SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
|X| Filed by Registrant
|_| Filed by a Party other than the Registrant
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for use by Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant toss.240.14a-12
INVISA, INC.
(Name of Registrant As Specified in its Charter)
N/A
(Name of Persons Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set forth the amount on which the
filing fee is calculated and state how it was determined.
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid:
N/A
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and date of its filing.
1) Amount Previously Paid:
N/A
2) Form, Schedule or Registration Statement No.:
N/A
3) Filing Party:
N/A
4) Date Filed:
N/A
INVISA, INC.
4400 INDEPENDENCE COURT
SARASOTA, FLORIDA 34234
(941) 355-9361
May 22, 2004
Dear Fellow Stockholder:
The 2004 Annual Meeting of Stockholders (the "Annual Meeting") of
Invisa, Inc. (the "Company" or "Invisa") will be held at 10:00 a.m. on Tuesday,
June 22, 2004 at 4400 Independence Court, Sarasota, Florida 34234. Enclosed you
will find a formal Notice of Annual Meeting, Proxy Card and Proxy Statement,
detailing the matters which will be acted upon. Directors and Officers of the
Company will be present to help host the meeting and to respond to any questions
from our stockholders. I hope you will be able to attend.
Please sign, date and return the enclosed Proxy without delay in the
enclosed envelope. If you attend the Annual Meeting, you may vote in person,
even if you have previously mailed a Proxy, by withdrawing your Proxy and voting
at the meeting. Any stockholder giving a Proxy may revoke the same at any time
prior to the voting of such Proxy by giving written notice of revocation to the
Company's Secretary, by submitting a later dated Proxy or by attending the
Annual Meeting and voting in person. The Company's Annual Report on Form 10-KSB
(including audited financial statements) for the fiscal year ended December 31,
2003 accompanies the Proxy Statement. All shares represented by Proxies will be
voted at the Annual Meeting in accordance with the specifications marked
thereon, or if no specifications are made, (a) as to Proposal 1, the Proxy
confers authority to vote "FOR" all of the seven persons listed as candidates
for a position on the Board of Directors, (b) as to Proposal 2, the Proxy
confers authority to vote "FOR" the approval of the 2003-A Employee, Director
Consultant and Advisor Stock Compensation Plan, as amended, and (c) as to any
other business which comes before the Annual Meeting, the Proxy confers
authority to vote in the Proxy holder's discretion.
The Company's Board of Directors believes that a favorable vote for
each candidate for a position on the Board of Directors and for all other
matters described in the attached Notice of Annual Meeting and Proxy Statement
is in the best interest of the Company and its stockholders and recommends a
vote "FOR" all candidates and all other matters. Accordingly, we urge you to
review the accompanying material carefully and to return the enclosed Proxy
promptly.
Thank you for your investment and continued interest in Invisa, Inc.
Sincerely,
/s/ Herbert M. Lustig
-----------------------------------------
Herbert M. Lustig
President and Chief Executive Officer
INVISA, INC.
4400 INDEPENDENCE COURT
SARASOTA, FLORIDA 34234
(941) 355-9361
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY JUNE 22, 2004
Notice is hereby given that the 2004 Annual Meeting of Stockholders
(the "Annual Meeting") of Invisa, Inc., a Nevada corporation (the "Company" or
"Invisa"), will be held at the Company's principal office at 4400 Independence
Court, Sarasota, Florida 34234, on Tuesday, June 22, 2004 at 10:00 a.m., Eastern
Standard Time, for the following purposes:
1.To elect seven Directors to the Board of Directors to serve until the
2005 Annual Meeting of Stockholders or until their successors have
been duly elected or appointed and qualified;
2.To approve the Company's 2003-A Employee, Director, Consultant and
Advisor Stock Compensation Plan, as amended; and
3.To consider and take action upon such other business as may properly
come before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on May 10,
2004, as the record date for determining the stockholders entitled to notice of,
and to vote at, the Annual Meeting or any adjournments thereof.
For a period of 10 days prior to the Annual Meeting, a stockholders
list will be kept at the Company's office and shall be available for inspection
by stockholders during usual business hours. A stockholders list will also be
available for inspection at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement for
further information regarding each proposal to be made.
STOCKHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE URGED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND MAIL IT IN THE ENCLOSED
STAMPED, SELF-ADDRESSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU SIGN AND RETURN
YOUR PROXY WITHOUT SPECIFYING YOUR CHOICES IT WILL BE UNDERSTOOD THAT YOU WISH
TO HAVE YOUR SHARES VOTED IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU DESIRE, REVOKE YOUR PROXY AND
VOTE IN PERSON.
By Order of the Board of Directors
/s/ Edmund C. King
-------------------------------------
Edmund C. King, Secretary
May 22, 2004
INVISA, INC.
4400 INDEPENDENCE COURT
SARASOTA, FLORIDA 34234
(941) 355-9361
PROXY STATEMENT
2004 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation
by and on behalf of the Board of Directors (the "Board of Directors") of Invisa,
Inc. (the "Company" or "Invisa") of proxies to be voted at the 2004 Annual
Meeting of Stockholders to be held at 10:00 a.m., Eastern Standard Time, on
Tuesday, June 22, 2004 at the principal office of the Company at 4400
Independence Court, Sarasota, Florida 34234 and at any adjournments thereof (the
"Annual Meeting"). The Annual Meeting has been called to consider and take
action on the following proposals: (i) To elect seven Directors to the Board of
Directors to serve until the 2005 Annual Meeting of Stockholders or until their
successors have been duly elected or appointed and qualified; (ii) To approve
the Company's 2003-A Employee, Director, Consultant and Advisor Stock
Compensation Plan, as amended; and (iii) To consider and take action upon such
other business as may properly come before the Annual Meeting or any
adjournments thereof.
The Board of Directors knows of no other matters to be presented for
action at the Annual Meeting. However, if any other matters properly come before
the Annual Meeting, the persons named in the proxy will vote on such other
matters and/or for other nominees in accordance with their best judgment. The
Company's Board of Directors recommends that the stockholders vote in favor of
each of the proposals. Only holders of record of common stock, $.001 par value
(the "Common Stock"), of the Company at the close of business on May 10, 2004
(the "Record Date") will be entitled to vote at the Annual Meeting.
The principal executive offices of the Company are located at 4400
Independence Court, Sarasota, Florida 34234 and its telephone number is (941)
355-9361. The approximate date on which this Proxy Statement, the proxy card and
other accompanying materials are first being sent or given to stockholders is
May 22, 2004. A copy of the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2003 is enclosed with these materials, but should
not be considered proxy solicitation material.
INFORMATION CONCERNING SOLICITATION AND VOTING
As of the Record Date, there were 19,283,332 outstanding shares of
Common Stock, each share entitled to one vote on each matter to be voted on at
the Annual Meeting. As of the Record Date, the Company had approximately 950
holders of record of Common Stock. Only holders of shares of Common Stock on the
Record Date will be entitled to vote at the Annual Meeting. The holders of
Common Stock are entitled to one vote on all matters presented at the meeting
for each share held of record. The presence in person or by proxy of holders of
record of a majority of the shares outstanding and entitled to vote as of the
Record Date shall be required for a quorum to transact business at the Annual
Meeting. If a quorum should not be present, the Annual Meeting may be adjourned
until a quorum is obtained.
Each nominee to be elected as a director named in Proposal 1 must
receive the vote of a plurality of the votes of the shares of Common Stock
present in person or represented by proxy at the meeting. For the purposes of
election of directors, although abstentions will count toward the presence of a
quorum, they will not be counted as votes cast and will have no effect on the
result of the vote. Brokers who hold shares in street name may vote on behalf of
beneficial owners with respect to Proposal 1.
The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy at the meeting is
required for approval of the Company's 2003-A Employee, Director, Consultant and
Advisor Stock Compensation Plan, as amended. For purposes of approval of the
Company's 2003-A Employee, Director, Consultant and Advisor Stock Compensation
Plan, as amended, described in Proposal 2, abstentions will not be counted as
votes entitled to be cast on this matter and will have no effect on the result
of the vote. "Broker non-votes," which occur when brokers are prohibited from
exercising discretionary voting authority for beneficial owners who have not
provided voting instructions, will not be counted for the purpose of determining
the number of shares present in person or by proxy on Proposal 2 and will have
no effect on the outcome of the vote.
The expense of preparing, printing and mailing this Proxy Statement,
exhibits and the proxies solicited hereby will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of the Company, without additional remuneration,
by personal interviews, telephone or facsimile transmission. The Company will
also request brokerage firms, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of shares of Common Stock held of
record and will provide reimbursements for the cost of forwarding the material
in accordance with customary charges.
Proxies given by stockholders of record for use at the Annual Meeting
may be revoked at any time prior to the exercise of the powers conferred. In
addition to revocation in any other manner permitted by law, stockholders of
record giving a proxy may revoke the proxy by an instrument in writing, executed
by the stockholder or his attorney authorized in writing or, if the stockholder
is a corporation, under its corporate seal, by an officer or attorney thereof
duly authorized, and deposited either at the corporate headquarters of the
Company at any time up to and including the last business day preceding the day
of the Annual Meeting, or any adjournments thereof, at which the proxy is to be
used, or with the chairman of such Annual Meeting on the day of the Annual
Meeting or adjournments thereof, and upon either of such deposits the proxy is
revoked. Stockholder attending the meeting may revote their proxies at the
meeting.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO
CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS
THAT MAY COME BEFORE THE ANNUAL MEETING.
Proposals 1 and 2 do not give rise to any statutory right of a
stockholder to dissent and obtain the appraisal of or payment for such
stockholder's shares.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, seven individuals will be elected to serve as
directors until the next annual meeting or until their successors are duly
elected, appointed and qualified. The Company's Board of Directors currently
consists of seven persons. All of the individuals who are nominated for election
to the Board of Directors are existing directors of the Company. Unless a
stockholder WITHHOLDS AUTHORITY, a properly signed and dated proxy will be voted
"FOR" the election of the persons named below, unless the proxy contains
contrary instructions. Management has no reason to believe that any of the
nominees will not be a candidate or will be unable to serve as a Director.
However, in the event any nominee is not a candidate or is unable or unwilling
to serve as a Director at the time of the election, unless the stockholder
withholds authority from voting, the proxies will be voted "FOR" any nominee who
shall be designated by the present Board of Directors to fill such vacancy.
The name and age of each of the seven nominees, his position with the
Company, and the period during which such person has served as a Director are
set out below.
BIOGRAPHICAL SUMMARIES OF NOMINEES FOR THE BOARD OF DIRECTORS
NAME OF NOMINEE AGE POSITION WITH THE COMPANY DIRECTOR SINCE
- ------------------ -- ------------------------------------ --------------
Joseph F. Movizzo 60 Director 2003
Herbert M. Lustig 51 Director, President & CEO 2003
Edmund C. King 69 Director, CFO, Secretary & Treasurer 2000
Robert Knight 47 Director 1998
Stephen A. Michael 56 Director and Chairman 2000
Gregory J. Newell 54 Director 2002
John E. Scates 47 Director 2002
JOSEPH F. MOVIZZO joined the Company's Board of Directors in May 2003.
From 1965 to 1998, Mr. Movizzo served in various positions at the IBM
Corporation. His positions included serving as a General Manager of IBM Global
Services Consulting Group, which he helped form, and creating and managing IBM
China/Hong Kong Corporation. From March 1998 to the present, Mr. Movizzo has
been self-employed primarily as a business consultant in textiles, financial
services, data services and government. From May 2000 to the present, Mr.
Movizzo has also served as an independent Director non-executive Chairman of
ManageSoft Corporation headquartered in Boston, MA. He was elected non-executive
Chairman of that entity in November 2002. Mr. Movizzo holds BS and MS degrees in
Nuclear Engineering from the University of Wisconsin - Madison.
HERBERT M. LUSTIG joined the Company in November of 2003 as Chief
Operating Officer. In December of 2003 he joined the Invisa Board of Directors
and on January 1, 2004, he was appointed the Company's President and CEO. From
November 2002 to October 2003, Mr. Lustig was principal at Techmark Group, a
consultancy providing technology and market development assistance for
corporations. From June 2000 to November 2002 he served as President and CEO of
Expanse Networks, an ePrivacy software developer. From June 1996 to May 2000, he
was Vice President, then Sr. Vice President of Marketing & Business Development
within the Security and Fire Solutions manufacturing businesses of Honeywell
International. Prior to that, Mr. Lustig held executive positions at General
Instrument Corporation, Booz Allen Hamilton, and Communications Satellite
Corporation (COMSAT). Mr. Lustig holds an MBA from the Wharton School of the
University of Pennsylvania and a BS in Biochemistry from the University of
Massachusetts at Amherst.
3
EDMUND C. KING has served as our Chief Financial Officer and Director
since February 9, 2000. Mr. King has had a distinguished career in accounting
and financial assistance to various industries. Until October 1, 1991, Mr. King
was a partner in Ernst & Young, an international accounting and consulting firm.
While at Ernst & Young, Mr. King was that firm's Southern California senior
healthcare partner and prior to that directed the Southern California healthcare
practice for Arthur Young & Company, one of the predecessor firms of Ernst &
Young. During his 30 years with Ernst & Young, Mr. King counseled clients in
structuring acquisitions and divestitures; advised on the development of
strategic plans, resulting in implementation of successful business strategies;
directed the preparation of feasibility studies; assisted with operational and
financial restructuring; directed and supervised audits of client financial
statements; and provided expert witness testimony and technical SEC
consultation. Commencing in 1999, Mr. King became a financial consultant to
SmartGate, L.C. that we acquired in February 2000. Mr. King has served as Chief
Financial Officer and Director of SmartPlug, Inc. since November 2000 and Chief
Financial Officer and Director of FlashPoint International, Inc. since October
2001. From January 1992, Mr. King has been a general partner of Trouver, an
investment banking and financial consulting partnership. Mr. King is also a
member of the Board of Directors of LTC Properties, Inc., a NYSE listed real
estate investment trust.
Mr. King is a graduate of Brigham Young University, having served on
the National Advisory Council of that school's Marriott School of Management,
and has completed a Harvard University management course sponsored by Ernst &
Young. Mr. King also has served as Chairman of the HFMA's Long-Term Care
Committee (Los Angeles Chapter) and is a past member of the National Association
of Corporate Directors. He holds CPA certificates in the states of California
and Utah. Mr. King has lectured and written extensively on healthcare industry
financial matters.
ROBERT KNIGHT has served as a Director of the Company since July 1998.
Mr. Knight served as President and Secretary-Treasurer of the Company from 1998
until February 2000. Mr. Knight serves as Treasurer and Director of Advertain
On-Line Inc. a position he has held since March 14, 2000. From September 1, 1998
to June 23, 1999 he served as President, Secretary - Treasurer and Director of
Silverwing Systems Corporation. From September 1, 1998 Mr. Knight served as
President and Director of Centaur BioResearch, Inc. From November 1997 Mr.
Knight has served as President and Director of Peregrine Mineral Resources
Group, Inc. From June 24, 1997 to February 1, 1999, he was the President and
Director of ANM Holdings Corporation. From March 24, 1997 to July 1, 1998, Mr.
Knight was President and director of AFD Capital Group. From November 12, 1996
to February 1, 1999, Mr. Knight was President and director of Biologistics, Inc.
In November 1995 to September 1996 Mr. Knight was President and Director of
BioQuest, Inc. (formerly Victoria Enterprises, Inc.). At the completion of the
merger between Victoria Enterprises, Inc. and BioQuest, Inc., Mr. Knight
resigned as President, Secretary and Treasurer but remained a director until May
1998. Additionally, Mr. Knight has served as a Director of FlashPoint
International, Inc. since October 2001. Mr. Knight has 15 years of experience in
the public company arena and corporate finance.
Mr. Knight completed a Masters in Business Administration, December
31, 1998 from Herriot-Watt University.
STEPHEN A. MICHAEL has served as a Director since February 9, 2000 and
as President from that date through November 6, 2003. Subsequent to that date
Mr. Michael had served as Chairman. Mr. Michael attended the School of
Engineering at Ohio State University. Upon returning from military service in
Vietnam, he attended the Schools of Business/Marketing at both Ohio State
University and Franklin University. Mr. Michael has also attended the University
of Wisconsin School of Engineering to acquire certification in the area of High
Energy Surge Suppression and New York University School of Engineering for
Advanced Studies in FRP (Fiber Reinforced Plastic) and Composites Engineering.
Mr. Michael has served as President and Director of SmartGate, L.C. since
January 1997. SmartGate, L.C. became one of our subsidiaries in February 2000.
4
Additionally, he has served as President and Director of SmartPlug, Inc. since
January 1997 and President and Director of FlashPoint International, Inc. since
October 2001. Mr. Michael has devoted a significant portion of his career to
developing functional products, including participating in the development and
marketing of the Panasonic Auto Sound-Car dealer system, the Fuzz Buster and the
Sears KingFisher Boat.
Ambassador GREGORY J. NEWELL has served as a Director of the Company
since June 13, 2002. Ambassador Newell is an international business development
strategist and former: U.S. Ambassador; U. S. Assistant Secretary of State; and
White House Commissioned Officer, having served under four U.S. Presidents. From
1992 to the present, Ambassador Newell has served as President of International
Commerce Development Corporation in Provo, Utah, an international
business-consulting firm. From 1989 to 1991, Ambassador Newell served as
President and International Development Strategist of Dow, Lohnes & Albertson
International, a subsidiary of one of Washington, D.C.'s oldest and largest law
firms. Ambassador Newell was U.S. Ambassador to Sweden from 1985 to 1989. Prior
to that he was U.S. Assistant Secretary of State for International
Organizational Affairs serving as the senior U.S. government official
responsible for the formulation and execution of U.S. multilateral foreign
policy in 96 international organizations including the United Nations, where he
served as senior advisor to the 37th, 38th, 39th and 40th United Nations General
Assemblies. He served as Director of Presidential Appointments and Scheduling
and Special Assistant to President Ronald Reagan and Staff Assistant to
President Gerald R. Ford. Ambassador Newell has also served on the boards of the
Landmark Legal Foundation, Sutherland Institute and the Swedish-American Chamber
of Commerce.
JOHN E. SCATES, a garage door industry engineer and consultant, was
appointed to the Company's Board of Directors on June 27, 2002. From June 1997
to the present, Mr. Scates has been President and Owner of Scates, Inc., a
product design and failure analysis consultancy in Carrollton, Texas. From May
1993 to May 1997, Mr. Scates served as Manager of Research and Development for
Windsor Door, Little Rock, Arkansas. From February 1985 to May 1993, Mr. Scates
served as Manager of Structures at Overhead Door R & D/engineering, Dallas,
Texas. Mr. Scates earned a BS Degree in Mechanical Engineering, Summa Cum Laude
from Texas A & M University in 1979. Mr. Scates is licensed as a Professional
Engineer in Texas, Florida and North Carolina.
Board members are elected annually by the stockholders and the
officers are appointed annually by the Board of Directors.
VOTE REQUIRED
Provided that a quorum of stockholders is present at the meeting in
person, or is represented by proxy, and is entitled to vote thereon, Directors
will be elected by a plurality of the votes cast at the meeting
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR Messrs. Movizzo, Lustig,
King, Knight, Michael, Newell and Scates. Unless otherwise instructed or unless
authority to vote is withheld, the enclosed proxy will be voted FOR the election
of the above listed nominees and AGAINST any other nominees.
5
COMPENSATION OF DIRECTORS
The Company is currently establishing a formal plan for compensating
its Board of Directors. Currently, directors are reimbursed for actual expenses
incurred in connection with performing duties as directors and do not receive
compensation for attendance at meetings, except that Messrs. Newell, Scates and
Movizzo are each entitled to be paid an annual director's fee of $10,000 which
has not yet been paid and accrues. Further, from time to time, directors are
granted options under the Company's various stock option plans, as reflected in
the description of the stock option plans beginning on page 12.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2003 ("fiscal 2003"), the
Board of Directors held fourteen meetings, twelve regular meetings (not
including the 2003 annual meeting) and two special meeting, all of which were
attended by all of the Company's Directors during the period that such person
was a member of the Board. Directors are expected to attend all meetings.
Although the Company is not currently required to have any board committees
under applicable securities laws and exchange listing guidelines, the Company
has established compensation and audit committees. The Company does not have a
standing nominating committee at this time. Currently the entire Board of
Directors is active in the nominating process. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any stockholder
entitled to vote for the election of directors. The Board of Directors carefully
considers nominees regardless of whether they are nominated by stockholders or
existing board-members.
Special meetings are held from time to time to consider matters for
which approval of the Board of Directors is desirable or required by law.
THE COMPENSATION COMMITTEE
Messrs. Knight, Movizzo, Newell and Scates serve on the Compensation
Committee, which determines the cash (and with respect to the Plans as defined
hereinafter, the non-cash) compensation amounts to be paid to directors,
officers and employees of the Company. The Compensation Committee met one time
in fiscal 2003. All members of the Compensation Committee (as then constituted)
attended such meeting.
THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors currently consists of
four directors, Messrs. Knight, Movizzo, Newell and Scates. The Audit Committee
met one time during the 2003 fiscal year. All the members of the Audit Committee
(as then constituted) attended the meeting and the chairman attended three
additional meetings with the auditors. The Audit Committee is primarily
responsible for reviewing the services performed by the Company's independent
auditors, evaluating the Company's accounting policies and its system of
internal controls, and reviewing significant finance transactions.
The audit functions of the Audit Committee are focused on three areas:
o the adequacy of the Company's internal controls and financial
reporting process and the reliability of the Company's financial
statements.
o the independence and performance of the Company's independent
auditors.
o the Company's compliance with legal and regulatory requirements.
6
The Audit Committee meets with management periodically to consider the
adequacy of the Company's internal controls and the objectivity of its financial
reporting. The Audit Committee discusses these matters with the Company's
independent auditors and with appropriate Company financial personnel. Meetings
are held with the independent auditors. The independent auditors are given
unrestricted access to the Audit Committee. The Audit Committee also recommends
to the Board the appointment of the independent auditors and reviews
periodically their performance and independence from management. In addition,
the Audit Committee reviews the Company's financing plans and reports its
recommendations to the full Board of Directors for approval and to authorize
action.
The Audit Committee was established in 2003. Its current members, Messrs.
Knight, Movizzo, Newell and Scates are all non-employee directors each of whom
meets the independence and other requirements to serve on our Audit Committee
under applicable securities laws and the rules of the SEC and the American Stock
Exchange ("AMEX"). Although we are not listed on the AMEX, we have chosen to
comply with the AMEX Audit Committee Qualifications. The Board of Directors
believes that Mr. Knight is an "audit committee financial expert" as defined
under the rules of the SEC. The report of the Audit Committee is provided below.
AUDIT COMMITTEE REPORT
In April 2003, the Board of Directors adopted an Audit Committee Charter,
which conforms to the requirements of the Sarbanes-Oxley Act of 2002. The Audit
Committee Charter is attached hereto as Exhibit A.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls. The independent auditors audit the annual financial
statements prepared by management, express an opinion as to whether those
financial statements present fairly the financial position, results of
operations and cash flows of the Company in conformity with generally accepted
accounting principles and discuss with the Audit Committee any issues they
believe should be raised with the Audit Committee.
The Audit Committee reviews the Company's audited financial statements and
meets with both management and the Company's independent auditors, to discuss
such audited financial statements. Management has represented to the Audit
Committee that the financial statements have been prepared in accordance with
generally accepted accounting principles. The Audit Committee has received from
and discussed with Grant Thornton LLP, the Company's independent auditors, the
written disclosure and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). These items
relate to that firm's independence from the Company. The Audit Committee also
discusses with the Company's independent auditors, any matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). Based on these reviews and discussions, the Audit Committee
recommended to the Board that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003.
AUDIT FEES
For the year ended December 31, 2003, the Company incurred professional
fees to its independent auditors in the following amounts:
Audit fees $122,000
Audit related fees $43,000
Tax fees $8,000
7
The Audit Committee has the sole authority to pre-approve all audit
and non-audit services provided by the independent auditors to the Company.
Audit Committee
---------------
Robert Knight
Gregory J Newell
John F.Scates
Joseph F. Movizzo
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires officers, directors and persons
who own more than ten (10) percent of a class of equity securities registered
pursuant to Section 12 of the Exchange Act to file reports of ownership and
changes in ownership with both the SEC and the principal exchange upon which
such securities are traded or quoted. Officers, directors and persons holding
greater than ten (10) percent of the outstanding shares of a class of
Section 12-registered equity securities ("Reporting Persons") are also
required to furnish copies of any such reports filed pursuant to Section 16(a)
of the Exchange Act with the Company. Based solely on a review of the copies of
such forms furnished to the Company, the Company believes that, other than set
forth below, in the year ended December 31, 2003 all Section 16(a) filing
requirements applicable to its Reporting Persons were complied with.
The Form 3s to be filed by the persons and entities listed below were due
January 2, 2003 and were filed later in January, 2003.
Samuel S. Duffey Stephen A. Michael Spencer Charles Duffey Irrevocable Trust
Edmund C. King Robert Knight
John E. Scates Gregory J. Newell Elizabeth Rosemary Duffey Irrevocable Trust
A Form 4 to be filed by Gregory J. Newell by July 2, 2003 to report vesting
of an option was filed on September 18, 2003.
Form 4s to be filed by John F. Scates by May 19, 2003 and July 2, 2003,
respectively, to report vesting of options were filed by July 16, 2003.
8
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid to our executive officers, directors and significant employees
for the years stated.
SUMMARY COMPENSATION TABLE(1)
- -------------------------------------------------------------------------------- Long Term Compensation
Annual Compensation Awards
(a) (b) (c) (d) (e) (f) (g)
NAME AND OTHER ANNUAL RESTRICTED SECURITIES
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS UNDERLYING
OPTIONS/
($) ($) ($) ($) (#)
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert M. Lustig 2003 32,500(2) -- -- -- 1,400,000
President & CEO
Stephen A. Michael 2003 120,000(3) 43,050(4) 8,400(3) -- --
Director 2002 120,000(4) 30,000(9) 8,400(4) -- 300,000
2001 120,000(9) 65,444(9) 140,000(9) --
William W. Dolan 2003 120,000(5) -- 4,800(5) -- 200,000
2002 120,000 10,000(6) 4,800(6) -- 100,000
2001 63,750(10) -- 17,461(10) 35,000(10) --
Edmund C. King 2003 120,000(7) -- -- -- 200,000
Secretary, CFO, Treasurer & 2002 120,000(8) -- 22,500(8) -- 125,000
Director 2001 -- -- 39,985(11) 17,500(11) --
[Continued from above table, first column(s) repeated]
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
ALL OTHER
NAME AND PAYOUTS COMPENSATION
PRINCIPAL POSITION ($) ($)
Herbert M. Lustig -- --
President, CEO and
Director
Stephen A. Michael 30,000 --
Director
William W. Dolan -- 3,200
Edmund C. King -- --
Secretary, CFO,
Treasurer and
Director
(1) For all individuals named in the foregoing table, compensation reflected is
the aggregate of compensation paid by both the Company and SmartGate, L.C.
for the period stated.
(2) Mr. Lustig commenced employment in November 2003. Salary paid to him
totaled $32,500 in 2003. He is currently being paid at an annual rate of
$195,000.
9
(3) During the year 2003, Mr. Michael earned a base salary of $120,000, none of
which was paid in cash; other annual compensation comprised a car allowance
paid in cash.
(4) During the year 2002, Mr. Michael was paid the following compensation: (i)
$80,000 of Mr. Michael's $120,000 base salary was paid in cash and $40,000
was not paid and accrues; (ii) $16,000 of the bonus was paid in cash and
$27,050 was not paid and accrues; (iii) other annual compensation consisted
of a car allowance of which $5,600 was paid in cash and $2,800 was not paid
and accrues; and (iv) all other compensation consisted of a cash payment of
$25,000 in previously unpaid bonuses that had accrued during prior years,
and a cash payment of $30,000 in previously unpaid back salary that had
accrued during prior years.
(5) During the year 2003, Mr. Dolan earned a base salary of $120,000 of which
$30,000 was paid and the remainder accrues; other annual compensation
comprised a car allowance paid in cash.
(6) During the year 2002, Mr. Dolan was paid the following compensation: (i)
$80,000 of Mr. Dolan's $120,000 base salary was paid in cash and $40,000
was not paid and accrues; (ii) the bonus of $10,000 was not paid and
accrues; (iii) other annual compensation consisted of a car allowance of
which $3,200 was paid in cash and $1,600 was unpaid and accrues; and (iv)
all other annual compensation consisted of a cash payment of $3,200 in
unpaid car allowance which had accrued from the prior year.
(7) During the year 2003, Mr. King earned a base salary of $120,000 of which
$30,000 was paid in cash in the form of a consulting fee through Teasdale
Corporation, which is controlled by Mr. King; and the remainder accrues.
(8) During the year 2002, Mr. King was paid the following compensation: (i)
Commencing in October 2002, Mr. King went on full-time salary at the annual
base rate of $120,000, of which only $7,500 was paid in cash during the
period of its commencement in October 2002 through December 2002, and
$22,500 of the salary due during that three-month period was not paid and
accrues. From January 2002 through September 2002, Mr. King's compensation
was not paid in salary, but was paid in the form of a monthly consulting
fee at $2,500 per month as further described in (ii) next: (ii) this
represents the compensation that Mr. King was paid in cash in the form of a
monthly consulting fee at $2,500 per month as described in (i) above for
the months of January 2002 through September 2002. This compensation was
paid to Mr. King through Teasdale Corporation, which is controlled by Mr.
King and which provided consulting services to the Company.
(9) During the year 2001, Mr. Michael was paid the following compensation: (i)
$120,000 base salary paid in cash; (ii) $30,000 bonus paid in cash; (iii)
other annual compensation paid in cash consisting of an $8,400 car
allowance and $57,044 as a cash reimbursement for the payment of taxes
associated with the restricted stock award granted to Mr. Michael during
the year; (iv) 40,000 shares of stock pursuant to a restricted stock award
issued in 2001 which was valued at $3.50 per share on the date of grant;
and (v) a long-term incentive plan award of $30,000 in the form of accrued
salary which will not be paid until the Company has achieved adequate
capitalization as determined by the independent members of the Board of
Directors (the "Condition to Payment").
(10) During the year 2001, Mr. Dolan was paid the following compensation: (i)
$63,750 in base salary which was paid in cash; (ii) other annual
compensation consisting of $14,261 as a cash reimbursement for the payment
of taxes associated with the restricted stock award granted to Mr. Dolan
during the year, and a $3,200 car allowance which was accrued but paid in
2002; and (iii) 10,000 shares of stock pursuant to a restricted stock award
which was issued in 2001 which was valued at $3.50 per share on the date of
grant.
10
(11) During the year 2001 Mr. King was paid the following compensation: (i)
$9,985 as a cash reimbursement for the payment of taxes associated with the
restricted stock award granted to Mr. King during the year, and $30,000
paid in cash for consulting services provided during 2001. This
compensation for the consulting services was paid to Mr. King through
Teasdale Corporation, which is controlled by Mr. King and which provided
consulting services to the Company; and (ii) 5,000 shares of stock pursuant
to a restricted stock award which was issued in 2001 which was valued at
$3.50 per share on the date of grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR 2003
PERCENT OF TOTAL
OPTIONS/SARs
GRANTED TO
EMPLOYEES IN
NO. OF OPTIONS GRANTED FISCAL YEAR EXERCISE PRICE EXPIRATION DATE
NAME
-----------------------------------------------------------------------------------------------
William W. Dolan 200,000 8.1 3.35 10/15/13
Edmund C. King 200,000 8.1 3.35 10/15/13
Herbert M. Lustig 1,400,000 56.5 3.41 11/05/13
AGGREGATED OPTION/SAR EXERCISES IN 2003 AND 2003 YEAR-END OPTION/SAR VALUES
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING OPTIONS AT VALUE OF UNEXERCISED IN-THE-
NAME AND ON VALUE FISCAL YEAR END MONEY OPTIONS AT FISCAL
PRINCIPAL POSITION EXERCISE REALIZED (#) YEAR END ($)(1)
- -----------------------------------------------------------------------------------------------------------------------
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
Stephen A. Michael,
Director and Chairman -- -- 600,000 -- 165,000 --
Samuel S. Duffey,
Former Chairman
and Director(2) -- -- 600,000 -- 165,000 --
William W. Dolan 66,667
-- 253,333 40,000 --
Edmund C. King,
Director -- -- 483,333 41,667 154,167 2,083
and CFO
Herbert M. Lustig,
Director and
President -- -- -- 1,400,000 196,000
(1) The fair market value is based upon the closing bid price of the Company's
common stock on December 31, 2003 at $3.55 per share, as reported by NASD OTC
BB.
(2) 300,000 of these options were issued to Duffey & Dolan, P.A., a professional
corporation controlled by Mr. Duffey that earned consulting fees for providing
services to the Company.
11
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS AS OF THE END
OF 2003
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
to be issued upon
exercise or Weighted average exercise Number of securities
outstanding options price of outstanding options, remaining available
warrantand rights warrants and rights for future issuance
Plan category (a) (b) (c)
- --------------------------------- ------------ -------------- --------------
Equity compensation plans 4,749,336(1) 3.47 30,000
approved by security holders
Equity compensation plans 2,489,595(2) 2.47 -0-
not approved by security holders
Total 7,238,931 3.14 30,000
- --------
(1) This total includes shares to be issued upon exercise of outstanding options
under four equity compensation plans that have been approved by the Company's
shareholders (i.e. - the 2000 Plan and the 2002 Plan, the 2003 Plan and the
2003-A Plan).
(2) This total includes shares to be issued under individual compensation
arrangements not submitted for approval by the Company's shareholders. These
arrangements have been approved by the Company's Board of Directors, and are
described below under "Individual Compensation Arrangements."
STOCK COMPENSATION PLAN - 2000
Pursuant to the Company's 2000 Plan, the below named directors, officers,
and significant employees were among the persons (or entities) who received
stock options for providing services to the Company. Pursuant to the 2000 Plan
and the Option Agreements, the exercise price is the average market price of our
stock during the ten-day period prior to the Option grant. All of the
below-described options with the exception of the options issued to Duffey &
Dolan, P.A. and John E. Scates are exercisable for a period of seven years from
the date of grant; provided however, the shares which may be purchased are
subject to vesting as follows: one-third of the shares vests on the grant date;
another one-third of the shares vest one year from the grant date; and the final
one-third of the shares vests two years from the grant date, provided the
consultant or employee remains an officer, director, consultant or employee of
the Company on the vesting dates. The options granted to Duffey & Dolan, P.A.
and John E. Scates vests as follows: one-third of the shares vest on the first
anniversary of the grant date; another one-third of the shares vests on the
second anniversary of the grant date; and the final one-third of the shares
vests on the third anniversary of the grant date, provided the holder remains an
officer, director, consultant or employee of the Company on the vesting dates.
On July 26, 2000, options were granted at an exercise price of $3.00 per
share as follows:
Stephen A. Michael..........................300,000 Shares
Duffey & Dolan, P.A.........................300,000 Shares
Edmund C. King..............................200,000 Shares
Robert Knight...............................150,000 Shares
On December 20, 2000, an Option under the 2000 Plan to purchase 20,000
shares was granted to William W. Dolan at an exercise price of $4.96 per share.
On May 17, 2001, an Option under the 2000 Plan to purchase 10,000 shares
was granted to John E. Scates at an exercise price of $4.27 per share.
On August 6, 2001, an Option under the 2000 Plan to purchase 100,000
shares was granted to Carl Parks at an exercise price of $5.32 per share.
12
The total number of shares that may be purchased pursuant to options
granted under the 2000 Plan, including those set forth above, is 1,200,000
shares (this includes 10,000 additional shares which may be issued to a
consultant if certain performance conditions are met), of which all are vested
except for 6,666 which are not yet vested. There will be no additional options
granted under this 2000 Plan.
STOCK COMPENSATION PLAN - 2002
On January 22, 2002, pursuant to the Company's 2002 Plan, the below named
directors, officers and significant employees were among the persons who
received stock options for providing services to the Company. Pursuant to the
2002 Plan and the Option Agreements, the exercise price was the fair market
value of the Company's common stock on the date of grant. The 2002 Plan provided
for both qualified and non-qualified options. All of the options that were
issued on January 22, 2002 are exercisable for a period of five years from the
date of grant; provided however, the shares which may be purchased are subject
to vesting as follows: one-third of the shares vest on the first anniversary of
the grant date; another one-third of the shares vests on the second anniversary
of the grant date; and the final one-third of the shares vests on the third
anniversary of the grant date.
The options granted on January 22, 2002 were at exercise prices of $3.85
and $3.50 per share as follows:
Stephen A. Michael 300,000 shares $ 3.85
Samuel S. Duffey 300,000 shares $ 3.85
Edmund C. King 125,000 shares $ 3.50
Robert Knight 75,000 shares $ 3.50
William W. Dolan 100,000 shares $ 3.85
Jeffrey Jones 25,000 shares $ 3.50
Robert Fergusson 25,000 shares $ 3.50
On June 13, 2002, an Option under the 2002 Plan to purchase 100,000 shares
was granted to Gregory J. Newell at an exercise price of $5.10 per share. This
Option has a term of seven years, and beginning September 30, 2002, vests
quarterly over a period of 20 quarters with 5,000 shares vesting at the end of
each quarter, and, in the event Mr. Newell terminates his service to the Company
after June 13, 2005 for the primary purpose of returning to full-time government
service, the balance of the option will continue to vest as provided in the
Option Agreement.
On June 27, 2002, Mr. Scates was granted an option under the 2002 Plan to
purchase 20,000 shares at $5.15 per share. This Option has a term of seven
years, and beginning September 30, 2002, vests quarterly over a period of 8
quarters with 2,500 shares vesting at the end of each quarter.
The total number of shares that may be purchased pursuant to options
granted under the 2002 Plan, including those set forth above, is 1,205,000
shares, of which 972,499 are vested and 232,501 are not vested. There will be no
additional options granted under this 2002 Plan.
2003 STOCK COMPENSATION PLAN
The Company's Board of Directors adopted a 2003 Incentive Plan ("2003
Plan") on January 2, 2003 and which was approved by the Company's shareholders
on January 3, 2003. Under the 2003 Plan, the Company has reserved 1,500,000
shares of its common stock for awarding to eligible current and prospective
employees, consultants and directors. The 2003 Plan provides for both qualified
and non-qualified options. It is anticipated that options which may be granted
under the 2003 Plan will be subject to vesting schedules. The exercise price of
options granted under the 2003 Plan will be the fair market value of the
Company's common stock on the date of grant. The 2003 Plan shall continue until
the earlier of: (i) its termination by the Company's Board of Directors; or (ii)
the date on which all shares of
13
common stock available for issuance under the 2003 Plan have been issued and all
restrictions on such shares under the terms of the 2003 Plan and the option
agreements have lapsed; or (iii) ten years from the 2003 Plan s adoption date.
On May 13, 2003, Mr. Movizzo was granted an option under the 2003 Plan to
purchase 80,000 shares of the Company's common stock at $3.00 per share. The
option has a term of seven years, and beginning June 30, 2003, vests in equal
quarterly installments of 5,000 shares each over 16 quarters. On November 6,
2003, Mr. Lustig was granted an option under the Plan to purchase 1,400,000
shares of the Company's common stock at $3.41 per share, which vests 233,340
shares on June 30, 2004 and 116,666 shares on September 30, 2004 and on each
quarter thereafter. This option has a term of ten years and is not forfeitable
during this term. The terms of Mr. Lustig's options were negotiated as part of
his employment contract.
2003 - A STOCK COMPENSATION PLAN
In October 2003, the Company's Board of Directors adopted its 2003-A
Employee, Director, Consultant and Advisor Stock Compensation Plan. Under the
Plan, the Company has reserved 1,000,000 shares of its common stock to issue to
eligible current employees of the Company. On October 15, 2003 employees were
granted options under the Plan to purchase 1,000,000 shares of the Company's
common stock at $3.35 per share. The options have a term of ten years and vested
fully at January 1, 2004. On May 11, 2004, the Board of Directors approved an
amendment to the 2003-A Employee, Director, Consultant and Advisor Stock
Compensation Plan raising the number of shares that may be issued under the plan
to 3,500,000 shares and granted options to acquire an additional 1,610,000
shares of common stock at $2.00 per share. The number of options granted to
individual directors and others are as follows:
GRANT DATE
OCT. 15, 2003 MAY 11, 2004
-------------- -------------
DIRECTORS
Edmund C. King 200,000 175,000
Robert Knight 100,000 100,000
Herbert M. Lustig -- 700,000
Joseph F. Movizzo 75,000 100,000
Gregory J. Newell 75,000 100,000
John E. Scates 75,000 100,000
OTHERS 475,000 335,000
Total 1,000,000 1,610,000
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with the following
officers:
HERBERT M. LUSTIG - Mr. Lustig's Employment Agreement provides for an
annual base salary of $195,000 and, within 90 days of executing the Agreement a
$15,000 lump sum moving allowance. The Agreement also provides for four (4)
weeks of paid vacation and entitlement to participate in any group plans or
programs maintained by the Company, such as health insurance, etc. The term of
the contract is 38 months, which ends January 5, 2007. In the event of early
termination of the Agreement by the Company, Mr. Lustig would receive a
severance consisting of base salary, bonuses and benefits that otherwise would
have been due him during the 12 month period following the date of such
termination, paid in a lump sum. As part of the Employment Agreement, Mr. Lustig
entered into a Covenant Not to Compete and Confidentiality Agreement that are
attached to the Employment Agreement.
14
EDMUND C. KING - Mr. King's contract provides for an annual base salary of
$120,000. Annually the Board of Directors reviews the base salary for potential
increases based upon performance of the Company. Additionally, Mr. King is
entitled to receive a bonus, as determined from time to time, by the Company's
Board of Directors. The Agreement also provides for six (6) weeks of paid
vacation and entitlement to participate in any group plans or programs
maintained by the Company, such as health insurance, etc. The contract is for a
term of three (3) years, which ends in February 2006. In the event of early
termination of the Agreement by the Company, Mr. King would receive a severance
consisting of base salary, bonuses and benefits that would have been due him
during the remaining contract term following the date of such termination, paid
in the same intervals as paid under the contract. Also, in the event of death,
Mr. King s estate shall receive an amount equal to the base salary for the
remaining term of the Agreement which may be payable at the same intervals as
the compensation would have been paid had the employment not been terminated by
death. As part of the Employment Agreement, Mr. King entered into a Covenant Not
to Compete and Confidentiality Agreement that are attached to the Employment
Agreement. Mr. King is currently receiving $30,000 per year and the balance is
being accrued by the Company.
CHARLES A. YANAK - Mr. Yanak's Employment Agreement provides for an annual
base salary of $150,000 and, for the first 12 months of the Agreement, a $1500
per month living allowance. The Agreement also provides for three (3) weeks of
paid vacation and entitlement to participate in any group plans or programs
maintained by the Company, such as health insurance, etc. The term of the
contract is 36 months, which ends March 24, 2007. In the event of early
termination of the Agreement by the Company, Mr. Yanak would receive a severance
consisting of base salary, bonuses and benefits that otherwise would have been
due him during the 6 month period following the date of such termination, paid
in a lump sum. As part of the Employment Agreement, Mr. Yanak entered into a
Covenant Not to Compete and Confidentiality Agreement that are attached to the
Employment Agreement.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of shares of our
common stock, as of December 31, 2003, of (i) each person known by us to
beneficially own 5% or more of such shares; (ii) each of our directors,
executive officers, and significant employees named in the Summary Compensation
Table; and (iii) all of our current executive officers, directors, and
significant employees as a group. Except as otherwise indicated, all shares are
beneficially owned, and the persons named as owners hold investment and voting
power.
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF SHARES PERCENTAGE
OWNER(1) BENEFICIALLY OWNED(2) OWNED(2)
William W. Dolan(3) 4,819,228 25.4%
Stephen A. Michael(4) 4,858,446 25.1%
H.R. Williams(5) 1,183,486 6.2%
Samuel S. Duffey(6) 949,572 4.9%
Edmund C. King(7) 685,373 3.6%
Robert Knight(8) 300,000 1.6%
Gregory J. Newell(9) 105,000 .6%
John E. Scates(10) 96,666 .5%
Joseph F. Movizzo(11) 187,286 1.0%
G.M. Capital Partners, Ltd.(12) 1,223,000 6.2%
All directors, executive officers
and significant employees as
a group (10) persons)
14,408,058 shares, 64% (approx.)
15
- --------
(1) The business address for Mr. Dolan is 3440 Gulf of Mexico Drive, Sarasota,
Florida 34228; for Mr. Michael, 4400 Independence Court, Sarasota, Florida
34234; for Mr. Williams, 7954 Royal Brikdale Circle, Bradenton, FL 34202;and for
G.M. Capital Partners Ltd., 2755 Lougheed Highway, Suite 620, Port Coquitlam,
B.C. V3B 5Y9, Canada.
(2) The percentage calculations are based on 18,767,582 shares that were
outstanding as of December 31, 2003 plus the respective beneficial shares.
Beneficial ownership is determined in accordance with rules of the Securities
and Exchange Commission and includes voting power and/or investment power with
respect to securities. Shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days of December 31, 2003 are
deemed outstanding for computing the number and the percentage of outstanding
shares beneficially owned by the person holding such options but are not deemed
outstanding for computing the percentage beneficially owned by any other person.
(3) Includes: (i) 1,958,334 shares held by Mr. Dolan as Trustee of the Spencer
C. Duffey Irrevocable Trust, a Trust created by Samuel S. Duffey, for his son;
(ii) 1,958,334 shares held by Mr. Dolan as Trustee of the Elizabeth R. Duffey
Irrevocable Trust, a Trust created by Samuel S. Duffey, for his daughter; (iii)
117,286 shares held by Mr. Dolan as Trustee of the Grace Duffey Irrevocable
Trust, a Trust created by Samuel S. Duffey, for his former spouse; (iv) 551,941
shares owned by William W. Dolan; (v) Mr. Dolan s options to purchase 213,333
shares.
(4) Includes options to purchase 600,000 shares.
(5) Includes 611,603 shares and options to purchase 446,804 shares held by the
H.R. Williams Family Limited Partnership (Partnership) and 125,079 shares held
in the name of H.R. Williams individually
(6) Includes 234,572 shares owned by Mr. Duffey s spouse, 40,000 shares along
with options to purchase 300,000 shares held by Duffey & Dolan, P.A., an entity
controlled by Mr. Duffey, an option to purchase 300,000 shares owned by Mr.
Duffey, and 75,000 shares owned by the Pharis Duffey Family Foundation
(Foundation), a charitable entity controlled by Mr. Duffey and his two adult
children. Mr. Duffey disclaims beneficial ownership of the Foundation and Trusts
set forth in footnote number (3) above in which Mr. Dolan serves as Trustee.
(7) Includes 197,040 shares held in Mr. King`s name, 5,000 shares held in the
name of the King Family Trust, and Mr. King's options to purchase 483,333
shares.
(8) Includes 4,200 shares and options to purchase 300,000 shares.
(9) Includes options to purchase 105,000 shares.
(10) Represents options to purchase 96,666 shares.
(11) Includes 97,286 shares and options to purchase 90,000 shares.
(12) Includes 335,000 shares and options to purchase 888,000 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To the best of management's knowledge, other than (i) compensation for
services as officers and directors, or (ii) as set forth below, there were no
material transactions, or series of similar transactions, or any currently
proposed transactions, or series of similar transactions, to which Invisa was or
is to be a party, in which the amount involved exceeds $60,000, and in which any
director or executive officer, or any security holder who is known by us to own
of record or beneficially more than 5% of any class of our common stock, or any
member of the immediate family of any of the foregoing persons, has an interest.
Pursuant to a Merger, on February 26, 2002, the Company acquired Radio
Metrix Inc., a Florida corporation. Radio Metrix Inc. was formed in 1992 by
certain individuals who founded SmartGate, L.C. Radio Metrix Inc. became the
exclusive worldwide licensee of the InvisaShield technology in 1992. It
16
began research and development efforts following obtaining the exclusive
worldwide license and in 1997, granted a sublicense limited to powered closure
applications to SmartGate, L.C. The assets of Radio Metrix Inc. were acquired
more than two years before its acquisition by Invisa, with the exception of a
patent. The patent was purchased by Radio Metrix Inc. on January 8, 2002
pursuant to a Purchase Agreement dated October 9, 2000. The purchase price paid
by Radio Metrix Inc. for the patent was $1,200,000 of which $50,000 was paid by
Radio Metrix Inc. as a deposit against the purchase price. The Radio Metrix Inc.
agreement to purchase the patent required a closing, with payment, by January 8,
2002, which was before the closing of the planned acquisition of Radio Metrix
Inc. by Invisa. Accordingly, as part of its acquisition of Radio Metrix Inc.,
Invisa loaned approximately $550,000 to Radio Metrix Inc. to enable Radio Metrix
Inc. to timely close its purchase of the patent by paying the remaining $550,000
due at closing. In acquiring Radio Metrix Inc., Invisa acquired ownership of the
patent and the $550,000 loan to Radio Metrix Inc. became an intercompany debt.
The purchase price paid by the Company for Radio Metrix Inc. is discussed later
in this section. Reference is made to Note B to the financial statements for
additional information regarding the Company's $550,000 loan to Radio Metrix
Inc.
Pursuant to this acquisition, Radio Metrix Inc. was merged into a
subsidiary, which we incorporated specifically for this transaction. Because
each of the Radio Metrix Inc. shareholders had pre-existing relationships with
us, the transaction was approved by the Board Members having no affiliation,
stock ownership or other relationship with Radio Metrix Inc. (the "Independent
Committee of Directors'). The Independent Committee of Directors was represented
by legal counsel. Additionally, it received advice as to the financial fairness
of the transaction from a national firm experienced in financial valuation and
consulting. At the date of the acquisition Mr. Stephen Michael was Chairman of
the Board of the Company and President, Director and a principal shareholder of
Radio Metrix Inc.
At the closing of Invisa's purchase of Radio Metrix Inc., the patent was
subject to a previous pledge as collateral for a twenty-four (24) month
Promissory Note in the principal amount of $600,000, which was made by Radio
Metrix Inc. when it purchased the patent. The party that sold the patent to
Radio Metrix Inc. was not affiliated with either the Radio Metrix Inc.
shareholders or Invisa. As a further result of the acquisition of Radio Metrix
Inc., the Company eliminated its obligation to pay ongoing royalty fees in
connection with its sale of powered closure safety products based upon the
InvisaShield technology while expanding its access to all presence-sensing
market categories outside of safety, including access to the security market and
other markets (Technology Purchase from Radio Metrix Inc.).
The aggregate consideration paid for the purchase of Radio Metrix Inc.
through December 2003 was: (i) 3,685,000 shares of restricted common stock; (ii)
$1,300,000 (plus accrued and unpaid interest) payable by two promissory notes
consisting of: (a) a $500,000 promissory note, payable at 10% interest per annum
until August 25, 2003, at which time the interest rate becomes 15%. This
promissory note is due in one installment on February 25, 2006; and (b) an
$800,000 promissory note payable at 15% interest due monthly, and all principal
due in one installment on February 25, 2004. Both promissory notes may be
prepaid without penalty. Neither promissory note is collateralized; and (iii) a
7% royalty on all revenue earned from the sale of products based upon the Radio
Metrix Inc. technology other than safety products which constituted the
Company's core business prior to the Merger. The royalty may be terminated by
the Company for a one-time payment based upon appraisal. Additionally, Note B to
the financial statements details obligations of Radio Metrix Inc., including
approximately $175,000 in accrued compensation payable to stockholders of Radio
Metrix Inc. that remained in place and was assumed by the Company at the
acquisition of Radio Metrix Inc. As a result of an Amendment to the Radio Metrix
Inc. Merger Agreement, no earn-out or other consideration will be paid by the
Company except as described above.
In November 2003, the Company and two principal shareholders entered into
new agreements to forgive and restructure certain notes receivable and notes
payable, including those in connection with the Radio Metrix Inc. transaction.
17
Pursuant to an agreement made in 1992 between Radio Metrix Inc. and an
individual who introduced Radio Metrix Inc. to the inventors of the InvisaShield
technology, Radio Metrix Inc. was obligated to pay up to $200,000 contingent
upon sales. Under the Agreement, the obligation terminates when Radio Metrix
Inc. has paid an aggregate of $200,000. The obligation arose out of an
introduction to the inventors of the Radio Metrix Inc. Technology and the
anticipation of future assistance to be provided by the finder in connection
with the commercialization of the technology. In 1999, as a result of the
unavailability of the finder, and the lack of any ongoing support from the
finder, Radio Metrix Inc. asserted breach of the Agreement and provided notice
of termination. The termination has not been contested, and the Company has had
no contact with the finder following such termination.
On February 9, 2000 we purchased SmartGate, L.C. principally from the same
group of related parties that previously owned Radio Metrix Inc.. As a result,
on February 9, 2000, we issued 7,743,558 shares of Invisa common stock to the
SmartGate, L.C. members which represented approximately 74% of our outstanding
capital stock at that date. As a result of this transaction, we agreed to
subsequently make loans to certain of the SmartGate, L.C. members should same be
required to fund IRS recapture tax obligations imposed as a result of this
transaction. As a result of this obligation, in October 2001, we loaned
approximately $74,384 to Mr. Michael, and approximately $71,810 to Mr. Duffey,
pursuant to unsecured five-year Promissory Notes.
We are obligated to pay a royalty equal to 7% of revenue to affiliated
parties with regard to all categories of our business, other than the safety
category. This obligation arose from the consideration to be paid by us in the
business combination transaction with Radio Metrix Inc., This royalty-based
payment may be terminated by us at any time for a one-time payment in an amount
to be determined by appraisal.
The following officers or directors entered into loan transactions
associated with the purchase of common stock with SmartGate, L.C. before it was
acquired by us and became a wholly owned subsidiary. As a result of these
pre-acquisition transactions, we have the following notes receivable: Stephen A.
Michael - $375,000, Samuel S. Duffey - $375,000 and Edmund C. King - $210,000.
The notes with Messrs. Michael and Duffey were waived as part of the
restructuring and severance agreements. (One of the Company's principal
shareholders is H.R. Williams ("Mr. Williams") and his family limited
partnership, the H.R. Williams Family Limited Partnership ("HRW Partnership").
The Company's transactions with Mr. Williams or the HRW Partnership are
summarized below:
In March 1999, Mr. Williams subscribed for 446,804 shares of the Company's
wholly owned subsidiary, SmartGate, L.C. As part of the subscription, Mr.
Williams: (a) paid $59,523 in cash; (b) agreed to loan the Company $25,000
pursuant to a Promissory Note with interest at prime ("the $25,000 Note"); (c)
agreed to sublease SmartGate, L.C. space to conduct its operations in a building
leased by the HRW Partnership; and (d) agreed to guarantee a line of credit for
SmartGate, L.C. at the Regions Bank in Bradenton, Florida in the amount of
$150,000 ("Credit Facility"). As part of the Subscription Agreement, SmartGate,
L.C. granted the HRW Partnership (see Security Ownership of Certain Beneficial
Owners and Management) an option to purchase 446,804 shares at a purchase price
of $1.07 per share. The Option will remain exercisable until the last to occur
of: (i) 245 days following either the Company's payoff of a Credit Facility
guaranteed by H.R. Williams; (ii) the date Mr. Williams guarantee of the Credit
Facility is released; or (iii) one year following the date when certain shares
owned by Mr. Williams or HRW Partnership are free of transfer restrictions.
18
PROPOSAL 2
APPROVAL OF THE 2003-A EMPLOYEE, DIRECTOR, CONSULTANT AND ADVISOR
STOCK COMPENSATION PLAN, AS AMENDED
On October 15, 2003, the Board of Directors (the "Board") approved,
subject to stockholder approval, the Company's 2003-A Employee, Director,
Consultant and Advisor Stock Compensation Plan,(the "2003-A Stock Option Plan")
under which 1,000,000 shares of the Company's common stock was reserved for
issuance. On May 11, 2004, the Board of Directors increased the number of shares
of the Company's common stock reserved for issuance to 3,500,000 shares (18% of
the outstanding shares as of March 31, 2004). On October 15, 2003 and May 11,
2004, respectively, the Board of Directors granted, subject to shareholder
approval of the 2003-A Plan, options to purchase 1,000,000 shares at $3.35 per
share and 1,610,000 shares at $2.00 per share of the Company's common stock (see
"2003-A Stock Compensation Plan" on Page 14 for more details including the
number of options granted to Directors). The 2003-A Stock Option Plan will not
become effective until it is approved by the Company's stockholders. The Board
is asking the Company's stockholders to approve the 2003-A Stock Option Plan, as
amended, so that the Company may issue stock options thereunder, thereby
providing additional incentives to those persons responsible for the success of
the Company and allowing the Company to continue its policy of allowing those
persons to share in the appreciation of the value of the Company's stock. The
stockholders should be aware that since the Directors have been granted an
aggregate of 1,800,000 of the 2,610,000 shares granted under the 2003-A Stock
Option Plan they will receive a personal benefit from the approval of this
proposal by the Stockholders Even if the 2003-A Stock Option Plan is not
approved, the Company intends to continue to grant stock-based awards with
respect to all shares that remain available under the Company's 2000 Plan, 2002
Plan and 2003 Plan.
DESCRIPTION OF THE 2003-A STOCK OPTION PLAN
The following is a description of the purpose and certain of the
provisions of the 2003-A Stock Option Plan, as amended. The summary is qualified
in its entirety by reference to the complete text of the 2003-A Stock Option
Plan, which is attached hereto as Exhibit B.
General. The 2003-A Stock Option Plan permits the Company to issue stock
options to directors, employees, consultants and advisors.
Types of Awards. The 2003-A Stock Option Plan allows for the issuance of
incentive stock options to employees of the Company and nonqualified stock
options to non-employee directors, employees, consultants and advisors of the
Company.
Administration of the 2003-A Stock Option Plan. The 2003-A Stock Option
Plan will be administered by the Board, whose construction and interpretation of
the terms and provisions of the 2003-A Stock Option Plan shall be final and
conclusive. The Board may, to the full extent permitted by or consistent with
applicable laws or regulations including, without limitation, applicable state
laws and Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), or any successor rule (Rule 16b-3"), delegate any or all of its
powers under the 2003-A Stock Option Plan to a Committee appointed by the Board,
and if the Committee is so appointed all references to the Board in the 2003
Stock Option Plan shall mean and relate to such Committee. The Board may, in its
discretion, authorize the issuance of stock options for the purchase of Common
Stock under the 2003 Stock Option Plan. The Board shall have authority, subject
to the express provision of the 2003-A Stock Option Plan, to construe the
respective stock option agreements, and the 2003-A Stock Option Plan, to
prescribe, amend and rescind rules and regulations relating to the 2003 Stock
Option Plan, to determine the terms and provisions of the prescribed stock
option agreements, which need not be identical, and to make all other
determinations in the judgment of the Board necessary or desirable for the
administration of the 2003
19
Stock Option Plan. The Board may correct any defect or supply any omission or
reconcile any inconsistency in the 2003 Stock Option Plan or in any stock option
agreement in the manner and to the extent it shall deem expedient to carry the
2003-A Stock Option Plan into effect and it shall be the sole and final judge of
such expediency. No other director or person acting pursuant to authority
delegated by the Board or the Committee shall be liable for any action or
determination under the 2003 Stock Option Plan made in good faith.
The Compensation Committee is comprised solely of four outside directors
of the Board.
Eligibility. Options under the 2003-A Stock Option Plan may be granted to
all of the Company's directors, employees, consultants and advisors. Two types
of options may be granted under the 2003-A Stock Option Plan. Incentive stock
options only may be granted to employees of the Company. Non-qualified stock
options may be granted to directors, employees and consultants, advisors and
non-employee directors of the Company.
Issuance of Stock Options to Officers and Directors. The selection of an
officer or director as a recipient of stock options, the timing of the stock
option issuance, and the number of shares subject to the issuance shall be
determined either (i) by the Board or the Compensation Committee, or (ii) by two
or more directors having full authority to act in the matter.
Number of Shares Available for Issuance. The aggregate number of such
shares which may be issued upon exercise of options under the 2003-A Stock
Option Plan shall not exceed Three Million Five Hundred Thousand (3,500,000). If
an option is cancelled, terminated or expires before it is exercised, the shares
of common stock underlying that option will be available for future grants under
the 2003-A Stock Option Plan.
Termination. The 2003-A Stock Option Plan will terminate the earlier of:
(i) October 16, 2013 or (ii) the date on which all shares available for
issuance under stock options granted under the 2003-A Stock Option Plan shall
have been issued, unless sooner terminated by the Board or the Compensation.
Amendment of the Plan. a. The Board may at any time, and from time to
time, modify or amend the Plan in any respect, except that if at any time the
approval of the shareholders of the Company is required under the law or rule,
the Board may not effect such modification or amendment without such approval.
b. The termination or any modification or amendment of the Plan shall not,
without the consent of a recipient of options, affect his or her rights under
options previously granted to him or her. With the consent of the optionee
affected, the Board may amend outstanding option agreements in a manner not
consistent with the Plan.
Adjustments for Changes in Capitalization. If the Board determines that a
dividend, recapitalization, stock split, merger, consolidation, sale of all or
substantially all the assets of the Company, or other similar corporate
transaction or event, equitably requires an adjustment, then the Board may
adjust any or all of:
o The number and kind of shares of common stock (or other securities or
property) with respect to which options may be awarded;
o The number and kind of shares of common stock (or other securities or
property) subject to outstanding options; and
o The grant or exercise price with respect to any outstanding option.
Substitute Stock. The Company may issue stock under the 2003-A Stock
Option Plan in substitution for stock held by employees and directors or
consultants or advisors to, another corporation who becomes employees of or
consultant or advisors to the Company or a subsidiary of the Company, or
20
as a result of the acquisition by the Company, or one of its subsidiaries, or
property or stock of the employing corporation. The Company may direct that
substitute stock may be issued on such terms and conditions as the Board
considers appropriate in the circumstances.
Additional Provisions. The Board may, in its sole discretion, include
additional provisions in stock option agreements under the 2003-A Stock Option
Plan, including without limitations restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, registration rights under the Securities Act of
1933, or such provisions as shall be determined by the Board; provided that such
additional provisions shall not be inconsistent with any other term or condition
of the 2003-A Stock Option Plan.
General Restrictions. The shares issued pursuant to options granted under
the 2003-A Stock Option Plan shall be subject to the requirements that if, at
any time, counsel to the Company shall determine that the listing, registration
or qualification of the shares, upon any securities exchange or under any state
or federal law, or that the consent or approval of any government or regulatory
body, or that the disclosure of non-public information or the satisfaction of
any other condition is necessary as a condition of, or in connection with, the
issuance of shares thereunder, such shares may not be issued, in whole or in
part, unless such listing, registration, qualification, consent or approval, or
satisfaction of such condition shall have been effected or obtained on
conditions acceptable of the Board.
U.S. Tax Consequences. The following brief description, which is based on
existing law, sets forth certain of the federal income tax consequences of the
grant of options under the 2003-A Stock Option Plan. This description may differ
from the actual tax consequences incurred by any individual optionee. Moreover,
existing law is subject to change by new legislation, by new regulations, by
administrative pronouncements and by court decisions or by new or clarified
interpretations or applications of existing laws, regulations, administrative
pronouncements and court decisions. Any such change may affect the federal
income tax consequences described below.
There is no tax incurred by the optionee (or tax deduction for the
Company) when a non-qualified stock option is granted. At the time of exercise
of a nonqualified stock option, the difference between the exercise price and
the fair market value of common stock on the date of exercise will constitute
compensation income to the optionee. Subject to applicable provision of the
Code, the Company will be allowed a tax deduction equal to the amount of
ordinary income recognized by the optionee.
The optionee's basis in the shares acquired pursuant to a non-qualified
stock option is equal to the sum of the option price plus the amount includible
in his or her income as compensation upon exercise. Any gain (or loss) upon
subsequent disposition of the shares will be a long-term or short-term gain (or
loss), depending upon the holding period of the shares.
In the case of incentive stock options, no tax is incurred by the optionee
(or tax deduction for the Company) when the options are granted or when they are
exercised. However, the excess of the fair market value on the date of exercise
over the exercise price is an item of adjustment in determining the alternative
minimum taxable income of the optionee. If the optionee holds the shares
received on the exercise of an incentive stock option for at least one year
after the date of exercise and for at least two years after the date of grant,
then the gain realized on disposition of the shares is taxed to the optionee as
long-term capital gain.
If the shares are disposed of during this period, however, then the
optionee will include in income, as compensation income for the year of
disposition, an amount equal to the excess, if any, of the fair market value of
the shares over the option price (or, if less, the excess of the amount realized
upon disposition over the option price). The excess, if any, of the sale price
over the fair market value on the date of exercise will be a short-term capital
gain. In such case, the Company will be entitled to a
21
deduction, in the year of such disposition, for the amount includible in the
optionee's income as compensation. The optionee's basis in the shares acquired
upon exercise of an incentive stock option is equal to the option price paid,
plus any amount includible in his or her income as a result of a disqualifying
disposition.
The Company shall have the right to reduce the number of shares of common
stock deliverable pursuant to the 2003-A Stock Option Plan by an amount which
would have a fair market value equal to the amount of all federal, state, or
local taxes required to be withheld, or to deduct the amount of such taxes from
any cash payment to be made to the participant pursuant to the 2003-A Stock
Option Plan or otherwise.
REQUIRED VOTE AND RECOMMENDATION
Stockholder approval of the 2003-A Stock Option Plan is required under the
Internal Revenue Code of 1986, as amended, in order for options granted under
the 2003-A Stock Option Plan to be considered "incentive stock options." The
affirmative vote of a majority of all the votes cast at a meeting at which a
quorum is present is required to approve the 2003-A Stock Option Plan as set
forth in this Proposal 2. For purposes of the vote on Proposal 2, abstentions
and broker non-votes will not be counted as votes cast and thus will have no
effect on the result of the vote although they will count towards the presence
of a quorum for Proposal 2. Properly executed, unrevoked proxies will be voted
FOR Proposal 2 unless a vote against Proposal 2 or abstention is specifically
indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
COMPANY'S 2003-A STOCK OPTION PLAN, AS AMENDED
22
GENERAL
The Management of the Company does not know of any matters, other than
those stated in this Proxy Statement, that are to be presented for action at the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, proxies will be voted on those other matters in accordance with the
judgment of the persons voting the proxies. Discretionary authority to vote on
such matters is conferred by such proxies upon the persons voting them.
The Company will bear the cost of preparing, printing, assembling and
mailing all proxy materials that may be sent to stockholders in connection with
this solicitation. Arrangements will also be made with brokerage houses, other
custodians, nominees and fiduciaries, to forward soliciting material to the
beneficial owners of the Common Stock of the Company held by such persons. The
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them. In addition to the solicitation of proxies by use of the
mails, officers and regular employees of the Company may solicit proxies without
additional compensation, by telephone or facsimile transmission. The Company
does not expect to pay any compensation for the solicitation of proxies.
A copy of the Company's Form 10-KSB for the fiscal year ended December 31,
2003 as filed with the Securities and Exchange Commission, accompanies this
Proxy Statement. Upon written request, the Company will provide each stockholder
being solicited by this Proxy Statement with a free copy of any exhibits and
schedules thereto. All such requests should be directed to Invisa Inc., 4400
Independence Court, Sarasota, Florida 34324 Attn: Edmund King, Secretary.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with the
directions given. In voting by proxy in regard to items to be voted upon,
stockholders may (i) vote in favor of, or FOR, the item, (ii) vote AGAINST the
item or, (iii) ABSTAIN from voting on one or more items. Stockholders should
specify their choices on the enclosed proxy. If no specific instructions are
given with respect to the matters to be acted upon, the shares represented by
the proxy will be voted FOR the election of all Directors, and FOR the approval
of the Company's 2003-A Employee, Director, Consultant and Advisor Stock
Compensation Plan, as amended
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING AND GENERAL COMMUNICATIONS
Any stockholder proposals intended to be presented at the Company's 2005
Annual Meeting of Stockholders must be received by the Company at its office in
Sarasota, Florida on or before January 17, 2005 in order to be considered for
inclusion in the Company's proxy statement and proxy relating to such meeting.
The Company has received no stockholders nominations or proposals for the 2004
Annual Meeting.
Shareholders may communicate their comments or concerns about any other
matter to the Board of Directors by mailing a letter to the attention of the
Board of Directors c/o the Company at its office in Sarasota, Florida.
VOTING OF PROXIES
Proxies may be revoked by stockholders at any time prior to the voting
thereof by giving notice of revocation in writing to the Secretary of the
Company or in person at the Annual Meeting. If the enclosed proxy is properly
signed, dated and returned, the Common Stock represented thereby will be voted
in accordance with the instructions thereon. If no instructions are indicated,
the Common Stock represented thereby will be voted FOR the election of all the
Directors, and FOR the approval of the Company's 2003-A Employee, Director,
Consultant and Advisor Stock Compensation Plan, as amended.
23
REVOCABILITY OF PROXY
Shares represented by valid proxies will be voted in accordance with
instructions contained therein, or, in the absence of such instructions, in
accordance with the Board of Directors' recommendations. Any person signing and
mailing the enclosed proxy may, nevertheless, revoke the proxy at any time prior
to the actual voting thereof by attending the Annual Meeting and voting in
person, by providing written notice of revocation of the proxy or by submitting
a signed proxy bearing a later date. Any written notice of revocation should be
sent to the attention of the Secretary of the Company at the address above. Any
stockholder of the Company has the unconditional right to revoke his or her
proxy at any time prior to the voting thereof by any action inconsistent with
the proxy, including notifying the Secretary of the Company in writing,
executing a subsequent proxy, or personally appearing at the Annual Meeting and
casting a contrary vote. However, no such revocation will be effective unless
and until such notice of revocation has been received by the Company at or prior
to the Annual Meeting.
METHOD OF COUNTING VOTES
Unless a contrary choice is indicated, all duly executed proxies will be
voted in accordance with the instructions set forth on the proxy card. A broker
non-vote occurs when a broker holding shares registered in street name is
permitted to vote, in the broker's discretion, on routine matters without
receiving instructions from the client, but is not permitted to vote without
instructions on non-routine matters, and the broker returns a proxy card with no
vote (the "non-vote") on the non-routine matter. Under the rules and regulations
of the primary trading markets applicable to most brokers, the election of
directors is a routine matter on which a broker has the discretion to vote if
instructions are not received from the client in a timely manner. Abstentions
will be counted as present for purposes of determining a quorum but will not be
counted for or against the election of directors. As to Item 1, the Proxy
confers authority to vote for all of the seven persons listed as candidates for
a position on the Board of Directors even though the block in Item 1 is not
marked unless the names of one or more candidates are lined out. The Proxy will
be voted "For" Item 2 unless "Against" or "Abstain" is indicated. If any other
business is presented at the meeting, the Proxy shall be voted in accordance
with the recommendations of the Board of Directors.
By order of the Board of Directors
/s/ Herbert M. Lustig
Herbert M. Lustig
President and Chief Executive Officer
May 22, 2004
24
INVISA, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINT(S) HERBERT M. LUSTING AND EDMUND C. KING
WITH THE POWER OF SUBSTITUTION AND RESUBSTITUTION TO VOTE ANY AND ALL SHARES OF
CAPITAL STOCK OF INVISA, INC. (THE "COMPANY") WHICH THE UNDERSIGNED WOULD BE
ENTITLED TO VOTE AS FULLY AS THE UNDERSIGNED COULD DO IF PERSONALLY PRESENT AT
THE ANNUAL MEETING OF THE COMPANY, TO BE HELD ON JUNE 22, 2004, AT 10:00 A.M.
LOCAL TIME, AND AT ANY ADJOURNMENTS THEREOF, HEREBY REVOKING ANY PRIOR PROXIES
TO VOTE SAID STOCK, UPON THE FOLLOWING ITEMS MORE FULLY DESCRIBED IN THE NOTICE
OF ANY PROXY STATEMENT FOR THE ANNUAL MEETING (RECEIPT OF WHICH IS HEREBY
ACKNOWLEDGED):
1. ELECTION OF DIRECTORS
[ ] VOTE
[ ] FOR ALL NOMINEES LIST BELOW EXCEPT AS MARKED TO THE
CONTRARY BELOW
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S
NAME BELOW.)
JOSEPH F. MOVIZZO, HERBERT M. LUSTIG, EDMUND C. KING, ROBERT KNIGHT, STEPHEN A.
MICHAEL, GREGORY J. NEWELL AND JOHN E. SCATES.
2. ADOPTION OF THE 2003-A EMPLOYEE, DIRECTOR, CONSULTANT
AND ADVISOR STOCK COMPENSATION PLAN, AS AMENDED
[ ] FOR THE ADOPTION OF THE 2003-A EMPLOYEE, DIRECTOR,
CONSULTANT AND ADVISOR STOCK COMPENSATION PLAN, AS
AMENDED
[ ] AGAINST
[ ] ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE INDICATED,
THIS PROXY WILL BE VOTED FOR ELECTION OF THE SEVEN (7) NOMINEES NAMED IN ITEM 1,
AND FOR THE ADOPTION OF THE 2003-A EMPLOYEE, DIRECTOR, CONSULTANT AND ADVISOR
STOCK COMPENSATION PLAN IN ITEM 2.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, SIGN DATE AND RETURN THIS PROXY PROMPTLY USING THE
ACCOMPANYING POSTAGE PRE-PAID ENVELOPE. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF INVISA, INC.
DATED:___________________________________
-----------------------------------------
SIGNATURE
-----------------------------------------
SIGNATURE IF JOINTLY OWNED:
-----------------------------------------
PRINT NAME:
PLEASE SIGN EXACTLY AS THE NAME APPEARS ON YOUR STOCK CERTIFICATE. WHEN
SHARES OF CAPITAL STOCK ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, OR CORPORATE
OFFICER, PLEASE INCLUDE FULL TITLE AS SUCH. IF THE SHARES OF CAPITAL STOCK ARE
OWNED BY A CORPORATION, SIGN IN THE FULL CORPORATE NAME BY AN AUTHORIZED
OFFICER. IF THE SHARES OF CAPITAL STOCK ARE OWNED BY A PARTNERSHIP, SIGN IN THE
NAME OF THE PARTNERSHIP BY AN AUTHORIZED OFFICER.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
EXHIBIT A
AUDIT COMMITTEE CHARTER
The following Audit Committee Charter was adopted by the Audit Committee
of the Board of Directors and the Board of Directors of Invisa, Inc. (the
"Company"):
1. Members. The Board of Directors appoints an Audit Committee of at least three
members, consisting entirely of "independent" directors of the Board, and
designates one member as chairperson. "Independent" means a director who meets
the American Stock Exchange definition of "independence," as determined by the
Board of Directors.
Each member of the Company's audit committee must be financially literate. At
least one of the independent members of the Audit Committee shall be an "Audit
Committee Financial Expert" under the rules and regulations of the Securities
and Exchange Commission, as determined by the Board of Directors.
2. Purposes, Duties, and Responsibilities. The Audit Committee represents the
Board of Directors in discharging its responsibility relating to the accounting,
reporting and financial practices of the Company and its subsidiaries, and has
general responsibility for oversight of internal controls, accounting and audit
activities and Code of Conduct compliance of the Company and its subsidiaries.
Specifically, the Audit Committee will:
(a) Recommend to the Board of Directors the appointment, retention or
discharge of the independent public accountants as auditors of the Company
and to perform the annual audit, which accountants shall be ultimately
accountable to the Board of Directors through the Audit Committee.
(b) Review with the independent accountants the scope of the audit and the
results of the annual audit examination by the independent accountants and
any reports of the independent accountants with respect to reviews of
interim financial statements.
(c) Review information, including written statements from the independent
accountants, concerning any relationships between the auditors and the
Company or any other relationships that may adversely affect the
independence of the auditors and assess the independence of the outside
auditor.
(d) Review and discuss with management and the independent auditors the
Company's annual audited financial statements, including a discussion with
the auditors of their judgments as to the quality of the Company's
accounting principles.
(e) Review the services to be provided by the independent auditors to
assure that the independent auditors do not undertake any engagement for
services for the Company that would constitute prohibited services or
could be viewed as compromising the auditor's independence.
(f) Review with management and the independent auditors the results of any
significant matters identified as a result of the independent auditors'
interim review procedures prior to the filing of each Form l0-Q or as soon
thereafter as possible. The Audit Committee Chair may perform this
function on behalf of the Audit Committee.
(g) Review the annual program for the Company's internal audits, if any,
and review audit reports submitted by the internal auditing staff, if any.
(h) Periodically review the adequacy of the Company's internal controls.
(i) Review changes in the accounting policies of the Company and
accounting and financial reporting proposals that are provided by the
independent accountants that may have a significant impact on the
Company's financial reports, and make comments on the foregoing to the
Board of Directors.
(j) Oversee the Company's Business Conduct and Compliance Program.
(k) Review the adequacy of the Audit Committee Charter on an annual basis.
(l) Make reports and recommendations to the Board of Directors within the
scope of its functions.
(m) Approve material contracts where the Board of Directors determines
that it has a conflict.
(n) Establish procedures for receipt, retention and treatment of
complaints received by the company regarding the audit or accounting
matters.
(o) Prepare a budget for the committee, engage independent counsel and
other advisors if it deems it necessary at the Company's expense and to
maintain a separate bank account for this purpose.
(p) Satisfy itself that management put into place procedures that
facilitate compliance with the Disclosure and Financial Reporting Controls
provisions of the Sarbanes - Oxley Act.
(q) Review all loans to officers and maintain records of meetings and
other documents.
(r) Have the authority and responsibility of pre-approving all auditing
services, internal control-related services and permitted non-audit
services (including the terms thereof) to be performed for the Company by
its independent auditors, subject to the de minimis exceptions for
non-audit services described in Section 10(A)(i)(1)(B) of the Securities
Exchange Act of 1934, as amended, which are approved by the Audit
Committee prior to the completion of the audit (the Audit Committee may
also form and delegate such authority to sub-committees consisting of one
or more members when appropriate, including the authority to grant
pre-approvals of audit and permitted non-audit services, provided that
decisions of such subcommittees to grant pre-approvals shall be presented
to the full Audit Committee at its next scheduled meeting).
3. Meetings. The Audit Committee will meet as often as it deems necessary or
appropriate, in its judgment, either in person or telephonically, and at such
times and places as the Audit Committee determines. As it deems appropriate, but
not less than once each year, the Audit Committee will meet in private session
with the independent accountants and with the Internal Audit Manager. The
majority of the members of the Audit Committee constitute a quorum.
EXHIBIT B
"INVISA, INC."
2003-A EMPLOYEE, DIRECTOR, CONSULTANT AND ADVISOR STOCK
COMPENSATION PLAN
1. Purpose
The purpose of this plan (the "Plan") is to secure for Invisa, Inc. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company and its parent and subsidiary corporation who have contributed
to the Company in the past and who are expected to contribute to the Company's
future growth and success. Except where the context otherwise requires, the term
"Company" shall include the parent and all present and future subsidiaries of
the Company.
2. Issuance of Stock Options and Administration
a. Authorization of Option Issuance - The issuance of options for the
purchase of shares of the Company's Common Stock pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (the "Board"), or
a committee (the "Committee") designated by the Board of Directors.
b. Administration - The Plan will be administered by the Board, whose
construction and interpretation of the terms and provisions of the Plan shall be
final and conclusive. The Board may, to the full extent permitted by or
consistent with applicable laws or regulations including, without limitation,
applicable state laws and Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), or any successor rate (Rule 16b-3"), delegate
any or all of its powers under the Plan to a Committee appointed by the Board,
and if the Committee is so appointed all references to the Board in this Plan
shall mean and relate to such Committee. The Board may, in its sole discretion,
authorize the issuance of stock options for the purchase of Common Stock under
this Plan. The Board shall have authority, subject to the express provision of
the Plan, to construe the respective stock option agreements, and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the prescribed stock option agreements,
which need not be identical, and to make all other determinations in the
judgment of the Board necessary or desirable for the administration of the Plan.
The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any stock option agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect and it shall be
the sole and final judge of such expediency. No other director or person acting
pursuant to authority delegated by the Board or the Committee shall be liable
for any action or determination under the Plan made in good faith.
3. Eligibility.
a. General - Options may be issued to persons who are, at the time of
issuance, employees or officers and directors of, or consultants or advisors to
the Company.
b. Issuance of Stock Options to Officers and Directors - The selection of
an officer or director as a recipient of stock options, the timing of the stock
option issuance, and the number of shares subject to the issuance shall be
determined either (i) by the Board or the Compensation Committee, or (ii) by two
or more directors having full authority to act in the matter.
c. Issuance of Option - Options may only be issued to eligible persons (as
defined in Section 3(a) above).
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 8 below, the maximum number of
shares of Common Stock of the Company which may be issued pursuant to options
granted under the Plan is 3,500,000 shares.
5. Forms of Stock Option Agreements.
As a condition to the issuance of options under the Plan, each recipient of an
option shall execute a stock option agreement in such form not inconsistent with
the Plan as may be approved by the Board. Such agreements may differ among
recipients.
6. Additional Provisions.
The Board may, in its sole discretion, include additional provisions in stock
option agreements under the Plan, including without limitations restrictions on
transfer, repurchase rights, commitments to pay cash bonuses, registration
rights under the Securities Act of 1933, or such provisions as shall be
determined by the Board; provided that such additional provisions shall not be
inconsistent with any other term or condition of the Plan.
7. General Restrictions.
The shares issued pursuant to options granted under this Plan shall be subject
to the requirements that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares, upon any
securities exchange or under any state or federal law, or that the consent or
approval of any government or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance of shares thereunder,
such shares may not be issued, in whole or in part, unless such listing,
registration, qualification, consent or approval, or satisfaction of such
condition shall have been effected or obtained on conditions acceptable of the
Board.
8. Adjustment Provisions for Recapitalization.
If, through or as a result of any merger, consolidation, sale of all or
substantially all of the assets of the Company, reorganization, or
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company; or (ii) additional shares or new or
different shares or other securities, of the Company or other non-cash assets
are distributed with respect to such shares of Common Stock or other securities,
an appropriate and proportionate adjustment may be made in the maximum number
and kind of shares reserved for issuance under the Plan.
9. Substitute Stock.
The Company may issue stock under the Plan in substitution for stock held by
employees and directors of, or consultants or advisors to, another corporation
who becomes employees of or consultant or advisors to the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute stock be issued on such terms and conditions
as the Board considers appropriate in the circumstances.
10. No Special Employment Rights.
Nothing contained in the Plan or in any option issuance shall confer upon any
recipient any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
recipient.
11. Amendment of the Plan.
a. The Board may at any time, and from time to time, modify or amend the
Plan in any respect, except that if at any time the approval of the shareholders
of the Company is required under the law or rule, the Board may not effect such
modification or amendment without such approval.
b. The termination or any modification or amendment of the Plan shall not,
without the consent of a recipient of options, affect his or her rights under
options previously granted to him or her. With the consent of the optionee
affected, the Board may amend outstanding option agreements in a manner not
inconsistent with the Plan.
12. Effective Date and Duration of the Plan.
a. Effective Date - The Plan shall become effective when adopted by the
Board. Amendments to the Plan shall become effective when adopted by the Board.
Options may be granted under the Plan at any time after the effective date and
before the dated fixed as the termination date of the Plan.
b. Termination - Unless sooner expressly terminated in accordance with the
provisions of the Plan, the Plan shall terminate upon the earlier of (i) October
16, 2013; or (ii) the date on which all shares available for issuance under
stock options granted under the Plan shall have been issued.
13. Provisions for Foreign Participation.
The Board may, without amending the Plan, modify stock issuances granted
to participants who are foreign nationals or employed outside the United States
to recognize differences in laws, rules, regulations or customs of such foreign
jurisdiction with respect to tax, securities, currency, employee benefits or
other matters.
14. Registration of Shares.
In the Board's discretion, the Board may agree with respect to any or all
of the shares issued under the Plan, to prepare and file Registration Statements
on Form S-8, which Registration Statements may include re-offer prospectuses as
that term is defined in Form S-8, to register and continue to keep effectively
registered for resale the shares issued as compensation under the Plan.