SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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INSYNQ, INC.
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(Name of Registrant as Specified In Its Charter
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INSYNQ, INC.
1127 Broadway Plaza, Suite 10
Tacoma, Washington 98402
(253) 284-2000
______________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 19, 2001
______________
To the Stockholders of
INSYNQ, INC.
The annual meeting of stockholders of Insynq, Inc., a Delaware
corporation, will be held at our offices located at 1127 Broadway Plaza,
Suite 10, Tacoma, Washington, 98402, on Monday, November 19, 2001, at
10:00 a.m. Pacific Standard Time ("PST"), for the following purposes:
1. To elect four directors for terms expiring at the annual meeting
of stockholders in 2002. The directors will continue to serve until their
respective successors are duly elected and qualified;
2. To consider and vote upon a proposal to amend and restate the Insynq
2000 Long Term Incentive Plan;
3. To consider and vote upon a proposal to amend the Insynq certificate
of incorporation so as to increase the number of authorized common stock from
100,000,000 to 250,000,000;
4. To ratify the appointment by the board of directors of Grant Thornton
LLP as independent certified public accountants of Insynq for the fiscal year
ending May 31, 2002; and
5. To transact such other business as properly may come before the
annual meeting or any adjournment thereof.
The close of business on October 1, 2001 has been fixed by our board of
directors as the record date for the annual meeting. Only stockholders of
record on that date will be entitled to notice of and to vote at the annual
meeting or any adjournment thereof, notwithstanding the transfer of any stock
on our books after such record date. The stock transfer books will not be
closed.
A proxy statement, form of proxy, copy of Form 10-KSB, our annual
report on our operations for the fiscal year ended May 31, 2001, and copy of
Form 10-QSB, our quarterly report on our operations for the quarter ended
August 31, 2001, accompany this notice.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
IF YOU DO NOT EXPECT TO ATTEND IN PERSON, PLEASE SIGN AND DATE THE FORM OF
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THE FORM OF PROXY IS ENCLOSED IN
THE MAILING ENVELOPE IN WHICH THIS PROXY STATEMENT IS CONTAINED. STOCKHOLDERS
WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF
THEY DESIRE.
By Order of the Board of Directors
/s/ M. Carroll Benton
M. CARROLL BENTON
Secretary
October 22, 2001
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Insynq, Inc.
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PROXY STATEMENT
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TABLE OF CONTENTS
Page
Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . 2
Security Ownership of Principal Stockholders,
Directors and Executive Officers . . . . . . . . . . . . . . . . . 5
Quorum and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Proposal One - Election of Directors . . . . . . . . . . . . . . . . . 6
Nominees for Director . . . . . . . . . . . . . . . . . . . . . . 6
Board Meetings and Committees . . . . . . . . . . . . . . . . . . 7
Directors' Compensation . . . . . . . . . . . . . . . . . . . . . 7
Proposal Two - Amendment to Long Term Incentive Plan . . . . . . . . . 7
Proposal Three - Amendment to Certificate of Incorporation . . . . . . 12
Proposal Four - Ratification of Independent Auditors . . . . . . . . . 14
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Executive Compensation and Other Matters . . . . . . . . . . . . . . . 15
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . 15
Long Term Incentive Awards in Last Fiscal Year . . . . . . . . . . 16
Aggregate Option Exercises in Last Fiscal year and
Fiscal Year-End Option Values . . . . . . . . . . . . . . . . 17
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 16(a) Beneficial Ownership Reporting Compliance . . . . . . . . 18
Stockholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Annual Report on Form 10-KSB . . . . . . . . . . . . . . . . . . . . . 19
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GENERAL QUESTIONS AND ANSWERS
The following questions and answers are intended to provide brief answers
to frequently asked questions concerning the proposals described in this proxy
statement and the proxy solicitation process. These questions and answers do
not, and are not intended to, address all the questions that may be important
to you. You should carefully read the remainder of this proxy statement as
well as the appendices and the documents incorporated by reference in this
proxy statement.
1. Q: Why am I receiving this proxy statement?
A: The board of directors of Insynq, Inc., a Delaware corporation,
is furnishing this proxy statement to our stockholders as of
October 22, 2001 in connection with the solicitation of proxies
to be voted at our annual meeting of stockholders, or at any
adjournment of the annual meeting, for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders.
The annual meeting will be held at 1127 Broadway Plaza,
Suite 10, on Monday, November 19, 2001, at 10:00 a.m.,
Tacoma, Washington time.
2. Q: Who is soliciting my vote?
A: This proxy statement is furnished in connection with the
solicitation of your vote by the board of directors of Insynq.
We will bear the cost of solicitation of proxies. In addition to
the use of the mails, we may also solicit proxies by personal
interview, facsimile transmission and telephone by our
directors, officers, employees and agents, none of whom will
receive additional compensation. We will also supply brokers,
nominees or other custodians with the number of proxy forms,
proxy statements and annual reports they may require for
forwarding to beneficial owners and we will reimburse these
persons for their expenses.
3. Q: When was this proxy statement mailed to stockholders?
A: This proxy statement was first mailed to stockholders on or
about October 22, 2001.
4. Q: What may I vote on?
A: (1) The election of four directors to serve on the board of
directors;
(2) An amendment to the Insynq, Inc. 2000 Long Term Incentive
Plan to authorize additional shares of common stock;
(3) An amendment to the Insynq Certificate of Incorporation to
increase the number of authorized common stock from
100,000,000 to 250,000,000 for the purposes of
(i) completing and fulfilling a capital-raising transaction
entered into on June 29, 2001, and (ii) entering into
future capital raising transactions (both as more fully
described in Proposal Three);
(4) The ratification of Grant Thornton LLP as independent
auditors for the fiscal year ending May 31, 2002; and
(5) At the discretion of the persons named in the enclosed
form of proxy, on any other matter that may properly come
before the annual meeting or any adjournment thereof.
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5. Q: How does the board recommend I vote on the proposals?
A: (1) The board recommends a vote FOR each of the nominees to
serve on the board of directors.
(2) The board recommends a vote FOR the amendment to the
Insynq, Inc. 2000 Executive Long Term Incentive Plan to
increase the authorized common stock under the plan;
(3) The board recommends a vote FOR the amendment to the
Certificate of Incorporation to increase the number of
authorized common shares from 100,000,000 to 250,000,000;
(4) The board recommends a vote FOR the ratification of the
independent auditors.
6. Q: Who is entitled to vote?
A: Stockholders of record at the close of business on
October 1, 2001 (the record date) may vote at this annual
meeting.
7. Q: How do I vote?
A: Stockholders entitled to vote may vote by any one of the
following methods:
* By signing, dating and completing the enclosed proxy card
and returning it in the enclosed self-addressed envelope
by mail.
* In person, at the annual meeting.
* If you hold your shares through a bank, broker or other
nominee, they will give you separate instructions for
voting your shares.
8. Q: How can I revoke or change my vote?
A: If you have already voted and wish to change or revoke your
proxy, you may do so at any time prior to the annual meeting by
any one of the following methods:
(1) Notifying in writing M. Carroll Benton, Secretary,
Insynq, Inc., 1127 Broadway Plaza, Suite 10,
Tacoma, Washington, 98402;
(2) Voting in person at the annual meeting;
(3) Returning a later-dated proxy card that is received prior
to the annual meeting.
9. Q: Who will count the votes?
A: David Smith, Esq., our local legal representative, will count
the votes and act as inspector of the election.
10. Q: Is my vote confidential?
A: Proxy cards and ballots that identify individual stockholders
are mailed or returned directly to Colonial Stock Transfer Co.
and handled in a manner that protects your voting privacy. Your
vote will not be disclosed except: (1) as needed to permit
Colonial to tabulate and certify the vote or (2) as required by
law. Your identity will be kept confidential unless you ask
that your name be disclosed.
11. Q: How many votes do I have?
A: As of the close of business on the record date of
October 1, 2001, 37,364,932 shares of common stock were issued
and outstanding. Every stockholder is entitled to one (1) vote
for each share of common stock held.
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12. Q: What is a "quorum" and what vote is required to pass proposals?
A: A "quorum" is a majority of the outstanding shares. The person
with the right to vote the shares may be present at the annual
meeting or represented by proxy. There must be a quorum for the
annual meeting to be held. Abstentions and broker non-votes are
each included in the determination of the number of shares
present at the annual meeting for purposes of determining a
quorum. Abstentions and broker non-votes have no effect on
determinations of plurality, except to the extent that they
affect the total votes received by any particular candidate.
The affirmative vote of a plurality of the shares of outstanding
Insynq common stock represented at the annual meeting and
entitled to vote is required for the election of directors. The
affirmative vote of a majority of the voting power represented
at the annual meeting and entitled to vote is required on all
other matters. Cumulative voting is not permitted in the
election of directors.
13. Q: Who can attend the annual meeting and how do I get on the
guest list?
A: All stockholders as of the close of business on the record date
of October 1, 2001 can attend. To be included on the guest
list, you may check the box on your proxy card. If your shares
are held by a broker and you would like to attend, please write
to M. Carroll Benton, Secretary, Insynq, Inc., 1127 Broadway
Plaza, Suite 10, Tacoma, Washington, 98402. Include a copy of
your brokerage account statement or omnibus proxy (which you can
get from your broker), and we will place your name on the guest
list.
14. Q: How will voting on any other business be conducted?
A: We do not know of any business to be considered at the 2001
annual meeting other than the proposals described in this proxy
statement. If any other business is presented at the annual
meeting, your signed proxy card gives discretionary authority to
John P. Gorst and/or M. Carroll Benton to vote on such matters.
15. Q: When are the stockholder proposals for the 2001 annual meeting
due?
A: All stockholder proposals to be considered for inclusion in next
year's proxy statement must be submitted in writing prior to
July 22, 2002 to M. Carroll Benton, Secretary, Insynq, Inc.,
1127 Broadway Plaza, Suite 10, Tacoma, Washington, 98402.
Additionally, the proxy for the annual meeting may confer
discretionary authority to Insynq to vote on any matter at its
2002 annual meeting of stockholders if Insynq does not have
notice of the matter prior to October 5, 2002.
This question and answer information sheet is qualified in its entirety by
the more detailed information contained in this proxy statement, including its
appendices. You are strongly urged to carefully read this proxy statement,
including its appendices, in its entirety before you vote.
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SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of October 1, 2001 by (1) each
person known by us to own beneficially more than 5% of our outstanding common
stock, (2) each current director, (3) each current named executive officer,
and (4) all current directors and current named executive officers as a group.
Unless otherwise indicated, the shares listed in the table are owned directly
by the individual or entity, or by both the individual and the individual's
spouse. The individual or entity has sole voting and investment power as to
shares shown or, in the case of the individual, such power is shared with the
individual's spouse.
Certain of the shares listed below are deemed to be owned beneficially
by more than one stockholder under SEC rules. Accordingly, the sum of the
ownership percentages listed may exceed 100%. The information for the five
percent owners is derived solely from Forms 13D and 13G filed with the SEC as
of August 15, 2001. Except as otherwise noted, the address for each owner is
1127 Broadway Plaza, Suite 10, Tacoma, Washington, 98402.
Shares of Common Stock Beneficially
Owned and Percentage of Outstanding
Shares as of
October 1, 2001(5)
Name Number Percent
----------------------- ---------- -----
John P. Gorst(1) 10,213,847 25.2%
M. Carroll Benton(2) 6,287,556 16.0%
David D. Selmon 44,908 *
James R. Leigh, III(3) 590,003 *
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Directors and executive officers
as a group (6 persons)(4) 17,794,839 41.1%
<FN>
________________
* Less than 1%
(1) This includes (a) 1,100,000 shares of common stock held by
One Click Investments, LLC, (b) 1,150,000 shares of common stock held
by Kathleen McHenry, and (c) 350,000 shares of common stock held by
Hagens Berman LLP as to which Mr. Gorst holds a voting proxy and as
to which Mr. Gorst disclaims beneficial ownership. Also includes
3,133,904 shares of common stock issuable upon the exercise of
outstanding stock options that are presently exercisable or will
become exercisable within 60 days of October 1, 2001.
(2) Includes 446,466 shares of common stock held by Charles Benton,
the husband of Ms. Benton, as to which Ms. Benton disclaims
beneficial ownership. Also includes 2,105,221 shares of common stock
issuable upon the exercise of outstanding stock options that are
presently exercisable or will become exercisable with 60 days of
October 1, 2001.
(3) Includes 570,003 shares of common stock issuable upon exercise of
outstanding stock options that are presently exercisable or will
become exercisable within 60 days of October 1, 2001. In April 2001,
Mr. Leigh resigned as president and chief technology officer to
become general manager.
(4) Includes 6,112,369 shares of common stock issuable upon exercise of
outstanding stock options held by our executive officers that are
presently exercisable or will become exercisable within 60 days of
October 1, 2001.
(5) Adjusted for the two-for-one stock split effected on August 3, 2000.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
voting power of the outstanding shares of our common stock entitled to vote is
necessary to constitute a quorum at the annual meeting. The affirmative vote
of a plurality of the voting power represented at the annual meeting and
entitled to vote is required for the election of directors. The affirmative
vote of a majority of the voting power represented at the annual meeting and
entitled to vote is required on all other matters. A holder of shares of
common stock will be entitled to one vote per share of common stock as to each
matter properly brought before the annual meeting. Cumulative voting is not
permitted in the election of directors. Abstentions and votes "withheld" are
included in the determination of the number of shares present at the annual
meeting for purposes of determining a quorum. Broker non-votes are counted for
purposes of determining whether a quorum is present on any particular matter
only if authority to vote on the matter is granted by the respective proxy.
Abstentions and broker non-votes have no effect on determinations of plurality,
except to the extent that they affect the total votes received by any
particular candidate, and have the effect of negative votes on matters
requiring approval of a specified percentage of the outstanding shares.
For matters requiring approval by the holders of a specified percentage of the
voting power represented at the annual meeting and entitled to vote,
abstentions will have the effect of negative votes but broker non-votes will
have no effect since they are not treated as shares entitled to vote on such
matters.
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PROPOSAL ONE
ELECTION OF DIRECTORS
Our bylaws provide that the board of directors will consist of not less
than three nor more than nine directors, as determined from time to time by
resolution of the board. The board of directors has set the number of
directors at four, all of whom are to be elected at the annual meeting. Each
director will serve until the 2002 annual meeting and until his successor has
been elected and qualified or until the director's earlier death, resignation
or removal. Each nominee has consented to being named in this proxy statement
and to serve if elected.
We have no reason to believe that any of the nominees will not serve if
elected, but if any of them should become unavailable to serve as a director,
and if the board of directors designates a substitute nominee, the persons
named in the accompanying proxy will vote for the substitute nominee designated
by the board of directors, unless a contrary instruction is given in the proxy.
Each stockholder is entitled to cast one vote for each share of common
stock held on October 1, 2001. The majority vote of the shares represented in
person or by proxy at the annual meeting is required to elect each director.
Votes may be cast in favor or withheld. Votes that are withheld will be
excluded entirely from the vote and will have no effect. Votes that are
withheld for a particular nominee will be excluded from the vote for that
nominee only.
NOMINEES FOR DIRECTORS
JOHN P. GORST, age 32, has served as our chairman of the board, chief
executive officer and director since February 2000, and served as our president
since April 2001. Mr. Gorst, a co-founder of Insynq-WA, has been with the
Company since 1998 until its acquisition by Xcel Management, Inc. in 2000. Mr.
Gorst has over twelve years experience in founding entrepreneurial technology
ventures, specifically in the development of software and data services for
businesses. The prior experience of Mr. Gorst includes serving as a co-founder
of Microcomputer Training Professionals, Inc., a training/IS consulting
business in conjunction with Nynex Business Centers of New York, from 1989 to
1991; Vice President and General Manager of Business Development for Relational
Technology Professionals, Inc. from 1991 to 1993; from 1996 to 1998 served as
Vice President and General Manager of Interactive Information Systems Corp.
Mr. Gorst directs company strategy, works to position Insynq in the business
marketplace, forges strategic alliances, and oversees mergers and acquisitions.
He also serves as company and technology evangelist at trade shows, press
conferences, and industry analyst meetings.
M. CARROLL BENTON, age 57, has served as our chief administrative officer,
secretary, treasurer and director since February 2000. Ms. Benton, a co-founder
of Insynq-WA, has been with the Company since 1998 until its acquisition by
Xcel Management, Inc. in 2000. Ms. Benton has worked with banking systems and
higher education institutions where she assisted in information systems
development and deployment strategies. She managed a 13 state insurance
brokerage firm and has been a consultant to the small- to medium-sized business
markets via accounting system design, support, and business practice analysis.
Ms. Benton also taught undergraduate accounting courses at several Puget Sound
colleges and universities. Formerly with a local CPA firm from 1989 to 1995,
she brings us over 25 years of business and financial expertise.
DAVID D. SELMON, age 44, has served as our director since February 2000.
Mr. Selmon is a certified tax professional and has practiced with David Selmon,
Inc. since 1982. In August 1999 a complaint against Mr. Selmon was filed by the
National Futures Association, or NFA, alleging that Mr. Selmon violated high
standards of commercial honor and just and equitable principals of trade in
that he, along with others, aided and abetted an individual in acting in a
manner which required such individual to be an NFA member or associated after
such individual had been barred permanently from the NFA. Mr. Selmon, without
admitting or denying the allegations raised in such complaint, agreed to
withdraw from the NFA in all capacities and to refrain from applying in the
future for any status with the NFA.
DONALD KAPLAN, age 60, earned his Ph.D. in Computer Science at Stanford
University in 1968, following Engineering and Mathematics degrees at the
University of Toronto in 1963 and 1964. He has been qualified as Certified
Management Consultant and Professional Engineer. Dr. Kaplan was a Professor of
Computer Science at the University of Toronto from 1968 to 1970, and at York
University from 1971 to 1974. During his thirty-year business career, he has
provided the business concept, developed the financing, and was CEO for
successful startup businesses in the management consulting, publishing,
hospitality and computer service industries. In his private practice, he has
provided client CEOs with strategic direction consulting related to marketing,
organization & management, and enterprise information systems. Clients have
included Four Seasons Hotels, Xerox and Bell Canada. Dr. Kaplan will be full
time with Insynq, Inc., operating in a number of management, consultative and
leadership capacities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE APPROVAL OF EACH OF THE DIRECTOR NOMINEES.
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BOARD MEETINGS AND COMMITTEES
The board of directors held 5 meetings in the fiscal year ended
May 31, 2001. Each director attended 100% of the meetings held by the board of
directors and by committees of the board on which he served. The board of
directors does not have an Audit Committee, a Compensation Committee, a
Nominating Committee or a Stock Option Committee.
COMPENSATION OF DIRECTORS
Pursuant to a consulting agreement we entered into with David D. Selmon,
Mr. Selmon will receive 3,500 shares of our common stock for each full fiscal
quarter he serves on our board beginning June 1, 2000. Mr. Selmon also receives
$250 for each board meeting attended. To date, Mr. Selmon has received 14,000
shares as director compensation and 30,908 shares in lieu of cash payments for
expenses.
PROPOSAL TWO
AMENDMENT TO 2000 LONG TERM INCENTIVE PLAN
Our board has approved an amendment to Section 6 of our 2000 Long Term
Incentive Plan (the 2000 Plan) which will make an additional 15,000,000 shares
of common stock available for issuance pursuant thereto, and has directed that
the amendment to the 2000 Plan be submitted to the stockholders for approval.
If approved, Section 6 of the 2000 Plan will read as follows, effective
November 19, 2001:
"SHARES SUBJECT TO THE PLAN. The shares of Stock with respect to which
awards may be made under the Plan shall be either authorized and unissued
shares or issued and outstanding shares (including, in the discretion of
the Board, shares purchased in the market). Subject to the provisions of
Section 1.10, the number of shares of Stock available under the Plan for
the grant of Stock Options with or without tandem Stock Appreciation
Rights, Performance Units and Restricted Stock shall not exceed 31,675,300
shares in the aggregate. If, for any reason, any award under the Plan or
any portion of the award, shall expire, terminate or be forfeited or
cancelled, or be settled in cash pursuant to the terms of the Plan and,
therefore, any such shares are no longer distributable under the award,
such shares of Stock shall again be available for award under the Plan."
The 2000 Plan was initially adopted on August 3, 2000. The 2000 Plan was
amended in September 2000 to provide, at the discretion of our board of
directors, for the issuance to consultants of non-qualified options at less
than fair market value. As of May 31, 2001, there were 7,946,540 shares of
common stock remaining available for grant as awards under the 2000 Plan.
If the stockholders approve Proposal Two, there will be 22,946,540 shares of
common stock available for grant as awards under the 2000 Plan. In the opinion
of the board of directors, it is appropriate to amend the 2000 Plan to increase
the number of shares available for issuance because of our current intentions
to recruit additional senior management personnel.
PURPOSE. The purpose of the 2000 Plan is to foster and promote the
financial success of Insynq and increase stockholder value by enabling eligible
key employees and others to participate in the long-term growth and financial
success of Insynq. A summary of the 2000 Plan is set forth below.
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TERM. The 2000 Plan was initially adopted by our board on February 21,
2000, and approved by our stockholders on August 3, 2000. The 2000 Plan will
terminate on February 21, 2010, or sooner at the discretion of the board as
described below.
SCOPE. The 2000 Plan authorize the granting of incentive stock options
and nonqualified stock options to purchase common stock, stock appreciation
rights, restricted stock and performance units, to key executives and other key
employees of Insynq, including officers of Insynq and our subsidiaries. The
purpose of the 2000 Plan is to attract and retain key employees, to motivate
key employees to achieve long-range goals and to further identify the interests
of key employees with those of the other shareholders of Insynq.
If an award made under the 2000 Plan expires, terminates or is forfeited,
canceled or settled in cash, without issuance of shares covered by the award,
those shares will be available for future awards under the 2000 Plan.
ADMINISTRATION. The 2000 Plan may be administered by the board of
directors or, if directed by the board of directors, the Stock Option Committee
or any successor thereto of the board of directors of Insynq. Currently, the
board has not designated a Stock Option Committee. Subject to the provisions
of the 2000 Plan, the board will have authority to select employees to receive
awards, to determine the time or times of receipt, to determine the types of
awards and the number of shares covered by the awards, to establish the terms,
conditions and provisions of such awards, to determine the value of performance
units, and to cancel or suspend awards. In making such award determinations,
the board may take into account the nature of services rendered by the
employee, his or her present and potential contribution to Insynq's growth and
success and such other factors as the board deems relevant. The board is
authorized to interpret the 2000 Plan, to establish, amend, and rescind any
rules and regulations relating to the 2000 Plan, to determine the terms and
provisions of any agreements made pursuant to the 2000 Plan, and to make all
other determinations that may be necessary or advisable for the administration
of the 2000 Plan.
ELIGIBILITY. Executives and other key full-time employees of Insynq and
our subsidiaries may be selected by the board to receive awards under the 2000
Plan. We estimate that approximately four (4) executives and approximately
seventeen (17) other employees are currently eligible to receive awards under
the 2000 Plan. In the discretion of the board, an eligible employee may
receive an award in the form of a stock option, stock appreciation right,
restricted stock award or performance unit or any combination thereof, and more
than one award may be granted to an eligible employee.
STOCK OPTIONS. The 2000 Plan authorize the award of both incentive stock
options (ISOs) and nonqualified stock options. Under the 2000 Plan, an option
may be exercised at any time during the exercise period established by the
board, except that: (i) no option may be exercised more than thirty (30) days
after employment with Insynq or a subsidiary which terminates by reason other
than death, disability or authorized leave of absence for military or
government service; and (ii) no option may be exercised more than twelve (12)
months after employment with Insynq or a subsidiary which terminates by reason
of death or disability. The aggregate fair market value (determined at the
time of the award) of the common stock, with respect to which ISOs are
exercisable for the first time by any employee during any calendar year may not
exceed $100,000. The term of each option is determined by the board, but in no
event may such term exceed ten (10) years from the date of grant. The board
determines the exercise price of each option, but the exercise price of cannot
be less than the fair market value of the common stock on the date of the
grant; however, the 2000 Plan does allow for grants of nonqualified stock
options to consultants at less than fair market value. The exercise price of
options may be paid in cash or, with the board's approval, in shares of common
stock. Grants of options do not entitle any optionee to any rights as a
shareholder, and such rights will accrue only as to shares actually purchased
through the exercise of an option.
STOCK APPRECIATION RIGHTS. The 2000 Plan authorize the grant of both
primary stock appreciation rights (SARs) and additional SARs. Primary SARs may
be granted either separately or in tandem with options. Primary SARs entitle
the holder to receive an amount equal to the difference between the fair market
value of a share of common stock at the time of exercise of the SAR and the
option price (or deemed option price in the event of an SAR that is not granted
in tandem with an option), multiplied by the number of shares of common stock
subject to the option or deemed option as to which the SAR is being exercised
(subject to the terms and conditions of the option or deemed option). An SAR
may be exercised at any time when the option to which it relates may be
exercised and will terminate no later than the date on which the right to
exercise the tandem option (or deemed option) terminates (or is deemed to
terminate). The participating employee has the discretion to determine whether
the exercise of an SAR will be settled in cash, in common stock (valued at its
fair market value at the time of exercise) or in a combination of the two,
subject to the approval of the board in certain circumstances. The exercise of
an SAR requires the surrender of the tandem option, if any, and the exercise of
a stock option requires the surrender of the tandem SAR, if any.
- 8 -
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Additional SARs may be granted only in tandem with stock options and
entitle the holder to receive an amount equal to the difference between the
fair market value of a share of common stock on the date of exercise of the
related option and the option price, multiplied by the number of shares of
common stock subject to the option as to which the SAR is being exercised
(subject to the terms and conditions of the option), multiplied by a percentage
factor ranging form 10% to 100% (as determined either by the board at the date
of grant by the formula established by the board at the date of grant).
If an SAR, or the corresponding option with which the SAR was awarded, is
not exercised prior the date that it ceases to be exercisable, then such SAR
generally shall be deemed exercised as of such date and shall be paid to the
employee in cash. No SAR may be exercised more than 90 days after employment
with Insynq and our subsidiaries terminates by reason other than death,
disability or authorized leave of absence for military or government service.
No SAR may be exercised more than 12 months after the holder's employment with
Insynq and our subsidiaries terminates by reason of death or disability.
RESTRICTED STOCK. Restricted stock awards are grants of common stock made
to employees subject to a required period of employment following the award
(the Restricted Period) and any other conditions established by the board. An
employee will become the holder of shares of restricted stock free of all
restrictions if he or she completes the Restricted Period and satisfies any
other conditions; otherwise, the shares will be forfeited. Under the 2000 Plan,
the Restricted Period may not be more than ten years. The employee will have
the right to vote the shares of restricted stock and, unless the board
determines otherwise, will have the right to receive dividends on the shares
during the Restricted Period. The employee may not sell, pledge or otherwise
cucumber or dispose of restricted stock until the conditions imposed by the
board have been satisfied. The board may accelerate the termination of the
Restricted Period or waive any other conditions with respect to any restricted
stock.
PERFORMANCE UNITS. Performance units are awards that entitle the holders
to receive a specified value for the units at the end of a performance period
established by the board if performance measures established by the board at
the beginning of the performance period are met. Although the performance
measures and performance period will be determined by the board at the time of
the award of performance units, they may be subject to such later revision as
the board deems appropriate to reflect significant events or changes. If the
employment of a holder of a performance unit with Insynq or our subsidiary
terminates by reason of death, disability or retirement, then Insynq will pay
the employee or his or her beneficiary or estate the amount of the performance
unit earned as of the date of termination. If the employment of a holder of a
performance unit with Insynq or a subsidiary terminates for any other reason,
then the performance units held by such holder will automatically be forfeited.
ADJUSTMENTS. In the event of any change in the outstanding shares of
common stock by reason of any stock dividend, split, spin-off,
recapitalization, merger, consolidation, combination, exchange of shares or
other similar change, the aggregate number of shares with respect to which
awards may be made under the Incentive Plan, and the terms and the number of
shares of any outstanding option, SAR, performance unit or restricted stock,
may be equitably adjusted by the board in its sole discretion.
BUSINESS COMBINATIONS. Unless provision is otherwise made in the terms of
the award granted by the board, or by the terms of the agreement with respect
to the business combination, in the event of a change in control of Insynq (as
defined), all outstanding stock options, stock appreciation rights, restricted
stock and performance units shall terminate, provided that the holders of any
options or SARs may exercise such awards to the extent then vested immediately
prior to any such event and the holders of any performance units shall be
entitled to the then vested values of such units as of such date.
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TERMINATION AND AMENDMENT. The 2000 Plan may be suspended, terminated or
amended by the board of directors, provided that, in the absence of stockholder
approval, no amendment of the 2000 Plan or action of the board of directors may
materially increase the total number of shares of common stock with respect to
which awards may be made under the 2000 Plan (except as discussed in
"Adjustments" above), change the exercise price of a stock option or the base
price of an SAR, materially modify the requirements as to eligibility for
participation in the 2000 Plan or materially increase the benefits accruing to
participants under the 2000 Plan. No amendment, suspension or termination of
either of the 2000 Plan may alter or impair any option, SAR, share of
restricted stock or performance unit previously awarded under such 2000 Plan
without the consent of the holder thereof.
ESTIMATION OF BENEFITS. The amounts that will be paid pursuant to the
amended 2000 Plan are not currently determinable.
FEDERAL INCOME TAX CONSEQUENCES. The following summary of the federal
income tax consequences of the 2000 Plan is not comprehensive and is based on
current income tax laws, regulations and rulings:
INCENTIVE STOCK OPTIONS. An optionee does not recognize income on the
grant of an incentive stock option. Subject to the effect of the alternative
minimum tax, discussed below, if an optionee exercises an incentive stock
option in accordance with the terms of the option and does not dispose of the
shares acquired within two years from the date of the grant of the option nor
within one year from the date of exercise, the optioned will not realize any
income by reason of the exercise and Insynq will be allowed no deduction by
reason of the grant or exercise. The optionee's basis in the shares acquired
upon exercise will be the amount paid upon exercise. Provided the optionee
holds the shares as a capital asset at the time of sale or other disposition of
the shares, his gain or loss, if any, recognized on the sale or other
disposition will be capital gain or loss. The amount of his gain or loss will
be the difference between the amount realized on the disposition of the shares
and his basis in the shares.
If an optionee disposes of the shares within two years from the date of
grant of the option or within one year from the date of exercise (an Early
Disposition), the optionee will realize ordinary income at the time of such
Early Disposition which will equal the excess, if any, of the lesser of (1) the
amount realized on the Early Disposition; or (2) the fair market value of the
shares on the date of exercise, over the optionee's basis in the shares. We
will be entitled to a deduction in an amount equal to such income. The excess,
if any, of the amount realized on the Early Disposition of such shares over the
fair market value of the shares on the date of exercise will be long-term or
short-term capital gain, depending upon the holding period of the shares,
provided the optionee holds the shares as a capital asset at the time of Early
Disposition. If an optionee disposes of such shares for less than his basis in
the shares, the difference between the amount realized and his basis will be a
long-term or short-term capital loss, depending upon the holding period of the
shares, provided the optionee holds the shares as a capital asset at the time
of disposition.
The excess of the fair market value of the shares at the time the
incentive stock option is exercised over the exercise price for the shares is
an item of "tax preference" as such term is used in the Internal Revenue Code
(the Stock Option Preference).
NONQUALIFIED STOCK OPTIONS. Nonqualified stock options do not qualify for
the special tax treatment accorded to incentive stock options under the
Internal Revenue Code. Although an optionee does not recognize income at the
time of the grant of the option, he recognizes ordinary income upon the
exercise of a nonqualified option in an amount equal to the difference between
the fair market value of the stock on the date of exercise of the option and
the amount of the exercise price.
As a result of the optionee's exercise of a nonqualified stock option, we
will be entitled to deduct as compensation an amount equal to the amount
included in the optionee's gross income. Our deduction will be taken in the
taxable year in which the option is exercised.
The excess of the fair market value of the stock on the date of exercise
of a nonqualified stock option over the exercise price is not an item of tax
preference.
APPRECIATION RIGHTS. Recipients of SARs do not recognize income upon the
grant of such an award. When a participant elects to receive payment under an
SAR, he recognizes ordinary income in an amount equal to the cash and/or fair
market value of shares received, and we are entitled to a deduction equal to
such amount.
RESTRICTED STOCK; PERFORMANCE UNITS. Grantees of restricted stock and
performance units do not recognize income at the time of the grant of such
stock or units. However, when shares of restricted stock become free from any
restrictions or when performance units are paid, grantees recognize ordinary
income in an amount equal to the cash and the fair market value of the stock on
the date all restrictions are satisfied. Alternatively, the grantee of
restricted stock may elect to recognize income upon the grant of the stock and
not at the time the restrictions lapse.
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TAXATION OF PREFERENCE ITEMS. Section 55 of the Internal Revenue Code
imposes an alternative minimum tax equal to the excess, if any, of (1) 26% of
the optionee's "alternative minimum taxable income" that does not exceed
$175,000, plus 28% of his "alternative minimum taxable income" in excess of
$175,000, over (2) his "regular" federal income tax. Alternative minimum
taxable income is determined by adding the optioned's Stock Option Preference
and any other items of tax preference to the optioned's adjusted gross income
and then subtracting certain allowable deductions and an exemption amount. The
exemption amount is $33,750 for single taxpayers, $45,000 for married taxpayers
filing jointly, and $22,500 for married taxpayers filing separately. However,
these exemption amounts are phased out beginning at certain levels of
alternative minimum taxable income.
CHANGE OF CONTROL. If there is an acceleration of the vesting of benefits
and/or an acceleration of the exerciseability of Stock Options upon a Change of
Control, all or a portion of the accelerated benefits may constitute "excess
parachute payments" under Section 280G of the Internal Revenue Code. The
employee receiving an excess parachute payment incurs an excise tax of 20% of
the amount of the payment in excess of the employee's average compensation over
the five calendar years preceding the year of the Change of Control, and we are
not entitled to a deduction for such payment.
GRANTS UNDER THE 2000 PLAN. There have been no grants under the 2000 Plan
since the board approved the amendment set forth in this proposal; accordingly,
the benefits or amounts that will be received as a result of the amendment are
not currently determinable.
In fiscal 2001, there were grants of options to purchase shares of our
common stock as follows:
Number of
Name Position Options
------------------------- -------------------------- ---------
John P. Gorst President, Chief Executive 75,355
Officer and Director
M. Carroll Benton Secretary, Treasurer; Chief 74,555
Administrative Officer and
Director
James R. Leigh, III Chief Technical Officer 21,453
All Executives as a Group 241,271
All Employees, Including
Non-Executive Officers,
As a Group 6,330,188
STOCKHOLDER APPROVAL REQUIREMENT
The approval of the amendment requires the affirmative vote of a majority
of the shares of common stock voting on the matter. Accordingly, abstentions
and broker non-votes applicable to shares at the annual meeting will not be
included in the tabulation of votes cast on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR PROPOSAL TWO.
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PROPOSAL THREE
AMENDMENT TO CERTIFICATE OF INCORPORATION INCREASING
AUTHORIZED COMMON STOCK FROM 100,000,000 SHARES TO 250,000,000 SHARES
Our board of directors has unanimously approved an amendment to Article IV
of our certificate of incorporation, to increase the number of authorized
shares of common stock from 100,000,000 to 250,000,000 shares. The number of
shares of class A common stock will remain unchanged at 10,000,000 shares, and
the number of shares of preferred stock will remain unchanged at 10,000,000
shares. The proposed amendment, if adopted, will be effected through the
filing of a Certificate of Amendment to the Certificate of Incorporation with
the Secretary of State of the State of Delaware. Such a filing shall be made
on such date as the board, in its sole discretion, determines and will be
effective on the date of filing.
Notwithstanding receipt of proxies sufficient to approve proposal three,
if, for any reason, the board of directors deems it advisable to do so, we may
abandon the amendment at any time prior to the filing with the Secretary of
State of the State of Delaware of the Certificate of Amendment effecting the
amendment without further action by the stockholders of Insynq.
REASONS FOR THE AMENDMENT
INTRODUCTION
Our certificate of incorporation provides that we are authorized to issue
120,000,000 shares, 100,000,000 of which are common stock, 10,000,000 of which
are class A common stock and 10,000,000 of which are preferred stock. Our
board has determined by resolution that it is in the best interests of Insynq
and its stockholders to increase the number of authorized shares of common
stock from 100,000,000 to 250,000,000, and authorize an amendment to Article IV
of our certificate of incorporation to effect such changes.
On October 1, 2001, there were 27,364,932 shares of our common stock
issued and outstanding, 13,034,161 shares of common stock reserved for issuance
under our long term incentive plans, 15,487,596 shares of common stock reserved
for issuance pursuant to outstanding options and warrants, and 34,997,237
additional shares of common stock reserved for issuance pursuant to convertible
debentures and warrants under a Securities Purchase Agreement which are subject
to anti-dilution provisions.
THE SECURITIES PURCHASE AGREEMENT
Pursuant to a Securities Purchase Agreement we entered into on
June 29, 2001, with three investors, AJW partners, LLC, New Millennium Capital
Partners II, LLC and AJW/New Millennium Offshore, Ltd., we will receive up to
$1,200,000 from the investors, and they will received in return a corresponding
amount of convertible debentures and 2,400,000 warrants. The terms of the
debentures provide for full payment on or before June 29, 2002, with interest
of 12% per annum, which may be converted at any time at the lesser of (i) $0.18
or (ii) the average of the lowest three trading prices during the twenty
trading days immediately prior to the date the conversion notice is sent,
divided by two. The terms of the warrants entitle each investor to purchase
shares of our common stock at a price equal to the lesser of (i) $0.04 per
share and (ii) the average of the lowest three trading prices during the twenty
trading days immediately prior to exercise, at any time after June 29, 2001 and
before June 29, 2003. Under the related Registration Rights Agreement, we
agreed to register all of the shares underlying such convertible debentures and
warrants on a registration statement which will allow the investors to sell
them in a public offering or other distribution.
The number of shares we have registered with the SEC pursuant to a
registration statement filed on August 1, 2001, represents an estimate of the
number of shares of common stock to be offered by the investors. The actual
number of shares of common stock issuable upon conversion of the debentures and
exercise of the related warrants is indeterminate, is subject to adjustment and
could be materially less or more than such estimated number depending on
factors which cannot be predicted by us at this time including, among other
factors, the future market price of the common stock and the anti-dilution
provisions contained in the agreement. Under the terms of the debentures and
the related warrants, the debentures are convertible and the warrants are
exercisable by any holder only to the extent that the number of shares of
common stock issuable pursuant to such securities, together with the number of
shares of common stock owned by such holder and its affiliates (but not
including shares of common stock underlying unconverted shares of debentures or
unexercised portions of the warrants) would not exceed 4.9% of the then
outstanding common stock as determined in accordance with Section 13(d) of the
Exchange Act. This limitation may be waived by the investors upon 61 days
notice to Insynq.
The Securities Purchase Agreement also places certain restrictions on our
ability to obtain additional financing. The agreement prohibits us for a
period of six months from the date of closing from obtaining financing which
would involve the issuance of additional common stock without first obtaining
the consent of the investors. In addition, we are prohibited from entering
into any financial arrangements which would involve the issuance of common
stock for a period of two years from the date the registration statement
becomes effective, without first giving the investors the opportunity to
purchase an equal number of shares of common stock to maintain their equity
position in Insynq.
As of October 1, 2001, (i) $650,000 of the debentures have been issued,
none of which have been converted, and (ii) 1,300,000 of the warrants have been
issued, none of which have been exercised. Pursuant to the terms of the
Securities Purchase Agreement, upon the registration statement being declared
effective by the SEC, the remaining $550,000 of debentures and 1,100,000
warrants will be issued to the investors. If all debentures were issued and
converted and all warrants were issued and exercised on October 1, 2001, a
total of 48,000,000 debentures and 2,400,000 warrants would have been issued
and outstanding.
The closing price of our common stock on September 27, 2001 was $0.06 per
share.
PURPOSE AND EFFECT OF THE AMENDMENT
Recognizing our immediate need for financing and our obligation to issue
additional shares pursuant to the anti-dilution requirements in the Securities
Purchase Agreement, we are seeking to amend our certificate of incorporation to
provide for the authorization of up to 200,000,000 shares of common stock. The
amendment, if implemented, would rectify an existing shortage of authorized and
unissued shares of common stock which would be needed, principally as a result
of our recent stock price levels, to satisfy the requirements under the
Securities Purchase Agreement and certain anti-dilution provisions of certain
outstanding securities. In the opinion of our board of directors, the
additional authorized shares of common stock will benefit Insynq by providing
flexibility to the board of directors, without requiring further action or
authorization by the stockholders (except as may be required by applicable law
or the rules of any stock exchange on which our securities may then be listed)
to issue additional shares of common stock from time to time to respond to
financial and business needs and opportunities as they arise, to issue shares
upon conversion of the convertible debentures and warrants pursuant to the
Securities Purchase Agreement and pursuant to anti-dilution provisions of
certain outstanding securities, or for other proper corporate purposes.
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These needs, opportunities and purposes might include, for example,
obtaining capital funds through public and private offerings of shares of
common stock or of securities convertible into shares of common stock and using
shares of common stock in connection with structuring possible acquisitions of
businesses and assets. Additionally, the board of directors, in its discretion,
could in the future declare stock splits or stock dividends or, subject to
stockholder approval, increase, establish, or extend stock option and other
stock award plans. We may evaluate potential acquisitions from time to time;
however, we have no present arrangements or agreements with respect to possible
acquisitions or financings. No stock splits, dividends or other actions
requiring the availability of the additional authorized shares of common stock
are currently planned. Our ability to issue shares in the future is limited by
restrictive covenants in favor of the parties to the Securities Purchase
Agreement described above.
Increasing the number of authorized shares of common stock will not have
any immediate effect on the rights of current stockholders. However, the board
of directors will have the authority to issue authorized shares of common stock
without requiring future stockholder approval of those issuances (except as may
be required by applicable law or stock exchange requirements). If the board of
directors determines that an issuance of shares of our common stock is in the
best interests of Insynq and our stockholders, the issuance of additional
shares could have the effect of diluting the earnings per share or book value
per share of the outstanding shares of common stock or the stock ownership or
voting rights of a stockholder. The holders of our common stock have no
preemptive right to purchase any of the additional shares of common stock when
issued.
POTENTIAL ANTI-TAKEOVER EFFECTS OF THE AMENDMENT
The increase in the number of authorized shares of common stock and the
subsequent issuance of all or a portion of those shares could have the effect
of delaying or preventing a change of control of Insynq without further action
by the stockholders. Subject to applicable law and stock exchange requirements,
we could issue shares of authorized and unissued common stock in one or more
transactions that would make a change of the control of Insynq more difficult
and therefore less likely. Any issuance of additional shares could have the
effect of diluting the earnings per share and book value per share of the
outstanding shares of common stock or the stock ownership and voting rights of
a person seeking to obtain control of Insynq. We are not aware of any pending
or proposed transaction involving a change of control of Insynq.
NO APPRAISAL RIGHTS RELATING TO THE AMENDMENT
Under Section 262 of the Delaware General Corporation Law, you are not
entitled to appraisal rights, whether or not you consent to the amendment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors recommends that you vote FOR the approval of
proposal three. You should consider the fact that the increase in authorized
common stock to 200,000,000 shares could allow the board of directors to issue
additional shares of stock in the future in a manner that may have an anti-
takeover effect on Insynq and discourage offers for your shares that may be
attractive. However, the board of directors has not approved the proposed
increase in authorized common stock for this purpose, and the board of
directors has no current intention to issue additional shares in a manner
designed to have an anti-takeover effect on Insynq.
STOCKHOLDER APPROVAL REQUIREMENT
The approval of the amendment requires the affirmative vote of a majority
of the shares of common stock voting on the matter. Accordingly, abstentions
and broker non-votes applicable to shares at the annual meeting will not be
included in the tabulation of votes cast on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR PROPOSAL THREE.
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PROPOSAL FOUR
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our board of directors has selected Grant Thornton LLP as independent
certified public accountants for the fiscal year ended May 31, 2002, and has
determined that it would be desirable to request that the stockholders ratify
such selection. The affirmative vote of a majority of the outstanding shares
of common stock present at the annual meeting in person or by proxy is
necessary for the ratification of the appointment of Grant Thornton LLP. Grant
Thornton LLP served as our independent certified public accountants since
fiscal 2001. Representatives of Grant Thornton LLP are expected to be present
at the annual meeting and will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions from
stockholders.
Fees for the last annual audit were $65,907 and all other fees were
$164,100, including audit related services of $66,207 and non-audit services of
$97,893. Audit related services generally include fees for employee benefit
plan audits, accounting consultations and SEC registration statements. We have
discussed with Grant Thornton LLP whether the services rendered are compatible
with maintaining their independence, and have determined that such is the case.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF GRANT, THORNTON LLP
AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF
THE COMPANY FOR THE FISCAL YEAR ENDED MAY 31, 2002.
EXECUTIVE OFFICERS
Our executive officers as of May 31, 2001, are as follows:
Name Age Position with Company
------------------- --- -----------------------------------------------
John P. Gorst 32 Chairman of the Board, Chief Executive Officer
and President
M. Carroll Benton 57 Chief Administrative Officer, Secretary and
Treasurer
James R. Leigh, III 31 Chief Technical Officer
Stephen C. Smith 51 Interim Chief Financial Officer
Joanie C. Mann 40 Executive Vice President, Treasurer, and
Chief Financial Officer
INFORMATION CONCERNING THE BUSINESS EXPERIENCE OF MR. GORST AND MS. BENTON
IS PROVIDED UNDER THE CAPTION "ELECTION OF DIRECTORS" ABOVE. SET FORTH BELOW
IS INFORMATION CONCERNING OUR OTHER EXECUTIVE OFFICERS.
JAMES R. LEIGH, III served as our chief technical officer from
February 2000 to April 2001 and served as our president from September 2000 to
April 2001. In April 2001 Mr. Leigh resigned his position as chief technical
officer and president to become our general manager of technical operations and
currently serves in this capacity. From August 1998 until its acquisition by
Xcel Management, Inc., Mr. Leigh served as the general manager of our
predecessor, Insynq-WA. Prior to joining Insynq and our predecessors,
Mr. Leigh was served as vice president of information systems of Interactive
Information Systems from February to August 1998, as a technical consultant for
Analysts International Corporation from July 1997 to January 1998, and as an
information systems senior associate for the United Way of Pierce County from
May 1994 to July 1997.
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STEPHEN C. SMITH has been our interim chief financial officer since
September 2000. Mr. Smith graduated from the University of Memphis in 1981. He
retired as director of finance for the City of Bartlett, Tennessee in 1978
after 21 years. During Mr. Smith's time with the City, he was an active member
of the Government Finance Officers Association of the United States and Canada,
serving as the Tennessee state representative for six years. While with the
City of Bartlett, Mr. Smith served on advisory committees for the Government
Accounting Standards Board. Mr. Smith has more than eight years experience as
the chief financial officer of several private companies including Public
Properties Management, Inc. of Memphis, Tennessee from 1992 to present, and
Applied Logistical Technologies, Inc. in Carlsbad, California from 1999 to
present. He is a licensed securities broker and has extensive experience in
providing financial advice for public and private companies.
JOANIE C. MANN has served as our vice president of strategic alliances
since February 2001, and served as our vice president of operations from July
2000 to February 2001. She brings to us over 18 years of experience in multi-
user system design and implementation, voice and data networking, and advanced
network integrations. Ms. Mann also has extensive experience in business
process automation and a strong background in business accounting principles.
Previous positions held include founder of Com-Pacific Resources, Inc., a
network integration firm whose business operations were sold to Communications
World International, for whom she worked from 1984 to 1993, manager of the
Seattle-based computer telephony and data integration division of Commworld
from 1994 to 1996, and IS Management Consultant for Interactive Information
Systems from 1998 to 1999.
All executive officers are elected annually by the board of directors to
serve until the next annual meeting of the board of directors and until their
respective successors are chosen and qualified.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table summarizes the compensation earned by or paid to our
chief executive officer and the other most highly compensated executive
officers whose total salary and bonuses exceeded $100,000 for services rendered
in all capacities during the two fiscal years ended May 31, 2001. We refer to
these individuals as our named executive officers.
SUMMARY COMPENSATION TABLE(1)
-------------------------------
Annual Compensation Long Term Awards Compensation
------------------------- -----------------------------
Securities
Name and Fiscal Salary Bonus Other Underlying All Other
Principal Position Year ($) ($) ($)(3) Options (#) ($)
------------------------ ------ -------- ------ ------- -------------- ---------
John P. Gorst 2001 $160,000 - $ 6,876 75,355 -
President, Chief 2000 $107,919 $1,624 $20,129 3,000,000(2) -
Executive Officer
M. Carroll Benton 2001 $ 96,900 - $ 6,876 74,555 -
Secretary, Treasurer and 2000 $ 66,810 - $10,543 2,000,000(2) -
Chief Administrative
Officer
James R. Leigh, III(4) 2001 $102,630 - $ 6,876 21,453 -
Chief Technical Officer 2000 $ 74,957 $1,624 $25,000 780,000 -
<FN>
(1) The compensation described in this table does not include medical,
group life insurance or other benefits received by the named
executive officers that are available generally to all of our
salaried employees, and may not include certain perquisites and other
personal benefits received by the named executive officers that do
not exceed the lesser of $50,000 or ten percent (10%) of any such
officer's salary and bonus disclosed in the table.
(2) Represents options for class A common stock granted under our
2000 Executive Long Term Incentive Plan.
(3) Includes non-cash compensation, in the form of common stock, for
services performed for us. During fiscal year 2001 each executive
officer rescinded the non-cash compensation received in fiscal
year 2000.
(4) Mr. Leigh served as president from September 22, 2000 to
April 4, 2001 and as chief technical officer from February 2000 to
April 4, 2001. Effective April 4, 2001, Mr. Leigh resigned his
position as an officer and assumed the position of general manager of
technical operations.
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LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table provides information related to long-term incentive
awards granted to our named executive officers during the fiscal year ended
May 31, 2001. The information in this table reflects options granted by the
board of directors under our 2000 Executive Long Term Incentive Plan and our
2000 Long Term Incentive Plan, which plans were approved by our stockholders on
August 3, 2000.
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Awards
---------------------------------------
Performance Or
Number of Shares, Other Period
Fiscal Units or Other Until Maturation
Name Year Rights (#) Or Payout
------------------------------- ------ ----------------- -----------------
John P. Gorst, President, Chief
Executive Officer and Director 2001 75,355(1) Vested upon grant
M. Carroll Benton, Secretary,
Treasurer; Chief Administrative
Officer and Director 2001 74,555 Vested upon grant
James R. Leigh, III
Chief Technical Officer 2001 21,453 Vested upon grant
<FN>
(1) Mr. Leigh served as president from September 22, 2000 to April 4, 2001 and
as chief technical officer from February 2000 to April 4, 2001. Effective
April 4, 2001, Mr. Leigh resigned his position as an officer and assumed
the position of general manager of technical operations.
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OPTIONS GRANTS IN LAST FISCAL YEAR
The following table provides information related to options granted to
our named executive officers during the fiscal year ended May 31, 2001.
The information in this table reflects options granted by the board of
directors under our 2000 Executive Long Term Incentive Plan and our 2000
Long Term Incentive Plan, which plans were approved by our stockholders on
August 3, 2000.
The following table sets forth each grant of stock options made during the
fiscal year ended May 31, 2001, to the named executive officers:
Number of % of Total
Securities Options
Underlying Granted Exercise
Options in Fiscal Price Expiration
Name Granted 2001 (1) Per Share Date (3)
-------------------- ---------- ---------- ---------- ----------
John P. Gorst 15,000 - $1.63 9/15/10
60,355 - $0.3438 1/30/11
M. Carroll Benton 15,000 - $1.63 9/15/10
59,555 - $0.3438 1/30/11
James R. Leigh (2) 10,000 - $1.63 9/15/10
11,453 - $0.3438 1/30/11
<FN>
______________
* Less than 1%
(1) Based on a total of 8,568,760 options granted during the fiscal year ended
May 31, 2001.
(2) Mr. Leigh served as president from September 22, 2000 to April 4, 2001 and
as chief technical officer from February 2000 to April 4, 2001. Effective
April 4, 2001, Mr. Leigh resigned as an officer and assumed the position
of general manager of technical operations.
(3) Options may terminate before their expiration date upon death, disability,
or termination of employment
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTIONS VALUES
The following table sets forth, for each of the named executive officers,
information concerning the number of shares received during fiscal 2001 upon
exercise of options and the aggregate dollar amount received from such
exercise, as well as the number and value of securities underlying unexercised
options held on May 31, 2001.
Shares Number of
Acquired Securities Underlying Value of In-The_Money
on Value Options at Year-End (#) Options at Year-End ($)(2)
Exercise Realized --------------------------- ---------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
------------------ -------- -------- ----------- ------------- ----------- -------------
John P. Gorst - - 3,075,355 - - -
M. Carroll Benton - - 2,074,555 - - -
James R. Leigh, III - - 476,731 324,722 - -
<FN>
(1) Based on the difference between the option exercise price and the
fair market value of our common stock on the exercise date as
determined pursuant to the terms of the 2000 Long Term Incentive Plan
and the 2000 Executive Long Term Incentive Plan.
(2) Based on the difference between the option exercise price and the
closing sale price of $0.12 of our common stock as reported on the
OTC Bulletin Board on May 31, 2001, the last trading day of our 2001
fiscal year, multiplied by the number of shares underlying the
options. None of these options are currently in-the-money.
CERTAIN TRANSACTIONS
Interactive is a company wholly owned by M. Carroll Benton, our chief
administrative officer, secretary and treasurer. John P. Gorst, our chief
executive officer, was also vice president and general manager of Interactive.
During their time at Interactive, Ms. Benton and Mr. Gorst began developing
the "Insynq Project," which later developed into our current business.
On September 16, 1998, Interactive transferred to Charles Benton, husband of
Ms. Benton and then a creditor of Interactive, all of Interactive's title and
interest in and to (1) certain equipment and other tangible personal property,
and (2) the intellectual properties, computer software, trademarks, copyrights,
ideas, work-in-progress, and other tangible and intangible property comprising
the system known as the "Insynq Project" to retire a $200,000 debt obligation
owed by Interactive to Charles Benton. These assets later developed into
Insynq's IQ Delivery System. Mr. Benton contributed all of the "Insynq Project"
intellectual property assets to Insynq-WA in exchange for the initial 5,500,000
shares of common stock issued by Insynq-WA at the time of its formation. On the
same date, Mr. Benton sold the equipment and other tangible property to the
newly formed Insynq-WA, in exchange for a $70,000 promissory note. Mr. Benton
then sold 2,750,000 shares to each of Ms. Benton and Mr. Gorst in exchange for
a $65,000 note from each of them secured by the shares. During the start-up
operations of Insynq-WA, the business contacts of Interactive were utilized in
the purchase of supplies and other items for Insynq-WA. As of September 30,
1999, Insynq-WA owed Interactive $117,024 related to these purchases, and on
November 12, 1999, the board of Insynq-WA approved the issuance of 118,000
shares of its common stock in full payment of this debt, after a board
determination that the shares of Insynq-WA should be valued at $1.00 per share.
On September 22, 2000, we executed a Release Agreement with M. Carroll
Benton, our chief administrative officer, secretary and treasurer, John Gorst,
our chief executive officer, Charles Benton, the husband of Ms. Benton,
Interactive Information Systems, an entity owned by Ms. Benton, and entities
controlled by Mr. Benton, which, with certain exceptions, releases the parties
from any and all claims, if any, arising from the parties' prior relationships
and dealings prior to the release date. Among the consideration given for the
Release Agreement, we granted Mr. Benton registration rights to register his
shares of common stock. In addition, Mr. Gorst, Mr. Benton and Ms. Benton
executed a Release Agreement (the Gorst Release) to fully and finally release
Mr. Gorst personally of any obligations arising under the $65,000 promissory
note he owed to Mr. Benton secured by shares of our stock he originally
purchased from Mr. Benton, as well as a general release of Mr. Gorst, with
certain exceptions, by Mr. and Mrs. Benton and certain entities affiliated with
them. In consideration of the Gorst Release, Mr. Gorst agreed to transfer
150,000 shares of our common stock held by him to Mr. Benton, and Ms. Benton
transferred approximately 98,000 shares of common stock held by her to Mr.
Benton.
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On October 17, 2000, we executed a Lock-Up and Waiver Agreement with Mr.
Benton with respect to the 496,466 shares of our common stock owned by him.
Under the agreement, he waived any rights he may have to exercise any
registration right for a period of 180 trading days after a contemplated
registration statement is filed with the SEC. This agreement was amended on
November 30, 2000, to allow Mr. Benton to sell 50,000 shares per calendar
quarter during the term of the lock up agreement.
On October 31, 2000, we executed a Consulting Agreement with CFB
Associates, Inc., and specifically Charles F. Benton, CPA, for him to provide
consulting services on general operational issues for a period of three (3)
months. We have agreed to compensate CFB in the amount of $350 per hour. For
previous consulting services performed by Mr. Benton, we have agreed to
guarantee Mr. Benton a minimum of eighty-six (86) hours at this rate.
Additionally, we agree to pay to CFB $5,000 per month for eight (8) consecutive
months beginning November 30, 2000.
On June 1, 2000, we entered into a Master Licensing Agreement with My
Partner Online, Inc. (MPO), a company two-thirds owned by M. Carroll Benton and
Charles Benton. The agreement is for a term of five (5) years with an automatic
one-year extension unless either party notifies the other of termination within
ninety (90) days. Either party for breach or insolvency may terminate the
agreement at any time. Under the agreement, MPO has a non-exclusive, worldwide
license to promote, market, distribute and sublicense application hosting
services, bundled or unbundled with MPO products. MPO must use reasonable
commercial efforts to market, promote, and distribute our services by marketing
them through their sales activity. We have agreed to charge MPO a below-market
rate for subscription pricing and to forgive the $5,000 monthly maintenance fee
in exchange for the right to exercise an option to purchase a five percent (5%)
equity position in MPO. On November 29, 2000, this agreement was amended to
specifically detail the services MPO is to provide, and also requires that MPO
purchase 100 of our seats at $50.00 per seat for a period of twelve (12)
months, beginning on December 1, 2000.
On November 28, 2000, we executed an Independent Consultant Agreement with
MPO and Summer J. Mathews, MPO's president. The Consultant Agreement is for a
term of three (3) months beginning December 1, 2000, and is automatically
renewable for additional three (3) month terms unless terminated by either
party upon thirty (30) days notice. For consulting services, we have agreed to
pay a consulting fee of $15,000 in the form of shares of our common stock at
$0.9675 per share. We have agreed to register these shares within 45 days of
their issuance.
On June 21, 2001, in exchange for the waiver of certain registration
rights by One Click Investments, LLC, John P. Gorst gifted to One Click
1,000,000 shares of common stock with voting rights retained by Gorst and
agreed that One Click's securities dated August 2000 and January 2001 will be
included in the next SB-2 Registration that we shall file and the February 2000
warrants shall be re-priced to bear an exercise price of $0.25 per share of
common stock with an exercise date extending to December 31, 2004 with a
cashless provision.
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 ten percent of a registered class of our equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the Commission and the National Association of Securities
Dealers, Inc. Such officers, directors and ten-percent stockholders are also
required by Commission rules to furnish Insynq with copies of all such forms
that they file. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons that
no other reports were required for such persons, we believe that during the
fiscal year ended May 31, 2001, all Section 16(a) filing requirements
applicable to ours officers, directors and ten-percent stockholders were
complied with.
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STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 2002 annual meeting of
stockholders, for inclusion in our proxy statement and form of proxy relating
to that annual meeting, must be received by Insynq at our offices in Tacoma,
Washington, addressed to the Secretary, 1127 Broadway Plaza, Suite 10, Tacoma,
Washington, 98402, not later than July 22, 2002. Such proposals must comply
with our bylaws and the requirements of Regulation 14a-8 of the Securities
Exchange Act of 1934, as amended.
Any holder of our common stock desiring to bring business before the 2002
annual meeting of stockholders in a form other than a stockholder proposal in
accordance with the preceding paragraph must give written notice that is
received by us, addressed to the Secretary, 1127 Broadway Plaza, Suite 10,
Tacoma, Washington, 98402, no later than October 5, 2001.
OTHER MATTERS
At the date of this proxy statement, management was not aware that any
matters not referred to in this proxy statement would be presented for action
at the annual meeting. If any other matters should come before the annual
meeting, the persons named in the accompanying form of proxy will have
discretionary authority to vote all proxies in accordance with their best
judgment, unless otherwise restricted by law.
ANNUAL REPORT ON FORM 10-KSB
UPON WRITTEN REQUEST OF ANY BENEFICIAL STOCKHOLDER OR STOCKHOLDER OF
RECORD, A COPY OF THE COMPANY'S ANNUAL REPORT AND FORM 10-KSB FOR THE FISCAL
YEAR ENDED MAY 31, 2001 (INCLUDING THE EXHIBITS, FINANCIAL STATEMENTS, AND THE
SCHEDULES THERETO) REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934,
MAY BE OBTAINED, WITHOUT CHARGE, FROM M. CARROLL BENTON, SECRETARY, 1127
BROADWAY PLAZA, SUITE 10, TACOMA, WASHINGTON, 98402.
By Order of the Board of Directors
/s/ M. Carroll Benton
M. CARROLL BENTON
Secretary
Dated: October 22, 2001
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APPENDIX A
AMENDED AND RESTATED INSYNQ, INC. 2000 LONG TERM INCENTIVE PLAN
I. GENERAL
1. PURPOSE. The Insynq, Inc. 2000 Long Term Incentive Plan (the "Plan")
has been established by Insynq, Inc. (the "Company") to:
(a) attract and retain key executive and managerial employees of the
Company;
(b) attract and retain directors, independent contractors and
consultants;
(c) motivate Participants by means of appropriate incentives to
achieve long-range goals;
(d) provide incentive compensation opportunities that are
competitive with those of comparable corporations; and
(e) further identify Participants' interests with those of the
Company's other shareholders through compensation alternatives based on
the Company's common stock;
and thereby promote the long-term financial interest of the Company and its
Subsidiaries (if any), including the growth in value of the Company's equity
and enhancement of long-term shareholder return.
2. EFFECTIVE DATE. Subject to the approval of the holders of a
majority of the voting Stock of the Company, the Plan shall be effective as of
February 21, 2000, provided, however, that awards made under the Plan prior to
such approval of the Plan by stockholders of the Company are contingent on such
approval of the Plan by the stockholders of the Company and shall be null and
void if such approval of the stockholders of the Company is withheld. The Plan
shall terminate on February 21, 2000, the tenth anniversary of the Plan's
effective date.
3. DEFINITIONS. The following definitions are applicable to the Plan.
(a) "Award Agreement" means a written agreement between the Company
and a Participant documenting an award under this Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" has the meaning ascribed to it in
Section 1.11.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee of the Board.
(f) "Disabled" means the inability of a Participant, by reason of a
physical or mental impairment, to engage in any substantial gainful
activity, of which the Board shall be the sole judge.
(g) "Fair Market Value" of any share of Stock means (i) if the Stock
is listed on a national securities exchange, the closing price on the
Stock on a given date; (ii) if the Stock is traded on an exchange or
market in which prices are reported on a bid and asked price, the average
of the mean between the bid and asked price for the Stock on a given date;
and (iii) if the Stock is not listed on a national securities exchange nor
traded on the over-the-counter market, such value as the Committee, in
good faith, shall determine.
(h) "1934 Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
(i) "Option Date" means, with respect to any Stock Option, the date
on which the Stock Option is awarded under the Plan.
(j) "Participant" means (i) any regular full-time employee of the
Company or any Subsidiary (meaning an employee who works twenty (20) hours
or more per week) who is selected by the Committee to participate in the
Plan, or (ii) any consultant, independent contractor or director of the
Company or any Subsidiary.
(k) "Performance Award" has the meaning ascribed to it in
Article VI.
(l) "Performance Period" has the meaning ascribed to it in
Article VI.
(m) "Related Company" means any corporation during any period in
which it is a Subsidiary, or during any period in which it directly or
indirectly owns fifty percent (50%) or more of the total combined voting
power of all classes of securities that are entitled to vote.
(n) "Restricted Period" has the meaning ascribed to it in Article V.
(o) "Restricted Stock" has the meaning ascribed to it in Article V.
(p) "Retirement" means (i) termination of employment in accordance
with the retirement procedures set by the Company from time to time;
(ii) termination of employment because a participant becomes Disabled; or
(iii) termination of employment voluntarily with the consent of the
Company (of which the Board shall be the sole judge).
(q) "Stock" means the common stock, $.001 par value per share, of
Insynq, Inc.
(r) "Stock Appreciation Right" means the right of a holder of a
Stock Option to receive Stock or cash as described in Article IV.
(s) "Stock Option" means the right of a Participant to purchase
Stock pursuant to an Incentive Stock Option, a Non-Qualified Option or a
Reload Option awarded pursuant to the provisions of the Plan.
(t) "Subsidiary" means any corporation during any period of which
fifty percent (50%) or more of the total combined voting power of all
classes of securities entitled to vote is owned, directly or indirectly,
by the Company.
4. ADMINISTRATION. The authority to manage and control the operation
and administration of the Plan shall be vested in the Board. Subject to the
provisions of the Plan, the Board will have authority to select employees to
receive awards of Stock Options, with or without tandem Stock Appreciation
Rights, Performance Awards and/or Restricted Stock, to determine the time or
times of receipt, to determine the types of awards and the number of shares
covered by the awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such awards, and to amend,
modify or suspend awards. In making such award determinations, the Board may
take into account the nature of services rendered by the respective employee,
his or her present and potential contribution to the Company's success and such
other factors as the Board deems relevant.
The Board is authorized to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the Plan, to determine the terms
and provisions of any agreements made pursuant to the Plan, to modify such
agreements, and to make all other determinations that may be necessary or
advisable for the administration of the Plan. With respect to persons subject
to Section 16 of the 1934 Act, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successor rule or
statute under the 1934 Act. To the extent any provision of the Plan or action
by the Board of Directors or the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law.
The Board, in its discretion, may delegate any or all of its authority,
powers and discretion under this Plan to the Committee, and the Board in its
discretion may revest any or all such authority, powers and discretion in
itself at any time. If any or all of the authority, powers and discretion
under this Plan are delegated to the Committee and the Company has registered
any of its equity securities under Section 12 of the 1934 Act, the Committee
shall consist solely of two or more non-employee directors (as defined in Rule
16b-3 under the 1934 Act) until such time as such other requirements are
imposed by applicable law. If appointed, the Committee shall function as
follows: A majority of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all members of the Committee, shall be
the acts of the Committee, unless provisions to the contrary are embodied in
the Company's Bylaws or resolutions duly adopted by the Board. All actions
taken and decisions and determinations made by the Board or the Committee
pursuant to the Plan shall be binding and conclusive on all persons interested
in the Plan. No member of the Board or the Committee shall be liable for any
action or determination taken or made in good faith with respect to the Plan.
5. PARTICIPATION. Subject to the terms and conditions of the Plan, the
Board shall determine and designate, from time to time, (i) the full-time
employees of the Company and/or its Subsidiaries who will participate in the
Plan, and (ii) any consultants, independent contractors or directors of the
Company and/or its Subsidiaries who will participate in the Plan. In the
discretion of the Board, a Participant may be awarded Stock Options with or
without tandem Stock Appreciation Rights, Performance Units or Restricted Stock
or any combination thereof, and more than one award may be granted to a
Participant; provided, however, that Incentive Stock Options shall not be
awarded to Participants who are not employees of the Company. Except as
otherwise agreed to by the Company and the Participant, any award under the
Plan shall not affect any previous award to the Participant under the Plan or
any other plan maintained by the Company or its Subsidiaries.
6. SHARES SUBJECT TO THE PLAN. The shares of Stock with respect to
which awards may be made under the Plan shall be either authorized and unissued
shares or issued and outstanding shares (including, in the discretion of the
Board, shares purchased in the market). Subject to the provisions of
Section 1.10, the number of shares of Stock available under the Plan for the
grant of Stock Options with or without tandem Stock Appreciation Rights,
Performance Units and Restricted Stock shall not exceed 31,675,300 shares in
the aggregate. If, for any reason, any award under the Plan or any portion of
the award, shall expire, terminate or be forfeited or cancelled, or be settled
in cash pursuant to the terms of the Plan and, therefore, any such shares are
no longer distributable under the award, such shares of Stock shall again be
available for award under the Plan.
7. COMPLIANCE WITH APPLICABLE LAWS AND WITHHOLDING OF TAXES.
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to issue any shares of Stock under the Plan unless
such issuance would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity. Prior to the
issuance of any shares of Stock under the Plan, the Company may require a
written statement that the recipient is acquiring the shares for
investment and not for the purpose or with the intention of distributing
the shares.
(b) All awards and payments under the Plan are subject to
withholding of all applicable taxes, which withholding obligations may be
satisfied, with the consent of the Board, through the surrender of shares
of Stock that the Participant already owns, or to which a Participant is
otherwise entitled under the Plan. The Company shall have the right to
deduct from all amounts paid in cash in consequence of the exercise of a
Stock Option, Performance Unit or Stock Appreciation Right or in
connection with an award of Restricted Stock under the Plan any taxes
required by law to be withheld with respect to such cash payments. Where
an employee or other person is entitled to receive shares of Stock
pursuant to the exercise of a Stock Option, a Performance Unit or a Stock
Appreciation Right pursuant to the Plan, the Company shall have the right
to require the employee or such other person to pay to the Company the
amount of any taxes that the Company is required to withhold with respect
to such shares, or, in lieu thereof, to retain, or sell without notice, a
sufficient number of such shares to cover the amount required to be
withheld.
(c) Upon the disposition (within the meaning of Code Section 424(c))
of shares of Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to the expiration of the holding period requirements of Code
Section 422(a)(1), the employee shall be required to give notice to the
Company of such disposition and the Company shall have the right to
require the employee to pay to the Company the amount of any taxes that
are required by law to be withheld with respect to such disposition.
(d) Upon termination of the Restricted Period with respect to an
award of Restricted Stock (or such earlier time, if any, as an election is
made by the employee under Code Section 83(b), or any successor provisions
thereto, to include the value of such shares in taxable income), the
Company shall have the right to require the employee or other person
receiving shares of Stock in respect of such Restricted Stock award to pay
to the Company the amount of taxes that the Company is required to
withhold with respect to such shares of Stock or, in lieu thereof, to
retain or sell without notice a sufficient number of shares of Stock held
by it to cover the amount required to be withheld. The Company shall have
the right to deduct from all dividends paid with respect to Restricted
Stock the amount of taxes that the Company is required to withhold with
respect to such dividend payments.
8. TRANSFERABILITY. Performance Awards, Incentive Stock Options with or
without tandem Stock Appreciation Rights, and, during the period of
restriction, Restricted Stock awarded under the Plan are not assignable or
transferable except as designated by the Participant by will or by the laws of
descent and distribution. Incentive Stock Options may be exercised during the
lifetime of the Participant only by the Participant or his guardian or legal
representative.
9. EMPLOYEE AND STOCKHOLDER STATUS. The Plan does not constitute a
contract of employment, and selection as a Participant will not give any
employee the right to be retained in the employ of the Company or any
Subsidiary or any director or consultant the right to continue to provide
services to the Company or any Subsidiary. No award under the Plan shall
confer upon the holder thereof any right as a stockholder of the Company prior
to the date on which he fulfills all service requirements and other conditions
for receipt of shares of Stock. If the redistribution of shares is restricted
pursuant to Section 1.7, certificates representing such shares may bear a
legend referring to such restrictions.
10. ADJUSTMENTS TO NUMBER OF SHARES SUBJECT TO THE PLAN. In the event of
any change in the outstanding shares of Stock of the Company by reason of any
stock dividend, split, spinoff, recapitalization, merger, consolidation,
combination, extraordinary dividend, exchange of shares or other similar
change, the aggregate number of shares of Stock with respect to which awards
may be made under the Plan, the terms and the number of shares of any
outstanding Stock Options, Stock Appreciation Rights, Performance Units and
Restricted Stock, and the purchase price of a share of Stock under Stock
Options, may be equitably adjusted by the Board in its sole discretion.
11. BUSINESS COMBINATIONS. In addition to the rights and obligations of
the Committee to modify, adjust or accelerate exercisability of outstanding
options, in the event that, while any Stock Options, Stock Appreciation Rights,
Performance Units or Restricted Shares are outstanding under the Plan, there
shall occur (i) a merger or consolidation of the Company with or into another
corporation in which the Company shall not be the surviving corporation (for
purposes of this Section 1.11, the Company shall not be deemed the surviving
corporation in any such transaction if, as the result thereof, the existing
shareholders of the Company hold less than 51% of the outstanding stock of the
Company), (ii) a dissolution of the Company, or (iii) a transfer of all or
substantially all of the assets or shares of stock of the Company in one
transaction or a series of related transactions to one or more other persons or
entities (any of the foregoing events as described in (i)-(iii) above, a
"Change of Control"), then, with respect to each Stock Option, Stock
Appreciation Right, Performance Unit and share of Restricted Stock outstanding
immediately prior to the consummation of such transaction and without the
necessity of any action by the Committee:
(a) If provision is made in writing in connection with such
transaction for the continuance and/or assumption of the Stock Options,
Stock Appreciation Rights, Performance Units and Restricted Shares granted
under the Plan, or the substitution for such Stock Options, Stock
Appreciation Rights, Performance Units and Restricted Shares of new Stock
Options, Stock Appreciation Rights, Performance Units and Restricted
Shares, with appropriate adjustment as to the number and kind of shares or
other securities deliverable with respect thereto, the Stock Options,
Stock Appreciation Rights, Performance Units and Restricted Shares granted
under the Plan, or the new Stock Options, Stock Appreciation Rights,
Performance Units and Restricted Shares substituted therefor, shall
continue, subject to such adjustment, in the manner and under the terms
provided in the respective agreements.
(b) In the event provision is not made in connection with such
transaction for the continuance and/or assumption of the Stock Options,
Stock Appreciation Rights, Performance Units and Restricted Shares granted
under the Plan, or for the substitution of equivalent options, rights,
units and awards, then (i) each holder of an outstanding option shall be
entitled, immediately prior to the effective date of such transaction, to
purchase the full number of shares that he or she would otherwise have
been entitled to purchase during the entire remaining term of the option;
(ii) the holder of any right or unit shall be entitled, immediately prior
to the effective date of such transaction, to exercise such right to the
extent the related option is or becomes exercisable at such time in
accordance with its terms; (iii) all restrictions on any award of
Restricted Shares shall lapse, and (iv) any restriction or risk of
forfeiture imposed under the Plan shall lapse immediately prior to the
effective date of such transaction. The unexercised portion of any option
or right shall be deemed cancelled and terminated as of the effective date
of such transaction.
12. AGREEMENT WITH COMPANY. At the time of any awards under the Plan,
the Board will require a Participant to enter into an agreement with the
Company in a form specified by the Board (the "Award Agreement"), agreeing to
the terms and conditions of the Plan and to such additional terms and
conditions, not inconsistent with the Plan, as the Board may, in its sole
discretion, prescribe.
13. AMENDMENT AND TERMINATION OF PLAN. Subject to the following
provisions of this Section 13, the Board may at any time and in any way amend,
suspend or terminate the Plan. No amendment of the Plan and, except as
provided in Section 1.10, no action by the Board shall, without further
approval of the stockholders of the Company, increase the total number of
shares of Stock with respect to which awards may be made under the Plan,
materially increase the benefits accruing to Participants under the Plan or
materially modify the requirements as to eligibility for participation in the
Plan, if stockholder approval of such amendment is a condition of Securities
and Exchange Commission Rule 16b-3 or its successor rule or statute, the Code
or any exchange or market system on which the Stock is listed at the time such
amendment is adopted. No amendment, suspension or termination of the Plan
shall alter or impair any Stock Option with or without tandem Stock
Appreciation Right, Performance Award or share of Restricted Stock previously
awarded under the Plan without the consent of the holder thereof.
II. INCENTIVE STOCK OPTIONS
1. DEFINITION. The award of an Incentive Stock Option under the Plan
entitles the Participant to purchase shares of Stock at a price fixed at the
time the option is awarded, subject to the following terms of this Article II.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Incentive Stock Options, as described in Code Section 422(b) or any successor
section thereto, are to be awarded under the Plan and shall determine the
number of option shares to be offered to each of them. Incentive Stock Options
may be awarded only to employees. In no event shall the aggregate Fair Market
Value (determined at the time the option is awarded) of Stock with respect to
which Incentive Stock Options are exercisable for the first time by an
individual during any calendar year (under all plans of the Company and all
Related Companies) exceed $100,000.
3. PRICE. The purchase price of a share of Stock under each Incentive
Stock Option shall be determined by the Board, provided, however, that in no
event shall such price be less than the greater of (i) 100% of the Fair Market
Value of a share of Stock as of the Option Date (or 110% of such Fair Market
Value if the holder of the option owns stock possessing more than 10% of the
combined voting power of all classes of stock of the Company or any Subsidiary)
or (ii) the par value of a share of Stock on such date. To the extent provided
by the Board, the full purchase price of each share of Stock purchased upon the
exercise of any Incentive Stock Option shall be paid in cash or in shares of
Stock (valued at Fair Market Value as of the day of exercise), or in any
combination thereof, at the time of such exercise and, as soon as practicable
thereafter, a certificate representing the shares so purchased shall be
delivered to the person entitled thereto.
4. EXERCISE. Each Option shall become and be exercisable at such time
or times and during such period or periods, in full or in such installments as
may be determined by the Board at the Option Date. In addition, if permitted
by the Board or the terms of the Award Agreement evidencing such Stock Option,
Participants may elect to pay the purchase price of shares of Stock purchased
upon the exercise of Incentive Stock Options in cash or through delivery at the
time of such exercise of shares of Stock (valued at Fair Market Value as of the
date of exercise) already owned by the Participant, or any combination thereof,
equivalent to the purchase price of such Incentive Stock Options. A
Participant's payment of the purchase price in connection with the exercise of
an Incentive Stock Option through delivery of share of Stock ("ISO Stock") that
were acquired through the exercise of an Incentive Stock Option and that have
not been held for more than one year will be considered a disposition (within
the meaning of Code Section 422(c)) of ISO Stock, resulting in the
disqualification of the ISO Stock from treatment as an Incentive Stock Option
under Code Section 422, and the Participant's recognition of ordinary income.
Participants should consult with their tax advisors prior to electing to
exercise an Incentive Stock Option by this method.
5. OPTION EXPIRATION DATE. Unless otherwise provided by the Award
Agreement, the "Expiration Date" with respect to an Incentive Stock Option or
any portion thereof awarded to a Participant under the Plan means the earliest
of:
(a) the date that is ten (10) years after the date on which the
Incentive Stock Option is awarded (or, if the Participant owns stock
possessing more than ten percent (10%) of the combined voting power of all
classes of stock of the Company or any Subsidiary, the date that is five
(5) years after the date on which the Incentive Stock Option is awarded);
(b) the date that is one year after the Participant's employment
with the Company and all Related Companies is terminated by reason of the
Participant becoming Disabled or by reason of the Participant's death; or
(c) thirty (30) days following the date that the Participant's
employment with the Company and all Related Companies is terminated by
reasons other than death or becoming Disabled. All rights to purchase
shares of Stock pursuant to an Incentive Stock Option shall cease as of
such option's Expiration Date.
All rights to purchase shares of Stock pursuant to an Incentive Stock Option
shall cease as of such option's Expiration Date.
6. RELOAD OPTIONS. The Committee may, in its discretion, provide in the
terms of any Award Agreement that if the Participant delivers shares of Stock
already owned or to be received upon exercise of the Option in full or partial
payment of the option price, or in full or partial payment of the tax
withholding obligations incurred on account of the exercise of the Option, the
Optionee shall automatically and immediately upon such exercise be granted an
additional option (a "Reload Option") to purchase the number of shares of Stock
delivered by the Optionee to the Company, on such terms and conditions as the
Committee may determine under the terms of the Plan. Notwithstanding the
preceding, the purchase price of shares of Stock acquired under a Reload Option
shall be not less than the Fair Market Value of a share of Stock on the date
the Reload Option is issued.
III. NON-QUALIFIED STOCK OPTIONS
1. DEFINITION. The award of a Non-Qualified Stock Option under the Plan
entitles the Participant to purchase shares of Stock at a price fixed at the
time the option is awarded, subject to the following terms of this Article III.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Non-Qualified Stock Options are to be awarded under the Plan and shall
determine the number of option shares to be offered to each of them.
3. PRICE. The purchase price of a share of Stock under each
Non-Qualified Stock Option shall be determined by the Board; provided, however,
that in no event shall such price for Non-Qualified Stock Options issued to
Employees and Directors be less than the Fair Market Value of a share of Stock
as of the Option Date; the purchase price of a share of Stock issued to a
consultant may be less than Fair Market Value.
4. EXERCISE. Each Option shall become and be exercisable at such time
or times and during such period or periods, in full or in such installments as
may be determined by the Board at the Option Date. To the extent provided by
the Board, the full purchase price of each share of Stock purchased upon the
exercise of any Non-Qualified Stock Option shall be paid in cash or in shares
of Stock (valued at Fair Market Value as of the day of exercise), or in any
combination thereof, at the time of such exercise and, as soon as practicable
thereafter, a certificate representing the shares so purchased shall be
delivered to the person entitled thereto. In addition, unless restricted by
the Board, Participants may elect to pay the purchase price of shares of Stock
purchased upon the exercise of Non-Qualified Stock Options in cash or through
the constructive delivery at the time of such exercise of shares of Stock
(valued at Fair Market Value as of the day of exercise) already owned by the
Participant, or any combination thereof, equivalent to the purchase price of
such Non-Qualified Stock Options, and, as soon as practicable thereafter, a
certificate representing the net number of shares so purchased shall be
delivered to the person entitled thereto. Participants also may elect to pay,
unless restricted by the Board, the purchase price, in whole or in part, of
shares of Stock purchased upon the exercise of Non-Qualified Options through
the Company's withholding of shares of Stock (valued at Fair Market Value as of
the day of exercise) that would otherwise by issuable upon exercise of such
options equivalent to the purchase price of such Non-Qualified Stock Options
and, as soon as practicable thereafter, a certificate representing the net
number of shares so purchased shall be delivered to the person entitled
thereto.
5. OPTION EXPIRATION DATE. Unless otherwise provided in a Participant's
Award Agreement, the "Expiration Date" with respect to a Non-Qualified Stock
Option or any portion thereof awarded to a Participant under the Plan means the
earliest of:
(a) the date that is one (1) year after the Participant's employment
with the Company and all Related Companies is terminated by reason of the
Participant becoming Disabled or by reason of the Participant's death; or
(b) thirty (30) days following the date that the Participant's
employment with the Company and all Related Companies is terminated by
reasons other than death or becoming Disabled.
All rights to purchase shares of Stock pursuant to a Non-Qualified Stock Option
shall cease as of such option's Expiration Date.
6. RELOAD OPTIONS. The Committee may, in its discretion, provide in the
terms of any Award Agreement that if the Participant delivers shares of Stock
already owned or to be received upon exercise of the Option in full or partial
payment of the option price, or in full or partial payment of the tax
withholding obligations incurred on account of the exercise of the Option, the
Optionee shall automatically and immediately upon such exercise be granted a
Reload Option to purchase the number of shares of Stock delivered by the
Optionee to the Company, on such terms and conditions as the Committee may
determine under the terms of the Plan. Notwithstanding the preceding, the
purchase price of shares of Stock acquired under a Reload Option shall be not
less than the Fair Market Value of a share of Stock on the date the Reload
Option is issued.
IV. STOCK APPRECIATION RIGHTS
1. DEFINITION. A Stock Appreciation Right is an award that may or may
not be granted in tandem with a Non-Qualified Stock Option or Incentive Stock
Option, and entitles the holder to receive an amount equal to the difference
between the Fair Market Value of the shares of option Stock at the time of
exercise of the Stock Appreciation Right and the option price, subject to the
applicable terms and conditions of the tandem options and the following
provisions of this Article IV.
2. ELIGIBILITY. The Board may, in its discretion, award Stock
Appreciation Right under this Article IV concurrent with, or subsequent to, the
award of the option.
3. EXERCISE. A Stock Appreciation Right shall entitle the holder of a
Stock Option to receive, upon the exercise of the Stock Appreciation Right,
shares of Stock (valued at their Fair Market Value at the time of exercise),
cash or a combination thereof, in the discretion of the Board, in an amount
equal in value to the excess of the Fair Market Value of the shares of Stock
subject to the Stock Appreciation Right as of the date of such exercise over
the purchase price of the Stock Appreciation Right, as shall be prescribed by
the Board in its sole discretion and as shall be contained in the Participant's
Award Agreement. If granted in tandem with an option, the exercise of a Stock
Appreciation Right will result in the surrender of the related Incentive Stock
Option or Non-Qualified Stock Option and, unless otherwise provided by the
Board in its sole discretion, the exercise of a Stock Option will result in the
surrender of a related Stock Appreciation Right, if any.
4. EXPIRATION DATE. The "Expiration Date" with respect to a Stock
Appreciation Right shall be determined by the Board and documented in the
Participant's Award Agreement, and if granted in tandem with an option, shall
be not later than the Expiration Date for the related Stock Option. If neither
the right nor the related Stock Option is exercised before the end of the day
on which the right ceases to be exercisable, such right shall be deemed
exercised as of such date and payment shall be made to the holder in cash.
V. RESTRICTED STOCK
1. DEFINITION. Restricted Stock awards are grants of Stock to
Participants, the vesting of which is subject to a required period of
employment and any other conditions established by the Board.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Restricted Stock is to be awarded and the number of shares of Stock that are
subject to the award.
3. TERMS AND CONDITIONS OF AWARDS. All shares of Restricted Stock
awarded to Participants under the Plan shall be subject to the following terms
and conditions and to such other terms and conditions, not inconsistent with
the Plan, as shall be prescribed by the Board in its sole discretion and as
shall be contained in the Participant's Award Agreement.
(a) Restricted Stock awarded to Participants may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as
hereinafter provided, for a period of ten (10) years or such shorter
period as the Board may determine, but not less than one (1) year, after
the time of the award of such stock (the "Restricted Period"). Except for
such restrictions, the Participant as owner of such shares shall have all
the rights of a shareholder, including but not limited to the right to
vote such shares and, except as otherwise provided by the Board, the right
to receive all dividends paid on such shares.
(b) The Board may in its discretion, at any time after the date of
the award of Restricted Stock, adjust the length of the Restricted Period
to account for individual circumstances of a Participant or group of
Participants, but in no case shall the length of the Restricted Period be
less than one (1) year.
(c) Except as otherwise determined by the Board in its sole
discretion, a Participant whose employment with the Company and all
Related Companies terminates prior to the end of the Restricted Period for
any reason shall forfeit all shares of Restricted Stock remaining subject
to any outstanding Restricted Stock Award.
(d) Each certificate issued in respect of shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant
and, at the discretion of the Board, each such certificate may be
deposited in a bank designated by the Board. Each such certificate shall
bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Insynq, Inc. 2000 Stock Incentive Plan
and an agreement entered into between the registered owner and
Insynq, Inc. A copy of such plan and agreement is on file in the
office of the Secretary of Insynq, Inc. in Tacoma, Washington.
(e) At the end of the Restricted Period for Restricted Stock, such
Restricted Stock will be transferred free of all restrictions to a
Participant (or his or her legal representative, beneficiary or heir).
VI. PERFORMANCE UNITS
1. DEFINITION. Performance Units are awards to Participants who may
receive value for the units at the end of a Performance Period. The number of
units earned, and value received for them, will be contingent on the degree to
which the performance measures established at the time of the initial award are
met.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Performance Units are to be awarded, and the number of units to be the subject
of such awards.
3. TERMS AND CONDITIONS OF AWARDS. For each Participant, the Board will
determine the timing of awards; the number of units awarded; the value of
units, which may be stated either in cash or in shares of Stock; the
performance measures used for determining whether the Performance Units are
earned; the performance period during which the performance measures will
apply; the relationship between the level of achievement of the performance
measures and the degree to which Performance Units are earned; whether, during
or after the performance period, any revision to the performance measures or
performance period should be made to reflect significant events or changes that
occur during the performance period; and the number of earned Performance Units
that will be paid in cash and/or shares of Stock, as shall be prescribed by the
Board in its sole discretion and as shall be contained in the Participant's
Award Agreement.
4. PAYMENT. The Board will compare the actual performance to the
performance measures established for the performance period and determine the
number of units to be paid and their value. Payment for units earned shall be
wholly in cash, wholly in Stock or in a combination of the two, in a lump sum
or installments, and subject to vesting requirements and such other conditions
as the Board shall provide. The Board will determine the number of earned
units to be paid in cash and the number to be paid in Stock. For Performance
Units valued when awarded in shares of Stock, one share of Stock will be paid
for each unit earned, or cash will be paid for each unit earned equal to either
(i) the Fair Market Value of a share of Stock at the end of the Performance
Period or (ii) the Fair Market Value of the Stock averaged for a number of days
determined by the Board. For Performance Units valued when awarded in cash,
the value of each unit earned will be paid in its initial cash value, or shares
of Stock will be distributed based on the cash value of the units earned
divided by (i) the Fair Market Value of a share of Stock at the end of the
Performance Period or (ii) the Fair Market Value of a share of Stock averaged
for a number of days determined by the Board.
5. RETIREMENT, DEATH OR TERMINATION. A Participant whose employment
with the Company and Related Companies terminates during a performance period
because of Retirement or death shall be entitled to the prorated value of
earned Performance Units, issued with respect to that performance period, at
the conclusion of the performance period based on the ratio of the months
employed during the period to the total months of the performance period.
If the Participant's employment with the Company and Related Companies
terminates during a performance period for any reason other than Retirement or
death, the Performance Units issued with respect to that performance period
will be forfeited on the date his employment with the Company and Related
Companies terminates. Notwithstanding the foregoing provisions of this
Part VI, if a Participant's employment with the Company and Related Companies
terminates before the end of the Performance Period with respect to any
Performance Units awarded to him, the Board may determine that the Participant
will be entitled to receive all or any portion of the units that he or she
would otherwise receive, and may accelerate the determination and payment of
the value of such units or make such other adjustments as the Board, in its
sole discretion, deems desirable.
===============================================================================
INSYNQ, INC. PROXY
1127 Broadway Plaza, Suite 10
Tacoma, Washington 98402
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John P. Gorst, M. Carroll Benton and
David Selmon, and each or any of them, proxies for the undersigned, with full
power of substitution, to vote all shares of common stock, $0.001 par value per
share ("Shares") of Insynq, Inc. (the "Company") which the undersigned would be
entitled to vote at the ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY (THE
"MEETING") TO BE HELD AT 1127 BROADWAY PLAZA, SUITE 10, TACOMA, WASHINGTON
98402 ON NOVEMBER 19, 2001, AT 10:00 A.M., PACIFIC STANDARD TIME, and directs
that the Shares represented by this Proxy shall be voted as indicated below:
1. Election Of Directors
[ ] For All Nominees [ ] Withhold Authority
Listed Below (except as to vote for all nominees
marked to the contrary below) listed below
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through his/her name in the list below:
John P. Gorst; M. Carroll Benton; Donald Kaplan David Selmon
2. To consider and vote upon a proposal to amend and restate Insynq's
2000 Long Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and vote upon a proposal to amend Insynq's certificate of
incorporation so as to increase the number of authorized common stock
from 100,000,000 to 250,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment by the board of directors of Grant Thornton LLP
as independent certified public accountants of Insynq for the fiscal year
ending May 31, 2002; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To transact such other business as properly may come before the meeting
or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. THE BOARD OF DIRECTORS FAVORS A VOTE FOR PROPOSAL. IF NO
DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 and 4, ABOVE
AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES NAMED HEREIN WITH THE
RESPECT TO ANY MATTER REFERRED TO IN 5 ABOVE. YOU ARE ENCOURAGED TO SPECIFY
YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
Dated: _____________, 2001
PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON STOCK CERTIFICATE(S).
A corporation is requested to sign its name by its President or other
authorized officer, with the office held so designated. A partnership
should sign in the partnership should sign in the partnership name by an
authorized person. Executors, administrators, trustees, guardians and
corporate officers are requested to indicate the capacity in which they
are signing. JOINT TENANTS SHOULD BOTH SIGN.
________________________________ ______________________________________
(Signature of Stockholder(s))
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
COLONIAL STOCK TRANSFER CO.
455 E 400 #100
Salt Lake City, UT 84111