<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S><C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[ ] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
</TABLE>
ESYNCH CORPORATION
---------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
-------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ESYNCH CORPORATION
15502 MOSHER AVENUE
TUSTIN, CA 92780
(714) 258-1900
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 15, 1999
To the stockholders of ESYNCH CORPORATION:
You are cordially invited to attend the Annual Meeting of Stockholders
of eSynch Corporation, a Delaware corporation (the "Company"), which will be
held at the principal executive office of the Company, 15502 Mosher Avenue,
Tustin, CA 92780, at 10:00 a.m., Pacific Time, on Monday November 15 ,1999, to
consider and act upon the following matters, all as more fully described in the
accompanying Proxy Statement which is incorporated herein by this reference:
1. To elect a board of five directors to serve until the next annual meeting
of the Company's stockholders and until their successors have been elected
and qualify;
2. To adopt and authorize an amendment of the Restated Certificate of
Incorporation of the Company to increase the number of authorized shares of
Common Stock, par value $.001 (herein called "Common Stock") to 50,000,000
from the currently authorized amount of 20,000,000;
3. To adopt and authorize the 1999 Stock Incentive Plan (the "1999 Plan");
and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record of the Company at the close of business on
September 27, 1999, the record date fixed by the Board of Directors, are
entitled to notice of, and to vote at, the meeting.
THOSE WHO CANNOT ATTEND ARE URGED TO SIGN, DATE, AND OTHERWISE COMPLETE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. ANY
STOCKHOLDER GIVING A PROXY HAS THE RIGHT TO REVOKE IT ANY TIME BEFORE IT IS
VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
T. Richard Hutt
Secretary
Tustin, California
October __, 1999
<PAGE>
ESYNCH CORPORATION
15502 MOSHER AVENUE
TUSTIN, CALIFORNIA 92780
(714) 258-1900
----------------
PROXY STATEMENT
----------------
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO STOCKHOLDERS:
OCTOBER __, 1999
The following information is in connection with the solicitation of
proxies for the Annual Meeting of Stockholders of eSynch Corporation, a Delaware
corporation (the "Company"), to be held at the principal executive office of the
Company, 15502 Mosher Avenue, Tustin, California, at 10:00 a.m., Pacific Time,
on Monday, November 15, 1999, and adjournments thereof (the "Meeting"), for the
purposes stated in the Notice of Annual Meeting of Stockholders preceding this
Proxy Statement.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
stockholder and, in each case, is solicited on behalf of the Board of Directors
of the Company for use at the Meeting. The entire cost of soliciting these
proxies will be borne by the Company. The Company may pay persons holding shares
in their names or the names of their nominees for the benefit of others, such as
brokerage firms, banks, depositaries, and other fiduciaries, for costs incurred
in forwarding soliciting materials to their principals. Members of the
Management of the Company may also solicit some stockholders in person, or by
telephone, telegraph or telecopy, following solicitation by this Proxy
Statement, but will not be separately compensated for such solicitation
services. The total amount that the Company estimates that it will expend in
connection with soliciting proxies is $5,000, none of which has been spent prior
to the date hereof.
Proxies duly executed and returned by stockholders and received by the
Company before the Meeting will be voted FOR the election of all five of the
nominee-directors specified herein, FOR the approval of the Amendment of the
Certificate of Incorporation to increase the authorized number of shares of
Common Stock, and FOR the 1999 Plan, unless a contrary choice is specified in
the proxy. Where a specification is indicated as provided in the proxy, the
shares represented by the proxy will be voted and cast in accordance with the
specification made. As to other matters, if any, to be voted upon, the persons
designated as proxies will take such actions as they, in their discretion, may
deem advisable. The persons named as proxies were selected by the Board of
Directors of the Company and each of them is a director of the Company.
Under the Company's bylaws and Delaware law, shares represented by
proxies that reflect abstentions or "broker non-votes" (i.e., shares held by a
broker or nominee which are represented at the Meeting, but with respect to
which such broker or nominee is not empowered to vote on a particular proposal)
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Any shares represented at the Meeting but
not voted (whether by abstention, broker non-vote or otherwise) or voted against
a nominee will have no impact in the election of directors, except to the extent
that the failure to vote for an individual results in seven other individuals
receiving a larger number of votes. Any shares represented at the Meeting but
not voted (whether by abstention, broker non-vote or otherwise) with respect to
the proposal to approve the increase in the number of shares of Common Stock
authorized will have no effect on the vote for such proposal except to the
extent the number of shares not voted causes the number of shares voted in favor
of such proposals not to equal or exceed a majority of the outstanding voting
power (in which case such proposal would not be approved).
Your execution of the enclosed proxy will not affect your right as a
stockholder to attend the Meeting and to vote in person. Any stockholder giving
a proxy has the right to revoke it at any time by either (i) a later-dated proxy
voted at the Meeting, (ii) a later dated proxy or written revocation sent to and
received by the Secretary of the Company prior to the Meeting, or (iii)
attendance at the Meeting and voting in person.
<PAGE>
VOTING SECURITIES
The Company has outstanding Common Stock, of which 9,327,143 shares
were outstanding as of the close of business on September 27, 1999 (the "Record
Date"), Series I Preferred Stock, of which 599,999 shares were outstanding as of
the close of business on the Record Date, and Series J Preferred Stock, of which
162.5 shares were outstanding as of the close of business on the Record Date.
Only stockholders of record on the books of the Company at the close of business
on the Record Date will be entitled to vote at the Meeting. Each share of common
stock is entitled to one vote. Each share of Series I Preferred Stock is
entitled to one-third vote per share , which is equal to the number of shares of
Common Stock issuable upon conversion of one share of Series I Preferred Stock.
Series J Preferred Stock is entitled to vote in regard only to specific matters,
such as Proposal Two, that are specified in the Certificate of Designation of
the Series J Preferred Stock or other matters where pursuant to Delaware
corporation law the shares of Series J Preferred Stock are entitled to vote as a
separate class.
Representation at the Meeting by the holders of a majority of the
outstanding voting power of all outstanding shares, as of the Record Date,
either by personal attendance or by proxy, will constitute a quorum.
2
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth as of September 30, 1999, information
regarding beneficial ownership of the Company's stock by each director and each
executive officer, and by all directors and executive officers of the Company as
a group. Each named person and all directors and executive officers as a group
are deemed to be the beneficial owners of shares that may be acquired within 60
days upon exercise of stock options. Accordingly, the number of shares and
percentages set forth next to the name of such person and all directors and
executive officers as a group include the shares issuable upon stock options
exercisable within 60 days. However, the shares so issuable upon such exercise
by any such person are not included in calculating the percentage of shares
beneficially owned by any other stockholder. Based in part upon the absence of
any Schedule 13G or Schedule 13D filings, the Company is not aware of any other
person or group with beneficial ownership in excess of 5% of the Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
COMMON PREFERRED
------ ---------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Thomas Hemingway(1) 1,730,609 16.8% 0 0%
T. Richard Hutt(2) 1,234,091 12.5% 0 0%
James H. Budd(3) 1,227,715 12.4% 0 0%
Donald C. Watters, Jr.(4) 1,079,838 10.3% 0 0%
David Noyes(5) 500,000 4.9% 0 0%
Robert Way(6) 295,381 2.9% 0 0%
Norton Garfinkle(7) 460,000 4.7% 0 0%
All Directors and Executive Officers
as a group 7 Persons)(8) 6,517,314 54.3% 0 0%
- ----------
</TABLE>
(1) Includes 542,500 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable. Includes 140,395 shares of Ms. Detra Mauro, the spouse of
Mr. Hemingway.
(2) Includes 117,000 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(3) Includes 117,000 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(4) Includes 698,568 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(5) Includes 500,000 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(6) Includes 262,951 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(7) Includes shares held by a corporation and a trust that are controlled
by him.
(8) Includes all of the shares and options referred to in notes (1)
through (7) above.
3
<PAGE>
PRINCIPAL HOLDERS OF PREFERRED STOCK
The following tables sets forth information regarding ownership of
outstanding shares of the Preferred Stock by those individuals or groups who own
more than five percent (5%) of either the Series I Preferred Stock or the Series
J Preferred Stock outstanding.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
SERIES I PREFERRED COMMON(1)
-------------------- ---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Quad City Partners 60,000 10.0% 38,292 0.4%
Lawrence E. Kaplan 75,000 12.5% 47,865 0.5%
Eileen Kaplan 35,000 5.8% 25,260 0.3%
Walnut Capital Corp. 120,000 20.0% 76,585 0.8%
The Holding Company 30,000 5.0% 26,453 0.3%
American High Growth Equities 34,999 5.8% 22,337 0.2%
Michael Miller 100,000 16.7% 63,820 0.7%
Dune Holdings 100,000 16.7% 63,820 0.7%
</TABLE>
(1) Beneficial ownership of Common Stock includes shares of Common Stock
issuable upon conversion of Series I Preferred Stock as well any Common Stock
held of record by such owner. Beneficial ownership of Common Stock in this table
assumes a conversion price of $3.00 per share of Series I Preferred Stock. The
conversion price will equal $3.00 if the trading price of the Common Stock
equals or exceeds $3.00 on any trading day during the 10-trading-day period
ending November 9, 1999. In no event will one share of Series I Preferred Stock
become convertible into more than one-half share of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
SERIES J PREFERRED COMMON(1)
-------------------- ---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Amro International, S.A. 50 19.0% 142,857 1.5%
Austinvest Anstalt Balzers 50 19.0% 142,857 1.5%
Esquire Trade and Finance, Inc. 50 19.0% 142,857 1.5%
Gilston Corporation, Ltd. 35 13.3% 100,000 1.1%
Manchester Asset Management, Ltd. 40 15.2% 114,286 1.2%
Triton Private Equity Fund L.P. 25 9.5% 71,429 0.8%
Warwick Corporation, Ltd. 12.5 4.8% 35,715 0.4%
</TABLE>
(1) Beneficial ownership of Common Stock includes shares of Common Stock
issuable upon conversion of Series J Preferred Stock. Beneficial ownership of
Common Stock in this table assumes a conversion price of $3.50 per share of
Series J Preferred Stock. The conversion price is equal to $3.50, subject to
adjustment. In addition to the amounts shown in the table, any accrued dividends
from the original issue date shall be converted into Common Stock concurrently
with any conversion of the shares of Series J Preferred Stock. Dividends are at
the rate of 7% per year.
4
<PAGE>
PROPOSAL ONE
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
stockholders to serve until the next annual meeting of stockholders or until
their successors are elected and qualified. The Board of Directors proposes the
election of five directors at the Meeting.
In the event that any of the nominees for director should become unable
to serve if elected, it is intended that shares represented by proxies which are
executed and returned will be voted for such substitute nominee(s) as may be
recommended by the Company's existing Board of Directors.
The seven nominee-directors receiving the highest number of votes cast
at the Meeting will be elected as the Company's directors to serve until the
next annual meeting of stockholders and until their successors are elected and
qualify.
The following table and paragraphs set forth the names of and certain
information concerning the nominees for election as directors of the Company:
<TABLE>
<CAPTION>
NOMINEE(1) POSITION(S) WITH THE COMPANY AGE
- ------------------------------------------------------------------------------
<S> <C> <C>
Thomas Hemingway Director and Chief Executive Officer 43
T. Richard Hutt Director, Vice President and 60
Secretary/Treasurer
James H. Budd Director and Vice President of Marketing 58
Robert Orbach(2)(3) Director 48
David Lyons(2)(3) Director 50
Donald C. Watters, Jr. Nominee for Director and President and 42
Chief Operating Officer
Norton Garfinkle Nominee for Director 68
- ----------
</TABLE>
(1) The Company does not have a nominating committee of the Board of
Directors. The nominees for election as directors at the Meeting were
selected by the Board of Directors of the Company.
(2) The members of the audit committee of the Board of Directors of the
Company, neither of whom is an employee of the Company.
(3) The members of the compensation committee of the Board of Directors of
the Company, neither of whom is an employee of the Company.
Thomas ("Tom") Hemingway -- On August 5, 1998, Mr. Hemingway became the
Chief Executive Officer and a director of the Company pursuant to the Agreement
and Plan of Share Exchange among the Company, Intermark Corporation, a
California corporation ("Intermark"), and Intermark's securityholders upon the
consummation of that transaction. A co-founder of Intermark, from October 1995
to the present Mr. Hemingway has served as Chief Executive Officer and in other
senior management positions at Intermark, a software publishing, sales and
marketing company. From August 1994 to September 1995, Mr. Hemingway operated a
consulting business specializing in software sales and marketing. From January
1994 to July 1994, Mr. Hemingway was chief operating officer at Ideafisher
Systems, an artificial intelligence / associative processing software company.
From August 1993 to December 1993, Mr. Hemingway was serving as a consultant
with L3, an edutainment software company. From January 1993 to July 1993, Mr.
Hemingway was involved in computer-related consulting in the capacity of chief
executive officer of Becker/Smart House, LV, a home automation enterprise. In
1992, Mr. Hemingway was involved in making private investments in various
industries. Previously, from 1987 to 1991, Mr. Hemingway founded and served as
president of Intellinet Information Systems, a provider of network services and
systems. Earlier in his career, Mr. Hemingway was a founder of Omni Advanced
Technologies, a research and development firm developing products for the
computer and communications industry.
James H. ("Jim") Budd -- In August, 1998, Mr. Budd became a Vice
President of the Company pursuant to the Agreement and Plan of Share Exchange
among the Company, Intermark and Intermark's securityholders. A co-founder of
Intermark, from October 1995 to the present Mr. Budd has served as Vice
President of Marketing and in other executive capacities of Intermark, a
software publishing, sales and marketing company. From August 1994 to September
1995, Mr. Budd operated a consulting business
5
<PAGE>
specializing in software sales and marketing. From March 1994 to July 1994, Mr.
Budd was vice president of marketing at Ideafisher Systems, an artificial
intelligence / associative processing software company. From November 1993 to
February 1994, Mr. Budd was involved in making private investments in various
industries. Previously, from July 1978 to October 1993, Mr. Budd was founder and
chief executive officer of Command Business Systems, a developer of business
software products. Earlier in his career, Mr. Budd held marketing and sales
management positions at Unisys, Nixdorf, Tymshare, and Prime Computer.
T. Richard ("Dick") Hutt -- In August, 1998, Mr. Hutt became a Vice
President and the Secretary of the Company pursuant to the Agreement and Plan of
Share Exchange among the Company, Intermark and Intermark's securityholders. A
co-founder of Intermark, from October 1995 to the present Mr. Hutt has served as
Vice President of Sales and Secretary of Intermark. From September 1992 to
September 1995, Mr. Hutt was distribution sales manager for Strategic Marketing
Partners, a leading national software and technology marketing firm. Previously,
he was in the communications and mini-computer industry with TRW where he formed
the Canadian subsidiary as vice president of sales. He moved to TRW's Redondo
Beach headquarters and managed the western division until Fujitsu acquired the
business unit. Before joining TRW, he was with NCR's financial sales division in
Canada. Prior to that he managed the VAR division at Wang Laboratories. Moving
to Matsushita, he played a key role in the development of the distribution
channel for their Panasonic products.
Donald C. Watters, Jr. -- From April 1, 1999 to the present, Mr.
Watters has been the President and Chief Operating Officer of eSynch
Corporation. Formerly, Mr. Watters was President and CEO of Kiss Software
Corporation (KISSCO), a publisher/developer of Internet software utilities.
Prior to Kissco, Mr. Watters was vice president of worldwide sales of Touchstone
Software (Nasdaq: TSSW).
Norton Garfinkle is Chairman of Oxford Management Corporation, an
investment company that specializes in building new technology companies. He
also serves as Chairman of several of these portfolio companies, including:
Cambridge Parallel Processing, Cambridge Management Advanced Systems Corporation
and ERS International.
6
<PAGE>
BOARD MEETINGS AND COMMITTEES
There were 3 meetings of the Board of Directors of the Company during
the fiscal year of the Company ended December 31, 1998. The Board of Directors
established a standing Audit Committee and a Compensation Committee. In the
fiscal year ended December 31, 1998, the Audit Committee held 2 meetings and the
Compensation Committee held 2 meetings. Each of the directors attended at least
75% of the meetings of the Board and committees on which the director served
during fiscal 1998.
The Audit Committee's function is to review, act on, and report to the
Board of Directors with respect to various auditing and accounting matters,
including the selection of the Company's independent public accountants, the
scope of the annual audits, the nature of non-audit services, fees to be paid to
the independent public accountants, the performance of the Company's independent
public accountants, and the accounting practices of the Company.
The Compensation Committee's function is to review the performance of
the executive officers of the Company and review the compensation programs for
other key employees, including salary and cash incentive payment levels and
option grants.
There is no standing nominating committee or other committee performing
a similar function.
COMPENSATION OF DIRECTORS
The Company has agreed to issue an option to purchase 350,000 shares of
Common Stock to Mr. Norton Garfinkle upon his election to the Board of
Directors. The Company's non-employee Directors are not currently compensated
for attendance at Board of Director meetings. Non-employee directors from time
to time have been, and in the future may be, granted, on an ad hoc basis, stock
options upon being appointed to the Board. The Company may adopt a formal
director compensation plan in the future. All of the Directors are reimbursed
for their expenses for each Board and committee meeting attended.
EXECUTIVE OFFICERS
For information on the business background of Messrs. Hemingway, Budd,
Hutt and Watters, see "Nomination and Election of Directors" above. The
following table and paragraphs set forth the names of and certain information
concerning other executive officers of the Company:
<TABLE>
<CAPTION>
NAME OF EXECUTIVE POSITION(S) WITH THE COMPANY AGE
- ------------------------------------------------------------------------
<S> <C> <C>
David Noyes Chief Financial Officer 56
Robert B. Way Vice President 56
</TABLE>
David Noyes -- Mr. Noyes became the Chief Financial Officer of the
Company in July 1999. Previously, Mr. Noyes was President of Monarch Capital
(1993 to Present) and President, Chief Financial Officer and a Director of
Directional Recovery Systems, LLC (1995 to Present). In addition he was Chief
Executive Officer, Chief Financial Officer and a Director of American
Furnishings Corp. and California Mattress (1996 to 1997), President, Chief
Financial Officer and Director of California Software Products, Inc. (1996) and
Director and Interim Chief Financial Officer of Griswold Industries(1994 to
1995).
Robert B. Way -- Mr. Way became a Vice President of the Company in
April 1999. Previously, Mr. Way was the Senior Vice President and General
Manager of Kiss Software Corporation , where he served in that capacity from
January, 1997. Before that, Mr. Way was an independent consultant in software
business management specializing in product planning, development and support.
Mr. Way was Vice President and General Manager of California Software Products,
Inc. from 1976 to 1995.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth compensation received by the Company's
Chief Executive Officer and by each of the persons who were, for the fiscal year
ended December 31, 1998, the other four most highly compensated executive
officers of the Company whose total compensation during that year exceeded
$100,000 (the "Named Officers"), for the three fiscal years ended December 31,
1998 or for the shorter period during which the Named Officer was compensated by
the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- ---------------------------
NAME AND SECURITIES
PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(#)(2) COMPENSATION
- ------------- ---- ------ ----- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Hemingway 1998 $ 88,789 292,500 shs.
CEO
James H. Budd 1998 $ 52,868 117,000 shs.
Vice President
T. Richard Hutt 1998 $ 64,281 117,000 shs.
Vice President
- ----------
</TABLE>
(1) Perquisites and other personal benefits did not for any Named Officer
in the aggregate equal or exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported in this table for such
person.
(2) The amounts in the table represent shares of the Company's Common Stock
covered by stock options of the named individual assumed by eSynch
Corporation from Intermark Corporation effective August 5, 1998.
8
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has an employment agreement with each Executive Officers listed
below. The terms of those employment agreements is summarized in the following
table:
<TABLE>
<CAPTION>
CURRENT BASE OPTION OTHER BENEFITS DUE ON
NAME COMPENSATION GRANT BENEFITS TERMINATION
- ----------- ------------ ----- -------- -----------
<S> <C> <C> <C> <C>
Thomas C. Hemingway $150,000 250,000 Any If he is terminated by the Company
CEO at $1.00 ea. benefits without cause, he is paid an amount
fully vested for other equal to 12 months' base salary and
officers, all other benefits and perquisites
and 3 weeks continue for 12 months and
vacation per the Company will be
year required to repurchase
all his stock and options
at the 30-day average market price
Donald C. Watters, Jr. $150,000 250,000 Any If he is terminated by the Company
President and COO at $1.00 ea. benefits without cause, he is paid an amount
fully vested for other equal to 12 months' base salary and
and 400,000 officers, all other benefits and perquisites
shares and 3 weeks continue for 12 months and
at $_____ vacation per the Company will be
each year required to repurchase
all his stock and options
at the 30-day average market price
James H. Budd $130,000 Any If he is terminated by the Company
Vice President benefits without cause, he is paid an amount
for other equal to 3 months' base salary and
officers, all other benefits and perquisites
and 2 weeks continue for 3 months and all stock
vacation per options held by him vest and
year become exercisable.
Robert Way $110,000 250,000 Any If he is terminated by the Company
Vice President at $1.00 ea. benefits without cause, he is paid an amount
fully vested for other equal to 3 months' base salary and
officers, all other benefits and perquisites
and 3 weeks continue for 3 months and all stock
vacation per options held by him vest and
year become exercisable.
T. Richard Hutt $130,000 Any If he is terminated by the Company
Vice President benefits without cause, he is paid an amount
for other equal to 3 months' base salary and
officers, all other benefits and perquisites
and 2 weeks continue for 3 months and all stock
vacation per options held by him vest and become
year. exercisable.
David P. Noyes $150,000 Any If he is terminated by the Company
CFO benefits without cause, he is paid an amount
for other equal to months' base salary and
officers. all other benefits and perquisites
and 3 weeks continue for months and all stock
vacation per options held by him vest and become
year exercisable.
</TABLE>
9
<PAGE>
OPTION GRANTS DURING FISCAL 1998
The following table sets forth information on all grants of stock
options during the fiscal year ended December 31, 1998, to Named Officers:
OPTION GRANTS TABLE
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
-------------------------------------------------- REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE
UNDERLYING EMPLOYEES EXERCISE APPRECIATION FOR
OPTIONS IN FISCAL PRICE EXPIRATION OPTION TERM($)(4)
NAME GRANTED(1) YEAR(2) ($/SHARE) DATE(3) 5% 10%
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Hemingway 292,500 46.3% $0.94 April, 2008 $1,386,148 $2,193,861
James H. Budd 117,000 18.5% $0.94 April, 2008 $ 554,459 $ 877,545
T. Richard Hutt 117,000 18.5% $0.94 April, 2008 $ 554,459 $ 877,545
</TABLE>
- --------
(1) The amounts in the table represent shares of the Company's Common Stock
covered by stock options assumed by the Company that had been granted
by Intermark Corporation. Each option is exercisable in full.
(2) Options to purchase an aggregate of 631,800 shares of common stock were
assumed by the Company during the fiscal year ended December 31, 1998
that had been granted to employees, including the Named Officers.
(3) Options held by the Named Officers have a term of 10 years, subject to
earlier termination in certain events related to termination of
employment.
(4) These columns present hypothetical future values of the stock
obtainable upon exercise of the options net of the options' exercise
price, assuming that the closing market price of the Company's common
stock, as reported on the Nasdaq over-the-counter Bulleting Board on
October 5, 1999, appreciates at a 5% and 10% compound annual rate over
the ten year term of the options. The 5% and 10% rates of stock price
appreciation are presented as examples pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") and do
not necessarily reflect management's estimate or projection of the
Company's future stock price performance. The potential realizable
values presented are not intended to indicate the value of the options.
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OPTION EXERCISES IN FISCAL 1998 AND YEAR-END OPTION VALUES
The following table sets forth information concerning stock options
which were exercised during, or held at the end of, fiscal 1998 by the Named
Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES VALUE AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
ACQUIRED ON REALIZED ------------------------------------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tom Hemingway -0- -0- 542,500 -0- $1,509,425 -0-
James H. Budd -0- -0- 117,000 -0- $ 328,770 -0-
T,. Richard Hutt -0- -0- 117,000 -0- $ 328,770 -0-
</TABLE>
- ----------
(1) Market value of underlying securities at exercise date or year end, as
the case may be, minus the exercise or base price of "in-the-money"
options. The value of options is based on the closing sale price for
the Company's common stock as of October 5, 1999 as reported on the
Nasdaq OTC Bulletin Board, which was $3.75, minus the exercise price.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 5, 1998, the Company finalized an Agreement and Plan of Share
Exchange with Intermark Corporation ("Intermark"). Under the Agreement, as
amended, the shareholders of Intermark exchanged all of the outstanding capital
stock of Intermark for 103,367 shares of common stock of the Company and for
2,665 shares of the Company's newly created Series H Preferred stock convertible
into approximately 4,427,224 shares of Common Stock. In addition, the Company
assumed Intermark options which are now exercisable to purchase up to 631,800
shares of the Company's common stock. See "Change in Control."
On April 1, 1999, the Company acquired Kiss Software Corporation, a
California corporation ("Kissco"). Donald C. Watters, Jr. was a major
shareholder of Kissco and received in that acquisition 381,270 shares of Common
Stock, and the Company also assumed a Kissco option entitling Mr. Watters to
acquire 48,568 shares of Common Stock at a price of $ 2.11 per share. Robert B.
Way was also a shareholder of Kissco and received in the acquisition 32,430
shares of Common Stock, and the Company also assumed a Kissco option entitling
Mr. Way to acquire 19,427 shares of Common Stock at $ 2.11per share.
On September 30, 1999, the Company acquired Oxford Media Group, a
Delaware corporation, for 450,000 shares of the Company's Common Stock. Oxford
Media Group was controlled by Mr. Norton Garfinkle, a nominee for a position on
the Board of Directors.
CHANGE IN CONTROL
On May 8, 1998, after the close of business, the Company entered into
an Agreement and Plan of Share Exchange dated as of May 8, 1998 (the
"Agreement") by and among the Company and Intermark Corporation, a California
corporation ("Intermark"), and the securityholders of Intermark Corporation
("Exchanging Securityholders"). On June 17, 1998, the Company entered into the
First Amendment of Agreement and Plan of Share Exchange dated as of May 8, 1998.
On July 30, 1998, the Company entered into the Second Amendment of Agreement and
Plan of Share Exchange dated as of May 8, 1998 ("Second Amendment").
The closing of the transactions contemplated by the Agreement
("Closing") occurred on August 5, 1998. The Closing resulted in a change in
control of the Company. The Agreement, as amended by the First Amendment and the
Second Amendment, provided for the Exchanging Securityholders to deliver and
exchange all of the outstanding capital stock of Intermark and options or other
rights to purchase such capital stock for capital stock of the Company
aggregately having voting power equal to 77.5% of the capital stock of the
Company aggregately outstanding as of immediately after the Closing. Accordingly
Messrs. Hemingway, Budd and Hutt became the beneficial owners of approximately
62% of the Company's capital stock as of the Closing. Intermark became
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a wholly-owned subsidiary of the Company upon the Closing.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than ten percent of the Company's Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Directors, officers and greater than ten percent holders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) reports they file.
To the Company's knowledge, except as noted below, based solely on
review of the copies of the above-mentioned reports furnished to the Company and
written representations regarding all reportable transactions, during the fiscal
year ended December 31, 1998, all Section 16(a) filing requirements applicable
to its directors and officers and greater than ten percent beneficial owners
were complied with on time, except one report each for Messrs. Hemingway, Budd
and Hutt upon becoming officers of the Company.
-----------------------------
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PROPOSAL TWO
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
GENERAL
The Board of Directors believes that it would be in the best interests
of the Company and its stockholders for the stockholders to adopt and approve an
amendment (the "Amendment") of the Company's Restated Certificate of
Incorporation to increase from 20,000,000 to 50,000,000 the number of shares of
Common Stock that the Company is authorized to issue.
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), authorizes the issuance of 20,000,000 shares of
Common Stock, $.001 par value, and 1,000,000 shares of Preferred Stock, $.001
par value. As of August 6, 1999, the Board of Directors of the Company approved
an amendment to the Certificate of Incorporation to increase the authorized
number of shares of Common Stock from 20,000,000 to 50,000,000 and to submit the
proposed amendment to the Stockholders at this Meeting. If the amendment is
adopted, the total number of shares the Company will be authorized to issue,
including the 1,000,000 shares of Preferred Stock, which are currently
authorized, will be 51,000,000 shares.
If the Stockholders approve this proposal, the Certificate of
Incorporation shall be amended to effect this change, and upon such amendment,
the first paragraph of Article IV's of the Certificate of Incorporation shall
read as follows (the highlighting is added below to show the changes, and the
highlighting will not actually appear in the amendment):
ARTICLE IV
AUTHORIZED SHARES
The Corporation shall have authority to issue an aggregate of
51,000,000 shares, of which 1,000,000 shares shall be preferred stock,
$0.001 par value (hereinafter the "Preferred Stock"), and 50,000,000
shares shall be common stock, $0.001 par value (hereinafter the "Common
Stock"). The powers, preferences, and rights, and the qualifications,
limitations, and restrictions of the shares of stock of each class and
series which the Corporation shall be authorized to issue are as
follows:
PURPOSE AND EFFECT OF THE AMENDMENT
The general purpose and effect of the proposed amendment to the
Company's Certificate of Incorporation will be to authorize 30,000,000
additional shares of Common Stock. The Board of Directors believes that it is
prudent to have the additional shares of Common Stock available for general
corporate purposes, including acquisitions and equity financings.
The Company has determined that securing Stockholder approval of
30,000,000 additional authorized shares of Common Stock would be appropriate in
order to provide the Company with the flexibility to consider a combination of
possible actions, including acquisitions or financings, that might require the
issuance of additional shares of Common Stock.
The Company currently has 20,000,000 authorized shares of Common Stock.
As of October 5, 1999, the Company had approximately 9,797,143 shares issued and
outstanding and of the remaining 10,212,157 authorized but unissued shares, the
Company had reserved approximately 2,420,000 shares in connection with the
possible conversion of outstanding preferred stock, 2,619,987 shares pursuant to
the Company's outstanding options, 826,966 for outstanding warrants, convertible
notes and contracts for services, and 3,000,000 shares pursuant to the Company's
1999 Stock Incentive Plan. This leaves approximately 1,315,204 shares of common
stock currently available for other purposes.
If the Board of Directors deems it to be in the best interests of the
Company and the Stockholders to issue additional shares of Common Stock in the
future, the Board of Directors generally will not seek further authorization by
vote of the Stockholders, unless such authorization is otherwise required by law
or regulations. If approved, the increased number of authorized shares of common
stock will be available for issue from time to time for such purposes and
consideration as the Board of Directors may approve.
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<PAGE>
The Company's reserve of authorized but unissued shares of common stock
has been substantially depleted as a result of the Company's recent financing
activities through the sale of Preferred Stock and the granting of stock options
under stock option plans. The Board of Directors has decided to recommend an
increase in the authorized number of shares of common stock in order to provide
that the Company will have a sufficient number of authorized and unissued shares
of common stock for corporate opportunities, such as additional stock offerings,
acquisitions, stock splits, stock dividends and compensation plans.
POSSIBLE NEGATIVE EFFECTS
The increase in the authorized number of shares of Common Stock could
have an anti-takeover effect. If the Company's Board of Directors desires to
issue additional shares in the future, such issuance could dilute the voting
power of a person seeking control of the Company, thereby deterring or rendering
more difficult a merger, tender offer, proxy contest or an extraordinary
corporate transaction opposed by the Company.
Holders of common stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company, which means that
current stockholders do not have a prior right to purchase any new issue of
capital stock of the Company in order to maintain their proportionate ownership
of the Company.
Under Delaware law, Stockholders are not entitled to dissenters' rights
of appraisal with respect to this Proposal Two.
No increase in the number of authorized shares of preferred stock of
the Company is proposed or anticipated at the present time. However, the Company
has issued preferred stock, and may in the future issue additional shares of
preferred stock, pursuant to which shares of Common Stock may in the future be
issued upon conversion. The holders of Common Stock have no preemptive
subscription, redemption, sinking fund or conversion rights and have equal
rights and preferences. The rights and preferences of holders of Common Stock
will be subject to the rights of the shares of Series I Preferred Stock and
Series J Preferred Stock and any series of Preferred Stock which the Company may
issue in the future.
From time to time, the Company has engaged in discussions concerning
possible acquisitions or financing arrangements. The Company may not be required
to disclose ongoing negotiations in all cases, and, as a policy, does not
disclose ongoing negotiations.
The Company may fund its existing obligations by raising capital
through the sale or conversion of shares. Any increase in the number of shares
authorized or outstanding may depress the price of shares and impair the
liquidity of stockholders. In addition, the issuance may be on terms that are
dilutive to stockholders. Issuance of additional shares also could have the
effect of diluting the earnings per share and book value per share of shares
outstanding.
VOTE
The affirmative vote of a majority of the voting power of the
outstanding shares of Common Stock and Series I Preferred Stock, voting together
as a single class, and three-quarters of the voting power of the Series J
Preferred Stock, voting as a separate class, will be required to approve the
amendment to the Company's Certificate of Incorporation increasing the number of
authorized shares of Common Stock. Both abstentions and broker non-votes are not
affirmative votes and, therefore, will have the same effect as votes against
this Proposal Two. The principal stockholders of the Company have indicated to
the Company that they intend to vote for Proposal Two.
THE BOARD OF DIRECTORS RECOMMENDS THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
FROM 20,000,000 TO 50,000,000, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED
IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
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<PAGE>
PROPOSAL THREE
APPROVAL OF THE COMPANY'S 1999 STOCK PLAN
GENERAL
The Company's Stockholders are being asked to approve the adoption of
the Company's 1999 Stock Incentive Plan (the "1999 Plan"). The 1999 Plan will
supplement the Company's existing option grants that have been made. All of the
Company's and its subsidiaries' employees (approximately 18 as of October 5,
1999), consultants (estimated to be less than ten individuals currently) and all
directors are eligible to participate in the 1999 Plan. The 1999 Plan will
become effective immediately upon Stockholder approval. It is anticipated that,
if approved by the Stockholders, the 1999 Plan will be used going forward in
lieu of option grants outside of plans. The 1999 Plan provides for the issuance
of rights to purchase restricted stock ("stock purchase rights") as well as
options.
The 1999 Plan will be funded initially with 3,000,000 shares of Common
Stock reserved for issuance under the plan. As of October 5, 1999, the closing
price of the Company's common stock as quoted by the Nasdaq OTC Bulletin Board
was $3.75.
The Company's growth through acquisitions during recent years has
generated substantial need for meaningful option grants to attract and retain
talented employees critical to the Company's ongoing growth and success. The
ongoing growth of the Internet and software markets has created a
hyper-competitive market for talented individuals, especially in the
programming, technical, new media, and sales areas. In order to continue to
attract and retain key talent, the Company must offer market competitive
long-term compensation opportunities. Stock options, because of their upside
potential and vesting requirements, are a key component in recruiting and
retaining these employees.
The Company's Board of Directors believes that stock options have been
very effective for these purposes over time and have proven to be an important
component of the Company's overall compensation strategy for employees. The
Company is committed to broad-based participation in the stock option program by
employees at all levels. The Company believes that the stock option program is
important in order to maintain the Company's culture, employee motivation, and
continued success.
The Compensation Committee of the Board of Directors (the "Committee")
monitors the Company's stock programs on an ongoing basis to ensure that stock
options and other stock awards are used effectively and in the best interests of
the Company and its Stockholders.
The Company is seeking Stockholder approval of the 1999 Plan also in
order for grants under the 1999 Plan to qualify as "performance-based"
compensation under Section 162(m) of the Internal Revenue Code.
MATERIAL FEATURES OF THE 1999 PLAN
The purpose of the 1999 Plan is to attract, retain and motivate
employees, directors, officers and consultants through the issuance of options
or rights to purchase Common Stock of the Company and to encourage ownership of
Common Stock by most employees, directors and certain consultants of the
Company. The 1999 Plan will be administered by the Compensation Committee of the
Board of Directors (the "Committee"). Subject to the provisions of the 1999
Plan, the Committee determines the persons to whom options or stock purchase
rights will be granted, the number of shares to be covered by each option or
stock purchase right and the terms and conditions upon which an option or stock
purchase right may be granted. All employees, directors and consultants of the
Company and its affiliates (as defined in the 1999 Plan, "Affiliates") are
eligible to participate in the 1999 Plan, although the Company has discretion in
identifying those people who actually receive grants.
Options granted under the 1999 Plan may be either (i) options intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or (ii) non-qualified stock
options. Other than certain minimum requirements described below, the Committee
has the discretion to fix the terms of options granted under the 1999 Plan.
Incentive stock options may be granted under the 1999 Plan to employees of the
Company and its Affiliates. Non-qualified stock options may be granted, in the
Company's discretion, to consultants, directors and employees of the Company and
its Affiliates.
Incentive stock options granted under the 1999 Plan may not be granted
with an exercise price less than the fair market value of the Common Stock on
the date of grant (or 110% of fair market value in the case of incentive stock
options granted to
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<PAGE>
participants holding 10% or more of the voting stock of the Company). Stock
options granted under the 1999 Plan expire not more than ten years from the date
of grant, or not more than five years from the date of grant in the case of
incentive stock options granted to an employee holding more than 10% of the
voting stock of the Company. The aggregate fair market value (determined at the
time of grant) of shares issuable pursuant to incentive stock options which
become exercisable in any calendar year under any incentive stock option plan of
the Company by an employee may not exceed $100,000. An option granted under the
1999 Plan is not transferable by an optionholder except by (i) will or by the
laws of descent and distribution or (ii) as determined by the Committee and set
forth in the Option Agreement. An option is exercisable only by the optionholder
or one who receives the option pursuant to a permitted transfer.
An incentive stock option granted under the 1999 Plan may be exercised
after the termination of the optionholder's employment with the Company (other
than by reason of death, disability or termination for cause as defined in the
1999 Plan) to the extent exercisable on the date of such termination, for up to
three months following such termination, provided that such incentive stock
option has not expired on the date of such exercise. In granting any
non-qualified stock option, the Committee may specify that such non-qualified
stock option shall be subject to such termination or cancellation provisions as
the Committee may specify. In the event of death or permanent and total
disability while an optionholder is employed by the Company or within three
months of termination of employment, incentive stock options and non-qualified
stock options may be exercised, to the extent exercisable on the date of
termination of employment (as calculated under the 1999 Plan), by the
optionholder or the optionholder's survivors at any time prior to the earlier of
the option's specified expiration date or one year from the date of the
optionholder's termination of employment (all as more specifically provided in
the 1999 Plan).
Stock purchase rights may be granted under the 1999 Plan. Stock
purchase rights entitle the participant to purchase shares of common stock at a
specified price, which may be nominal but not less than the par value of the
common stock, within six months of the date of grant. The shares acquired upon
purchase are restricted from transfers and are subject to a repurchase right
held by the Company. The repurchase right lapses with respect to specified
numbers or percentages of the shares over a period of time specified in the
restricted stock purchase agreement that applies to the stock purchase right.
The repurchase right entitles the Company to repurchase the shares at the same
price paid for the shares by the participant in the event the individual's
employment or services with the Company terminates before the lapsing of the
repurchase right occurs, subject to the terms of the restricted stock purchase
agreement, which may provide for accelerated lapsing of the repurchase right in
the case of terminations due to death, disability or for terminations by the
Company other than for cause. Stock purchase rights and shares subject to the
repurchase right are not transferable by the participant except (i) by will or
by the laws of descent and distribution or (ii) as determined by the Committee
and set forth in the restricted stock purchase agreement. Stock purchase rights
are exercisable only by the holder or one who receives the stock purchase rights
pursuant to a permitted transfer.
If the shares of Common Stock are subdivided or combined into a greater
or smaller number of shares or if the Company issues any shares of Common Stock
as a stock dividend on its outstanding Common Stock, the number of shares of
Common Stock deliverable upon the exercise of an option or stock purchase right
granted under the 1999 Plan shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend. If
provided in a specific stock option agreement or restricted stock purchase
agreement, in the event of either (i) the acquisition (with certain exceptions)
of more than 50% of the outstanding Common Stock or voting power by an
individual, entity or group acting together or (ii) a change in a majority of
the Directors comprising the Board at the time the 1999 Board is first approved
by the Stockholders (other than changes resulting from nominations by the then
incumbent Directors and the normal election process), vesting of the options
outstanding or lapsing of the repurchase rights on shares issued with respect to
stock purchase rights issued under the 1999 Plan may be made to automatically
accelerate such that some or all unvested options immediately become fully
exercisable and vested and such that the Company's repurchase right shall fully
or partially lapse on the earliest of (a) the original vesting or lapsing date,
(b) the date the acquisition or change in composition of the Board is deemed to
have occurred, or (c) the occurrence of an involuntary termination of employment
or services within 18 months thereafter, or such other events as may be provided
in the agreement. In addition, if provided in a specific stock option agreement
or restricted stock purchase agreement, in the event of (i) a reorganization,
recapitalization, merger or consolidation of the Company (unless securities
representing more than 50% of the outstanding common stock or voting power of
the entity resulting from such transaction is held subsequent to such
transaction by the persons who were the beneficial holders of the outstanding
Common Stock or voting securities of the Company immediately prior to such
transaction, in substantially the same proportions as their ownership
immediately prior to the transaction) or (ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company, each
option or stock purchase right outstanding as of the date of such transaction
shall be: (x) assumed by the successor corporation (or its parent) on an
equitable basis, (y) terminated upon written notice to the participants stating
that all options (with all options then outstanding
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<PAGE>
being deemed to be exercisable for purposes of this section) or stock purchase
rights must be exercised within a specified number of days (not less than 15),
at the end of which period any options or stock purchase rights not exercised
will terminate, or (z) terminated in exchange for a cash payment equal to the
excess of fair market value of the shares subject to option or stock purchase
right over the exercise or purchase price (with all options then outstanding
being deemed to be exercisable for purposes of this section), provided that the
administrator of the 1999 Plan shall select which treatment to provide and under
certain circumstances can determine to provide shares of Common Stock or other
consideration with value equal to the cash or other consideration that otherwise
would be received by a participant. If provided in the specific option agreement
of restricted stock agreement, each option or the lapsing of the repurchase
right on shares issued with respect to stock purchase rights that are assumed or
replaced in connection with such a transaction shall automatically accelerate
and such options shall become fully exercisable and vested or the repurchase
right shall fully lapse on the earliest of (a) the original vesting or lapsing
date, (b) the date the transaction is determined to have occurred, or (c) the
occurrence of an involuntary termination of employment or services within 18
months thereafter, or such other events as may be provided in the agreement. In
the event of other reorganizations, recapitalizations, mergers or consolidations
(not meeting the criteria described above), pursuant to which securities of the
Company or of another corporation are issued with respect to the outstanding
shares of Common Stock, a participant upon exercising an option or stock
purchase right will be entitled to receive for the purchase price paid upon such
exercise the securities he or she would have received if he or she had exercised
such option or stock purchase right prior to such reorganization,
recapitalization, merger or consolidation. Acceleration may be conditioned upon,
termination of employment without cause, reduction in base compensation, loss of
duties or responsibilities and reduction in power, authority or resources,
relocation or other events.
The Stockholders of the Company may amend the 1999 Plan. The 1999 Plan
may also be amended by the Board of Directors or the Committee, provided that
any amendment approved by the Board of Directors or the Committee which is of a
scope that the Committee determines requires Stockholder approval, shall be
subject to obtaining such Stockholder approval. The Committee may amend
outstanding option agreements or restricted stock purchase agreements as long as
the amendment is not materially adverse to the participant. Amendments that are
materially adverse to the participant can be effected only with the consent of
the participant.
The Committee has not made any awards under the 1999 Plan. The maximum
number of options or stock purchase rights that can be granted to an individual
in any fiscal year of the Company is options or stock purchase rights, or a
combination thereof, to purchase 500,000 shares, as such number may be adjusted
in accordance with the 1999 Plan.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of certain U.S. Federal income tax
consequences of the 1999 Plan:
INCENTIVE STOCK OPTIONS. An incentive stock option ("ISO") does not
result in taxable income to the optionee or a deduction to the Company at the
time it is granted or exercised, provided that the optionee does not dispose of
any acquired ISO shares within two years after the date the ISO was granted or
within one year after he acquires the shares (the "ISO holding period").
However, the difference between the fair market value of the stock on the date
he exercises the option (and acquires the stock) and the option price therefor
will be an item of tax preference includible in "alternative minimum taxable
income." Upon disposition of the stock after the expiration of the ISO holding
period, the optionee will generally recognize long term capital gain or loss
based on the difference between the disposition proceeds and the option price
paid for the stock. If the stock is disposed of prior to the expiration of the
ISO holding period, the optionee generally will recognize ordinary income, and
the Company will have a corresponding deduction, in the year of the disposition
equal to the excess of the fair market value of the stock on the date of
exercise of the option over the option price. If the amount realized upon such a
disqualifying disposition is less than the fair market value of the stock on the
date of exercise, the amount of ordinary income will be limited to the excess of
the amount realized over the optionee's adjusted basis in the stock.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option
will not result in taxable income to the optionee or deduction to the Company at
the time of grant. When the Optionee exercises his or her option to purchase the
stock, the amount of the excess of the then fair market value of the shares
acquired over the option price is treated as supplemental compensation and is
taxable as ordinary income. The Company is entitled to a corresponding
deduction.
STOCK PURCHASE RIGHTS. The grant of a stock purchase right will not
result in taxable income to the participant or a deduction to the Company at the
time of grant. The participant will recognize ordinary income (taxable as
compensation), and the
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Company will have a corresponding deduction, subject to limitations that may be
imposed under Section 162(m) of the Internal Revenue Code, at the time the
repurchase right in favor of the Company lapses and restrictions on transfer of
shares are removed. The taxable compensation income will be equal to the excess
of the then fair market value of the shares for which all restrictions on
transfer and repurchase rights have lapsed over the purchase price.
DEDUCTIBILITY OF COMPENSATION. If the Stockholders approve the 1999
Plan, options granted under this Plan will qualify as "performance-based"
compensation under Section 162(m) of the Internal Revenue Code, so as to allow
the Company to take corresponding deductions for all supplemental income that
Optionees realize upon the exercise of their stock options. Stock purchase
rights granted under the 1999 Plan will not qualify as "performance based"
compensation under Section 162(m) of the Internal Revenue Code, and to the
extent stock purchase rights are granted to "covered employees," as such term is
defined under Section 162(m), the Company will not be able to deduct related
compensation expenses to the extent such expenses exceed $1,000,000 in any year.
VOTE
The affirmative vote of a majority of the votes cast affirmatively or
negatively at the Meeting by holders of Common Stock and Series I Preferred
Stock, voting together as a single class is required to approve the 1999 Plan.
Abstentions and broker non-votes will have no effect upon this Proposal Three.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE 1999 PLAN, AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF SUCH PLAN UNLESS A STOCKHOLDER
HAS INDICATED OTHERWISE ON THE PROXY.
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INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Hansen Barnett & Maxwell, a professional
corporation ("HBM") serves the Company as its independent public accountants at
the direction of the Board of Directors of the Company and has served in such
capacity since June 1, 1998. One or more representatives of HBM are expected to
be present by telephone at the Meeting and will have an opportunity to make a
statement, if they desire to do so, and to be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for action at the 2000
Annual Meeting of Stockholders should submit their proposals in writing to the
Secretary of the Company at the address of the Company set forth on the first
page of this Proxy Statement. Proposals must be received by the Secretary no
later than July 1, 2000 for inclusion in next year's proxy statement and proxy.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders of the Company for the fiscal year
ended December 31, 1998, including audited consolidated financial statements,
has been mailed to the stockholders concurrently herewith, but such report is
not incorporated in this Proxy Statement and is not deemed to be a part of the
proxy solicitation material.
OTHER MATTERS
The Management of the Company does not know of any other matters which
are to be presented for action at the Meeting. Should any other matters come
before the Meeting or any adjournment thereof, the persons named in the enclosed
proxy will have the discretionary authority to vote all proxies received with
respect to such matters in accordance with their judgment.
ANNUAL REPORT ON FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), will be furnished by
first class mail within one business day of receipt of request without charge to
any person from whom the accompanying proxy is solicited upon written request to
Investor Relations, eSynch Corporation, 15502 Mosher Avenue, Tustin, California
92780. If Exhibit copies are requested, a copying charge of $.20 per page will
be made.
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS ONE, TWO AND THREE.
BY ORDER OF THE BOARD OF DIRECTORS
T. Richard Hutt
Secretary
Tustin, California
October __, 1999
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL
AND YOUR COOPERATION WILL BE APPRECIATED.
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PROXY PROXY
ESYNCH CORPORATION
15502 MOSHER AVENUE, TUSTIN, CALIFORNIA 92780
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas Hemingway and T. Richard Hutt as
Proxies, each with full power to appoint substitutes, and hereby authorizes them
or either of them to represent and to vote as designated below, all the shares
of Common Stock of eSynch Corporation held of record by the undersigned as of
September 27, 1999, at the Annual Meeting of Stockholders to be held will be
held at the principal executive office of the Company, 15502 Mosher Avenue,
Tustin, California, at 10:00 a.m., Pacific Time, on Monday, November 15, 1999,
and any adjournments or postponements thereof, and hereby ratifies all that said
attorneys and proxies may do by virtue hereof.
PLEASE MARK VOTE IN BRACKET IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
For All
1. ELECTION OF DIRECTORS For Withheld Except
FOR ALL EXCEPT NOMINEES CROSSED OUT. [ ] [ ] [ ]
Thomas Hemingway James H. Budd
T. Richard Hutt
Norton Garfinkle
Donald C. Watters, Jr.
2. APPROVAL OF THE INCREASE IN THE For Against Abstain
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK [ ] [ ] [ ]
3. APPROVAL OF THE 1999 STOCK INCENTIVE PLAN For Against Abstain
[ ] [ ] [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS ONE, TWO AND THREE.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO OTHER
BUSINESS WHICH PROPERLY MAY COME BEFORE THE MEETING, OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting.
PLEASE READ, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
Dated: , 1999
---------------------------
--------------------------------------
Signature
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Signature
Please sign exactly as name appears at left.
When shares are held by joint tenants or
more than one person, all owners should
sign. When signing as attorney, as executor,
administrator, trustee, or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.
<PAGE>
APPENDIX to EDGAR FILING
ESYNCH CORPORATION
1999 STOCK INCENTIVE PLAN
This 1999 STOCK INCENTIVE PLAN (the "Plan") is hereby established by eSynch
Corporation, a Delaware corporation (the "Company"), as adopted by its Board of
Directors as of August __, 1999 (the "Effective Date").
1. PURPOSES OF THE PLAN.
The purposes of the Plan are (a) to enhance the Company's ability to attract and
retain the services of qualified employees, officers and directors (including
non-employee officers and directors), and consultants and other service
providers upon whose judgment, initiative and efforts the successful conduct and
development of the Company's business largely depends, and (b) to provide
additional incentives to such persons or entities to devote their utmost effort
and skill to the advancement and betterment of the Company, by providing them an
opportunity to participate in the ownership of the Company and thereby have an
interest in the success and increased value of the Company.
2. DEFINITIONS.
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 ADMINISTRATOR.
"Administrator" means the Board or, if the Board delegates responsibility for
any matter to the Committee, the term Administrator shall mean the Committee.
2.2 AFFILIATED COMPANY.
"Affiliated Company" means any "parent corporation" or "subsidiary corporation"
of the Company, whether now existing or hereafter created or acquired, as those
terms are defined in Sections 424(e) and 424(f) of the Code, respectively.
2.3 BOARD.
"Board" means the Board of Directors of the Company.
2.4 CHANGE IN CONTROL.
"Change in Control" shall mean (i) the acquisition, directly or indirectly, by
any person or group (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) of the beneficial ownership of securities of
the Company possessing more than fifty percent (50%) of the total combined
voting power of all outstanding securities of the Company; (ii) a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction in which the holders of the outstanding voting securities of the
Company immediately prior to such merger or consolidation hold, in the
aggregate, securities possessing more than fifty percent (50%) of the total
combined voting power of all outstanding voting securities of the surviving
entity immediately after such merger or consolidation; (iii) a reverse merger in
which the Company is the surviving entity but in which securities possessing
more than fifty percent (50%) of the total combined voting power of all
outstanding voting securities of the Company are transferred to or acquired by a
person or persons different from the persons holding those securities
immediately prior to such merger; (iv) the sale, transfer or other disposition
(in one transaction or a series of related transactions) of all or substantially
all of the assets of the Company; or (v) the approval by the stockholders of a
plan or proposal for the liquidation or dissolution of the Company.
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2.5 CODE.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
2.6 COMMITTEE.
"Committee" means a committee of two or more members of the Board appointed to
administer the Plan, as set forth in Section 7.1 hereof.
2.7 COMMON STOCK.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Company, subject to adjustment pursuant to Section 4.2 hereof.
2.8 CONTINUOUS SERVICE.
"Continuous Service" shall mean--
(a) employment by either the Company or any parent or subsidiary
corporation of the Company, or by a corporation or a parent or
subsidiary of a corporation issuing or assuming a stock option in
a transaction to which Section 424(a) of the Code applies, which
is uninterrupted except for vacations, illness (except for
permanent disability, as defined in Section 22(e)(3) of the Code),
or leaves of absence which are approved in writing by the Company
or any of such other employer corporations, if applicable,
(b) service as a member of the Board of Directors of the Company until
Optionee resigns, is removed from office, or Optionee's term of
office expires and he or she is not reelected, or
(c) so long as Optionee is engaged as a consultant or service provider
to the Company or any corporation referred to in clause (a) above.
2.9 DISABILITY.
"Disability" means permanent and total disability as defined in Section 22(e)(3)
of the Code. The Administrator's determination of a Disability or the absence
thereof shall be conclusive and binding on all interested parties.
2.10 EFFECTIVE DATE.
"Effective Date" means the date on which the Plan is adopted by the Board, as
set forth on the first page hereof.
2.11 EXERCISE PRICE.
"Exercise Price" means the purchase price per share of Common Stock payable upon
exercise of an Option.
2.12 FAIR MARKET VALUE.
"Fair Market Value" on any given date means the value of one share of Common
Stock, determined as follows:
(a) If the Common Stock is then listed or admitted to trading on the
Nasdaq Stock Market or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the closing sale price on
the date of valuation as so reported by the principal system or
exchange on which the Common Stock is traded, or, if no closing
sale price is reported on such day, then the Fair Market Value
shall be the closing sale price of the Common Stock as so reported
on the next preceding day on which a closing sale price is
reported.
(b) If the Common Stock is not then listed or admitted to trading on
the Nasdaq Stock Market or a stock exchange which reports closing
sale prices, the Fair Market Value shall be the average of the
reported closing bid and asked prices of the Common Stock in the
over-the-counter market on the date of valuation.
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(c) If neither (a) nor (b) is applicable as of the date of valuation,
then the Fair Market Value shall be determined by the
Administrator in good faith using any reasonable method of
evaluation, which determination shall be conclusive and binding on
all interested parties.
2.13 HOSTILE TAKEOVER.
"Hostile Takeover" shall mean either of the following events effecting a change
in control or ownership of the Company:
(a) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Company or a person that directly
or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power
of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders which
the Board does not recommend such stockholders to accept, or
(b) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a
majority of the Board members described in clause (A) who were
still in office at the time the Board approved such election or
nomination.
2.14 INCENTIVE OPTION.
"Incentive Option" means any Option designated and qualified as an "incentive
stock option" as defined in Section 422 of the Code.
2.15 NASD DEALER.
"NASD Dealer" means a broker-dealer that is a member of the National Association
of Securities Dealers, Inc.
2.16 NONQUALIFIED OPTION.
"Nonqualified Option" means any Option that is not an Incentive Option. To the
extent that any Option designated as an Incentive Option fails in whole or in
part to qualify as an Incentive Option, including, without limitation, for
failure to meet the limitations applicable to a 10% Stockholder or because it
exceeds the annual limit provided for in Section 5.6 below, it shall to that
extent constitute a Nonqualified Option.
2.17 OFFEREE.
"Offeree" means a Participant to whom a Right to Purchase has been offered or
who has acquired Restricted Stock under the Plan.
2.18 OPTION.
"Option" means any option to purchase Common Stock granted pursuant to the Plan.
2.19 OPTION AGREEMENT.
"Option Agreement" means the written agreement entered into between the Company
and the Optionee with respect to an Option granted under the Plan.
2.20 OPTIONEE.
"Optionee" means a Participant who holds an Option.
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2.21 PARTICIPANT.
"Participant" means an individual or entity who holds an Option, a Right to
Purchase or Restricted Stock under the Plan.
2.22 PUBLIC OFFERING.
"Public Offering" shall mean the sale to the public and closing of an
underwritten public offering of the Company's Common Stock that is registered
under the Securities Act of 1933.
2.23 PURCHASE PRICE.
"Purchase Price" means the purchase price per share of Restricted Stock payable
upon acceptance of a Right to Purchase.
2.24 RESTRICTED STOCK.
"Restricted Stock" means shares of Common Stock issued, subject to any
restrictions and conditions as are established, pursuant to Section 6.
2.25 RESTRICTED STOCK PURCHASE AGREEMENT.
"Restricted Stock Purchase Agreement" means the written agreement entered into
between the Company and the Offeree with respect to a Right to Purchase offered
under the Plan.
2.26 RIGHT TO PURCHASE.
"Right to Purchase" means a right to purchase Restricted Stock granted to an
Offeree pursuant to Section 6 hereof.
2.27 SERVICE PROVIDER.
"Service Provider" means a consultant or other person or entity who provides
advice or other services to the Company or an Affiliated Company and who the
Administrator authorizes to become a Participant in the Plan.
2.28 10% STOCKHOLDER.
"10% Stockholder" means a person who, as of a relevant date, owns or is deemed
to own (by reason of the attribution rules applicable under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or of an Affiliated Company.
3. ELIGIBILITY.
3.1 INCENTIVE OPTIONS.
Officers and other key employees of the Company or of an Affiliated Company
(including members of the Board if they are employees of the Company or of an
Affiliated Company) are eligible to receive Incentive Options under the Plan.
3.2 NONQUALIFIED OPTIONS AND RIGHTS TO PURCHASE.
Officers and other key employees of the Company or of an Affiliated Company,
members of the Board (whether or not employed by the Company or an Affiliated
Company), and Service Providers are eligible to receive Nonqualified Options or
Rights to Purchase under the Plan.
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3.3 LIMITATION ON SHARES.
In no event shall any Participant be granted Options or Rights to Purchase in
any one calendar year pursuant to which more than 500,000 shares of Common Stock
may be acquired.
4. PLAN SHARES.
4.1 SHARES SUBJECT TO THE PLAN.
A total of 3,000,000 shares of Common Stock may be issued under the Plan,
subject to adjustment as to the number and kind of shares pursuant to Section
4.2 hereof. For purposes of this limitation, in the event that
(a) all or any portion of any Option or Right to Purchase granted or
offered under the Plan can no longer under any circumstances be
exercised, or
(b) any shares of Common Stock are reacquired by the Company pursuant
to an Option Agreement or Restricted Stock Purchase Agreement, the
shares of Common Stock allocable to the unexercised portion of
such Option or such Right to Purchase, or the shares so
reacquired, shall again be available for grant or issuance under
the Plan.
4.2 CHANGES IN CAPITAL STRUCTURE.
If the then outstanding shares of Common Stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend, or other similar change
in the capital structure of the Company, then appropriate adjustments shall be
made by the Administrator to the aggregate number and kind of shares subject to
this Plan, and the number and kind of shares and the price per share subject to
outstanding Option Agreements, Rights to Purchase and Restricted Stock Purchase
Agreements in order to preserve, as nearly as practical, but not to increase,
the benefits to Participants.
5. OPTIONS.
5.1 OPTION AGREEMENT.
Each Option granted pursuant to this Plan shall be evidenced by an Option
Agreement which shall specify the number of shares subject thereto, the Exercise
Price per share, and whether the Option is an Incentive Option or Nonqualified
Option. As soon as is practical following the grant of an Option, an Option
Agreement shall be duly executed and delivered by or on behalf of the Company to
the Optionee to whom such Option was granted. Each Option Agreement shall be in
such form and contain such additional terms and conditions, not inconsistent
with the provisions of this Plan, as the Administrator shall, from time to time,
deem desirable, including, without limitation, the imposition of any first
rights of refusal and resale restrictions or repurchase rights upon any shares
of Common Stock acquired pursuant to an Option Agreement. Each Option Agreement
may be different from each other Option Agreement in any respect.
5.2 EXERCISE PRICE.
The Exercise Price per share of Common Stock covered by each Option shall be
determined by the Administrator, subject to the following:
(a) the Exercise Price of an Incentive Option shall not be less than
100% of Fair Market Value on the date the Incentive Option is
granted,
(b) the Exercise Price of a Nonqualified Option shall not be less than
85% of Fair Market Value on the date the Nonqualified Option is
granted (or 100% as to a Nonqualified Option granted to a 10%
Stockholder), and
(c) if the person to whom an Incentive Option is granted is a 10%
Stockholder on the date of grant, the
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Exercise Price shall not be less than 110% of Fair Market Value
on the date the Option is granted.
5.3 PAYMENT OF EXERCISE PRICE.
Payment of the Exercise Price shall be made upon exercise of an Option and may
be made, in the discretion of the Administrator, subject to any legal
restrictions, by--
(a) cash;
(b) check;
(c) the surrender of shares of Common Stock owned by the Optionee that
have been held by the Optionee for at least six (6) months, which
surrendered shares shall be valued at Fair Market Value as of the
date of such exercise;
(d) the Optionee's promissory note in a form and on terms acceptable to
the Administrator;
(e) the cancellation of indebtedness of the Company to the Optionee;
(f) the waiver of compensation due or accrued to the Optionee for
services rendered;
(g) provided that a public market for the Common Stock exists, a "same
day sale" commitment from the Optionee and an NASD Dealer whereby
the Optionee irrevocably elects to exercise the Option and to sell
a portion of the shares so purchased to pay for the Exercise Price
and whereby the NASD Dealer irrevocably commits upon receipt of
such shares to forward the Exercise Price directly to the Company;
(h) provided that a public market for the Common Stock exists, a
"margin" commitment from the Optionee and an NASD Dealer whereby
the Optionee irrevocably elects to exercise the Option and to
pledge the shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such shares to forward the Exercise Price
directly to the Company; or
(i) any combination of the foregoing methods of payment or any other
consideration or method of payment as shall be permitted by
applicable corporate law.
5.4 TERM AND TERMINATION OF OPTIONS.
The term and provisions for termination of each Option shall be as fixed by the
Administrator, but no Option may be exercisable more than ten (10) years after
the date it is granted. An Incentive Option granted to a person who is a 10%
Stockholder on the date of grant shall not be exercisable more than five (5)
years after the date it is granted.
5.5 VESTING AND EXERCISE OF OPTIONS.
Each Option shall vest and become exercisable in one or more installments at
such time or times and subject to such conditions, including without limitation
the achievement of specified performance goals or objectives, as shall be
determined by the Administrator; provided, however that Options granted to
employees who are not officers, directors or Service Providers shall vest and
become exercisable in installments at a minimum rate of 20% per year over a
period of five (5) years from the date the Option is granted.
5.6 ANNUAL LIMIT ON INCENTIVE OPTIONS.
To the extent required for "incentive stock option" treatment under Section 422
of the Code, the aggregate Fair Market Value (determined as of the time of
grant) of the Common Stock shall not, with respect to which Incentive Options
granted under this Plan and any other plan of the Company or any Affiliated
Company become exercisable for the first time by an Optionee during any calendar
year, exceed $100,000. To the extent such dollar limitation is exceeded, the
excess portion of such Option shall be exercisable as a Nonqualified Option
under the Federal tax laws.
5.7 LIMITED TRANSFERABILITY.
No Incentive Option or Nonqualified Options shall be assignable or transferable
except by will or the laws of descent and distribution, and during the life of
the Optionee shall be exercisable only by such Optionee.
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Notwithstanding the foregoing, shares purchased upon exercise of Nonqualified
Options may be transferred, if the transferee agrees to be bound by the same
transfer restrictions applicable to the Participant, in connection with the
Optionee's estate plan, be assigned in whole or in part, during the Optionee's
lifetime to one or more members of the Optionee's immediate family, including
any parent, descendant, spouse, brother, sister, grandparent, grandchild,
dependent, or member of their immediate families, or to a trust established
exclusively for one or more such persons. The terms applicable to the assigned
portion of the shares shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Administrator may deem appropriate. In the event
that applicable tax law and federal and state securities laws permit transfer of
Options in any particular case, then with the consent of the Administrator in
such case, an Option may be transferred consistent with restrictions under law
and subject to any terms or restrictions imposed by the Administrator.
5.8 RIGHTS AS STOCKHOLDER.
An Optionee or permitted transferee of an Option shall have no rights or
privileges as a stockholder with respect to any shares covered by an Option
until such Option has been duly exercised and certificates representing shares
purchased upon such exercise have been issued to such person.
5.9 COMPANY'S REPURCHASE RIGHTS.
In the event of termination of a Participant's Continuous Service for any reason
whatsoever (including death or disability), the Option Agreement may provide, in
the discretion of the Administrator, that the Company, or its assignee, shall
have the right, exercisable at the discretion of the Administrator, to
repurchase shares of Common Stock acquired pursuant to the exercise of an Option
at any time, at any price, and on any terms as set forth in the Option Agreement
evidencing such Options.
5.10 RESTRICTIONS ON UNDERLYING SHARES OF COMMON STOCK.
Shares of Common Stock issued pursuant to the exercise of an Option may not be
sold, assigned, transferred, pledged or otherwise encumbered or disposed of
except as specifically provided in the Option Agreement.
6. RIGHTS TO PURCHASE.
6.1 NATURE OF RIGHT TO PURCHASE.
A Right to Purchase granted to an Offeree entitles the Offeree to purchase, for
a Purchase Price determined by the Administrator, shares of Common Stock subject
to such terms, restrictions and conditions as the Administrator may determine at
the time of grant ("Restricted Stock"). Such conditions may include, but are not
limited to, Continuous Service or the achievement of specified performance goals
or objectives. The Administrator shall have the discretion to grant options, or
amend outstanding options, such that the unvested portion of options are
exercisable for Restricted Stock.
6.2 ACCEPTANCE OF RIGHT TO PURCHASE.
An Offeree shall have no rights with respect to the Restricted Stock subject to
a Right to Purchase unless the Offeree shall have accepted the Right to Purchase
within ten (10) days (or such longer or shorter period as the Administrator may
specify) following the grant of the Right to Purchase by making payment of the
full Purchase Price to the Company in the manner set forth in Section 6.3 hereof
and by executing and delivering to the Company a Restricted Stock Purchase
Agreement. Each Restricted Stock Purchase Agreement shall be in such form, and
shall set forth the Purchase Price and such other terms, conditions and
restrictions of the Restricted Stock, not inconsistent with the provisions of
this Plan, as the Administrator shall, from time to time, deem desirable. Each
Restricted Stock Purchase Agreement may be different from each other Restricted
Stock Purchase Agreement.
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6.3 PAYMENT OF PURCHASE PRICE.
Subject to any legal restrictions, payment of the Purchase Price upon acceptance
of a Right to Purchase Restricted Stock may be made, in the discretion of the
Administrator, by--
(a) cash;
(b) check;
(c) the surrender of shares of Common Stock owned by the Offeree that
have been held by the Offeree for at least six (6) months, which
surrendered shares shall be valued at Fair Market Value as of the
date of such exercise;
(d) the Offeree's promissory note in a form and on terms acceptable to
the Administrator;
(e) the cancellation of indebtedness of the Company to the Offeree;
(f) the waiver of compensation due or accrued to the Offeree for
services rendered; or
(g) any combination of the foregoing methods of payment or any other
consideration or method of payment as shall be permitted by
applicable corporate law.
6.4 RIGHTS AS A STOCKHOLDER.
Upon complying with the provisions of Section 6.2 hereof, an Offeree shall have
the rights of a stockholder with respect to the Restricted Stock purchased
pursuant to the Right to Purchase, including voting and dividend rights, subject
to the terms, restrictions and conditions as are set forth in the Restricted
Stock Purchase Agreement. Unless the Administrator shall determine otherwise,
certificates evidencing shares of Restricted Stock shall remain in the
possession of the Company in accordance with the terms of the Restricted Stock
Purchase Agreement until such shares have vested.
6.5 RESTRICTIONS.
Shares of Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided in the
Restricted Stock Purchase Agreement or by the Administrator in the particular
case. In the event of termination of a Participant's employment, service as a
director of the Company or Service Provider status for any reason whatsoever
(including death or disability), the Restricted Stock Purchase Agreement may
provide, in the discretion of the Administrator, that the Company shall have the
right, exercisable at the discretion of the Administrator, to repurchase
(i) at the original Purchase Price, any shares of Restricted Stock
which have not vested as of the date of termination, and
(ii) at Fair Market Value, any shares of Restricted Stock which have
vested as of such date, on such terms as may be provided in the
Restricted Stock Purchase Agreement;
provided that, for Restricted Stock granted to employees who are not officers,
directors or Service Providers, the Company's Repurchase Right at the original
purchase price lapses at a minimum rate of 20% per year over a period of five
(5) years from the date the Right to Purchase was granted.
6.6 VESTING OF RESTRICTED STOCK.
The Restricted Stock Purchase Agreement shall specify the date or dates, the
performance goals or objectives which must be achieved, and any other conditions
on which the Restricted Stock may vest.
6.7 DIVIDENDS.
If payment for shares of Restricted Stock is made by promissory note, any cash
dividends paid with respect to the Restricted Stock may be applied, in the
discretion of the Administrator, to repayment of such note.
6.8 LIMITED ASSIGNABILITY OF RIGHTS.
No Right to Purchase shall be assignable or transferable except by will or the
laws of descent and distribution. Restricted Stock may, in connection with the
Participant's estate plan, be assigned in whole or in part during the
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Participant's lifetime to one or more members of the Participant's immediate
family, including any parent, descendant, spouse, brother, sister, grandparent,
grandchild, dependent, or member of their immediate families, or to a trust
established exclusively for one or more such persons, or to a trust established
exclusively for one or more such family members. The terms applicable to the
assigned portion shall be the same as those in effect for the Restricted Stock
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate. In the
event that applicable tax law and federal and state securities laws permit
transfer of Restricted Stock in any other particular case, then with the consent
of the Administrator in such case, Restricted Stock may be transferred
consistent with restrictions under law and subject to any terms or restrictions
imposed by the Administrator.
7. ADMINISTRATION OF THE PLAN.
7.1 ADMINISTRATOR.
Authority to control and manage the operation and administration of the Plan
shall be vested in the Board, which may delegate such responsibilities in whole
or in part to a committee consisting of two (2) or more members of the Board
(the "Committee"). Members of the Committee may be appointed from time to time
by, and shall serve at the pleasure of, the Board. As used herein, the term
"Administrator" means the Board or, with respect to any matter as to which
responsibility has been delegated to the Committee, the term Administrator shall
mean the Committee.
7.2 POWERS OF THE ADMINISTRATOR.
In addition to any other powers or authority conferred upon the Administrator
elsewhere in the Plan or by applicable law, the Administrator shall have full
power and authority, at any time and from time to time:
(a) to determine the persons to whom, and the time or times at which,
Incentive Options or Nonqualified Options shall be granted and
Rights to Purchase shall be offered, the number of shares to be
represented by each Option and Right to Purchase and the
consideration to be received by the Company upon the exercise
thereof;
(b) to interpret the Plan;
(c) to create, amend or rescind rules and regulations relating to the
Plan;
(d) to determine the terms, conditions and restrictions contained in,
and the form of, Option Agreements and Restricted Stock Purchase
Agreements;
(e) to determine the identity or capacity of any persons who may be
entitled to exercise a Participant's rights under any Option or
Right to Purchase under the Plan;
(f) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Option Agreement or Restricted
Stock Purchase Agreement;
(g) to extend the exercise date of any Option or acceptance date of any
Right to Purchase;
(h) to provide for first rights of refusal and/or repurchase rights;
(i) to effect, with the consent of the affected Participant, the
cancellation of any or all outstanding Options and to grant, in
substitution, new options covering the same or different number
of shares of Common Stock but with an exercise price per share
based on the Fair Market Value on the new grant date; and
(j) to amend outstanding Option Agreements and Restricted Stock
Purchase Agreements to provide for, among other things, any change
or modification to a provision which the Administrator could have
provided for upon the grant of an Option or Right to Purchase or
upon the issuance of Restricted Stock or in furtherance of the
powers provided for herein; and
(k) to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to
the express provisions of the Plan.
Any action, decision, interpretation or determination made in good faith by the
Administrator in the exercise of its authority conferred upon it under the Plan
shall be final and binding on the Company and all Participants.
7.3 LIMITATION ON LIABILITY.
No employee of the Company or member of the Board or Committee shall be subject
to any liability with respect to
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duties under the Plan unless the person acts fraudulently or in bad faith. To
the extent permitted by law, the Company shall indemnify each member of the
Board or Committee, and any employee of the Company with duties under the Plan,
who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the Plan.
8. MERGERS AND OTHER REORGANIZATIONS.
8.1 MERGERS AND OTHER REORGANIZATIONS.
The Option Agreement or Restricted Stock Purchase Agreement shall make provision
for what, if anything, shall happen in the event that the Company at any time
proposes to enter into any transaction approved by the Board to dissolve,
liquidate, sell substantially all of its assets, or merge or consolidate, or
acquire property or shares, separate or reorganize, with any other entity or
entities, corporate or otherwise, as a result of which either the Company is not
the surviving corporation or the Company is the surviving corporation. The Plan
and outstanding Options, Rights of Purchase, or Restricted Stock shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
8.2 CHANGE IN CONTROL.
In the event of a Change in Control of the Company, concurrent with and
conditioned upon the effective date of the proposed transaction, any outstanding
unexercised Options and Rights to Purchase that have not yet vested shall be
accelerated and vest at such time to the extent that the Option Agreement or
Restricted Stock Purchase Agreement provides. Notwithstanding the foregoing, the
Administrator in its discretion may take one or more of the following actions:
(i) provide for the purchase or exchange of this Option for an amount of
cash or other property having a value equal to the difference, or
spread, between
(x) the value of the cash or other property that the Optionee would
have received pursuant to such Change in Control transaction in
exchange for the shares issuable upon exercise of this Option
had this Option been exercised immediately prior to such Change
in Control transaction and
(y) the Exercise Price,
(ii) adjust the terms of this Option in a manner determined by the
Administrator to reflect the Change in Control,
(iii) cause this Option to be assumed, or new rights substituted therefor,
by another entity, through the continuance of the Plan and the
assumption of this Option, or the substitution for this Option of a
new option of comparable value covering shares of a successor
corporation, with appropriate adjustments as to the number and kind
of shares and Exercise Price, in which event the Plan and this
Option, or the new option substituted therefor, shall continue in the
manner and under the terms so provided, or
(iv) make such other provision as the Administrator may consider
equitable.
If the Administrator does not take any of the forgoing actions, this Option
shall terminate upon the consummation of the Change in Control and the
Administrator shall cause written notice of the proposed transaction to be given
to the Optionee not less than fifteen (15) days prior to the anticipated
effective date of the proposed transaction.
8.3 HOSTILE TAKEOVER.
The Administrator shall have the discretionary authority to structure Option
Agreements and Restricted Stock Purchase Agreements such that the Company's
Repurchase Rights shall terminate and such shares shall vest automatically upon
the consummation of a Hostile Take-Over, to condition the automatic acceleration
of one or more Options and the termination of one or more of the Company's
Repurchase Rights under Restricted Stock Purchase Agreements upon the
involuntary termination of the Participant's Continuous Service within a
designated period (not to exceed eighteen (18) months) following the effective
date of a Hostile Take-Over, and to make provision that each Option so
accelerated shall remain exercisable for fully-vested shares until a date not
later than
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the expiration of the option term.
9. AMENDMENT AND TERMINATION OF THE PLAN.
9.1 AMENDMENTS.
The Board shall have full power and authority (subject to certain amendments
requiring stockholder approval pursuant to applicable laws or regulations) from
time to time to alter, amend, suspend or terminate the Plan in any or all
respects as the Board may deem advisable. No such alteration, amendment,
suspension or termination shall be made which shall substantially affect or
impair the rights of any Participant under an outstanding Option Agreement or
Restricted Stock Purchase Agreement without such Participant's consent. The
Board may alter or amend the Plan to comply with requirements under the Code
relating to Incentive Options or other types of options which give Optionees
more favorable tax treatment than that applicable to Options granted under this
Plan. Upon any such alteration or amendment, any outstanding Option granted
hereunder may, if the Administrator so determines and if permitted by applicable
law, be subject to the more favorable tax treatment afforded to an Optionee
pursuant to such terms and conditions.
9.2 PLAN TERMINATION.
Unless the Plan shall theretofore have been terminated, the Plan shall terminate
on the tenth (10th) anniversary of the Effective Date and no Options or Rights
to Purchase may be granted under the Plan thereafter, but Option Agreements,
Restricted Stock Purchase Agreements and Rights to Purchase then outstanding
shall continue in effect in accordance with their respective terms.
10. TAX WITHHOLDING.
The Company shall have the power to withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy any applicable Federal, state,
and local tax withholding requirements with respect to any Options exercised or
Restricted Stock issued under the Plan. The Company's obligation to deliver
shares of Common Stock upon the exercise of Options or the issuance or vesting
of Common Stock under the Plan shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements. To the extent permissible under applicable tax, securities and
other laws, the Administrator may, in its sole discretion and upon such terms
and conditions as it may deem appropriate, permit a Participant to satisfy his
or her obligation to pay any such tax, in whole or in part, up to an amount
determined on the basis of the highest marginal tax rate applicable to such
Participant, by--
(a) directing the Company to apply shares of Common Stock to which the
Participant is entitled as a result of the exercise of an Option
or as a result of the purchase of or lapse of restrictions on
Restricted Stock or
(b) delivering to the Company shares of Common Stock owned by the
Participant.
The shares of Common Stock so applied or delivered in
satisfaction of the Participant's tax withholding obligation shall be
valued at their Fair Market Value as of the date of measurement of the
amount of income subject to withholding.
11. MISCELLANEOUS.
11.1 BENEFITS NOT ALIENABLE.
Other than as provided above, benefits under the Plan may not be transferred,
assigned or alienated, whether voluntarily or involuntarily or by operation of
law. Any unauthorized attempt at assignment, transfer, pledge or other
disposition shall be void and without force or effect whatsoever.
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11.2 NO CREATION OR ENLARGEMENT OF PARTICIPANT'S RIGHTS TO CONTINUE
IN ANY CAPACITY.
This Plan is strictly a voluntary undertaking on the part of the Company and
shall not be deemed to constitute a contract between the Company and any
Participant for, or to be consideration for, or an inducement to, or a condition
of, the continuation of any Participant's services to the Company in any
capacity. Nothing contained in the Plan shall be deemed to give the right to any
Participant to be retained in the service of the Company or any Affiliated
Company or to interfere with the right of the Company or any Affiliated Company
(which rights are hereby expressly reserved by each) to discharge or discontinue
the services of any Participant at any time for any reason, with or without
cause.
11.3 APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock pursuant to
Option Agreements and Restricted Stock Purchase Agreements, except as otherwise
provided herein, will be used for general corporate purposes.
11.4 ANNUAL AND OTHER PERIODIC REPORTS.
The Company shall furnish or make available to Participants copies of all annual
and other periodic financial and informational reports that the Company
distributes generally to its stockholders.
The Participants shall in any event receive financial statements at least
annually, except if all Participants are key employees with duties that assure
the equivalent access to information.
11.5 COMPLIANCE WITH SECTION 25102(o).
At no time shall the number of shares issuable upon the exercise of all
outstanding options and the total number of shares provided for under any stock
bonus or similar plan of the Company exceed the applicable percentage as
calculated in accordance with the conditions and exclusions of Title 10.,
Sections 260.140.45 of the California Code of Regulations, based on the shares
of the Company outstanding at the time the calculation is made. In the event the
any or all requirements of Section 25102(o) of the California Corporate
Securities Law of 1968, or applicable provisions of Title 10., including
Sections 260.140.41, 42, 45, or 46, of the California Code of Regulations, or
Rule 701 promulgated under the U.S. Securities Act of 1933 are inconsistent with
the Plan in any way, or become inconsistent hereafter because such laws or rules
are changed, replaced or superseded, this Plan and any outstanding securities
under the Plan shall be modified in the Administrator's best judgment and sole
discretion consistent with the new requirements or consistent with any other
available exemptions under federal or state securities laws.
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ESYNCH CORPORATION
STOCK OPTION AGREEMENT
TYPE OF OPTION (CHECK ONE): / /INCENTIVE / /NONQUALIFIED
This Stock Option Agreement (the "Agreement") is entered into as of , by
and between eSynch Corporation, a Delaware corporation (the "Company") and
(the "Optionee") pursuant to the Company's 1999 Stock Incentive Plan
(the "Plan").
1. GRANT OF OPTION.
The Company hereby grants to Optionee an option (the "Option") to purchase all
or any portion of a total of ( ) shares (the "Shares") of the Common Stock
of the Company at a purchase price of ( ) per share (the "Exercise
Price"), subject to the terms and conditions set forth herein and the provisions
of the Plan. If the box marked "Incentive" above is checked, then this Option is
intended to qualify as an "incentive stock option" as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). If this Option fails
in whole or in part to qualify as an incentive stock option, or if the box
marked "Nonqualified" is checked, then this Option shall to that extent
constitute a nonqualified stock option.
2. VESTING OF OPTION.
2.1 VESTING SCHEDULE.
The right to exercise this Option shall vest in installments, and this Option
shall be exercisable from time to time in whole or in part as to any vested
installment. Vesting will be measured from (the "Vesting Measurement
Date"). No additional Shares shall vest after the date of termination of
Optionee's "Continuous Service" (the "Service Termination Date"). As used
herein, the term "Continuous Service" has the meaning given in the Plan.
Except as may otherwise be provided in this Agreement, the vesting schedule
is as follows:
On or After:..........................................Option Exercisable As To:
The vesting schedule of this Option would result, assuming the Service
Termination Date shall not have theretofore occurred, in this Option being
exercisable as to One Hundred Percent (100%) of the Shares covered by this
Option ON THE _________ ANNIVERSARY of the Vesting Measurement Date.
2.2 ACCELERATION ON CHANGE IN CONTROL OR PUBLIC OFFERING.
In the event of a Change in Control (as defined in the Plan) or a Public
Offering of the Company, concurrent with and conditioned upon the effective date
of the proposed transaction, unexercised Options under this Agreement that have
not yet vested shall be accelerated and vest at such time to the extent that
they would have vested as if the Vesting Measurement Date were ______ years
earlier than it actually is. Notwithstanding the foregoing, the Administrator in
its discretion may take one or more of the following actions:
(i) provide for the purchase or exchange of this Option for an amount of
cash or other property having a value equal to the difference, or
spread, between
(x) the value of the cash or other property that the Optionee would
have received pursuant to such Change in Control transaction in
exchange for the shares issuable upon exercise of this Option had
this Option been exercised immediately prior to such Change in
Control transaction and
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(y) the Exercise Price,
(ii) adjust the terms of this Option in a manner determined by the
Administrator to reflect the Change in Control,
(iii) cause this Option to be assumed, or new rights substituted therefor,
by another entity, through the continuance of the Plan and the
assumption of this Option, or the substitution for this Option of a
new option of comparable value covering shares of a successor
corporation, with appropriate adjustments as to the number and kind
of shares and Exercise Price, in which event the Plan and this
Option, or the new option substituted therefor, shall continue in
the manner and under the terms so provided, or
(iv) make such other provision as the Administrator may consider
equitable.
If the Administrator does not take any of the forgoing actions, this
Option shall terminate upon the consummation of the Change in Control and the
Administrator shall cause written notice of the proposed transaction to be given
to the Optionee not less than fifteen (15) days prior to the anticipated
effective date of the proposed transaction.
3. TERM OF OPTION.
Optionee's right to exercise any vested portion of this Option shall terminate
upon the first to occur of the following:
3.1 MAXIMUM TERM.
the expiration of _______ (___) years from the date of this Agreement;
3.2 INVOLUNTARY TERMINATION WITHOUT CAUSE.
the expiration of three (3) months from the Service Termination Date if such
termination occurs for any reason OTHER THAN permanent disability, death,
voluntary resignation; or for "cause;" provided, however, that if Optionee dies
during such three-month period the provisions of subsection 3.5 below shall
apply;
3.3 VOLUNTARY RESIGNATION.
the expiration of one (1) month from the Service Termination Date if such
termination occurs due to voluntary resignation; provided, however, that if
Optionee dies during such one-month period the provisions of subsection 3.5
below shall apply;
3.4 PERMANENT DISABILITY.
the expiration of one (1) year from the Service Termination Date if such
termination is due to permanent disability of the Optionee (as defined in
Section 22(e)(3) of the Code);
3.5 DEATH.
the expiration of one (1) year from the Service Termination Date if such
termination is due to Optionee's death or if death occurs during either the
three-month or one-month period following the Service Termination Date pursuant
to subsection 3.2 or subsection 3.3 above, as the case may be;
3.6 CHANGE IN CONTROL.
upon the consummation of a "Change in Control" (as defined in the Plan), unless
otherwise provided by the Administrator pursuant to Section 2.2 above; and
3.7 TERMINATION FOR CAUSE.
in the event Optionee's Continuous Service is terminated by the Company for
"cause," defined hereby to mean the performance of those acts identified in
Section 2924 of the California Labor Code, then this Option, whether or not
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<PAGE>
exercisable on the Service Termination Date, shall terminate immediately and
become void and of no effect.
4. EXERCISE OF OPTION.
4.1 PERSONS PERMITTED TO EXERCISE OPTION.
This Option may be exercised in whole or in part only by the Optionee or by a
Successor designated in Section 5 below.
4.2 EXERCISE AS TO VESTED PORTION OF OPTION.
This Option may be exercised only on or after the vesting of any portion of this
Option in accordance with Section 2 above, and only as to the cumulative amount
vested at the date of exercise, except pursuant to provisions made, if any, by
the Administrator pursuant to subsection 4.5 below.
4.3 NO EXERCISE AFTER TERMINATION.
This Option may not be exercised at the time of, or any time after, termination
of this Option in accordance with Section 3 above.
4.4 MECHANICS OF EXERCISE.
Exercise of this Option shall be made by delivery of the following to the
Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement and states
the number of Shares then being purchased (but no fractional Shares may
be purchased);
(b) a check or cash in the amount of the Exercise Price (or payment of the
Exercise Price in such other form of lawful consideration as the
Administrator may approve from time to time under the provisions of the
Plan);
(c) a check or cash in the amount reasonably requested by the Company to
satisfy the Company's withholding obligations under federal, state or
other applicable tax laws with respect to the taxable income, if any,
recognized by the Optionee in connection with the exercise of this
Option (unless the Company and Optionee shall have made other
arrangements for deductions or withholding from Optionee's wages, bonus
or other compensation payable to Optionee, or by the withholding of
Shares issuable upon exercise of this Option or the delivery of Shares
owned by the Optionee in accordance with the provisions of the Plan,
provided such arrangements satisfy the requirements of applicable tax
laws); and
(d) a letter, if requested by the Company, in such form and substance as
the Company may require, setting forth the investment intent of the
Optionee, or of a Successor designated in Section 5, as the case may
be.
4.5 EXERCISE PRIOR TO VESTING; PURCHASE OF RESTRICTED STOCK.
The Administrator also has discretion, but not the obligation, to permit this
Option to be exercised as to the unvested portion prior to vesting, and in that
case to deliver Restricted Shares to the Optionee upon exercise of this Option.
The Administrator's determination to permit exercise of the unvested portion of
this Option shall be evidenced by the Company's and the Optionee's mutual
execution and delivery of a Restricted Stock Purchase Agreement in form and
substance determined by the Administrator, having the same or a different
Vesting Measurement Date and vesting schedule, as the Administrator and the
Optionee may agree.
5. TRANSFERS ON DEATH OF OPTIONEE; RESTRICTIONS ON LIFETIME ASSIGNMENTS.
Any attempt to sell, pledge, assign, hypothecate, transfer or dispose of this
Option in contravention of this Agreement or the Plan shall be void and shall
have no effect.
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5.1 NO ASSIGNMENT OF INCENTIVE STOCK OPTIONS.
If and to the extent that this Option comprises an incentive stock option, this
Option can be assigned or transferred (subject to all other restrictions in this
Agreement) only as follows:
the rights of the Optionee under this Agreement may not be assigned or
transferred except by will or by the laws of descent and
distribution,
this Option may be exercised during the lifetime of the Optionee only
by such Optionee;
if the Optionee's Continuous Service terminates as a
result of his or her death, and provided Optionee's
rights hereunder shall have vested pursuant to Section 2 hereof,
Optionee's legal representative, his or her legatee, or the person
who acquired the right to exercise this Option by reason of the
death of the Optionee (with regard to incentive stock options,
each individually, a "Successor") shall succeed to the Optionee's
rights and obligations under this Agreement.; and
after the death of the Optionee, only a Successor may exercise this
Option.
In the context of incentive stock options, the term "Successor"
refers to each of the transferees, successors or assigns described in
this subsection 5.1.
5.2 LIMITED ASSIGNABILITY OF NONQUALIFIED STOCK OPTIONS.
If and to the extent that this Option comprises a nonqualified stock option,
this Option can be assigned or transferred (subject to all other restrictions in
this Agreement) only as follows:
the rights of the Optionee under this Agreement may be assigned or
transferred by will or by the laws of descent and distribution,
and Optionee's legal representative, his or her legatee, or the
person who acquired the right to exercise this Option by reason of
the death of the Optionee shall succeed to the Optionee's rights
and obligations under this Agreement, and
the rights of the Optionee under this Agreement also may be assigned
and transferred by the Optionee for estate planning purposes to
members of the immediate family of the Optionee, including for
this purpose, but not limited to, spouses, parents, descendants,
brothers and sisters, or to trusts established for the benefit of
such persons.
In the context of nonqualified stock options, the term "Successor"
refers to each of the transferees, successors or assigns described in
this subsection 5.2.
6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.
6.1 INVESTMENT INTENT AS TO OPTIONS.
Optionee represents and warrants that this Option is being acquired by Optionee
for Optionee's personal account, for investment purposes only, and not with a
view to the distribution, resale or other disposition thereof.
6.2 INVESTMENT INTENT AS TO SHARES.
Optionee acknowledges that the Company may issue Shares upon the exercise of the
Option without registering such Shares under the Securities Act of 1933, as
amended (the "Act"), on the basis of certain exemptions from such registration
requirement. Accordingly, Optionee agrees that his or her exercise of the Option
may be expressly conditioned upon his or her delivery to the Company of an
investment certificate and agreement including such representations and
undertakings as the Company may reasonably require in order to assure the
availability of such exemptions, including representations, warranties and
agreements that--
(a) The Optionee is purchasing the Shares solely for the Optionee's own
account for investment and not with a view to or for sale or
distribution of the Shares or any portion thereof and not with any
present intention of selling, offering to sell or otherwise disposing
of or distributing the Shares or any portion thereof. The Optionee also
represents that the entire legal and beneficial interest of the Shares
the Optionee is purchasing is being purchased for, and will be held for
the account of, the Optionee only and neither in whole nor in part for
any other person.
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<PAGE>
(b) The Optionee has discussed the Company and its plans, operations and
financial condition with its officers and that the Optionee has
received all such information as the Optionee deems necessary and
appropriate to enable the Optionee to evaluate the financial risk
inherent in making an investment in the Shares of the Company, and has
received satisfactory and complete information concerning the business
and financial condition of the Company in response to all inquiries in
respect thereof.
(c) The Optionee realizes that the purchase of the Shares will be a highly
speculative investment.
(d) The Optionee is able, without impairing the
Optionee's financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on the
investment.
(e) The Optionee acknowledges that he is aware that the Shares to be issued
to him by the Company pursuant to this Agreement have not been
registered under the Act, and--
(i) the Shares must be held indefinitely unless a transfer of them
is subsequently registered under the Act or an exemption from such
registration is available;
(ii) the share certificate(s) representing the Shares will be stamped
with the legends restricting transfer as specified in this
Agreement; and
(iii)the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends as described
in this Agreement.
(f) The Optionee understands that the Shares are restricted securities
within the meaning of Rule 144 promulgated under the Act; that the
exemption from registration under Rule 144 will not be available in any
event for at least one year from the date of sale of the Shares to the
Optionee, and even then will not be available unless (i) a public
trading market then exists for the Shares of the Company, (ii) adequate
current public information concerning the Company is then available to
the public, (iii) the Optionee has been the beneficial owner and the
Optionee has paid the full purchase price for the Shares at least one
year prior to the sale, and (iv) other terms and conditions of Rule 144
are complied with; and that any sale of the Shares may be made by it
only in limited amounts in accordance with such terms and conditions of
Rule 144, as amended from time to time.
(g) Without in any way limiting any of the other provisions of this
Agreement, Optionee's further agreement that the Optionee shall in no
event make any disposition of all or any portion of the Shares which
the Optionee is purchasing unless and until:
(i) there is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or
(ii) (A) the Optionee shall have notified the Company of
the proposed disposition and shall have furnished the Company with
a detailed statement of the circumstances surrounding the proposed
disposition, (B) the Optionee shall have furnished the Company
with an opinion of counsel to the effect that such disposition
will not require registration of such shares under the Act, and
(C) such opinion of counsel shall have been concurred in by
counsel for the Company and the Company shall have advised the
Optionee of such concurrence.
(h) The Optionee acknowledges that the Optionee has been furnished with a
copy of the Plan, has read the Plan and this Agreement, and understands
that all rights and obligations connected with this Agreement are set
forth in this Agreement and in the Plan.
7. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE.
In the event that the outstanding shares of Common Stock of the Company are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend (in excess of two
percent (2%)) or other change in the capital structure of the Company, then
appropriate adjustments shall be made by the Administrator to the number of
Shares subject to the unexercised portion of this Option and to the Exercise
Price per share, in order to preserve, as nearly as practical, but not to
increase, the benefits of the Optionee under this Option, in accordance with the
provisions of the Plan. No fractional share shall be issued under this Option or
upon any such adjustment.
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<PAGE>
8. NO CREATION OR ENLARGEMENT OF OPTIONEE'S RIGHTS TO CONTINUE IN ANY
CAPACITY.
The right of the Company and any Affiliated Company (as defined in the Plan) to
terminate at will the Optionee's services to the Company or any Affiliated
Company at any time (whether by dismissal, discharge or otherwise), with or
without cause, is specifically reserved. Nothing in this Agreement shall
diminish or impair in any manner whatsoever the right or power of the Company or
any Affiliated Company to terminate the Optionee's Continuous Service for any
reason, with or without cause.
9. RIGHTS AS STOCKHOLDER.
The Optionee (or transferee of this option by will or by the laws of descent and
distribution) shall have no rights as a stockholder with respect to any Shares
covered by this Option until the date of the issuance of a stock certificate or
certificates to him or her for such Shares, notwithstanding the exercise of this
Option.
10. "MARKET STAND-OFF" AGREEMENT.
Optionee agrees that, if requested by the Company or the managing underwriter of
any proposed public offering of the Company's securities, Optionee will not sell
or otherwise transfer or dispose of any Shares held by Optionee without the
prior written consent of the Company or such underwriter, as the case may be,
during such period of time, not to exceed 180 days following the effective date
of the registration statement filed by the Company with respect to such
offering, as the Company or the underwriter may specify.
11. RESTRICTIVE LEGENDS.
In addition to all other legends that the Company or its legal counsel consider
appropriate under applicable securities laws, the certificates representing any
Shares purchased pursuant to this Agreement shall bear substantially the
following legend:
-------------------------------------------------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (INCLUDING ANY
SECURITIES ISSUABLE ON EXERCISE OR WITH RESPECT TO ANY OTHER RIGHT
CONNECTED HEREWITH) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT
AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE
SECURITIES ACT OF 1933, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER. IN ADDITION ANY TRANSFEREE OR ISSUEE OF SUCH SECURITIES
MAY BE REQUIRED TO PROVIDE APPROPRIATE INVESTMENT REPRESENTATIONS
PRIOR TO ANY SUCH TRANSFER OR ISSUANCE.
-------------------------------------------------------------------
12. STOP-TRANSFER NOTICES.
Optionee understands and agrees that, in order to ensure compliance with the
restrictions referred to herein, the
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<PAGE>
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
13. INTERPRETATION.
This Option is granted pursuant to the terms of the Plan, and shall in all
respects be interpreted in accordance therewith. The Administrator shall
interpret and construe this Option and the Plan, and any action, decision,
interpretation or determination made in good faith by the Administrator shall be
final and binding on the Company and the Optionee. As used in this Agreement,
the term "Administrator" shall refer to the committee of the Board of Directors
of the Company appointed to administer the Plan, and if no such committee has
been appointed, the term Administrator shall mean the Board of Directors.
14. NOTICES.
Any notice, demand or request required or permitted to be given under this
Agreement shall be in writing and shall be deemed given when delivered
personally or three (3) days after being deposited in the United States mail, as
certified or registered mail, with postage prepaid, and addressed, if to the
Company, at its principal place of business, Attention: the Chief Financial
Officer, and if to the Optionee, at his or her most recent address as shown in
the records of the Company.
15. GOVERNING LAW.
The validity, construction, interpretation, and effect of this Option shall be
governed by and determined in accordance with the laws of the State of
California.
16. SEVERABILITY.
Should any provision or portion of this Agreement be held to be unenforceable or
invalid for any reason, the remaining provisions and portions of this Agreement
shall be unaffected by such holding.
17. ENTIRE AGREEMENT.
This Agreement and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior or
contemporaneous written or oral agreements and understandings of the parties,
either express or implied. The option evidenced hereby may, in the discretion of
the Company, also be evidenced by a certificate in such form as the Company may
approve, in which case such option certificate and this Agreement shall evidence
one and the same option, which shall be governed by and construed in accordance
with this Agreement and the Plan.
18. AMENDMENT.
The Board shall have full power and authority (subject to certain amendments
requiring stockholder approval pursuant to applicable laws or regulations) from
time to time to alter, amend, suspend or terminate the Plan in any or all
respects as the Board may deem advisable, and to alter this Agreement in ways
which shall not substantially adversely affect or impair the Optionee's rights
under this Agreement No such alteration, amendment, suspension or termination
shall be made which shall substantially affect or impair the rights of any
Optionee under an outstanding Option Agreement without such Optionee's consent.
The Board may alter or amend the Plan to comply with requirements under the Code
relating to Incentive Options or other types of options which give Optionees
more favorable tax treatment than that applicable to Options granted under the
Plan. Upon any such alteration or amendment, any outstanding Option granted
hereunder may, if the Administrator so determines and if permitted by applicable
law, be subject to the more favorable tax treatment afforded to an Optionee
pursuant to such terms and conditions.
7
<PAGE>
19. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument. Execution and delivery of this Agreement or any
notices, certificates or instruments contemplated herein by fax, facsimile, or
telecopier shall be deemed the execution and delivery of an originally signed
agreement, notice or instrument, as the case may be.
IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement as of
the date first above written.
eSynch Corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
"OPTIONEE"
----------------------------------
(Signature)
----------------------------------
(Type or print name)
8
<PAGE>
RSPA No.
ESYNCH CORPORATION
RESTRICTED STOCK PURCHASE AGREEMENT
UNDER 1999 STOCK INCENTIVE PLAN
This Restricted Stock Purchase Agreement is entered into as of , by and
between eSynch Corporation, a Delaware corporation (the "Company"), and
(the "Purchaser") pursuant to the Company's 1999 Stock Incentive Plan
(the "Plan").
R E C I T A L S:
A. Purchaser is an employee, officer, member of the Board of Directors, member
of the Board of Advisors, consultant, or service provider of the Company,
and in such capacity is key to the future success of the Company.
B. The Company desires to issue and the Purchaser desires to purchase Common
Stock of the Company on the terms and conditions hereinafter set forth.
AGREEMENT
1. PURCHASE AND SALE OF SHARES.
The Purchaser hereby agrees to purchase from the Company, and the Company hereby
agrees to sell to the Purchaser, ( ) shares of its Common Stock
(the "Shares") for a purchase price of ( ) per share. The Shares
shall be duly issued and a certificate or certificates for the Shares are
concurrently herewith being issued in the name of Purchaser. Purchaser shall
thereupon be a stockholder with respect to all of the Shares represented by such
certificate(s) and shall have all of the rights of a stockholder with respect to
all of the Shares, including the right to vote the Shares and to receive all
dividends and other distributions paid with respect to the Shares, subject to
the transfer restrictions provided in this Agreement. The purchase price is
payable as follows:
(a) by delivery of cash,
(b) by check;
(c) by delivery of a promissory note payable to the Company, bearing
interest from the date hereof and substantially in the form attached as
EXHIBIT A; or
(d) any combination of cash and promissory note, so long as the total
consideration equals the aggregate purchase price as set forth above.
In the event payment of any portion or all of the purchase price is to be
made by delivery of a promissory note, Purchaser shall deliver to the
Company a pledge of the Shares or other securities or assets which may be
listed in the Pledge Agreement dated the date hereof and substantially in
the form attached as Exhibit B. If the note is to be unsecured by the
Shares or other collateral, the Pledge Agreement shall so indicate.
The Purchaser's rights to acquire the Shares hereunder are nontransferable other
than
by will or the laws of descent and distribution, and Purchaser's
legal representative, his or her legatee, or the person who
acquired the Purchaser rights to acquire the Shares by reason of
the death of the Purchaser shall succeed to the Purchaser's rights
and obligations under this Agreement, and
the rights of the Purchaser under this Agreement also may be assigned and
transferred by the Purchaser for estate planning purposes to members of
the immediate family of the Purchaser, including for this purpose, but
not limited to, spouses, parents, descendants, brothers and sisters, or
to trusts established for the benefit
<PAGE>
of such persons.
2. INTERNAL REVENUE CODE Section 83(b) ELECTION.
Purchaser hereby agrees to file the election provided under Section 83(b) of the
Internal Revenue Code of 1986, as amended (herein called the "Code"), within
thirty (30) days of the transfer of the Shares, substantially in the form
attached as Exhibit C hereto and, if required, a comparable form of election
with the California Franchise Tax Board. The parties hereto acknowledge and
agree that the total fair market value of the Shares on the date hereof is per
Share, or an aggregate of for Shares.
3. COMPANY REPURCHASE OPTION.
In addition to all other restrictions imposed by this Agreement or applicable
caw, the Shares acquired by the Purchaser pursuant to this Agreement shall be
subject to the following restrictions and repurchase options.
3.1 VESTING SCHEDULE.
Vesting will be measured from (the "Vesting Measurement Date"). The Shares
acquired hereunder shall vest and become "Vested Shares" in accordance with the
following vesting schedule:
On or After:...............................................Shares Vested As To:
The vesting schedule of this Agreement would result, assuming Continuous Service
shall have theretofore not terminated, in One Hundred Percent (100%) of the
Restricted Shares being Vested Shares on the ________ ANNIVERSARY of the Vesting
Measurement Date. Shares which have not yet become vested are herein called
"Unvested Shares." In the event Purchaser ceases his Continuous Service (the
"Service Termination Date"), all vesting shall cease unless otherwise determined
by the Board of Directors. As used herein, the term "Continuous Service" has the
meaning given in the Plan.
In the event of a Change in Control or a Public Offering of the Company,
concurrent with and conditioned upon the effective date of the proposed
transaction, outstanding Unvested Shares shall, to the extent, and only to the
extent, that they would have vested as if the Vesting Measurement Date were
_____ years earlier than it actually had been, be accelerated and vest.
Notwithstanding the foregoing, the Administrator in its discretion may take one
or more of the following actions:
(i) provide for the purchase or exchange of this Option for an amount of
cash or other property having a value equal to the difference, or
spread, between
(x) the value of the cash or other property that the Optionee would
have received pursuant to such Change in Control transaction in
exchange for the shares issuable upon exercise of this Option had
this Option been exercised immediately prior to such Change in
Control transaction and
(y) the Exercise Price,
(ii) adjust the terms of this Option in a manner determined by the
Administrator to reflect the Change in Control,
(iii) cause this Option to be assumed, or new rights substituted therefor,
by another entity, through the continuance of the Plan and the
assumption of this Option, or the substitution for this Option of a
new option of comparable value covering shares of a successor
corporation, with appropriate adjustments as to the number and kind
of shares and Exercise Price, in which event the Plan and this
Option, or the new option substituted therefor, shall continue in the
manner and under the terms so provided, or
(iv) make such other provision as the Administrator may consider
equitable.
If the Administrator does not take any of the forgoing actions, this Option
shall terminate upon the consummation of the Change in Control and the
Administrator shall cause written notice of the proposed transaction to be given
to the Optionee not less than fifteen (15) days prior to the anticipated
effective date of the proposed transaction.
2
<PAGE>
3.2 COMPANY OPTION TO REPURCHASE SHARES FOLLOWING TERMINATION OF
CONTINUOUS SERVICE.
Concurrent with the Service Termination Date and for the period and under the
procedures set forth in Section 3.3 below, the Company shall have the option to
repurchase (the "Repurchase Option") all or any portion of the Purchaser's
Vested and Unvested Shares on the terms and subject to the limitations set forth
herein.
3.3 PROCEDURES FOR EXERCISE OF REPURCHASE OPTION.
For sixty (60) days after the Service Termination Date or other event described
in this Section 3, the Company may exercise its Repurchase Option by giving
Purchaser and/or any other person obligated to sell written notice of the number
of Shares which the Company desires to purchase. The Company shall pay for such
Shares by the delivery of its check in the aggregate amount of the repurchase
price determined pursuant to Section 3.5 below against delivery of the
certificate(s) representing the Shares.
3.4 DEPOSIT OF SHARES.
In aid of the repurchase provisions set forth herein, Purchaser shall,
immediately upon receipt of the certificate or certificates representing the
Shares, deposit the certificate or certificates, together with a stock power or
other instrument of transfer appropriately endorsed in blank, with the Company
as escrow holder of the certificate(s). In the event that the repurchase rights
are not exercised by the Company following any Service Termination Date, the
Company shall cause the certificate or certificates to be delivered into the
possession of Purchaser.
3.5 REPURCHASE PRICE.
The per share price for the Unvested Shares ("Repurchase Price") repurchased by
the Company pursuant to this Section 3 shall be an amount equal to the per share
purchase price, without interest, paid for the Shares by the Purchaser pursuant
to Section 1 above.
3.6 ASSIGNMENT OF RIGHTS.
The Company may assign its rights under this Section 3.
4. RECAPITALIZATION.
In the event that, as the result of a stock split or stock dividend or
combination of shares or any other change, or exchange for other securities, by
reclassification, or recapitalization of the Shares, Purchaser shall be entitled
to new or additional or different shares of stock or securities, the certificate
or certificates for, or other evidences of, such new or additional or different
shares or securities shall be imprinted with the legend(s) provided in Section
5, and shall be deposited with the Company as escrow holder under the terms and
conditions provided in Section 3.4 herein, together with a stock power or other
instrument or transfer appropriately endorsed. In such event, any and all new,
substituted or additional securities or other property (other than cash) to
which the Purchaser is entitled by reason of his ownership of the Shares shall
be immediately subject to the Repurchase Right and be included in the word
"Shares" for all purposes of the Repurchase Right with the same force and effect
as the Shares subject to the Repurchase Right under the terms of Section 3.
While the total Repurchase Price shall remain the same after each such event,
the per share price shall be appropriately adjusted. Shares acquired as provided
in this Section 4 shall be deemed to have been acquired at the time of
acquisition of the Shares on which such Shares were distributed.
5. RESTRICTIVE LEGENDS.
In addition to all other legends that the Company or its legal counsel consider
appropriate under applicable securities laws, the certificates representing any
Shares, whether Vested Shares or Unvested Shares, purchased pursuant to this
Agreement shall bear substantially the following legend:
3
<PAGE>
--------------------------------------------------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (INCLUDING ANY
SECURITIES ISSUABLE WITH RESPECT TO ANY RIGHT CONNECTED HEREWITH)
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE
BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT AS
MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND THE RULES
AND REGULATIONS PROMULGATED THEREUNDER. IN ADDITION ANY TRANSFEREE
OR ISSUEE OF SUCH SECURITIES MAY BE REQUIRED TO PROVIDE APPROPRIATE
INVESTMENT REPRESENTATIONS PRIOR TO ANY SUCH TRANSFER OR ISSUANCE.
--------------------------------------------------------------------
Until such time as the Company's Repurchase Rights terminate fully, the stock
certificates for the Shares purchased pursuant to this Agreement shall be
endorsed with substantially the following legend:
--------------------------------------------------------------------
ANY DISPOSITION OF ANY INTEREST IN THE SECURITIES REPRESENTED BY
THIS CERTIFICATE (INCLUDING ANY SECURITIES ISSUABLE WITH RESPECT TO
ANY RIGHT CONNECTED HEREWITH) IS SUBJECT TO RESTRICTIONS, AND THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REPURCHASE RIGHT CONTAINED IN A RESTRICTED STOCK PURCHASE AGREEMENT
BETWEEN THE REGISTERED HOLDER (OR HIS PREDECESSOR IN INTEREST) AND
THE CORPORATION. THESE SECURITIES ARE NOT TRANSFERABLE EXCEPT BY
WILL OR PURSUANT TO THE LAWS OF DESCENT AND DISTRIBUTION, OR AS
EXPRESSLY PERMITTED IN THE RESTRICTED STOCK PURCHASE AGREEMENT AND
THE PLAN AS DEFINED THEREIN. A COPY OF SUCH AGREEMENT AND SUCH PLAN
ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY, AND A COPY
THEREOF WILL BE MAILED TO ANY HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE WITHIN 5 DAYS OF RECEIPT BY THE CORPORATION OF A WRITTEN
REQUEST THEREFOR.
--------------------------------------------------------------------
6. STOP-TRANSFER NOTICES.
Purchaser understands and agrees that, in order to ensure compliance with the
restrictions referred to herein, the Company may issue appropriate
"stop-transfer" instructions to its transfer agent, if any, and that, if the
Company
4
<PAGE>
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The Purchaser warrants and represents to the Company as follows:
(a) The Purchaser is purchasing the Shares solely for the Purchaser's own
account for investment and not with a view to or for sale or
distribution of the Shares or any portion thereof and not with any
present intention of selling, offering to sell or otherwise disposing
of or distributing the Shares or any portion thereof. The Purchaser
also represents that the entire legal and beneficial interest of the
Shares the Purchaser is purchasing is being purchased for, and will be
held for the account of, the Purchaser only and neither in whole nor in
part for any other person.
(b) The Purchaser has heretofore discussed the Company and its plans,
operations and financial condition with its officers, has heretofore
received all such information as the Purchaser deems necessary and
appropriate to enable the Purchaser to evaluate the financial risk
inherent in making an investment in the Shares of the Company, and has
received satisfactory and complete information concerning the business
and financial condition of the Company in response to all inquiries in
respect thereof.
(c) The Purchaser realizes that the purchase of the Shares will be a highly
speculative investment.
(d) The Purchaser is able, without impairing the Purchaser's financial
condition, to hold the Shares for an indefinite period of time and to
suffer a complete loss on the investment.
(e) The Purchaser acknowledges that he is aware that the Shares to be
issued to him by the Company pursuant to this Agreement have not been
registered under the Act. The Purchaser hereby acknowledges that:
(i) the Shares must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption from such
registration is available;
(ii) the share certificate(s) representing the Shares will be stamped
with the legends restricting transfer as specified in this
Agreement; and
(iii)the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(f) The Purchaser understands that the Shares are restricted securities
within the meaning of Rule 144 promulgated under the Act; that the
exemption from registration under Rule 144 will not be available in any
event for at least one year from the date of sale of the Shares to the
Purchaser, and even then will not be available unless (i) a public
trading market then exists for the Shares of the Company, (ii) adequate
current public information concerning the Company is then available to
the public, (iii) the Purchaser has been the beneficial owner and the
Purchaser has paid the full purchase price for the Shares at least one
year prior to the sale, and (iv) other terms and conditions of Rule 144
are complied with; and that any sale of the Shares may be made by it
only in limited amounts in accordance with such terms and conditions of
Rule 144, as amended from time to time.
(g) Without in any way limiting any of the other provisions of this
Agreement, the Purchaser further agrees that the Purchaser shall in no
event make any disposition of all or any portion of the Shares which
the Purchaser is purchasing unless and until:
(i) there is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made
in accordance with said Registration Statement; or
(ii) (A) the Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed
disposition, (B) the Purchaser shall have furnished the Company
with an opinion of counsel to the effect that such disposition
will not require registration of such shares under the Act, and
(C) such opinion of counsel shall have been concurred in by
counsel for the Company and the Company shall have advised the
Purchaser of such concurrence.
(h) The Purchaser acknowledges that the Purchaser has been furnished with a
copy of the Plan, has read the Plan and this Agreement, and understands
that all rights and obligations connected with this Agreement are set
forth in this Agreement and in the Plan.
5
<PAGE>
8. UNPERMITTED TRANSFERS.
The Company shall not be required (a) to transfer on its books any Shares of the
Company which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (b) to treat as owner of such shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.
9. "MARKET STAND-OFF" AGREEMENT.
Purchaser agrees that, if requested by the Company or the managing underwriter
of any proposed Public Offering of the Company's securities, Purchaser will not
sell or otherwise transfer or dispose of any Shares held by Purchaser without
the prior written consent of the Company or such underwriter, as the case may
be, during such period of time, not to exceed 180 days following the effective
date of the registration statement filed by the Company with respect to such
Public Offering, as the Company or the underwriter may specify.
10. ENTIRE AGREEMENT.
This Agreement and the Plan constitutes the entire agreement between the parties
pertaining to its subject matter and supersedes all contemporaneous written or
oral agreements and understandings of the parties, either express or implied.
The parties agree to execute such further instruments and to take such further
action as may reasonably be necessary to carry out the intent of this Agreement.
11. NO CREATION OR ENLARGEMENT OF PARTICIPANT'S RIGHTS TO CONTINUE IN ANY
CAPACITY.
The right of the Company and any Affiliated Company (as defined in the Plan) to
terminate at will the Purchaser's services to the Company or any Affiliated
Company at any time (whether by dismissal, discharge or otherwise), with or
without cause, is specifically reserved. Nothing in this Agreement shall
diminish or impair in any manner whatsoever the right or power of the Company or
any Affiliated Company to terminate the Purchaser's Continuous Service for any
reason, with or without cause.
12. NOTICES.
Any notice required or permitted hereunder shall be given in writing and shall
be deemed effectively given upon personal delivery or upon deposit in the United
States Post Office, by certified mail with postage and fees prepaid, addressed
to the other party at the address hereinafter shown below his or its signature
or at such other address as such party may designate by ten days' advance
written notice to the other party.
13. SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of the successors and assigns of the
Company and be binding upon the Purchaser and his heirs, executors,
administrators, successors and assigns.
14. GOVERNING LAW.
This Agreement shall be governed by and interpreted under the laws of the State
of California.
15. INTERPRETATION.
This Agreement is entered into pursuant to the terms of the Plan, and shall in
all respects be interpreted in accordance therewith. The Administrator shall
interpret and construe this Agreement and the Plan, and any action, decision,
interpretation or determination made in good faith by the Administrator shall be
final and binding on the
6
<PAGE>
Company and the Purchaser. As used in this Agreement, the term "Administrator"
shall refer to the committee of the Board of Directors of the Company appointed
to administer the Plan, and if no such committee has been appointed, the term
Administrator shall mean the Board of Directors.
16. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument. Execution and delivery of this Agreement or any
notices, certificates or instruments contemplated herein by fax, facsimile, or
telecopier shall be deemed the execution and delivery of an originally signed
agreement, notice or instrument, as the case may be.
17. SEVERABILITY.
Should any provision or portion of this Agreement be held to be unenforceable or
invalid for any reason, the remaining provisions and portions of this Agreement
shall be unaffected by such holding.
18. AMENDMENT.
The Board shall have full power and authority (subject to certain amendments
requiring stockholder approval pursuant to applicable laws or regulations) from
time to time to alter, amend, suspend or terminate the Plan in any or all
respects as the Board may deem advisable, and to alter this Agreement in ways
which shall not substantially adversely affect or impair the Purchaser's rights
under this Agreement No such alteration, amendment, suspension or termination
shall be made which shall substantially affect or impair the rights of any
Purchaser under an outstanding Restricted Stock Purchase Agreement without such
purchaser's consent.
IN WITNESS WHEREOF, the parties have executed this Restricted Stock Purchase
Agreement as of the day and year first above written.
eSynch Corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
PURCHASER:
----------------------------------
(SIGNATURE)
----------------------------------
(TYPE OR PRINT NAME)
Address:
--------------------------
--------------------------
7
<PAGE>
CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by its provisions, my spouse agrees, among other
things, to the granting of rights to repurchase and to the imposition of certain
restrictions on the transfer of the shares of eSynch Corporation, a Delaware
corporation (the "Company"), including my community interest therein (if any),
which rights and restrictions may survive my spouse's death. I hereby consent to
such rights and restrictions and approve of the provisions of the Agreement.
I further agree that in the event of a dissolution of the marriage between
myself and my spouse, in connection with which I secure or am awarded shares of
the common stock of the Company, or any interest therein through property
settlement agreement or otherwise, I shall receive and hold said shares subject
to all the provisions and restrictions contained in the foregoing Agreement,
including any option of a stockholder or the Company to purchase such shares or
interest from me.
I also acknowledge that I have been advised to obtain independent counsel to
represent my interests with respect to this Agreement but that I have declined
to do so and I hereby expressly waive my right to such independent counsel.
Date:
-----------------------
Signature:
--------------------------
Print Name:
-------------------------
Spouse of
8
<PAGE>
EXHIBIT A
TO RESTRICTED STOCK PURCHASE AGREEMENT
PROMISSORY NOTE
(_____ YEAR, [_____]%* Interest)
___________________, ____ ____________, California
For value received, the undersigned promises to pay eSynch
Corporation , a California Corporation (the "Company"), at the address of its
principal office, the sum of Dollars __________________ ($_____) in full by
or before the ________ anniversary date of the date hereof, together with
interest thereon as hereinafter provided.
The undersigned shall have the right to prepay said principal amount at any time
in whole or in part without penalty. Simple annual interest at the rate (1) of
____________ percent (_____%) per annum on unpaid principal shall be paid
annually on each anniversary of the date hereof and upon each prepayment of
principal, if any.
The entire outstanding principal and interest shall be due and payable if any
one or more of the following events shall have occurred:
(a) The making by the undersigned of any assignment for the benefit of
creditors or the filing by or against the undersigned of any petition
in bankruptcy if such proceeding not be discharged within ninety (90)
days of any such making or filing.
(b) The occurrence of any termination of Continuous Service as set forth in
the Restricted Stock Purchase Agreement of even date herewith between
the undersigned and the Company.
If any installment of principal and/or interest is not paid when due, the holder
hereof may, at its option, declare the entire amount of this note immediately
due and payable.
All payments hereon shall be credited first to accrued but unpaid interest, and
the balance, if any, shall be credited to principal.
If legal action is instituted for the collection of this note, the undersigned
promises to pay such sum as the Court may adjudge reasonable as attorneys' fees.
This note is given pursuant to that certain Restricted Stock Purchase Agreement
of even date herewith, between the Company and the undersigned and is subject to
all of the terms, rights and remedies set forth therein. This note is secured by
a Pledge Agreement of even date herewith between the Company and the
undersigned.
---------------------------------------
(1) A fixed rate of interest is to be determined from time to time by action of
the Board of Directors in accordance with prevailing rates and the Internal
Revenue Service prescribed interest rules.
<PAGE>
EXHIBIT B
TO RESTRICTED STOCK PURCHASE AGREEMENT
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement') is executed as of this _____ day of
____________, ____, between eSynch Corporation, a Delaware corporation (the
"Company"), and ("Purchaser").
WITNESSETH:
For the considerations and undertakings set forth herein, the parties do hereby
agree as follows:
1. To secure payment to the Company of a promissory note ("Note") in the
face amount of _______________________ Dollars ($__________), and
extensions or renewals thereof, which was executed concurrently with
the execution of this Pledge Agreement pursuant to a Restricted Stock
Purchase Agreement of even date herewith between the Company and
Purchaser, Purchaser hereby assigns and grants to the Company a
security interest in ___________________ (______) shares ("Shares") of
the Common Stock of the Company acquired under the Restricted Stock
Purchase Agreement, together with securities or other collateral (if
any) other than such Shares, all described as follows:
Issuer:
Certificate Number:
-------------------------
Number of Shares:
---------------------------
Registered Owner:
---------------------------
Purchaser does hereby deposit with the Company, as pledge holder, such
certificates, together with duly executed stock transfer powers.
2. Subject to any obligations of Purchaser under the Restricted Stock
Purchase Agreement, the Company agrees that within a reasonable time
after all or any portion of the Note is paid by Purchaser, the Company
shall release and deliver to Purchaser the number of Shares held
hereunder for which such payment was received. The Company, in its
discretion, may release portions of the Shares upon periodic principal
payments or deposit of other or additional security under the Note. All
Shares released and delivered to Purchaser shall be free and clear of
the restrictions of this Pledge Agreement.
3. Unless and until Purchaser defaults in his performance under the terms
of the Note, the terms of this Pledge Agreement and/or the terms of the
Restricted Stock Purchase Agreement, the Shares held by the Company at
any time under this Pledge Agreement shall remain registered in the
name of Purchaser on the records of the Company, and Purchaser may vote
the Shares on all corporate questions (if the same shall be entitled to
voting rights) and shall be entitled to receive all dividends and other
amounts accruing as a result of his ownership of the Shares.
4. In the event the Purchaser defaults in the performance of any of the
terms of the Note, this Pledge Agreement or the Restricted Stock
Purchase Agreement, the Company may exercise any and all rights which
it may have under the California Uniform Commercial Code or any other
applicable statute, case, ruling regulation or law; subject, however,
to all permits, orders, consents, rules and regulations of the
California Commissioner of Corporations and the Securities and Exchange
Commission and the Federal Reserve Board relating hereto, to which
Purchaser agrees to be bound.
5. If during the term of this Pledge Agreement the Company should become a
party to any merger, consolidation or other reorganization, this Pledge
Agreement shall be adjusted so as to apply to the securities to which a
holder of the Shares subject to this Pledge Agreement would have been
entitled upon such merger, consolidation or reorganization; and, if
during the term of this Pledge Agreement the Company shall be dissolved
or its existence otherwise terminated, then that portion of the assets
and consideration to which a holder of the Shares subject to this
Pledge Agreement would have been entitled in such transaction shall be
the subject matter of this Pledge Agreement for the remainder of its
term. This shall in no way limit the right of the Company to repurchase
shares under the Restricted Stock Purchase
<PAGE>
Agreement.
6. This Pledge Agreement shall inure to the benefit of and be binding upon
the heirs, executors and administrators of the parties hereto.
7. The rights, powers and remedies given to the Company by this Agreement
shall be in addition to all rights, powers and remedies given to the
Company under the Restricted Stock Purchase Agreement or any statute or
rule of law. Any forbearance or failure or delay by the Company in
exercising any right, power or remedy hereunder shall not be deemed to
be a waiver of such right, power or remedy, nor shall any single or
partial exercise of any right, power or remedy preclude the further
exercise thereof.
8. The Board of Directors may demand and receive payment or additional
security if for any reason the collateral hereunder is insufficient to
meet minimum requirements established under federal or state securities
or banking regulations or as may be necessary to bring the Note and the
security into compliance with any such law or regulations. Any failure
of Purchaser to meet any such demand shall be deemed a default under
this Pledge Agreement and under the note secured hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
PURCHASER
-------------------------------------------
Address:
-------------------------------------------
-------------------------------------------
eSynch Corporation
By:
----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
TO RESTRICTED STOCK PURCHASE AGREEMENT
-----------, ------
Internal Revenue Service Center
5045 East Butler Avenue
Fresno, California 93888
--------------------------------------------------------------
Re: Election Under Section 83(b) of the Internal Revenue
Code
--------------------------------------------------------------
Dear Sir or Madam:
The undersigned performed services in connection with which property was
transferred to the undersigned that, at the time of transfer [NOTE: if the
Shares were acquired upon exercise of an "incentive stock option" add
- ---pursuant to the exercise of an "incentive stock option" as defined in Section
422 of the Internal Revenue Code], was not transferable by the undersigned and
was subject to a substantial risk of forfeiture. The undersigned hereby makes
this election pursuant to Section 83(b) of the Internal Revenue Code.
In connection with this election, the undersigned hereby provides you with the
following information:
1. The undersigned's name, address, social security number, and the
taxable year of the person who performed the services are as follows:
Name and Address:
------------------------------------
------------------------------------
------------------------------------
Social Security No.:
---------------------------------
Taxable Year: Calendar Year
2. A description of the property with respect to which the election is
being made:
shares of Common Stock (the "Shares") of eSynch
Corporation, a Delaware corporation (the "Company").
3. The date on which the property was transferred: ________________
4. A description of the nature of the restrictions to which the property
is subject: The Company may reacquire all or any part of the Shares from the
undersigned in accordance with a repurchase schedule set forth in a Restricted
Stock Purchase Agreement (the "Agreement") between the undersigned and the
Company. In the event the undersigned should cease to be a service provider to
the Company at any time, the Company may repurchase vested Shares at the then
fair market value of the Shares, and unvested Shares may be repurchased by the
Company at the original price paid by the undersigned. The Shares acquired under
the Agreement shall vest and become "Vested Shares" from and after
(the "Vesting Measurement Date") in accordance with the following vesting
schedule:
On or After:...............................................Shares Vested As To:
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Shares which have not yet become vested are herein called "Unvested Shares." In
the event Purchaser ceases his employment or service provider status with the
Company, all vesting shall cease unless otherwise determined by the Board of
Directors.
6. The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) of the property with respect to which the election is
being made:
per share, which equals an aggregate fair market value of .
7. The amount paid for such property:
per share for , or an aggregate amount paid of .
There are enclosed herewith two copies of this written statement for filing.
Please stamp the third copy enclosed herewith as having been received and return
it to the undersigned in the enclosed, self-addressed, postage-paid envelope.
The undersigned has also submitted a copy of this statement to the person for
whom the services were performed.
If you have any questions or comments, or if any additional information is
required, please do not hesitate to contact:
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Very truly yours,
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PROXY PROXY
ESYNCH CORPORATION
15502 MOSHER AVENUE, TUSTIN, CALIFORNIA 92780
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas Hemingway and T. Richard Hutt as
Proxies, each with full power to appoint substitutes, and hereby authorizes them
or either of them to represent and to vote as designated below, all the shares
of Common Stock of eSynch Corporation held of record by the undersigned as of
September 27, 1999, at the Annual Meeting of Stockholders to be held will be
held at the principal executive office of the Company, 15502 Mosher Avenue,
Tustin, California, at 10:00 a.m., Pacific Time, on Monday, November 15, 1999,
and any adjournments or postponements thereof, and hereby ratifies all that said
attorneys and proxies may do by virtue hereof.
PLEASE MARK VOTE IN BRACKET IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
For All
1. ELECTION OF DIRECTORS For Withheld Except
FOR ALL EXCEPT NOMINEES CROSSED OUT. [ ] [ ] [ ]
Thomas Hemingway Robert Orbach
T. Richard Hutt David Lyons
Norton Garfinkle James H. Budd
Donald C. Watters, Jr.
2. APPROVAL OF THE INCREASE IN THE For Against Abstain
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK [ ] [ ] [ ]
3. APPROVAL OF THE 1999 STOCK INCENTIVE PLAN For Against Abstain
[ ] [ ] [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS ONE, TWO AND THREE.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO OTHER
BUSINESS WHICH PROPERLY MAY COME BEFORE THE MEETING, OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting.
PLEASE READ, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
Dated: , 1999
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Signature
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Signature
Please sign exactly as name appears at
left. When shares are held by joint
tenants or more than one person, all
owners should sign. When signing as
attorney, as executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
