, eSynch consummated an acquisition of Kiss Software
Corporation ("Kiss")whereby under the terms of an Agreement and Plan of
Merger Kiss became a wholly owned subsidiary of eSynch. Kiss was incorporated
under the laws of California on February 14, 1997. The primary activities
of Kiss have consisted of distributing computer utility software principally
through wholesale distribution channels.
The primary activities of eSynch, the consolidated company, have consisted
of raising capital, acquiring Innovus Corporation and SoftKat Inc., and
limited retail and turnkey sales of software games and various other
programs and related marketing services through distribution channels and
through the Internet.
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of Intermark and eSynch for all periods
presented, and the accounts of SoftKat, Inc. to May 25, 1999, and the accounts
of Kiss since April 1, 1999. These entities are collectively referred to as
"eSynch" or the "Company". All inter-company transactions and balances have
been eliminated in consolidation.
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.
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
1999.
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 annual financial statements included in the Company's Form
10-KSB dated December 31, 1998.
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 tangible net worth of $4,028,511. These
conditions raise substantial doubt regarding the Company's ability to
continue as a going concern. Management's plan to mitigate the impact of
these conditions is to obtain additional equity financing through the
issuance of the Company's common stock, convertible preferred stock or
warrants. As discussed in Note 8, the Company signed an Agreement effective
August 13,1999 from an investment source for equity financing in the
aggregate amount of $2,500,000.
The Company is also currently in negotiations for additional financing
arrangements. However, realization of the proceeds from these potential
transactions is not assured. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets or amounts and classifications of liabilities that might be necessary
should the Company be unable to continue as a going concern.
CONCENTRATION OF RISK AND MAJOR CUSTOMERS -- The Company operates
exclusively in the software industry, accordingly, segment information
relating to operations in different industries is not presented in these
financial statements. The concentration of business in the highly
competitive software industry subjects the Company to concentrated market
risk. Sales to any major customer during the quarters and six months June
30, 1999 and 1998 were not significant.
FAIR VALUES OF FINANCIAL INSTRUMENTS -- The amounts reported as cash,
accounts payable, notes payable, and liabilities relating to assets to be
sold are considered to reasonable approximations of their fair values. The
fair value estimates were based on market information available to
management at the time of the preparation of the financial statements.
LOSS PER SHARE -- The Company computes basic and diluted loss per share in
accordance with Statement of Financial Accounting Standards No. 128, ("SFAS
128"), Earnings Per Share. Basic loss per common share is computed by
dividing net loss available to common stockholders by the weighted-average
number of common shares outstanding during the period. Diluted loss per
share is calculated to give effect to stock warrants, options and
convertible notes payable except during loss periods when those potentially
issuable common shares would decrease the loss per share. 3,791,120 and
151,133 potentially issuable common shares outstanding at June 30, 1999 and
1998 were excluded from the calculation of diluted loss per share for the
quarters ended June 30, 1999 and 1998, as they would have decreased the loss
per share, respectively.
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. 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 from publishers
are accounted for as consigned product from publishers and the related cost
is not reflected in the financial statements with the exception of a limited
amount of software inventory owned by the Company at period-end.
NOTE 2--ACQUISITIONS
SOFTKAT -- On November 17, 1998, the Company acquired SoftKat, Inc,. a
California corporation primarily engaged in the wholesale distribution of
computer software games. In exchange for the SoftKat common shares, the
Company issued 720,000 common shares and 600,000 shares of Series I
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 of acquisition and a
target market price. The acquisition was accounted for using the purchase
method of accounting. The acquisition purchase price, based upon the fair
value of the common and preferred stock issued and the additional
contingently issuable common shares, was $2,670,000. The excess of the
purchase price over the estimated fair value of the identifiable acquired
assets less liabilities assumed was $6,882,300, which was recognized as
goodwill. The results of operations of SoftKat have been included in the
June 30, 1999 (through May 25, 1999 date of sale) condensed consolidated
financial statements.
In February 1999, Management of the Company decided to dispose of SoftKat
because it did not meet the core business objectives of the Company. On May
25, 1999, SoftKat was sold to a third party for $50,000 cash and a note
receivable for $100,000 which resulted in the recognition of an impairment
loss of $2,323,841. The subsequent sale and resulting loss provided
evidence of conditions that existed at December 31, 1998; therefore, an
impairment loss was recognized in 1998 in accordance with SFAS No. 121,
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. The impairment loss was determined by the excess of the
carrying amount of the assets in excess of the $50,000 subsequently
collected and the amount of the related liabilities. The $100,000 note
receivable was not considered in the computation of the impairment loss or
the resulting carrying value of the assets to be sold, but will be
recognized when collected. The resulting amount of the assets to be sold and
the related liabilities assumed by the buyer have been presented separately
in the accompanying balance sheet.
Effective April 1, 1999, the Company completed the acquisition of Kiss
a Software Corporation, California corporation engaged in the wholesale
and retail distribution of computer and Internet utility software products.
Under the agreement, shareholders of Kiss agreed to exchange each of their
common shares for.181557136 common shares of eSynch and each of their
preferred shares for .4183964 common shares of eSynch. The exchange resulted
in the Company issuing 1,428,134 common shares to Kiss shareholders.
The Company also issued 163,187 options in conjunction with the purchase.
These options are exercisable at $2.05 per share. During the second quarter
1999, the acquisition was accounted for using the purchase method of
accounting. The acquisition purchase price, based upon the fair value of the
common stock and options issued, has been estimated at $3,965,570. The excess
of the purchase price over the estimated fair value of the identifiable
acquired assets less liabilities assumed was $5,061,571 (unaudited), which was
recognized as goodwill. Goodwill is being amortized over approximately 3
years on a straight-line basis.
NOTE 3--PREPAID EXPENSES
In June 1999, the Company prepaid consulting services by issuing 54,000
common shares of stock to third-party consultants. The prepaid services
recognized from the issuance of these shares was $111,380. As of June 30,
1999, $29,906 of the prepaid services had been performed by the consultants
and therefore, were expensed by the Company.
NOTE 4--NOTES PAYABLE
In August 1999, the Company repaid $250,000 borrowed from a third-party.
Notes Payable long-term include a note to an Officer-Shareholder in the
amount of $195,270.
Note 5 -- STOCK BASED COMPENSATION
The Company issued stock options for 885,000 shares of Common stock to
Officers and Employees in connection with Employment Agreements signed on
April 1, 1999. The options allowed for the exercise of options over various
periods at a price of $1.00 per share. In addition, on April 1, 1999, an
officer of the Company was granted warrants to purchase 400,000 shares of
common stock at $0.05 per share. The charge under stock based compensation
was $1,817,347 for the three months ended June 30, 1999.
NOTE 6 --COMMITMENTS AND CONTINGENCIES
LITIGATION - SoftKat is a defendant in a lawsuit filed by a third-party for
alleged breach of distribution and licensing agreements. Management of
SoftKat claims it has paid money and substantial merchandise to the
plaintiff in satisfaction of a large portion of the debt. The plaintiff has
proposed to file a first amended complaint naming as defendants the original
parties as well as eSynch and claiming trademark and intellectual property
violations. The amount claimed is $100,000. The Company believes that the
potential exposure is much less than this amount. The stage of the
proceedings does not allow the Company to estimate the probability of an
unfavorable outcome at this time. No provision for a possible loss from this
proceeding has been accrued in the accompanying financial statements.
The Company is a defendant in a lawsuit filed by a third-party claiming
damages for unpaid printing charges. The suit asks for damages of $6,091,
plus interest and attorney fees of $660. The Company is unable to estimate
the likely-hood of an unfavorable outcome of this lawsuit at this time. The
Company denies the claim and has cross-complained seeking damages in excess
of $100,000, claiming that the printing work was substandard and could not
be used with the software product. The Company intends to vigorously defend
against the claim and prosecute its cross-complaint. No provision for a
possible loss from this lawsuit has been accrued in the accompanying
financial statements.
The Company is a defendant in a lawsuit filed by a third-party for unpaid
rent payments relating to a prior lease agreement entered into by SoftKat.
In February 1999, a default judgment was obtained by the plaintiff against
SoftKat for $38,273. Subsequently, the plaintiff sued the Company seeking
damages of the original $38,273 plus $46,528 for additional losses incurred
by the plaintiff in conjunction with SoftKat's departure from the premises
under lease.
The Company is a defendant in a lawsuit filed by a third-party for
non-payment of "guaranteed" royalties in the amount of $34,750. The Company
is unable to estimate the likelihood of an unfavorable outcome of this
lawsuit at this time. The Company intends to vigorously defend against this
claim. A provision of $5,818 has been accrued in the accompanying financial
statements.
SoftKat is a defendant in a number of lawsuits and collection actions filed
by various third-parties. These lawsuits and collection actions may result
in future claims against the Company in the event that
some or all of these claims are not assumed by the buyer in the purchase of
SoftKat.
A third-party has asserted a claim in the amount of $53,539 against Kiss
seeking payment for raw inventory materials purchased by a third-party
on behalf of Kiss. The claim asserts that the inventory was purchased
on behalf of Kiss as a result of Company purchase orders and is therefore
Kiss's liability. Kiss vigorously denies this claim, asserting that the
third-party was negligent in purchasing the material and is therefore liable
for the loss. Kiss is unable to estimate the likelihood of an unfavorable
outcome of this claim at this time. No provision for a possible loss for this
claim has been accrued in the accompanying financial statements.
Kiss is a defendant in a lawsuit in which the plaintiff is seeking $18,000 for
non-payment of services performed by the plaintiff on behalf of Kiss. Kiss
and the plaintiff are currently in negotiations to settle the suit for
approximately $11,500. The estimated negotiated settlement of $11,500
has been accrued in the accompanying financial statements.
NOTE 7--STOCKHOLDERS' EQUITY
On July 16, 1999 the Company issued 2,000 shares of common stock for
interest of $6,000.
During the six months ended June 30, 1999, the Company issued 602,500 shares
of common stock for services. The value of the services was determined based
upon the trading price of the Company's common stock on the date of
issuance. The services were valued at $1,395,394: $866,210 and $1,313,926
were expensed in the three and six month periods ended June 30, 1999,
respectively, and the remainder of $81,468 is shown as prepaid expenses at
June 30, 1999.
During March 1999, the Company issued 235,377 shares of common stock for
notes receivable totaling $565,440. The Company has collected $322,509
through June 30, 1999. An additional $79,884 has been recognized as a
discount on the note for the period ended June 30, 1999. The note balance
at June 30, 1999 has been included in Stockholders' Equity in the
accompanying Condensed Consolidated Balance Sheet.
The Company issued 75,000 share of common stock for $150,000 cash in
April 1999.
On June 11, 1999, the Company agreed to pay $50,000 in cash and agreed to
issue 9,033 shares of common stock as a compromise and settlement of a
lawsuit relating to a legal dispute between Kiss Corporation and a third-party.
The Series I redeemable preferred stock has a liquidation preference of
$1.00. The Company is required to redeem 200,000 shares of the preferred
stock at $1.00 per share upon obtaining financing of $1,500,000 or more
from any source and must redeem an additional 200,000 shares of preferred
stock upon obtaining an additional $3,000,000 in funding. Dividends on
the preferred stock are payable prior and in preference to any
declaration or payment of any dividends on the common stock, when, as,
and if declared by the Board of Directors. However, there is no stated
dividend rate. The preferred stock is convertible, at the option of the
holder, into common stock at the lesser of $3.00 per share or the average
closing bid price of the common stock over the ten trading days ending on
either November 16, 1999 or an earlier date on which the Company receives
a second funding of at least $3,000,000 mentioned above. The preferred
stock has voting rights equivalent to the number of common shares into
which it can be converted and has additional voting rights with respect
to approval of any issuance of a senior series of preferred shares.
NOTE 8--SUBSEQUENT EVENTS
Effective August 13, 1999, the Company entered into an Agreement from an
investing source for equity financing in an aggregate amount of $2,500,000,
subject to certain terms and conditions. The financing is in the form of
preferred stock and warrants issued by the Company. The Company will issue
262.5 shares of Series J Preferred Stock, with each share convertible into
common stock under certain conditions as described. In addition the Company
issued warrants to purchase 187,500 shares of the Company common stock at a
price equal to 115% of the closing stock price on the date before the closing
date. The Series J Preferred Stock is convertible into the Company's common
stock at a price equal to the lower of 80% of the average closing stock
price the lowest six trading days in the consecutive 20 days prior to
conversion or the average closing price for the five trading days before
closing, subject to a floor in the conversion price.
The Company is obligated, at its expense, to file for the registration
of the common stock issuable upon conversion within 60 days of closing, with
an effective date within 150 days after closing or the investors will be
entitled to a registration payment equal to 2% of the purchase price for
the first 30 days the Company is tardy and 3% for every 30 day period
thereafter.
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, 1998 found in the Company's Form
10-KSB dated June 21, 1999 and 10 QSB dated July 7, 1999.
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 negative tangible net worth at June 30, 1999 in the amount of
$4,028,511. 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.
Results of Operations
During the quarter and the six moths ended June 30, 1999 net sales were
$252,882 and $661,732 compared to $47,163 and $62,033 for the comparable
periods of the prior year. The sales amount for 1999 included sales for
SoftKat in the amount of $104,000 and $477,011. These sales will not continue
as SoftKat was sold May 25, 1999.
The costs of products sold in the quarter and six months ended June, 1999
were $88,726 and $368,423 compared with $77,922 and $171,553 for the
comparable periods in the prior year.
Operating losses for the quarter and six months ended June 30, 1999 were
$3,887,340 and $4,507,802 compared to an operating loss of $396,301 and
$708,432 for the comparable periods in the prior year The increased
operating loss was due to the difficulties associated with Softkat
operations and increased public relations due to the Company being a public
traded company.
Stock issued for services was $866,210 and $1,313,926 for the quarter and
six months ended June 30, 1999 and stock based compensation associated with
stock options and warrants amounted to $1,850,997.
Liquidity and Capital Resources
At June 30 1999 the Company had $34,547 of cash and a deficit in working
capital (current liabilities in excess of current assets) of $3,712,946.
The Company had been relying upon short-term borrowings from affiliates and
others, as well as issuance of common stock.
Management's efforts to obtain additional financing were successful to some
degree. The Company raised $150,000 from the sale of 75,000 of Common Stock
during the quarter.
The Company estimates that during the quarter it was using approximately
$250,000 more cash each month than was generated by operations.
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 which 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.
PART II OTHER INFORMATION
Item 1 - Legal Proceedings
In a Softkat related matter, on January 21, 1999, Interplay Entertainment
Corp. filed a complaint against the Company and Innovus in the Orange County
Superior Court, State of California. The complaint alleges that the Company
and Innovus owe $86,041 for goods and services provided to Softkat, Inc., a
former subsidiary of the Company and Innovus, based on a theory of successor
liability. The Company and Innovus have filed an answer denying that they
are obligated to pay any amounts incurred by Softkat.
In a Softkat related matter, on February 2, 1999, RPS, Inc. filed a
complaint against the Company in the United States District Court, Central
District of California. The complaint alleges that the Company owes
$52,555.58 for delivery services provided to Softkat, Inc., a former
subsidiary of the Company, based on a theory of successor liability. The
Company has filed an answer denying that it is obligated to pay any amounts
incurred by Softkat.
On February 5, 1999, Lawrence Tyson filed a complaint against Intermark and
Innovus in the San Mateo County Superior and Municipal Courts, State of
California. The complaint alleges that the Intermark and Innovus owe $8,000
on a promissory note given by Intermark. The Company believes that the
Complaint has not been properly served on Intermark and Innovus and,
therefore, no answers or appearances have been filed. The Company denies any
amount is owed.
In a Softkat related matter, on February 24, 1999, Muramatsu, Inc. filed a
complaint against the Company and Intermark in the Orange County Superior
Court, State of California. The complaint alleges that the Company and
Intermark owe $42,207.65 for convention display services provided to
Softkat, Inc., a former subsidiary of the Company and Intermark, based on a
theory of successor liability. The Company and Intermark have filed an
answer denying that they are obligated to pay any amounts incurred by
Softkat.
In a Softkat related matter, on April 7, 1999, Sunclipse, Inc. filed a
complaint against the Company in the Orange County Superior Court, State of
California. The complaint alleges that the Company owes $131,752.06 for
goods and services provided to Softkat, Inc., a former subsidiary of the
Company, based on a theory of successor liability. On May 24, 1999,
Sunclipse filed a first amended complaint seeking the same relief against
the Company as it sought in its original complaint. The Company intends to
file an answer denying that it is obligated to pay any amounts incurred by
Softkat.
On April 15, 1999, Bremer Public Relations, Inc. obtained a default judgment
in the amount of $32,980.85 against Innovus based on a Complaint filed in
the Third Judicial District for the City of Salt Lake City, State of Utah.
The Company has been attempting to negotiate a settlement of the amounts
owed but has not done so to date.
In a Softkat related matter, on April 30, 1999, Digital Leisure, Inc. filed
a complaint against the Company and Innovus in the Orange County Superior
Court, State of California. The complaint alleges that the Company and
Innovus owe $125,715 for goods and services provided to Softkat, Inc., a
former subsidiary of the Company and Innovus, based on a theory of successor
liability. The Company and Innovus have filed an answer denying that they
are obligated to pay any amounts incurred by Softkat.
In a Softkat related matter, on May 18, 1999, Frank Grange filed a complaint
against the Company in the Sonoma County Superior Court, State of
California. The complaint alleges that the Company owes $84,801.40 for
damages resulting from a lease between Plaintiff and Softkat, Inc., a former
subsidiary of the Company, and a Judgment obtained against Softkat for
unpaid rent, based on a theory of successor liability. The Company has not
yet responded to the Complaint but intends to file an answer denying that it
is obligated to pay any amounts incurred by Softkat.
In a Softkat related matter, on June 4, 1999, Cambrix Publishing, Inc. filed
a complaint against the Company in the Orange County Superior Court Harbor
Justice Center, State of California. The complaint alleges that the Company
owes $12,067.05 for goods and services provided to Softkat, Inc., a former
subsidiary of the Company, based on a theory of successor liability.
In a Softkat related matter, on May 25, 1999, Transworld Systems, Inc. filed
suit against the Company for $3,998.15 for collection work done on behalf of
Softkat Inc., a former subsidiary of the Company.
Although Softkat has been sold there may be asserted and unasserted claims
against Softkat or the Company:
The Company is aware of several other creditors of Softkat, Inc., which have
claims against Softkat for amounts owed based on good and/or services
provided to Softkat. In most cases, we do not know the identity of these
creditors, the amounts that they claim are due and owing or the
circumstances of their claims. Some of the claims against Softkat have been
asserted either in pending litigation or threatened litigation.
Regarding these unasserted claims against Softkat, there is a reasonable
likelihood that some of the plaintiffs/creditors will seek to satisfy their
claims against the Company on theories of either successor liability or
alter ego.
Item 2 - Changes in Securities:
(a) The following securities were issued by the Company during the quarter
ended June 30, 1999 without registration under the Securities Act of 1933:
(i) The Company issued 75,000 shares for $150,000 cash. The Company issued
1,428,134 in the acquisition of Kiss. The Company issued 115,000 shares for
services valued at $245,254 and 9,303 shares in partial settlement of a
lawsuit involving Kiss.
The Company issued 1,428,134 shares in connection with the Kiss Acquisition.
The Company believes the transactions were exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933.
Item 6 - Exhibits and Reports on Form 8-K
None.
(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.
(c) Exhibits
10.7 Employment Agreements of Officers
27 Financial Data Schedule
SIGNATURES
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: August 13, 1999
eSynch Corporation
By: /S/ Thomas Hemingway
--------------------------------------
Tom Hemingway, Chief Executive Officer
(Authorized Officer)
By: /S/ David P. Noyes
-------------------------------------
David P. Noyes, Chief Financial Officer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 1, 1999
is entered into by and between eSYNCH CORPORATION, a Delaware corporation
having its principal office at 4600 Campus Drive, Newport Beach, CA 92660
(the "Company"), and Tom Hemingway, an individual (the "Executive").
WlTNESSETH
WHEREAS, the Executive and the Company desire to enter this Agreement
to confirm the terms and conditions on which the Company will employ
the Executive;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the Company and the Executive
agree as follows:
1. Employment. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, for the term set forth in Section
2 below, in the position and with the duties and responsibilities set forth
in Section 3 below, and upon the other terms and conditions hereinafter
stated.
2. Term. The term of employment shall commence as of the date hereof and
shall end when terminated pursuant to Section 6 below. The period described
above shall be hereinafter referred to as the "Term of Employment."
3. Position, Duties, Responsibilities and Authority.
(a) During the Term of Employment, the Executive shall serve as Chief
Executive Officer of the Company, and shall report and be responsible
to the Board of Directors of the Company. During the Term of
Employment, the Executive shall have the duties, responsibilities
and authority as shall be determined from time to time by the Board of
Directors of the Company.
(b) Throughout the Term of Employment, the Executive shall devote his full
business time and attention to the business of the Company.
4. Base Compensation. During the Term of Employment, the Executive shall
receive base compensation at an annual rate of not less than
One Hundred Fifty Thousand Dollars ($150,000), to be paid in accordance
with the Company's normal procedure for compensation of its senior
executives, but not less frequently than monthly. At the end of each
calendar year during the Term of Employment, the Executive's
base compensation shall be reviewed by the Board of Directors of the
Company, on the basis of the performance of the Executive and the
profitability of the Company.
5. Employee Benefits, Perquisites and Expenses. During the Term of Employment,
the Executive shall be entitled to participate in all benefit plans,
programs or practices maintained by the Company for senior executives
or other employees of the Company on the date hereof and any other such
benefit plans, programs or practices from time to time in effect, subject
to the terms thereof. Without limiting the generality of the foregoing, the
Executive shall be entitled to the following:
(a) The company hereby grants the executive (250,000) shares of eSYNCH
company options that are immediately vested at a exercise price
of $1.00 per share as of 1/10/99
(b) Three (3) weeks of paid vacation in each calendar year during
the Term of Employment subject to the accrual policies of the Company
currently in effect or hereafter approved by the Company's Board of
Directors; plus such holidays, sick leave and other time off as are
established by the policies of the Company currently in effect or
hereafter approved by the Company's Board of Directors;
(c) Reimbursement for all reasonable and documented expenses incurred by
the Executive in connection with the performance of his duties
hereunder, all in accordance with the Company's polily with
respect to such reimbursement;
(d) Medical, dental and other supplemental health benefits, life
insurance benefits for the Executive and his dependents, accidental
death and dismemberment benefits for the Executive, and long-term
disability benefits, at least as favorable to the Executive as those
currently in effect;
(e) Participation in the Company's 401(k) plan, and related matching
program as currently in effect;
(f) Payment of personal tax planning and preparation expenses up to a
maximum of Fifteen Hundred Dollars ($1,500) per year;
(g) A reasonable car allowance or a company car of the make and
type approved by the Board of Directors of the Company but not less
than $500 a month.
6. Termination of Employment. The Term of Employment shall terminate upon
the occurrence of any of the following events:
(a) The Executive may terminate his employment upon giving the
Company written notice thirty (30) days in advance of the
proposed date of termination.
(b) The Executive's employment shall terminate automatically
upon the death of Executive.
(c) The Company may terminate the Executive's employment at any
time for cause by delivering to the Executive a certified
copy of a resolution of the Board of Directors of the Company
finding that the Executive committed an act or omission
constituting cause hereunder. As used herein, the term
"cause" shall mean:
(i) Misappropriation of any material funds or property of
the Company, or any act or acts of intentional dishonesty
relating to the executive's employment resulting or
intended to result in direct or Indirect personal gain or
enrichment at the expense of the Company;
(ii) Acting in a manner which is substantially detrimental
or substantially damaging to the Company's reputation,
business operations, prospects or relations with its employees,
suppliers or customers, after receipt of written notice
thereof from the Board of Directors of the Company and a
reasonable opportunity to so remedy such acts; or
(iii) Refusing to perform in material respects his duties
hereunder (other than as a result of any temporary or permanent
mental or physical impairment as certified by a physician
reasonably acceptable to the Company), after receipt of written
notice thereof from the Board of Directors of the Company and a
reasonable opportunity to so perform such duties.
(d) However, notwithstanding any of the above, the Company may
terminate the Executive's employment without cause at any
time and for any reason by giving the Executive written notice (in
accordance with the notice provisions contained in Section 9)
from the Board of Directors of the Company at least thirty (30)
days in advance of the date on which the termination is to
become effective.
7. Obligations and Payments Upon Termination.
(a) Upon any termination of employment pursuant to Section 6, the E
wxecutive and the Company shall have no further obligation to the
other under this Agreement except with respect to the provisions
of this Section 7.
(b) Upon any termination of employment under Sections 6(a), 6(b) or
6(c), the Company shall pay the Executive in a lump sum within ten
(10) days following such termination (or such earlier date required
by law) an amount equal to the pro-rata amount of the base
compensation owed to the Executive as of the effective date
of the termination (as well as any accrued but unpaid vacation)
as he may be entitled to receive up to the date of termination.
(c) Upon any termination of employment under Section 6(d), the Company
shall make payment to the Executive in the amounts and at the times
set forth in Section 7(b); and, in addition:
(i) the Company shall pay the Executive in a lump sum within ten
(10) days following such termination an additional amount
equal to twelve (12) months of his base compensation;
(ii) the Company shall continue to provide to the Executive the
employee benefits, perquisites and expenses identified
in Section 5(c) through 5(f) hereof for the twelve (12)
month period following the date of termination;
(iii) the Company shall repay all loans and other obligations
payable to the Executive in cash within ten (10) days
following such termination; and
(iv) the Company shall repurchase from the Executive all shares of
capital stock, options and warrants of the Company held by
him or his affiliates at the current 30 day average market
trading price prior to the date of delivery notice of the
Executives termination in a lump sum in cash within ten (10)
days following the effective date of termination.
(d) Provided that the Company repurchases all shares of capital
stock, options and warrants of the Company held by the
Executive or his affiliates pursuant to the this agreement
(whether such repurchase occurs as a result of termination
without cause or termination for any other reason) and, to
the extent applicable, in accordance with Section 7(c)(iv) of
this Agreement, the Executive hereby agrees that, from and
after the date on which the closing of such repurchase occurs
and continuing for a period of two (2) years thereafter, he
will not, directly or indirectly, engage in any business,
or have any interest in, any corporation, partnership,
proprietorship, firm, Association or business, which
engages in any activities competitive with the products
being licensed or sold by the Company or solicit and/or
recruit the company's customers, suppliers, or personnel
at the time of such repurchase. This covenant shall
apply in each jurisdiction in which the Company licenses or
sells any products at the time of such repurchase
Notwithstanding the foregoing, this covenant shall not restrict the ability
of the Executive to own up to 5% of the shares of capital stock of any public
company.
8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may
be amended, modified or waived unless such amendment, modification or
waiver is authorized by the Board of Directors of the Company and is
agreed to in writing, signed by the Executive and by an officer of the
Company (other than the Executive) thereunto duly authorized. Except as
otherwise specifically provided in this Agreement, no waiver by any party
hereto of any breach by any other party hereto of any condition or
provision of this Agreement to be performed by such other party shall
be deemed a waiver of a subsequent breach of such condition or provision
or a waiver of a similar or dissimilar provision or condition at the same
or at any prior or subsequent time; nor shall the receipt or acceptance of
compensation or other benefits following any termination of the Executive's
employment be deemed a waiver of any condition or provision thereof.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this agreement shall nevertheless remain
in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall
nevertheless remain in full force and effect in all other circumstances.
10. CHOICE OF LAW. The formation, construction and performance of this
agreement shall be construed in accordance with the laws of California.
11. INTEGRATION. This Agreement contains the entire agreement between the
parties and supercedes all prior oral and written agreements,
understandings, commitments and practices between them, including all prior
employment agreements, whether or not fully performed by Executive before
the date of this Agreement. No oral modifications, express or implied, may
alter or vary the terms of this Agreement.
12. VENUE. Any action brought to enforce the terms of this agreement shall
be commenced, prosecuted and defended exclusively in the State or Federal
court of the State of California located in Orange County, California.
13. ATTORNEY'S FEES. In the event of any legal action (including any appeal
of a judgement) in connection with the Agreement, the prevailing party
shall be entitled to reimbursement of reasonable attorneys' fees and
costs and expenses (including court costs) incurred in connection there
with.
IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized
officer of the Company, have executed this Employment Agreement as of
the first day of March, 1999
COMPANY
eSYNCH CORPORATION (Board of Directors)
By
________________________________________
By
________________________________________
By
________________________________________
By
________________________________________
EXECUTIVE
___________________________________
Tom Hemingway, an individual
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 1, 1999
is entered into by and between eSYNCH CORPORATION, a Delaware
corporation having its principal office at 4600 Campus Drive, Newport
Beach, CA 92660
(the "Company"), and Donald C. Watters, an individual (the "Executive").
WlTNESSETH
WHEREAS, the Executive and the Company desire to enter this Agreement
to confirm the terms and conditions on which the Company will employ
the Executive;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the Company and the
Executive agree as follows:
1. Employment. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the term
set forth in Section 2 below, in the position and with the duties and
responsibilities set forth in Section 3 below, and upon the other terms
and conditions hereinafter stated.
2. Term. The term of employment shall commence as of the date hereof
and shall end when terminated pursuant to Section 6 below. The period
described above shall be hereinafter referred to as the "Term of
Employment."
3. Position, Duties, Responsibilities and Authority.
(a) During the Term of Employment, the Executive shall serve as
President and Chief Operating Officer of the Company, and shall report
and be responsible to the Chief Executive Officer and the Board of
Directors of the Company. During the Term of Employment, the Executive
shall have the duties, responsibilities and authority as shall be
determined from time to time by the Chief Executive Officer and the
Board of Directors of the Company.
(b) Throughout the Term of Employment, the Executive shall
devote his full business time and attention to the business of the
Company.
4. Base Compensation. During the Term of Employment, the Executive
shall receive base compensation at an annual rate of not less than One
Hundred Fifty Thousand Dollars ($150,000), to be paid in accordance
with the Company's normal procedure for compensation of its senior
executives, but not less frequently than monthly. At the end of each
calendar year during the Term of Employment, the Executive's base
compensation shall be reviewed by the Board of Directors of the
Company, on the basis of the performance of the Executive and the
profitability of the Company.
5. Employee Benefits, Perquisites and Expenses. During the Term of
Employment, the Executive shall be entitled to participate in all
benefit plans, programs or practices maintained by the Company for
senior executives or other employees of the Company on the date hereof
and any other such benefit plans, programs or practices from time to
time in effect, subject to the terms thereof. Without limiting the
generality of the foregoing, the Executive shall be entitled to the
following:
(a) The company hereby grants the executive (400,000) four-hundred
thousand shares of eSYNCH stock at a purchase price of (5)
five cents per share and (250,000) shares of eSYNCH company
options that are immediately vested at a exercise price of $1.00 per
share as of 1/10/99.
(b) Three (3) weeks of paid vacation in each calendar year during the
Term of Employment subject to the accrual policies of the Company
currently in effect or hereafter approved by the Company's Board of
Directors; plus such holidays, sick leave and other time off as are
established by the policies of the Company currently in effect or
hereafter approved by the Company's Board of Directors;
(c) Reimbursement for all reasonable and documented expenses incurred
by the Executive in connection with the performance of his duties
hereunder, all in accordance with the Company's policy with respect
to such reimbursement;
(d) Medical, dental and other supplemental health benefits, life
insurance benefits for the Executive and his dependents, accidental
death and dismemberment benefits for the Executive, and long-term
disability benefits, at least as favorable to the Executive as
those currently in effect;
(e) Participation in the Company's 401(k) plan, and related matching
program as currently in effect;
(f) Payment of personal tax planning and preparation expenses up to a
maximum of Fifteen Hundred Dollars ($1,500) per year;
(g) A reasonable car allowance or a company car of the make and
type approved by the Board of Directors of the Company but not
less than $500 a month.
6. Termination of Employment. The Term of Employment shall terminate
upon the occurrence of any of the following events:
(a) The Executive may terminate his employment upon giving the
Company written notice thirty (30) days in advance of the proposed
date of termination.
(b) The Executive's employment shall terminate automatically
upon the death of Executive.
(c) The Company may terminate the Executive's employment at any
time for cause by delivering to the Executive a certified copy
of a resolution of the Board of Directors of the Company finding
that the Executive committed an act or omission constituting
cause hereunder. As used herein, the term "cause" shall mean:
(i) Misappropriation of any material funds or property of
the Company, or any act or acts of intentional dishonesty
relating to the Executive's employment resulting or intended to
result in direct or indirect personal gain or enrichment at the
expense of the Company;
(ii) Acting in a manner which is substantially detrimental
or substantially damaging to the Company's reputation, business
operations, prospects or relations with its employees, suppliers
or customers, after receipt of written notice thereof from the
Board of Directors of the Company and a reasonable opportunity to
so remedy such acts; or
(iii) Refusing to perform in material respects his duties
hereunder (other than as a result of any temporary or permanent
mental or physical impairment as certified by a physician
reasonably acceptable to the Company), after receipt of written
notice thereof from the Board of Directors of the Company and a
reasonable opportunity to so perform such duties.
(d) However, notwithstanding any of the above, the Company may
terminate the Executive's employment without cause at any time
and for any reason by giving the Executive written notice (in
accordance with the notice provisions contained in Section 9)
from the Board of Directors of the Company at least thirty (30)
days in advance of the date on which the termination is to become
effective.
7. Obligations and Payments Upon Termination.
(a) Upon any termination of employment pursuant to Section 6,
the Executive and the Company shall have no further obligation
to the other under this Agreement except with respect to the
provisions of this Section 7.
(b) Upon any termination of employment under Sections 6(a), 6(b)
or 6(c), the Company shall pay the Executive in a lump sum
within ten (10) days following such termination (or such
earlier date required by law) an amount equal to the pro-rata
amount of the base compensation owed to the Executive as of
the effective date of the termination (as well as
any accrued but unpaid vacation) as he may be entitled to
receive up to the date of termination.
(c) Upon any termination of employment under Section 6(d), the
Company shall make payment to the Executive in the amounts and
at the times set forth in Section 7(b); and, in addition:
(i) the Company shall pay the Executive in a lump sum
within ten (10) days following such termination an additional
amount equal to twelve (12) months of his base compensation;
(ii) the Company shall continue to provide to the Executive
the employee benefits, perquisites and expenses identified in
Section 5(c) through 5(f) hereof for the twelve (12) month
period following the date of termination;
(iii) the Company shall repay all loans and other obligations
payable to the Executive in cash within ten (10) days following
such termination; and
(iv) the Company shall repurchase from the Executive all shares
of capital stock, options and warrants of the Company held by
him or his affiliates at the current 30 day average market
trading price prior to the date of delivery notice of the
Executives termination in a lump sum in cash within ten
(10) days following the effective date of termination.
(d) Provided that the Company repurchases all shares of capital
stock, options and warrants of the Company held by the Executive
or his affiliates pursuant to the this agreement (whether such
repurchase occurs as a result of termination without cause or
termination for any other reason) and, to the extent applicable,
in accordance with Section 7(c)(iv) of this Agreement, the
Executive hereby agrees that, from and after the date on which
the closing of such repurchase occurs and continuing for a period
of two (2) years thereafter, he will not, directly or indirectly,
engage in any business, or have any interest in, any corporation,
partnership, proprietorship, firm, Association or business, which
engages in any activities competitive with the products being
licensed or sold by the Company or solicit and/or recruit the
company's customers, suppliers, or personnel at the time of such
repurchase. This covenant shall apply in each jurisdiction in
which the Company licenses or sells any products at the time of
such repurchase. Notwithstanding the foregoing, this covenant
shall not restrict the ability of the Executive to own up to 5%
of the shares of capital stock of any public company.
8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this
Agreement may be amended, modified or waived unless such
amendment, modification or waiver is authorized by the Board of
Directors of the Company and is agreed to in writing, signed by
the Executive and by an officer of the Company (other than the
Executive) thereunto duly authorized. Except as otherwise
specifically provided in this Agreement, no waiver by any party
hereto of any breach by any other party hereto of any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of a subsequent breach of such condition
or provision or a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time; nor
shall the receipt or acceptance of compensation or other benefits
following any termination of the Executive's employment be deemed
a waiver of any condition or provision hereof.
9. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable, the remainder of this agreement shall
nevertheless remain in full force and effect. If any provision is
held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and
effect in all other circumstances.
10. CHOICE OF LAW. The formation, construction and performance
of this agreement shall be construed in accordance with the laws
of California.
11. INTEGRATION. This Agreement contains the entire agreement
between the parties and supercedes all prior oral and written
agreements, understandings, commitments and practices between
them, including all prior employment agreements, whether or not
fully performed by Executive before the date of this Agreement.
No oral modifications, express or implied, may alter or vary the
terms of this Agreement.
12. VENUE. Any action brought to enforce the terms of this
agreement shall be commenced, prosecuted and defended exclusively
in the State or Federal court of the State of California located
in Orange County, California.
13. ATTORNEY'S FEES. In the event of any legal action
(including any appeal of a judgement) in connection with the
Agreement, the prevailing party shall be entitled to
reimbursement of reasonable attorneys' fees and costs and
expenses (including court costs) incurred in connection there with.
IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized
officer of the Company, have executed this Employment Agreement as of
the first day of March, 1999
COMPANY
eSYNCH CORPORATION (Board of Directors)
By
_______________________________________
By
_______________________________________
By
_______________________________________
EXECUTIVE
___________________________________
Donald C Watters, an individual
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 1, 1999
is entered into by and between eSYNCH CORPORATION, a Delaware
corporation having its principal office at 4600 Campus Drive, Newport
Beach, CA 92660
(the "Company"), and Dick Hutt, an individual (the "Executive").
WlTNESSETH
WHEREAS, the Executive and the and the Company desire to enter this
Agreement to confirm the terms and conditions on which the Company will
employ the Executive;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the Company and the
Executive agree as follows:
1. Employment. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the term
set forth in Section 2 below, in the position and with the duties and
responsibilities set forth in Section 3 below, and upon the other terms
and conditions hereinafter stated.
2. Term. The term of employment shall commence as of the date hereof
and shall end when terminated pursuant to Section 6 below. The period
described above shall be hereinafter referred to as the "Term of
Employment."
3. Position, Duties, Responsibilities and Authority.
(a) During the Term of Employment, the Executive shall serve as
Vice-President and Corporate Secretary of the Company, and shall
report and be responsible to the Chief Executive Officer of the
Company. During the Term of Employment, the Executive shall have
the duties, responsibilities and authority as shall be determined
from time to time by the Chief Executive Officer of the Company.
(b) Throughout the Term of Employment, the Executive shall
devote his full business time and attention to the business of the
Company.
4. Base Compensation. During the Term of Employment, the Executive
shall receive base compensation at an annual rate of not less than One
Hundred Ten Thousand Dollars ($110,000), to be paid in accordance with
the Company's normal procedure for compensation of its senior
executives, but not less frequently than monthly. At the end of each
calendar year during the Term of Employment, the Executive's base
compensation shall be reviewed by the Board of Directors of the
Company, on the basis of the performance of the Executive and the
profitability of the Company.
5. Employee Benefits, Perquisites and Expenses. During the Term of
Employment, the Executive shall be entitled to participate in all
benefit plans, programs or practices maintained by the Company for
senior executives or other employees of the Company on the date hereof
and any other such benefit plans, programs or practices from time to
time in effect, subject to the terms thereof. Without limiting the
generality of the foregoing, the Executive shall be entitled to the
following:
(a) Options in conjunction with former option agreement.
(b) Two (2) weeks of paid vacation in each calendar year during the
Term of Employment subject to the accrual policies of the Company
currently in effect or hereafter approved by the Company's Board of
Directors; plus such holidays, sick leave and other time off as are
established by the policies of the Company currently in effect or
hereafter approved by the Company's Board of Directors;
(c) Reimbursement for all reasonable and documented expenses incurred
by the Executive in connection with the performance of his duties
hereunder, all in accordance with the Company's policy with respect
to such reimbursement;
(d) Medical, dental and other supplemental health benefits, life
insurance benefits for the Executive and his dependents, accidental
death and dismemberment benefits for the Executive, and long-term
disability benefits, at least as favorable to the Executive as
those currently in effect;
(e) Participation in the Company's 401(k) plan, and related matching
program as currently in effect;
6. Termination of Employment. The Term of Employment shall terminate
upon the occurrence of any of the following events:
(a) The Executive may terminate his employment upon giving the
Company written notice thirty (30) days in advance of the
proposed date of termination.
(b) The Executive's employment shall terminate automatically
upon the death of Executive.
(c) The Company may terminate the Executive's employment at any
time for cause by delivering to the Executive a letter finding
that the Executive committed an act or omission constituting
cause hereunder. As used herein, the term "cause" shall mean:
(i) Misappropriation of any material funds or property of
the Company, or any act or acts of intentional dishonesty
relating to the Executive's employment resulting or
intended to result in direct or indirect personal gain or
enrichment at the expense of the Company;
(ii) Acting in a manner which is substantially detrimental
or substantially damaging to the Company's reputation,
business operations, prospects or relations with its
employees, suppliers or customers, after receipt of
written notice thereof from the President/COO and a
reasonable opportunity to so remedy such acts; or
(iii) Willfully refusing to perform in material respects his
duties hereunder (other than as a result of any temporary
or permanent mental or physical impairment as certified
by a physician reasonably acceptable to the Company),
after receipt of written notice thereof from the
President/COO of the Company and a reasonable opportunity
to so perform such duties.
(d) The Company may terminate the Executive's employment without
cause at any time and for any reason by giving the Executive
written notice from the President/COO of the Company at least
thirty (30) days in advance of the date on which the termination
is to become effective.
7. Obligations and Payments Upon Termination.
(a) Upon any termination of employment pursuant to Section 6,
the Executive and the Company shall have no further obligation
to the other under this Agreement except with respect to the
provisions of this Section 7.
(b) Upon any termination of employment under Sections 6(a), 6(b)
or 6(c), the Company shall pay the Executive in a lump sum within
ten (10) days following such termination (or such earlier date
required by law) an amount equal to the base compensation provided
under section 4 hereof (as well as any accrued but unpaid vacation)
as he may be entitled to receive up to the date of termination.
(c) Upon any termination of employment under Section 6(d), the
Company shall make payment to the Executive in the amounts and
at the times set forth in Section 7(b); and, in addition:
(i) The Company shall pay the Executive in a lump sum
within ten (10) days following such termination an additional
amount equal to three (3) months of his base compensation;
(ii) The Company shall continue to provide to the Executive
the employee benefits, perquisites and expenses identified in
Section 5(c) through 5(f) hereof for the three (3) month period
following the date of termination;
(iii) The Company shall repay all loans and other obligations
payable to the Executive in cash within ten (10) days following
such termination; and
(iv) The Company shall immediately vest all shares of stock
options and warrants of the Company held by the executive and the
company has the right at the companies option to buy back from
the executive any shares of stock, options and warrants held by
the executive at the current 30 day average market trading price
prior to the date of delivery of the Executive's termination.
(v) The executive has three (3) months from the termination date
in which to exercise these options and/or warrants or they expire.
(d) Provided that the Company repurchases all shares of capital
stock, options and warrants of the Company held by the Executive
or his affiliates pursuant to the this agreement (whether such
repurchase occurs as a result of termination without cause or
termination for any other reason) and, to the extent applicable,
in accordance with Section 7(c)(iv) of this Agreement, the
Executive hereby agrees that, from and after the date on which
the closing of such repurchase occurs and continuing for a period
of two (2) years thereafter, he will not, directly or indirectly,
engage in any business, or have any interest in, any corporation,
partnership, proprietorship, firm, Association or business, which
engages in any activities competitive with the products being
licensed or sold by the Company or solicit and/or recruit the
company's customers, suppliers, or personnel at the time of such
repurchase. This covenant shall apply in each jurisdiction in
which the Company licenses or sells any products at the time of
such repurchase. Notwithstanding the foregoing, this covenant
shall not restrict the ability of the Executive to own up to 5%
of the shares of capital stock of any public company.
8. AMENDMENT OR MODIFICATION; Waiver. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification
or waiver is authorized by the Board of Directors of the Company and is
agreed to in writing, signed by the Executive and by an officer of the
Company (other than the Executive) thereunto duly authorized. Except as
otherwise specifically provided in this Agreement, no waiver by any
party hereto of any breach by any other party hereto of any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar provision or condition
at the same or at any prior or subsequent time; nor shall the receipt
or acceptance of compensation or other benefits following any
termination of the Executive's employment be deemed a waiver of any
condition or provision hereof.
9. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable, the remainder of this agreement shall
nevertheless remain in full force and effect. If any provision is
held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and
effect in all other circumstances.
10. CHOICE OF LAW. The formation, construction and performance
of this agreement shall be construed in accordance with the laws
of California.
11. INTEGRATION. This Agreement contains the entire agreement
between the parties and supercedes all prior oral and written
agreements, understandings, commitments and practices between
them, including all prior employment agreements, whether or not
fully performed by Executive before the date of this Agreement.
No oral modifications, express or implied, may alter or vary the
terms of this Agreement.
12. VENUE. Any action brought to enforce the terms of this
agreement shall be commenced, prosecuted and defended exclusively
in the State or Federal court of the State of California located
in Orange County, California.
13. ATTORNEY'S FEES. In the event of any legal action
(including any appeal of a judgement) in connection with the
Agreement, the prevailing party shall be entitled to
reimbursement of reasonable attorneys' fees and costs and
expenses (including court costs) incurred in connection there with.
IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized
officer of the Company, have executed this Employment Agreement as of
the first day of April 1999
COMPANY
eSYNCH CORPORATION (Board of Directors)
By
_______________________________________
By
_______________________________________
By
_______________________________________
EXECUTIVE
___________________________________
Dick Hutt, an individual
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 1, 1999
is entered into by and between eSYNCH CORPORATION, a Delaware
corporation having its principal office at 4600 Campus Drive, Newport
Beach, CA 92660
(the "Company"), and Jim Budd, an individual (the "Executive").
WlTNESSETH
WHEREAS, the Executive and the and the Company desire to enter this
Agreement to confirm the terms and conditions on which the Company will
employ the Executive;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the Company and the
Executive agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the term
set forth in Section 2 below, in the position and with the duties and
responsibilities set forth in Section 3 below, and upon the other terms
and conditions hereinafter stated.
2. TERM. The term of employment shall commence as of the date hereof
and shall end when terminated pursuant to Section 6 below. The period
described above shall be hereinafter referred to as the "Term of
Employment."
3. POSITION, DUTIES, RESPONSIBILITIES AND AUTHORITY.
(a) During the Term of Employment, the Executive shall serve as
Vice-President and shall report and be responsible to the President and
COO of the Company. During the Term of Employment, the Executive shall
have the duties, responsibilities and authority as shall be determined
from time to time by the President and COO of the Company.
(b) Throughout the Term of Employment, the Executive shall
devote his full business time and attention to the business of the
Company.
4. BASE COMPENSATION. During the Term of Employment, the Executive
shall receive base compensation at an annual rate of not less than One
Hundred Ten Thousand Dollars ($110,000), to be paid in accordance with
the Company's normal procedure for compensation of its senior
executives, but not less frequently than monthly. At the end of each
calendar year during the Term of Employment, the Executive's base
compensation shall be reviewed by the Board of Directors of the
Company, on the basis of the performance of the Executive and the
profitability of the Company.
5. EMPLOYEE BENEFITS, PERQUISITES AND EQPENSES. During the Term of
Employment, the Executive shall be entitled to participate in all
benefit plans, programs or practices maintained by the Company for
senior executives or other employees of the Company on the date hereof
and any other such benefit plans, programs or practices from time to
time in effect, subject to the terms thereof. Without limiting the
generality of the foregoing, the Executive shall be entitled to the
following:
(a) Options in conjunction with former option agreement.
(b) Two (2) weeks of paid vacation in each calendar year during the
Term of Employment subject to the accrual policies of the Company
currently in effect or hereafter approved by the Company's Board of
Directors; plus such holidays, sick leave and other time off as are
established by the policies of the Company currently in effect or
hereafter approved by the Company's Board of Directors;
(c) Reimbursement for all reasonable and documented expenses incurred
by the Executive in connection with the performance of his duties
hereunder, all in accordance with the Company's policy with respect
to such reimbursement;
(d) Medical, dental and other supplemental health benefits, life
insurance benefits for the Executive and his dependents, accidental
death and dismemberment benefits for the Executive, and long-term
disability benefits, at least as favorable to the Executive as
those currently in effect;
(e) Participation in the Company's 401(k) plan, and related matching
program as currently in effect;
6. TERMINATION OF EMPLOYMNET. The Term of Employment shall terminate
upon the occurrence of any of the following events:
(a) The Executive may terminate his employment upon giving the
Company written notice thirty (30) days in advance of the
proposed date of termination.
(b) The Executive's employment shall terminate automatically
upon the death of Executive.
(c) The Company may terminate the Executive's employment at any
time for cause by delivering to the Executive a letter finding
that the Executive committed an act or omission constituting cause
hereunder. As used herein, the term "cause" shall mean:
(i) Misappropriation of any material funds or property of
the Company, or any act or acts of intentional dishonesty
relating to the Executive's employment resulting or intended to
result in direct or indirect personal gain or enrichment at the
expense of the Company;
(ii) Acting in a manner which is substantially detrimental
or substantially damaging to the Company's reputation, business
operations, prospects or relations with its employees, suppliers
or customers, after receipt of written notice thereof from the
President/COO and a reasonable opportunity to so remedy such
acts; or
(iii) Willfully refusing to perform in material respects his
duties hereunder (other than as a result of any temporary or
permanent mental or physical impairment as certified by a
physician reasonably acceptable to the Company), after receipt of
written notice thereof from the President/COO of the Company and
a reasonable opportunity to so perform such duties.
(d) The Company may terminate the Executive's employment without
cause at any time and for any reason by giving the Executive
written notice from the President/COO of the Company at least
thirty (30) days in advance of the date on which the termination
is to become effective.
7. OBLIGATIONS AND PAYMENTS UPON TERMINATION
(a) Upon any termination of employment pursuant to Section 6,
the Executive and the Company shall have no further obligation
to the other under this Agreement except with respect to the
provisions of this Section 7.
(b) Upon any termination of employment under Sections 6(a), 6(b)
or 6(c), the Company shall pay the Executive in a lump sum within
ten (10) days following such termination (or such earlier date
required by law) an amount equal to the base compensation provided
under section 4 hereof(as well as any accrued but unpaid vacation)
as he may be entitled to receive up to the date of termination.
(c) Upon any termination of employment under Section 6(d), the
Company shall make payment to the Executive in the amounts and at
the times set forth in Section 7(b); and, in addition:
(i) The Company shall pay the Executive in a lump sum
within ten (10) days following such termination an additional
amount equal to three (3) months of his base compensation;
(ii) The Company shall continue to provide to the Executive
the employee benefits, perquisites and expenses identified in
Section 5(c) through 5(f) hereof for the three (3) month period
following the date of termination;
(iii) The Company shall repay all loans and other obligations
payable to the Executive in cash within ten (10) days following
such termination; and
(iv) The Company shall immediately vest all shares of stock
options and warrants of the Company held by the executive and the
company has the right at the companies option to buy back from
the executive any shares of stock, options and warrants held by
the executive at the current 30 day average market trading price
prior to the date of delivery of the Executive's termination.
(v) The executive has three (3) months from the termination
date in which to exercise these options and/or warrants or they
expire.
(d) Provided that the Company repurchases all shares of capital
stock, options and warrants of the Company held by the Executive
or his affiliates pursuant to the this agreement (whether such
repurchase occurs as a result of termination without cause or
termination for any other reason) and, to the extent applicable,
in accordance with Section 7(c)(iv) of this Agreement, the
Executive hereby agrees that, from and after the date on which
the closing of such repurchase occurs and continuing for a period
of two (2) years thereafter, he will not, directly or indirectly,
engage in any business, or have any interest in, any corporation,
partnership, proprietorship, firm, Association or business, which
engages in any activities competitive with the products being
licensed or sold by the Company or solicit and/or recruit the
company's customers, suppliers, or personnel at the time of such
repurchase. This covenant shall apply in each jurisdiction in
which the Company licenses or sells any products at the time of
such repurchase. Notwithstanding the foregoing, this covenant
shall not restrict the ability of the Executive to own up to 5%
of the shares of capital stock of any public company.
8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement
may be amended, modified or waived unless such amendment,
modification or waiver is authorized by the Board of Directors of
the Company and is agreed to in writing, signed by the Executive
and by an officer of the Company (other than the Executive) thereunto
duly authorized. Except as otherwise specifically provided in this
Agreement, no waiver by any party hereto of any breach by any other
party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a
subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same or at any
prior or subsequent time; nor shall the receipt or acceptance of
compensation or other benefits following any termination of the
Executive's employment be deemed a waiver of any condition or
provision hereof.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this agreement shall nevertheless remain
in full force and effect. If any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain
in full force and effect in all other circumstances.
10. CHOICE OF LAW. The formation, construction and performance of this
agreement shall be construed in accordance with the laws of California.
11. INTEGRATION. This Agreement contains the entire agreement between the
parties and supercedes all prior oral and written agreements,
understandings, commitments and practices between them, including all
prior employment agreements, whether or not fully performed by Executive
before the date of this Agreement. No oral modifications, express or
implied, may alter or vary the terms of this Agreement.
12. VENUE. Any action brought to enforce the terms of this agreement shall
be commenced, prosecuted and defended exclusively in the State or Federal
court of the State of California located in Orange County, California.
13. ATTORNEY'S FEES. In the event of any legal action (including any appeal
of a judgement) in connection with the Agreement, the prevailing party
shall be entitled to Reimbursement of reasonable attorneys' fees and costs
and expenses (including court costs) incurred in connection there with.
IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized
officer of the Company, have executed this Employment Agreement as of
the first day of April 1999
COMPANY
eSYNCH CORPORATION (Board of Directors)
By
_______________________________________
By
_______________________________________
By
_________________________________________
EXECUTIVE
___________________________________
Jim Budd, an individual
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 1, 1999
is entered into by and between eSYNCH CORPORATION, a Delaware
corporation having its principal office at 4600 Campus Drive, Newport
Beach, CA 92660
(the "Company"), and Robert Way, an individual (the "Executive").
WlTNESSETH
WHEREAS, the Executive and the and the Company desire to enter this
Agreement to confirm the terms and conditions on which the Company will
employ the Executive;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the Company and the
Executive agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the term
set forth in Section 2 below, in the position and with the duties and
responsibilities set forth in Section 3 below, and upon the other terms
and conditions hereinafter stated.
2. TERM. The term of employment shall commence as of the date hereof
and shall end when terminated pursuant to Section 6 below. The period
described above shall be hereinafter referred to as the "Term of
Employment."
3. POSITION, DUTIES, RESPONSIBILITIES AND AUTHORITY
(a) During the Term of Employment, the Executive shall serve as
Vice-President and General Manager of the Company, and shall report and
be responsible to the President and Chief Operating Officer of the
Company. During the Term of Employment, the Executive shall have the
duties, responsibilities and authority as shall be determined from time
to time by the President and Chief Operating Officer of the Company.
(b) Throughout the Term of Employment, the Executive shall
devote his full business time and attention to the business of the
Company.
4. BASE COMPENSATION. During the Term of Employment, the Executive
shall receive base compensation at an annual rate of not less than One
Hundred Ten Thousand Dollars ($110,000), to be paid in accordance with
the Company's normal procedure for compensation of its senior
executives, but not less frequently than monthly. At the end of each
calendar year during the Term of Employment, the Executive's base
compensation shall be reviewed by the Board of Directors of the
Company, on the basis of the performance of the Executive and the
profitability of the Company.
5. EMPLOYEE BENEFITS, PEREQUSITIES AND EXPENSES During the Term of
Employment, the Executive shall be entitled to participate in all
benefit plans, programs or practices maintained by the Company for
senior executives or other employees of the Company on the date hereof
and any other such benefit plans, programs or practices from time to
time in effect, subject to the terms thereof. Without limiting the
generality of the foregoing, the Executive shall be entitled to the
following:
(a) The company hereby grants the executive(110,000) one hundred ten
thousand shares of eSYNCH options that are vested over three years
at a exercise price of $1.00 per share as of 1/10/99
(b) Three (3) weeks of paid vacation in each calendar year during the
Term of Employment subject to the accrual policies of the Company
currently in effect or hereafter approved by the Company's Board of
Directors; plus such holidays, sick leave and other time off as are
established by the policies of the Company currently in effect or
hereafter approved by the Company's Board of Directors;
(c) Reimbursement for all reasonable and documented expenses incurred
by the Executive in connection with the performance of his duties
hereunder, all in accordance with the Company's policy with respect
to such reimbursement;
(d) Medical, dental and other supplemental health benefits, life
insurance benefits for the Executive and his dependents, accidental
death and dismemberment benefits for the Executive, and long-term
disability Benefits, at least as favorable to the Executive as
those currently in effect;
(e) Participation in the Company's 401(k) plan, and related matching
program as currently in effect;
6. Termination of Employment. The Term of Employment shall terminate
upon the occurrence of any of the following events:
(a) The Executive may terminate his employment upon giving the
Company written notice thirty (30) days in advance of the
proposed date of termination.
(b) The Executive's employment shall terminate automatically
upon the death of Executive.
(c) The Company may terminate the Executive's employment at any
time for cause by delivering to the Executive a letter finding
that the executive committed an act or omission constituting
cause hereunder. As used herein, the term "cause" shall mean:
(i) Misappropriation of any material funds or property of
the Company, or any act or acts of intentional dishonesty
relating to the Executive's employment resulting or intended to
result in direct or indirect personal gain or enrichment at the
expense of the Company;
(ii) Acting in a manner which is substantially detrimental
or substantially damaging to the Company's reputation, business
operations, prospects or relations with its employees, suppliers
or customers, after receipt of written notice thereof from the
President/COO and a reasonable opportunity to so remedy such
acts; or
(iii) Willfully refusing to perform in material respects his
duties hereunder (other than as a result of any temporary or
permanent mental or physical impairment as certified by a
physician reasonably acceptable to the Company), after receipt of
written notice thereof from the President/COO of the Company and
a reasonable opportunity to so perform such duties.
(d) The Company may terminate the Executive's employment without
cause at any time and for any reason by giving the Executive
written notice from the President/COO of the Company at least
thirty (30) days in advance of the date on which the termination
is to become effective.
7. OBLIGATIONS AND PAYMENTS UPON TERMINATION.
(a) Upon any termination of employment pursuant to Section 6,
the Executive and the Company shall have no further obligation
to the other under this Agreement except with respect to the
provisions of this Section 7.
(b) Upon any termination of employment under Sections 6(a), 6(b)
or 6(c), the Company shall pay the Executive in a lump sum within
ten (10) days following such termination (or such earlier date
required by law) an amount equal to the base compensation provided
under section 4 hereof(as well as any accrued but unpaid vacation)
as he may be Entitled to receive up to the date of termination.
(c) Upon any termination of employment under Section 6(d), the
Company shall make payment to the Executive in the amounts and
at the times set forth in Section 7(b); and, in addition:
(i) The Company shall pay the Executive in a lump sum
within ten (10) days following such termination an additional
amount equal to three (3) months of his base compensation;
(ii) The Company shall continue to provide to the Executive
the employee benefits, perquisites and expenses identified in
Section 5(c) through 5(f) hereof for the three (3) month
period following the date of termination;
(iii) The Company shall repay all loans and other obligations
payable to the Executive in cash within ten (10) days
following such termination; and
(iv) The Company shall immediately vest all shares of stock
options and warrants of the Company held by the executive
and the company has the right at the companies option to buy
back from the executive any shares of stock, options and
warrants held by the executive at the current 30 day average
market trading price prior to the date of delivery of the
Executive's termination.
(v) The executive has three (3) months from the
termination date in which to exercise these options and/or
warrants or they expire.
(d) Provided that the Company repurchases all shares of capital
stock, options and warrants of the Company held by the Executive
pursuant to the this agreement (whether such repurchase occurs as
a result of termination without cause or termination for any
other reason) and, to the extent applicable, in accordance with
Section 7(c)(iv) of this Agreement, the Executive hereby agrees
that, from and after the date on which the closing of such
repurchase occurs and continuing for a period of two years
thereafter, he will not, directly or indirectly, engage in any
business, or have any interest in, any corporation, partnership,
proprietorship, firm, Association or business, which engages in
any activities competitive with the products being licensed or
sold by the Company at the time of such repurchase.
This covenant shall apply in each jurisdiction in which the Company
licenses or sells any products at the time of such repurchase.
Notwithstanding the foregoing, this covenant shall not restrict
the ability of the Executive to own up to 5% of the shares of
capital stock of any public company.
8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification
or waiver is authorized by the Board of Directors of the Company and is
agreed to in writing, signed by the Executive and by an officer of the
Company (other than the Executive) thereunto duly authorized. Except as
otherwise specifically provided in this Agreement, no waiver by any
party hereto of any breach by any other party hereto of any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar provision or condition
at the same or at any prior or subsequent time; nor shall the receipt
or acceptance of compensation or other benefits following any
termination of the Executive's employment be deemed a waiver of any
condition or provision hereof.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this agreement shall nevertheless
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall
nevertheless remain in full force and effect in all other circumstances.
10. CHOICE OF LAW. The formation, construction and performance of this
agreement shall be construed in accordance with the laws of California.
11. INTEGRATION. This Agreement contains the entire agreement between the
parties and supercedes all prior oral and written agreements,
understandings, commitments and practices between them, including all
prior employment agreements, whether or not fully performed by Executive
before the date of this Agreement. No oral modifications, express or
implied, may alter or vary the terms of this Agreement.
12. VENUE. Any action brought to enforce the terms of this agreement shall
be commenced, prosecuted and defended exclusively in the State or Federal
court of the State of California located in Orange County, California.
13. ATTORNEY'S FEES. In the event of any legal action (including any appeal
of a judgement) in connection with the Agreement, the prevailing party
shall be entitled to reimbursement of reasonable attorneys' fees and costs
and expenses (including court costs) incurred in connection there with.
IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized
officer of the Company, have executed this Employment Agreement as of
the first day of April 1999
COMPANY
eSYNCH CORPORATION (Board of Directors)
By
_______________________________________
By
_______________________________________
By
_______________________________________
EXECUTIVE
___________________________________
Robert Way, an individual
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1999, AND STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 34,547
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 88,748
<CURRENT-ASSETS> 256,711
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,054,992
<CURRENT-LIABILITIES> 3,969,957
<BONDS> 0
600
0
<COMMON> 9,240
<OTHER-SE> 6,116,042
<TOTAL-LIABILITY-AND-EQUITY> 5,054,992
<SALES> 661,732
<TOTAL-REVENUES> 661,732
<CGS> 368,423
<TOTAL-COSTS> 4,755,482
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,629
<INCOME-PRETAX> (4,507,802)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,507,802)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,507,802)
<EPS-BASIC> (0.57)
<EPS-DILUTED> (0.57)
</TABLE>
