eSYNCH CORPORATION.
(a Delaware Corporation)
29 Hubble
Irvine, California 92618
(Principle Executive Offices of the Company)
INFORMATION STATEMENT
DATE FIRST MAILED TO SHAREHOLDERS OF RECORD:
February 15, 2002
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
INTRODUCTION
This Information Statement is being furnished to the shareholders of record of
eSynch Corporation, a Delaware corporation (the "Company"), as of January 14,
2002, pursuant to the requirements of Regulation 14C under the Securities
Exchange Act 1934, as amended. Certain shareholders having more than fifty
percent (50%)of the total voting shares of the Company have provided their
written consent to the proposed actions as set forth within this Information
Statement, which actions shall take effect no sooner than 14 calendar days
following the mailing of the herein Information Statement. The certain
shareholder's written consents cover the following shareholder actions:
(i) an Action by Written Consent dated January 30, 2002, of the Stockholders
of the Company on the amendment to the Articles of Incorporation of the
company, as amended, to increase the number of common shares authorized for
issuance from 50,000,000 to 250,000,000;
A copy of the Written Consents are attached as Exhibit "A" to this Information
Statement.
Management of the Company is utilizing the Written Consents in order to save
expense and time.
Certain shareholders of the Company having more than fifty percent (50%) of the
issued and outstanding shares of the Company's common stock (the "Common Stock")
and Series J Preferred stock (Series J Stock) have provided written consents to
(1) increase the number of shares authorized for issuance. See "Vote Required";
"Other Information Regarding the Company - Security Ownership of Certain
Beneficial Owners and Management"; and "Directors and Executive Officers". See
"Matters Set Forth in the Written Consents".
Shareholders of record at the close of business on January 14, 2002 are being
furnished copies of this Information Statement. The principal executive office
of the Company is located at 29 Hubble, Irvine, California 92618, and the
Company's telephone number is (949) 727-3233.
MATTERS SET FORTH IN THE WRITTEN CONSENTS
The Written Consents contain:
(i) A Resolution dated January 30, 2002, to amend the Articles of Incorporation
of the Company, as amended, to increase the number of common shares authorized
for issuance from 50,000,000 to 250,000,000.
Shareholders representing 56.96% of the votes of the currently issued and
outstanding shares of Common Stock and Series J Preferred Stock, have
executed the Written Consents, thereby ensuring the increase of the number
of shares authorized for issuance. See "Other Information Regarding The Company
- Security Ownership of Certain Beneficial Owners and Management."
Set forth below is a table of the stockholders who have executed the Written
Consents and, to the best of the Company's knowledge, the number of shares of
Common Stock beneficially owned by such stockholders as of January 14, 2002:
# of Common Votes/ Common
----------- -------------
Common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shr.s Shr. Common Votes % of Total Votes
---------------------------------------------------------------- ----------- ------------- ------------ -----------------
Total Common Issued and Outstanding Votes Possible . . . . . . . 49,747,005
Votes by Written Consent For Increase in Issue-able Common Stock
Beneficial Owner
----------------------------------------------------------------
LightLine Limited. . . . . . . . . . . . . . . . . . . . . . . . 9,000,000 1 9,000,000 12.15%
Manchester Asset Management. . . . . . . . . . . . . . . . . . . 1,627,438 1 1,627,438 2.20%
Gilston Corporation. . . . . . . . . . . . . . . . . . . . . . . 1,627,438 1 1,627,438 2.20%
John Vasquez . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600,000 1 1,600,000 2.16%
David Lyons. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1 1,000,000 1.35%
Tom Hemingway. . . . . . . . . . . . . . . . . . . . . . . . . . 946,438 1 946,438 1.28%
Dick Hutt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,032,806 1 1,032,806 1.39%
Jim Budd . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,018,300 1 1,018,300 1.37%
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,852,420 1 17,852,420 24.09%
---------------------------------------------------------------- ----------- -------------
# of Pref Votes/Pref Number of Pref
---------- ---------- --------------
Preferred Series J. . . . . . . . . . . . . . . . . . . . . . . . . Shr.s . Shr.* . Votes % of Total Votes
----------------------------------------------------------------- ---------- ---------- -------------- -----------------
Total Series J Preferred Issued & Outstanding Votes Possible. . . 24,352,209
Votes by Written Consent For Increase in Issue-able Common Stock
Beneficial Owner
Manchester Asset Management . . . . . . . . . . . . . . . . . . . 32 366,198.63 11,718,356 15.81%
Gilston Corporation . . . . . . . . . . . . . . . . . . . . . . . 5 366,198.63 1,830,993 2.47%
Triton Private Equity Fund L.P. . . . . . . . . . . . . . . . . . 17 366,198.63 6,225,377 8.40%
Intercoastal Financial Services . . . . . . . . . . . . . . . . . 12.5 366,198.63 4,577,483 6.18%
-----------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66.5 366,198.63 24,352,209 32.86%
----------------------------------------------------------------- ----------
Total Votes Possible (Both Common and Series J Preferred) . . . . . . . . . . . . . . . . . . 74,099,214
Total Votes by Written Consent For Increase in Issue-able Common Stock 42,204,629 56.96%
* Please note that the number of votes per share (366,199) granted, of Series J
preferred stock is based on the number of shares of Common (366,199) that each
share of Series J preferred stock could be converted to on the date of record,
January 14, 2002.
(1) Messrs. Hemingway, Lyons, Hutt, and Budd are officers and Directors of
eSynch Corporation.
VOTE REQUIRED
Counterpart copies of the Written Consents evidencing a majority of the
outstanding shares of Common Stock, must be received by the Company within sixty
days of the earliest dated consent delivered by the Company in order to
effectuate the matters set forth therein. As of January 30, 2002 (the dates of
the Written Consents), 49,747,005 shares of Common Stock were issued
and outstanding with votes of 49,747,005 and 66.5 Series J Preferred shares were
issued and outstanding with votes of 24,352,209 totaling 74,099,214 votes thus,
Stockholders representing no less than 37,049,607 votes from Common Stock and
Series J Preferred were required to execute the Written Consents to effect the
matter set forth therein. As discussed under "Matters Set Forth in the
Written Consents," shareholders owning approximately 42,204,629 votes, or 56.96%
of the votes of Common Stock and Series J Preferred, have executed the Written
Consents and delivered them to the Company as required by law within the 60
day period, thereby ensuring the increase of the number of shares authorized
for issuance.
OTHER INFORMATION REGARDING THE COMPANY
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth to the best of the Company's knowledge the number
of shares beneficially owned as of January 14, 2002, by (i) each of the
current Executive Officers and Directors of the Company (ii) each person
(including any "group" as that term is defined in Section 13(d)(3) of the
Exchange Act) who beneficially owns more than 5% of the Common Stock, and
(iii) all current Directors and officers of the Company as a group. (1)
SHARES BENEFICIALLY OWNED
-------------------------
COMMON PREFERRED
------ ---------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------ ------ ------- ------ -------
Thomas Hemingway(1) 1,900,333 10.9% 0 0%
James H. Budd(2) 1,405,300 8.1% 0 0%
T. Richard Hutt(3) 1,409,738 8.1% 0 0%
David Lyons(4) 1,036,700 0.2% 0 0%
Robert Orbach(5) 32,684 0.2% 0 0%
All Directors and Executive Officers
as a group (5 Persons)(8) 5,784,755 11.6% 0 0%
(1) Includes 842,500 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable. Includes 111,395 shares owned by Ms. Detra Mauro
Hemingway, the spouse of Mr. Hemingway.
(2) Includes 387,000 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(3) Includes 376,932 shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(4) Includes 36,700 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(5) Includes 25,000 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
DIRECTORS AND EXECUTIVE OFFICERS
NAME POSITION(S) WITH THE COMPANY AGE
----------------------------------------------------------------------
Thomas Hemingway Chairman and Chief Executive Officer 44
David Lyons Director and President 51
T. Richard Hutt Director, Vice President and 61
Secretary/Treasurer
James H. Budd Director and Vice President 59
Robert Orbach(1) Director 48
Thomas Hemingway
-----------------
On August 5, 1998, Mr. Hemingway became the Chief Executive Officer and Chairman
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 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.
David Lyons
------------
Mr. Lyons was appointed to the Board of Directors in January 2000 and was
appointed President in February 2001. From 1997 into 2000, Mr. Lyons served as
Vice President - Acquisitions, Eastern Region, for Expanets, Inc., a start-up
consolidation venture financed by Northwestern Corp. (NYSE:NOR) to acquire
telecommunications voice and data companies. From 1996 to 1997, Mr. Lyons was
employed by Extel Communications, Inc., a telecommunications installation and
maintenance company, as Executive Vice President, Acquisitions. From 1992 to
1996, Mr. Lyons served as a principal in the Sherman Investment Group, Inc., a
Merchant Banking Company which invests in and provides managerial assistance to
medium sized public and private companies. Prior to 1996, Mr. Lyons was Chairman
and CEO of Amnex, Inc., an operator service and long distance company. Mr. Lyons
previously served as a member of Board of Directors from October 27, 1998 to
November 15, 1999.
James H. Budd
---------------
Mr. Budd was elected to the Board of Directors on October 27, 1998. 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 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 /
ssociative 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 Hutt
-----------------
Mr. Hutt was elected to the Board of Directors on October 27, 1998. 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.
Robert Orbach
--------------
Mr. Orbach was appointed to the Board of Directors in January, 2000. Mr. Orbach
is the founder and president of Orbach, Inc., providing high level consulting
and advisory services for PC hardware and software companies, regarding
acquisitions and strategic partnering as well as marketing, and has served in
that capacity since May 1990. In addition, Mr. Orbach is on the Board of
Directors of Midisoft and In10city. Mr. Orbach previously served as a member of
Board of Directors from October 27, 1998 to November 15, 1999.
EXECUTIVE COMPENSATION.
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, 2000, 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, 2000 or for the
shorter period during which the Named Officer was compensated by the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ --------------------- -------
NAME AND RESTRICTED SECURITIES
PRINCIPAL OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(S) OPTIONS(#) PAYOUTS COMPENSATION
------------------- ---- ------ ----- --------------- ---------- ----------- ------- ------------
Thomas C. Hemingway 2000 $146,250 300,000 $300,000
CEO 1999 $150,000 250,000 $350,000
1998 $88,789 292,500 -
James H. Budd 2000 $135,417 270,000 -
Vice President 1999 $115,000 - -
1998 $52,868 117,000 -
T. Richard Hutt 2000 $124,745 270,000 -
Vice President 1999 $115,000 - -
1998 $64,281 117,000 -
Robert B. Way 2000 $111,271 180,000 -
Vice President 1999 $82,500 250,000 $234,500
Donald C. Watters 2000 $140,410 300,000 $582,571
Former President 1999 $112,500 700,000 $530,000
David P. Noyes 2000 $127,962 240,000 $977,819
Former CFO 1999 $116,894 500,000 $337,067
(1) Perquisite 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.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has an employment agreement with each Executive Officer listed
below. The terms of those employment agreements are summarized in the following
table:
CURRENT BASE OPTION OTHER BENEFITS DUE ON
NAME COMPENSATION GRANT BENEFITS TERMINATION
------------------- ------------ -------- ------------- ----------------------------------
Thomas C. Hemingway $150,000 250,000 Any If he is terminated by the Company
CEO at $1.00 benefits without cause, he is paid an amount
each, for other equal to 12 months' base salary and
fully officers, all other benefits and perquisites
vested and 3 weeks continue for 12 months and
vacation the Company will be
per 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 options held by him vest and
per 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, all
officers other benefits and perquisites
and 2 weeks continue for 3 months and all stock
vacation options held by him vest and
per year become exercisable.
Robert Way $130,000 250,000 Any If he is terminated by the Company
Vice President at $1.00 benefits without cause, he is paid an amount
each, fully for other equal to 3 months' base salary and
vested officers, all other benefits and perquisites
and 3 weeks continue for 3 months and all stock
vacation options held by him vest and become
per year exercisable.
OPTION GRANTS DURING FISCAL 2000
The following table sets forth information on all grants of stock options during
the fiscal year ended December 31, 2000, to Named Officers:
OPTION GRANTS TABLE
OPTION GRANTS IN FISCAL YEAR 2000
INDIVIDUAL GRANTS
--------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR(1) ($/SHARE) DATE(2)
------------------------------------------------------------------------
Thomas C. Hemingway 300,000 12.2% $3.63 Jul 2010
James H. Budd 270,000 11.0% $3.63 Jul 2010
T. Richard Hutt 270,000 11.0% $3.63 Jul 2010
Robert B. Way 180,000 7.3% $3.63 Jul 2010
Donald C. Watters 300,000 12.2% $3.63 Jul 2010
David P. Noyes 240,000 9.7% $3.63 Jul 2010
(1) Options to purchase an aggregate of 2,465,000 shares of common stock were
granted by the Company to employees, including the Named Officers, during the
fiscal year ended December 31, 2000. Subsequently, a total of 525,000 options
expired or were voided.
(2) Options held by the Named Officers have a term of 5 and 10 years, subject to
earlier termination in certain events related to termination of employment.
18
OPTION EXERCISES IN FISCAL 2000 AND YEAR-END OPTION VALUES
The following table sets forth information concerning stock options which were
exercised during, or held at the end of, fiscal 2000 by the Named Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES VALUE AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
ACQUIRED ON REALIZED -----------------------------------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------------------------------------------------------------------------
Thomas C. Hemingway - - 842,500 - $17,550 -
James H. Budd - - 387,000 - $7,020 -
T. Richard Hutt 9,415 $55,978 376,932 - $6,416 -
Robert B. Way - - 449,427 - $ - -
Donald C. Watters 639,655 $582,571 348,568 - $11,112 -
David P. Noyes 441,379 $977,819 240,000 - $ - -
(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 December 31, 2000 as reported on the OTC Bulletin Board, which was $1.00,
minus the exercise price.
COMPENSATION OF DIRECTORS
The Company's non-employee Directors are not currently compensated for
attendance at Board of Directors meetings. Non-employee directors have been
granted, on an ad hoc basis, stock options upon being appointed to the Board.
The Company granted to each of the three non-employee directors options to
purchase 25,000 shares of common stock in the year-ended December 31, 2000. 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.
EMPLOYEE COMPENSATION
We do not yet have a compensation committee that approves or offers
recommendations on compensation for our employees.
LEGAL PROCEEDINGS
We are involved in several lawsuits in the normal course of business and all
amounts for exposure to these lawsuits have been recorded in our financial
statements except as noted below.
On May 18, 1999, a complaint was filed against the Company in the Sonoma County
Superior Court, State of California. The complaint alleged that we owed, based
on a theory of successor liability, $84,801.40 for damages resulting from a
lease between the plaintiff and SoftKat, Inc., and a judgment obtained against
SoftKat for unpaid rent. We filed an answer denying that we were obligated to
pay any of these claims and we opposed any attempt to impose successor
liability. At trial, the court rendered a judgment, subject to appeal, in favor
of eSynch. The appeal period has not yet expired.
In September, 1999, a lawsuit was filed by C-Group in United States District
Court, District of Maryland, against Intermark seeking $99,110 for goods that
were claimed to be purchased by Intermark. In October, 1999, the plaintiff
amended the complaint and reduced the amount it is seeking to $81,326. Discovery
proceedings are currently underway and the Company intends to vigorously defend
its position.
In June 2000, the Company was named as a co-defendant along with its landlord,
Bixby Land Company, in a lawsuit filed by Terry Murphy, a former employee, in
California Superior Court, County of Orange, claiming unspecified damages
resulting from an accident that occurred at the Company's leased offices.
Subsequently, Bixby filed a cross-complaint against the Company related to the
lawsuit seeking indemnity, equitable contribution and declaratory relief. The
Company`s insurance carriers are defending the claims against the Company.
On January 11, 2001, the Company was named as defendant in a lawsuit filed by
Post Modern Edit, LLC, in California Superior Court, County of Los Angeles,
seeking damages of not less than $50,000 for breach of a confidentiality
agreement, breach of contract, and other claims related to a proposed but
unconsummated acquisition by the Company of Post Modern Edit. The Company's
outside litigation counsel is reviewing the lawsuit and an appropriate response
will be timely filed.
CERTAIN TRANSACTIONS
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 $2.11 per share.
On September 30, 1999, the Company acquired Oxford Media Corporation, a Delaware
corporation, for 450,000 shares of the Company's Common Stock. Oxford Media
Corporation was controlled by Mr. Norton Garfinkle. In addition, for consulting
services and services as a director of the Company, Mr. Garfinkle received
warrants to purchase 450,000 shares of Common Stock.
In March 2000, the Company filed a Registration Statement on Form S-8 for the
purpose of registering a Reoffer Prospectus associated with certain Stock Option
Agreements, Warrants, and Consulting Agreements. Certain executive Officers and
Directors plus two unrelated parties were named as Selling Stockholders. The
Company registered 505,700 shares, 300,000 shares and 18,000 shares related to
Stock Options, Warrants, and Consulting Agreements, respectively.
On March 1, 2000, the Company entered into a License Agreement with Garfinkle
Limited Partnership II, of which Norton Garfinkle, a director and shareholder of
the Company, is a Partner. The License Agreement grants the Company the use of
two patents for use in the video-on-demand segment of the Company's business. As
consideration for the grant of license, Garfinkle Limited Partnership II was
given a warrant for 950,000 shares of the Company's common stock plus the
Company will pay a royalty of five percent of the gross revenue paid by end
users as a result of the use of the Patents.
On June 14, 2000, the Company borrowed $450,000 from Norton Garfinkle, a
director and shareholder, evidenced by an unsecured note bearing interest at
eight percent and due on demand. On January 10, 2001, the Company renegotiated
the terms of the terms of the note requiring Mr. Garfinkle to deliver to the
Company a written notice at least 20 days prior to demand for repayment. In
consideration of the change in payment terms, the Company issued to Mr.
Garfinkle a warrant to purchase 250,000 shares of the Company's common stock.
On August 28, 2000, the Company loaned Thomas Hemingway, Chairman and Chief
Executive Officer, and a director of the Company, the sum of $500,000 evidenced
by a promissory note bearing interest at ten percent per annum, due and payable
on February 24, 2001. As of the date hereof, $300,000 plus accrued interest
remains outstanding, of which $300,000 was recorded in the Company's accounting
records as income to Mr. Hemingway for the year-ended December 31, 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors, and
persons who own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the SEC and NASDAQ.
These persons are required by regulation of the SEC to furnish us with copies of
all Section 16(a) forms they file.
The Company has been registered pursuant to Section 12 of the Securities
Exchange Act of 1934 since September 23, 1990 and, by reason thereof, all
officers, directors and 10% or more shareholders of the Company became obligated
to file Forms 3, 4 and 5, describing the ownership of securities in the Company
and any changes thereto, as they may apply, since that date. To the Company's
knowledge, based solely upon a review of the copies of such reports furnished to
the Company and representations made to the Company, no other reports were
required, during and with respect to the fiscal year ended December 31, 2000 and
all Reporting Persons have complied with all filing requirements applicable to
them
AUTHORIZATION OF INCREASE OF SHARES AUTHORIZED FOR ISSUANCE
INTRODUCTION
Under the resolution passed by a majority of the shareholders, the Company
agrees to amend the Corporation's Certificate of Incorporation, as amended, to
increase the aggregate number of shares authorized for issuance from 50,000,000
shares to 400,000,000 shares.
REASONS FOR APPROVING THE INCREASE OF SHARES AUTHORIZED FOR ISSUANCE
The purpose for the increase of shares authorized for issuance the Corporation
is the following: The Company is competing in a dynamic and rapidly evolving
technology marketplace where the competitive pressures are very high and
companies with access to capital and with the flexibility to acquire emerging
technologies or synergistic businesses have greater opportunities for corporate
growth. To take advantage of these opportunities the Corporation needs an
adequate supply of authorized unissued shares available for use primarily in
connection with corporate acquisitions, raising additional capital for
operations, and granting shares to key employees to retain and award their
services to the Company.
GENERAL EFFECT ON THE COMPANY
The additional shares which the Board would be authorized to issue upon approval
of the proposed Resolution, if so affirmed, would have a dilutive effect upon
the percentage of our equity owned by present stockholders. The issuance of the
additional shares might be disadvantageous to current stockholders in that any
additional issuances would potentially reduce per share dividends, if any.
Stockholders should consider, however, that the possible impact upon dividends
is likely to be minimal in view of the fact that we have never paid dividends on
shares of our Common Stock and we do not intend to pay any cash dividends in the
foreseeable future. We instead intend to retain earnings, if any, for investment
and use in business operations.
EXHIBIT A
ESYNCH CORPORATION
NOTICE PUSUANT TO SECTION 228 OF THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE
TO: ALL STOCKHOLDERS
1. PLEASE TAKE NOTICE THAT Stockholders owning at least a majority of the
outstanding stock of eSYNCH CORPORATION, by written consent dated January 30,
2002 have duly adopted the following resolution:
"a resolution approving an amendment to the Corporation's Certificate of
Incorporation, as amended, to increase the aggregate number of shares
authorized for issuance from 50,000,000 shares to 250,000,000 shares.
DATE: February 11, 2002
BY: /S/ Thomas Hemingway
---------------------
Thomas Hemingway
Chairman and Chief Executive Officer
11