Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 2)
|
Filed
by the Registrant þ
|
| |
|
Filed
by a Party other than the Registrant o
|
| |
|
Check
the appropriate box:
|
|
þ Preliminary
Proxy Statement
|
|
o Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
|
o Definitive
Proxy Statement
|
|
o Definitive
Additional Materials
|
|
o Soliciting
Material Pursuant to Rule 14a-12
|
| |
|
INNOVA
HOLDINGS, INC.
|
|
(Name
of Registrant as Specified in Its Charter)
|
| |
| |
|
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
|
|
Payment
of Filing Fee (Check the appropriate box):
|
|
þ No
fee required.
|
|
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
| |
(1)
|
Title
of each class of securities to which transaction
applies:
|
| |
|
|
| |
|
|
| |
(2)
|
Aggregate
number of securities to which transaction applies:
|
| |
|
|
| |
|
|
| |
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
|
| |
|
|
| |
|
|
| |
(4)
|
Proposed
maximum aggregate value of transaction:
|
| |
|
|
| |
|
|
| |
(5)
|
Total
fee paid:
|
| |
|
|
|
o Fee
paid previously with preliminary materials:
|
|
o Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
|
| |
(1)
|
Amount
previously paid:
|
| |
|
|
| |
|
|
| |
(2)
|
Form,
Schedule or Registration Statement No.:
|
| |
|
|
| |
|
|
| |
(3)
|
Filing
Party:
|
| |
|
|
| |
|
|
| |
(4)
|
Date
Filed:
|
| |
|
|
TABLE
OF CONTENTS
| |
Page |
| |
|
|
Introduction
|
1
|
| |
|
|
Outstanding
Securities and Voting Rights
|
1
|
| |
|
|
Questions
and Answers About the Meeting and Voting
|
1
|
| |
|
|
Security
Ownership of Certain Beneficial Owners and Management
|
5
|
| |
|
|
Executive
Officers and Key Employees
|
6
|
| |
|
|
Family
Relationships
|
6
|
| |
|
|
Legal
Proceedings
|
7
|
| |
|
|
The
Board of Directors and Corporate Governance
|
7
|
| |
|
|
Executive
Compensation and Related Matters
|
7
|
| |
|
|
Section
16(a) Beneficial Ownership Reporting Compliance
|
13
|
| |
|
|
Item
1: Election of Directors
|
14
|
| |
|
|
Item
2. Reverse Stock Split
|
16
|
| |
|
|
Item
3. Approval of Amended and Restated 2005 Stock Option Plan
|
22
|
| |
|
|
Form
10-KSB
|
24
|
| |
|
|
Deadline
for Future Proposals of Stockholders
|
24
|
| |
|
|
Other
Matters Which May Come Before the Special Meeting
|
24
|
| |
|
|
Solicitation
of Proxies
|
25
|
Innova
Holdings, Inc.
NOTICE
OF
SPECIAL MEETING
and
PROXY
STATEMENT
2006
INNOVA
HOLDINGS, INC.
NOTICE
OF
SPECIAL MEETING OF STOCKHOLDERS
To
be
held October 6, 2006
TO
THE
STOCKHOLDERS OF INNOVA
HOLDINGS, INC.
You
are
cordially invited to the 2006 Special Meeting of Stockholders of Innova
Holdings, Inc., which will tentatively be held at Sanibel Harbour Resort
&
Spa, Island Room, 17260 Harbour Pointe Drive, Ft. Myers, FL 33908, on
Friday, October 6, 2006 beginning at 10:00 a.m., local time. The Special
Meeting
will be held for the following purposes:
| |
1.
|
To
elect 5 members to our Board of Directors, each to hold office for
the
terms as set forth in herein, and until his successor is elected
and
qualified (Proposal 1);
|
| |
2.
|
To
authorize our Board of Directors, in its discretion, to amend our
certificate of incorporation to effect a reverse stock split of the
issued
and outstanding shares of our Common Stock at a ratio of either
one-for-eight or one-for-ten, as determined at the discretion of
the board
of directors to be in the best interests of the Company without further
approval from our stockholders (the "Reverse Stock Split") (Proposal
2);
|
| |
3.
|
To
adopt our Amended and Restated 2005 Stock Option Plan (Proposal 3);
and
|
| |
4.
|
To
transact such other business as may properly come before the meeting
or
any postponements or adjournments of the
meeting.
|
BECAUSE
OF THE SIGNIFICANCE OF THESE PROPOSALS TO THE COMPANY AND ITS STOCKHOLDERS,
IT
IS VITAL THAT EVERY SHAREHOLDER VOTES AT THE SPECIAL MEETING IN PERSON OR BY
PROXY.
These
proposals are fully set forth in the accompanying Proxy Statement, which
you are
urged to read thoroughly. For the reasons set forth in the Proxy Statement,
your
Board of Directors recommends a vote "FOR" each of the proposals. The Company
intends to mail the Annual Report, Proxy Statement and Proxy enclosed with
this
notice on or about *, 2006, to all stockholders entitled to vote at the Special
Meeting. If you were a stockholder of record of our common stock on September
5,
2006, the record date for the Special Meeting, you are entitled to vote at
the
meeting and any postponements or adjournments of the meeting. Stockholders
are
cordially invited to attend the Special Meeting. However, whether or not
you
plan to attend the meeting in person, your shares should be represented and
voted. After reading the enclosed Proxy Statement, please sign, date, and
return
promptly the enclosed proxy in the accompanying postpaid envelope we have
provided for your convenience to ensure that your shares will be represented.
If
you do attend the meeting and wish to vote your shares personally, you may
revoke your Proxy.
We
hope
that you will use this opportunity to take an active part in our affairs by
voting on the business to come before the Special Meeting, either by executing
and returning the enclosed Proxy Card or by casting your vote in person at
the
meeting.
BY
ORDER
OF THE BOARD OF DIRECTORS
WALTER
K.
WEISEL
Chairman
of the Board of Directors
Fort
Myers, Florida
August *,
2006
Stockholders
unable to attend the special meeting in person are requested to date and sign
the enclosed proxy card as promptly as possible. A stamped envelope is enclosed
for your convenience. If a stockholder receives more than one proxy card because
he or she owns shares registered in different names or addresses, each proxy
card should be completed and returned.
INNOVA
HOLDINGS, INC.
17105
San Carlos Boulevard, Suite A6151
Fort
Myers, Florida 33931
(239)
466-0488
PROXY
STATEMENT
SPECIAL
MEETING OF STOCKHOLDERS
October
6, 2006
INTRODUCTION
This
Proxy Statement is furnished to the stockholders by the Board of Directors
of
Innova Holdings, Inc., for solicitation of proxies for use at the 2006
Special
Meeting of Stockholders to be tentatively held at Sanibel Harbour Resort
&
Spa, Island Room, 17260 Harbour Pointe Drive, Ft. Myers, FL 33908, on
Friday, October 6, 2006 beginning at 10:00 a.m., local time, and at any
and all
adjournments of the meeting.
The
purpose of the Special Meeting and the matters to be acted upon are set forth
in
the following Proxy Statement. As of the date of this Proxy Statement, our
Board
of Directors knows of no other business which will be presented for
consideration at the Special Meeting. A stockholder giving a proxy pursuant
to
this solicitation may revoke it at any time before it is exercised by submitting
a duly executed proxy bearing a later date or by delivering to our Corporate
Secretary a written notice of revocation prior to the Special Meeting, or by
appearing at the meeting and expressing a desire to vote his or her shares
in
person. Subject to such revocation, all shares represented by a properly
executed proxy received prior to or at the Special Meeting will be voted by
the
proxy holders whose names are set forth in the accompanying proxy in accordance
with the instructions on the proxy. If no instruction is specified with respect
to a matter to be acted upon, the shares represented by the proxy will be voted
"FOR" the election of the nominees for director and "FOR" each other matter
set
forth in this Proxy Statement. If any other business properly comes before
the
meeting, votes will be cast in accordance with the proxies in respect of any
such other business in accordance with the judgment of the persons acting under
the proxies.
It
is
anticipated that the mailing to stockholders of this Proxy Statement and the
enclosed proxy will commence on or about *, 2006.
OUTSTANDING
SECURITIES AND VOTING RIGHTS
Only
stockholders of record at the close of business on the record date of September
5, 2006 are entitled to notice of and to vote at the Special Meeting. At
that
date there were * outstanding shares of our common stock, par value $.001
per
share, * outstanding shares of our preferred stock, par value $.001 per
share, our only outstanding voting securities. At the Special Meeting,
each
share of common stock will be entitled to one vote.
The
representation, in person or by properly executed proxy, of the holders of
a
majority of the voting power of the shares of stock entitled to vote at the
Special Meeting is necessary to constitute a quorum for the transaction of
business at the meeting. Stockholders are not entitled to cumulate their votes.
Abstentions and broker non-votes (shares held by a broker or nominee which
are
represented at the Special Meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular proposal) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. In all matters, abstentions have the effect of votes against a
proposal in tabulations of the votes cast on proposals presented to
stockholders, while broker non-votes do not have any effect for purposes of
determining whether a proposal has been approved.
QUESTIONS
AND ANSWERS ABOUT
ABOUT
THE MEETING AND VOTING
It
is
your legal designation of another person to vote the stock that you own. That
other person is called a proxy. If you designate someone as your proxy in a
written document, that document also is called a proxy or a proxy card. Walter
K. Weisel, our Chief Executive Officer, and Sheri Aws, our Corporate Secretary,
have been designated as proxies for the 2006 Special Meeting of
Stockholders.
|
2.
|
WHAT
IS THE RECORD DATE AND WHAT DOES IT
MEAN?
|
The
record date for the 2006 Special Meeting of Stockholders is September 5,
2006.
The record date is established by our Board of Directors as required by Delaware
law and our By-laws. Stockholders of record (registered stockholders and
street
name holders) at the close of business on the record date are entitled
to:
| |
(a)
|
receive
notice of the meeting; and
|
| |
(b)
|
vote
at the meeting and any adjournments or postponements of the
meeting.
|
|
3.
|
WHAT
IS THE DIFFERENCE BETWEEN A REGISTERED STOCKHOLDER AND A STOCKHOLDER
WHO
HOLDS STOCK IN STREET
NAME?
|
If
your
shares of stock are registered in your name on the books and records of our
transfer agent, you are a registered stockholder.
If
your
shares of stock are held for you in the name of your broker or bank, your shares
are held in street name. The answer to Question 13 describes brokers'
discretionary voting authority and when your bank or broker is permitted to
vote
your shares of stock without instructions from you.
|
4.
|
WHAT
ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON
STOCK
OR PREFERRED STOCK?
|
All
stockholders of record can vote by mailing in their completed proxy card (in
the
case of registered stockholders) or their completed vote instruction form (in
the case of street name holders).
All
stockholders may vote in person at the meeting (unless they are street name
holders without a legal proxy).
|
5.
|
HOW
CAN I REVOKE A PROXY?
|
You
can
revoke a proxy prior to the completion of voting at the meeting by:
| |
(a)
|
giving
written notice to our Corporate
Secretary;
|
| |
(b)
|
delivering
a later-dated proxy; or
|
| |
(c)
|
voting
in person at the meeting.
|
|
6.
|
ARE
VOTES CONFIDENTIAL? WHO COUNTS THE
VOTES?
|
We
will
hold the votes of each stockholder in confidence from directors, officers and
employees except:
| |
(a)
|
as
necessary to meet applicable legal requirements and to assert or
defend
claims for or against us;
|
| |
(b)
|
in
case of a contested proxy
solicitation;
|
| |
(c)
|
if
a stockholder makes a written comment on the proxy card or otherwise
communicates his or her vote to management;
or
|
| |
(d)
|
to
allow the independent inspectors of election to certify the results
of the
vote.
|
|
7.
|
WHAT
ARE THE VOTING CHOICES WHEN VOTING ON DIRECTOR NOMINEES, AND WHAT
VOTE IS
NEEDED TO ELECT DIRECTORS?
|
When
voting on the election of director nominees to serve for the terms as set forth
herein, stockholders may:
| |
(a)
|
vote
in favor of all nominees;
|
| |
(b)
|
vote
to withhold votes as to all nominees;
or
|
| |
(c)
|
withhold
votes as to specific nominees.
|
Directors
will be elected by a plurality of the votes cast.
Our
Board
recommends a vote "FOR" all of the nominees.
|
8.
|
WHAT
ARE THE VOTING CHOICES WHEN VOTING ON THE APPROVAL OF THE
AMENDMENT
TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
OF THE
ISSUED AND OUTSTANDING SHARES OF OUR COMMON STOCK AT A RATIO OF EITHER
ONE-FOR-EIGHT OR ONE-FOR-TEN, AS DETERMINED AT THE DISCRETION OF
THE BOARD
OF DIRECTORS TO BE IN THE BEST INTERESTS OF THE COMPANY WITHOUT FURTHER
APPROVAL FROM OUR STOCKHOLDERS
AND WHAT VOTE IS NEEDED TO
APPROVE?
|
When
voting on the amendment to our Certificate of Incorporation to effect a reverse
stock split of the outstanding shares of our Common Stock at a ratio of either
one-for-eight or one-for-ten, as determined at the discretion of the board
of
directors to be in the best interests of the Company without further approval
from our stockholders, stockholders may:
| |
(d)
|
vote
in favor of the amendment;
|
| |
(e)
|
vote
against the amendment; or
|
| |
(f)
|
abstain
from voting on the amendment.
|
The
amendment will be approved if the votes cast "FOR" are a majority of the votes
present at the meeting. The Board recommends a vote "FOR" the
amendment.
|
9.
|
WHAT
ARE THE VOTING CHOICES WHEN VOTING ON THE APPROVAL
OF THE AMENDED AND RESTATED 2005
STOCK
OPTION PLAN
AND WHAT VOTE IS NEEDED TO
APPROVE?
|
When
voting on the approval of the Amended and Restated 2005 Stock Option Plan,
stockholders may:
| |
(a)
|
vote
in favor of the Plan;
|
| |
(b)
|
vote
against the Plan; or
|
| |
(c)
|
abstain
from voting on the Plan.
|
The
Plan
will be approved if the votes cast "FOR" are a majority of the votes present
at
the meeting. The Board recommends a vote "FOR" the Plan.
|
10.
|
WHAT
IF A STOCKHOLDER DOES NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING
A
PROXY?
|
Stockholders
should specify their choice for each matter on the enclosed proxy. If no
specific instructions are given, proxies which are signed and returned will
be
voted FOR the election of all director nominees, FOR the amendment to our
Certificate of Incorporation to effect a reverse stock split of the outstanding
shares of our Common Stock at a ratio of either one-for-eight or one-for-ten,
as
determined at the discretion of the board of directors to be in the best
interests of the Company without further approval from our stockholders, and
FOR
the approval of our Amended and Restated 2005 Stock Option Plan.
|
11.
|
WHO
IS ENTITLED TO VOTE?
|
You
may
vote if you owned stock as of the close of business on September 5, 2006.
Each
share of our common stock is entitled to one vote. As of September 5, 2006,
we
had * shares of common stock outstanding.
|
12.
|
WHAT
DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY
CARD?
|
It
means
that you have multiple accounts with brokers or our transfer agent. Please
vote
all of these shares. We recommend that you contact your broker or our transfer
agent to consolidate as many accounts as possible under the same name and
address. Our transfer agent is Continental Stock Transfer and Trust Company,
17
Battery Place, New York, NY 10004, or you can reach Corporate Stock Transfer
at
(212) 509-4000.
|
13.
|
WILL
MY SHARES BE VOTED IF I DO NOT PROVIDE MY
PROXY?
|
If
your
shares are registered in your name, they will not be voted unless you submit
your proxy card, or vote in person at the meeting. If your shares are held
in
street name, your bank, brokerage firm or other nominee, under some
circumstances, may vote your shares.
Brokerage
firms, banks and other nominees may vote customers' unvoted shares on "routine"
matters. Generally, a broker may not vote a customer's unvoted shares on
non-routine matters without instructions from the customer and must instead
submit a "broker non-vote." A broker non-vote is counted toward the shares
needed for a quorum, but it is not counted in determining whether a matter
has
been approved.
|
14.
|
ARE
ABSTENTIONS AND BROKER NON-VOTES
COUNTED?
|
Broker
non-votes will not be included in vote totals and will not affect the outcome
of
the vote. In matters other than the elections of directors, abstentions have
the
effect of votes against a proposal in tabulations of the votes cast on proposals
presented to stockholders.
|
15.
|
HOW
MANY VOTES MUST BE PRESENT TO HOLD THE
MEETING?
|
To
hold
the meeting and conduct business, a majority of our outstanding voting
shares as
of September 5, 2006 must be present at the meeting. On this date, a total
of * shares of our common stock were outstanding and entitled to vote.
Shares representing a majority, or * votes, must be present. This is called
a
quorum.
Votes
are
counted as present at the meeting if the stockholder either:
| |
(d)
|
Is
present and votes in person at the meeting,
or
|
| |
(e)
|
Has
properly submitted a proxy card.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information as to the shares of our common stock
beneficially owned as of August 10, 2006 by (i) each person known to us to
be
the beneficial owner of more than 5% of our common stock; (ii) each director
and
nominee for director; (iii) each executive officer; and (iv) all of our
directors and executive officers as a group. Unless otherwise indicated in
the
footnotes following the table, the persons as to whom the information is
given
had sole voting and investment power over the shares of common stock shown
as
beneficially owned by them. Unless otherwise indicated, the address of each
person shown is c/o Innova Holdings, Inc., 17105 San Carlos Boulevard, Suite
A6151, Fort Myers, Florida 33931.
|
Walter
K. Weisel
|
|
|
62,128,047
|
|
|
8.14
|
%
|
|
|
|
|
|
|
|
|
|
|
Martin
Nielson (1)
|
|
|
36,751,700
|
|
|
4.85
|
%
|
|
|
|
|
|
|
|
|
|
|
Gary
McNear (2)
|
|
|
21,902,117
|
|
|
2.89
|
%
|
|
|
|
|
|
|
|
|
|
|
Craig
Conklin (3)
|
|
|
23,223,617
|
|
|
3.07
|
%
|
|
|
|
|
|
|
|
|
|
|
Eugene
V. Gartlan (4)
|
|
|
46,437,196
|
|
|
6.01
|
%
|
|
|
|
|
|
|
|
|
|
|
Jerry
E. Horne
|
|
|
74,329,227
|
|
|
9.90
|
%
|
|
|
|
|
|
|
|
|
|
|
Richard
K. and Johanna Wynns
|
|
|
47,020,748
|
|
|
6.24
|
%
|
|
|
|
|
|
|
|
|
|
|
Sheri
Aws
|
|
|
6,034,483
|
|
|
*
|
|
| |
|
|
|
|
|
|
|
|
Directors
and Officers as a Group
|
|
|
196,497,160
|
|
|
24.21
|
%
|
_______________
*Less
than one percent.
(1).
On
April 29, 2003, the Gary F. McNear Revocable Trust ("Gary Trust"), the Susan
M.
McNear Revocable Trust ("Susan Trust"), the Craig M. Conklin Revocable Trust
("Craig Trust") and the Margaret L. Conklin Revocable Trust ("Margaret Trust")
(collectively the "Trusts") entered into a Stock Option and Irrevocable Proxy
Agreement with Altos. Gary McNear was the Chief Financial Officer, Vice
President, Secretary and Director of The Company; he currently is a director
of
the Company. Susan McNear is his wife. Craig M. Conklin was the Chief Operating
Officer, Vice President and a Director of the Company; he currently is a
director of the Company. Margaret Conklin is his wife. The Trusts own an
aggregate of 15,838,444 shares of the Company's Common Stock. The Trusts granted
to Altos an option to acquire 10,000,000 of their shares of Common Stock for
$.01 per share for a period of three years. The Trusts also granted to Altos
an
irrevocable proxy to vote their shares. The irrevocable proxy is for a term
of
three years with respect to the 10,000,000 shares of Common Stock held by the
Trusts that are subject to the option to purchase and for a term of six months
with respect to the 5,838,444 shares of Common Stock held by the Trusts that
are
not subject to the option to purchase. The irrevocable proxy relating to the
15,838,444 shares has expired as well as the option granted to Altos to acquire
10,000,000 shares. Additionally, Altos and Mr. Nielson earned a fee for services
rendered, compensation as an executive of the Company and reimbursement of
expenses, which was paid in full upon the issuance of 30,085,033 shares in
July
2006 and in accordance with the terms of the Merger Agreement between the
Company and Robotic Workspace Technologies, Inc., which was effective August
25,
2004.
(2).
Includes 2,919,224 shares owned by the Susan M. McNear Revocable Trust and
3,900,000 shares issued in July 2006 in accordance with the terms of the Merger
Agreement between the Company and Robotic Workspace Technologies, Inc., which
was effective August 25, 2004, for services rendered.
(3).
Includes 2,919,224 shares owned by the Margaret L. Conklin Revocable Trust
and
3,900,000 shares issued in July 2006 in accordance with the terms of the Merger
Agreement between the Company and Robotic Workspace Technologies, Inc., which
was effective August 25, 2004, for services rendered.
(4).
Includes 12,000,000 shares owned by Stratex Solutions, LLC, through which
Mr.
Gartlan provided consulting services to the Company from December 15, 2004
through June 14, 2005, and a bonus of 5,625,000 shares of the Company’s common
stock awarded on March 10, 2006, which was valued at $50,000 based on $.009
per
share, the closing price of the Company stock on the previous
day.
EXECUTIVE
OFFICERS AND KEY EMPLOYEES
The
following table sets forth the names and ages of our executive officers and
key
employees, if any, who are not also directors.
|
Name
|
Age
|
Position
|
|
|
|
|
|
Eugene
V. Gartlan
|
62
|
Chief
Financial Officer
|
|
|
|
|
|
Sheri
Aws
|
45
|
Vice
President and Secretary
|
Executive
Officers
The
principal occupations for the past five years (and, in some instances, for
prior
years) of each of our executive officers (other than those executive officers
who are also directors):
EUGENE
V. GARTLAN
was
appointed Chief Financial Officer of the Company in June 2005. Mr. Gartlan
served as a consultant to the Company since December 15, 2004 through his wholly
owned company, Stratex Solutions, LLC. ("Stratex"), a business consulting firm.
Stratex earned 12,000,000 shares of the Company's common stock and received
reimbursement of business expenses of approximately $12,000 as consideration
for
these consulting services. Mr. Gartlan served as the President of Stratex since
June 2003. Stratex's compensation was based on a monthly salary of $10,000,
payable in cash or common stock of the Company at the option of the Company.
The
price per share used to determine the number of shares earned if stock was
paid
was $.005 per share, the stock price on the date the Company and Stratex entered
into the consulting agreement. No cash salary has been paid to Stratex. From
June 2000 through June 2003 Mr. Gartlan was a self employed business consultant
doing business under the name CFO Strategies and E. V. Gartlan. From June 2000
to June 2003, Mr. Gartlan was also an independent contractor with Whitestone
Communications, Inc. serving in the capacity as a Managing Director of this
investment banking firm specializing in mergers and acquisitions in the
publishing industry. Mr. Gartlan's prior experience include positions as Chief
Financial Officer of The Thomson Corporation's Information Publishing Group,
Chief Financial Officer with Moody's Investors Service, Chief Financial Officer
with International Data Group as well as several top financial management
positions with The Dun & Bradstreet Corporation. Mr. Gartlan worked with
Price Waterhouse earlier in his career and is a CPA in New York.
SHERI
AWS
was
appointed Secretary of the Company on September 14, 2004. Ms. Aws has served
as
Vice President of Administration of RWT, the Company's wholly owned subsidiary,
since February 2004. Prior to that, Ms. Aws served as Executive Administrator,
General Mortgage Corporation of America, from August 24, 2003 to February 2004;
Director of Just for Kids, an after school and summer camp program for children,
from December 2002 to August 2003; Assistant to the Chief Executive Officer
of
RWT from December 2002 through February 2004; and Administrative Assistant
to
Vice President of Marketing and Sales and Manager of Proposals and Contracts
Administration for RWT.
FAMILY
RELATIONSHIPS
There
are
no family relationships among our executive officers and directors.
LEGAL
PROCEEDINGS
As
of the
date of this Proxy Statement, there are no material proceedings to which any
of
our directors, executive officers, affiliates or stockholders is a party adverse
to us. There are no orders, judgments, or decrees of any governmental agency
or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing
any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving
a
security, or any aspect of the securities business or of theft or of any felony
or any conviction in a criminal proceeding or being subject to a pending
criminal proceeding.
THE
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our
Board
of Directors is responsible for establishing broad corporate policies and for
overseeing our overall management. In addition to considering various matters
which require Board approval, the Board provides advice and counsel to, and
ultimately monitors the performance of, our senior management.
We
do not
have a standing Audit Committee, a Compensation Committee, or a Nominations
and
Governance Committee of the board of directors. Our directors perform the
functions of audit, nominating and compensation committees. Four of our
directors, Walter K. Weisel, Martin Nielson, Gary McNear and Craig Conklin
participate in the consideration of director nominees. Due to the small
size of
our company and our board, the board of directors does not believe that
establishing a separate nominating committee is necessary for effective
governance. When additional members of the Board of Directors are appointed
or
elected, we will consider creating a nominating committee. The entire Board
of
Directors participates in audit related matters of our company, including,
but
not limited to, reviewing and discussing our audited financial statements
with
management and our auditors and recommending to the board of directors
that the
financial statements be included in our Annual Reports on Form 10-KSB.
In
performing their role equivalent to an audit committee, the Board of Directors
(i) reviewed and discussed the Company’s audited financial statements in the
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31,
2005 with management, (ii) discussed with the Company’s independent registered
public accounting firm the matters required to be discussed pursuant
to Statement
on Auditing Standards No. 61 (Communication With Audit
Committees),
(iii)
discussed with its independent registered public accounting firm matters
relating to independence, including the disclosures made to the Board as
required by the Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees),
and
(iv) in reliance on the aforementioned reviews and discussions, recommended
to
management the inclusion of the Company’s audited financial statements in the
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31,
2005 for filing with the Securities and Exchange Commission. Messrs. Weisel,
Nielson, Conklin, Wynns and McNear are not considered independent directors
as
defined by any national securities exchange registered pursuant to Section
6(a)
of the Securities Exchange Act of 1934 or by any national securities association
registered pursuant to Section 15A(a) of the Securities Exchange Act of
1934.
The
Board
and our management strive to perform and fulfill their respective duties and
obligations in a responsible and ethical manner. The Board performs annual
self-evaluations. We have adopted a comprehensive Code of Ethics for all
directors, officers and employees. The Code of Ethics was filed with the
Securities and Exchange Commission as part of the Company’s report on Form
10-KSB for the fiscal year ended December 31, 2004.
During
2005, the Board of Directors met and/or executed unanimous written consents
of
the Board of Directors twelve times. While we do not have a formal policy
requiring members of the Board to attend the Special Meeting of Stockholders,
we
strongly encourage all directors to attend.
DIRECTOR
COMPENSATION
The
Company has not paid and does not presently propose to pay cash compensation
to
any director for acting in such capacity. However, the Company will give the
directors a grant of shares of common stock or options and reimbursement for
reasonable out-of-pocket expenses for attending meetings. In December 2004
and
in March 2006, the Company awarded each director 5,000,000 options in each
year
for services as a director, each with an exercise price of $.01 per share and
a
term of ten years. In addition, Mr. Weisel received 15,000,000 options in April
2005 for services as Chief Executive Officer of the Company. Originally these
options had an exercise price of $.017 per share but were modified in March
2006
to have an exercise price of $.01 per share. These options have a term of ten
years and expire in April 2015.
EXECUTIVE
COMPENSATION AND RELATED MATTERS
The
following table sets forth the cash compensation (including cash bonuses) paid
or accrued by us for our years ended December 31, 2005, 2004 and 2003 to our
Chief Executive Officer and our four most highly compensated officers other
than
the Chief Executive Officer at December 31, 2005.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
|
|
|
|
|
|
Name
& Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Other
|
|
Stock
|
|
Options
|
|
LTIP
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter
K. Weisel
|
|
|
2005
|
|
$
|
150,000
|
|
|
0.000
|
|
|
0
|
|
|
0
|
|
|
20,000,000
|
|
|
0
|
|
$
|
69,100
(1)
|
|
|
Chairman
and CEO (1) (3)
|
|
|
2004
|
|
$
|
150,000
|
|
|
0.000
|
|
|
0
|
|
|
0
|
|
|
5,000,000
|
|
|
0
|
|
|
0
|
|
| |
|
|
2003
|
|
$
|
150,000
|
|
|
0.000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin
Nielson
|
|
|
2005
|
|
$
|
0
|
|
|
0.000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2)
|
|
|
Chairman
and CEO (1) (2) (3)
|
|
|
2004
|
|
$
|
100,000
|
|
|
0.000
|
|
|
0
|
|
|
0
|
|
|
5,000,000
|
|
|
0
|
|
|
(2)
|
|
| |
|
|
2003
|
|
$
|
116,667
|
|
|
0.000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene
V. Gartlan
|
|
|
2005
|
|
$
|
0
|
|
|
0.000
|
|
|
0
|
|
|
12,000,000
|
|
|
18,000,000
|
|
|
0
|
|
$
|
12,000
(4)
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Walter K. Weisel has served as Chairman and CEO of the Company since August
25,
2004, the date the merger between the Company and RWT closed. Martin Nielson
served as Chairman and CEO of the Company from the beginning of the year to
August 25, 2004. During 2005,Mr. Weisel was reimbursed for expenses incurred
over the prior three years in an amount of $69,100.
(2)
On
April 22, 2003, the Company entered into an Advisory Agreement with AltosBancorp
Inc. ("Altos") pursuant to which Altos agreed to act as the Company's exclusive
business advisor for a one-year period. Martin Nielson was President of Altos
and subsequently became Chairman and Chief Executive Officer of the Company.
Altos advised the Company regarding equity and debt financings, strategic
planning, mergers and acquisitions, and business developments. In conjunction
with the decision to proceed with the RWT acquisition, the agreement with Altos
was concluded. Altos did not receive any cash compensation for its services
rendered, but in accordance with the terms of the Merger Agreement between
the
Company and Robotic Workspace Technologies, Inc., which was effective August
25,
2004, Altos and Mr. Nielson were to receive 16,133,333 shares of the Company's
common stock (valued at approximately $166,000), of which 10,633,333 shares
were
earned in 2004 and 5,500,000 shares were earned in 2003. These shares were
issued to Altos in July 2006.
(3)
During the past three years, Walter K. Weisel has not received any cash
compensation. The amounts earned by Mr. Weisel remain accrued by the Company
as
of December 31, 2005. Martin Nielson received $80,000 in cash compensation;
$50,000 was paid in 2003 and $30,000 was paid in 2004. The balance earned but
unpaid remains accrued by the Company as of December 31, 2005. Mr. Nielson
received 13,951,700 shares of the Company’s common stock in July 2006 for these
services rendered and in accordance with the terms of the Merger Agreement
between the Company and Robotic Workspace Technologies, Inc., which was
effective August 25, 2004.
(4)
Eugene V. Gartlan did not receive any cash compensation in 2005. Mr. Gartlan
served as a consultant to the company since December 15, 2004 through his wholly
owned company, Stratex Solutions, LLC. ("Stratex"), a business consulting firm.
Stratex earned 12,000,000 shares of the Company's common stock and received
reimbursement of business expenses of approximately $12,000 as consideration
for
these consulting services. Additionally, on December 15, 2004 Stratex received
12,121,276 options at an exercise price of $.005 per share with a term of ten
years, expiring in December 2014. On June 30, 2005, the Company and Mr. Gartlan
entered into an Employment Agreement effective as of June 14, 2005. For all
the
services to be rendered by Mr. Gartlan from June 14, 2005 through December
14,
2005, Mr. Gartlan shall be granted stock options to purchase 18,000,000 shares
of common stock of the Company at the purchase price of $.036 with a term of
ten
years. After December 14, 2005, Mr. Gartlan shall be paid a salary of fifteen
thousand dollars per month, which payment commenced in January 2006. In March
2006 the Company modified the 18,000,000 options granted to Mr. Gartlan as
part
of his employment agreement dated June 30, 2005 by changing their vesting from
a
three year period to 100% vested as of December 14, 2005, and by modifying
the
exercise price from $.036 to $.01. They expire in June 2015. Additionally,
the
12,121,276 options that were granted to Stratex Solutions, Inc in December
2004
were modified in March 2006 to vest over three years. They expire in December
2014.
In
March
2006 the Company modified the 18,000,000 options granted to Mr. Gartlan as
part
of his employment agreement dated June 30, 2005 by changing their vesting from
a
three year period to 100% vested as of December 14, 2005, and by modifying
the
exercise price from $.036 to $.01. Additionally, Mr. Gartlan has 12,121,276
options that were granted to Stratex Solutions, Inc. in December 2004 with
an
exercise price of $.005 per share and vest monthly over 5 years. These options
were modified in March 2006 to vest over three years. Additionally, Mr. Gartlan
received a bonus of 5,625,000 on March 10, 2006 which were valued at $50,000,
based on $.009 per share, the closing price of the Company stock on the previous
day.
2003,
2004 and 2005 Stock Option Plans
The
Company currently has three Stock Options Plans that are in place, the
2003
Stock Option Plan, the 2004 Stock Option Plan and the 2005 Stock Option
Plan. On
July 15, 2003, the Company adopted the 2003 Stock Option Plan authorizing
options to purchase an aggregate of 5,000,000 shares. On April 15, 2004,
the
Company adopted the 2004 Stock Option Plan authorizing options on 3,150,000
shares. On April 12, 2005, the Company adopted the 2005 Stock Option Plan
authorizing options to purchase an aggregate of 100,000,000 shares. On
April 12,
2006, the Company authorized an increase in the authorized shares of common
stock available under the 2005 Stock Option Plan from 100,000,000 shares
to
150,000,000 shares, and on July 24, 2006, the Company authorized an increase
in
the authorized shares of common stock available under the 2005 Stock Option
Plan
from 150,000,000 to 200,000,000 shares.
As
of
December 31, 2005, options awarded under the 2003, 2004 and 2005 Stock
Option
Plans aggregated 103,107,400. Of these, 20,000,000 options were awarded
to Mr.
Weisel, 5,000,000 options were awarded to Mr. Nielson and 18,000,000 options
were awarded to Mr. Gartlan, each under the 2005 Stock Option Plan. In
addition,
12,121,276 options were awarded to Stratex Solutions, LLC, a business owned
by
Mr. Gartlan that provided financial consulting services to the Company
prior to
Mr. Gartlan's employment date, under the 2005 Stock Option Plan.
Each
of
the 2003, 2004 and 2005 Stock Option Plans provide for the grant
of nonstatutory stock options that are not intended to qualify as
"incentive stock options,” options. As of June 30, 2006, there were
164,937,400 options awarded, including 1,000,000 options under the 2003
Plan, no
options under the 2004 Plan and 163,937,400 options under the 2005 Plan.
The
total number of shares of common stock to be reserved for issuance under
all
plans is 208,150,000 subject to adjustment in the event of a stock split,
stock dividend, recapitalization or similar capital change.
Each
of
the 2003, 2004 and 2005 Stock Option Plans are presently administered by
the
Company's board of directors, which selects the eligible persons to whom
options
shall be granted, determines the number of common shares subject to each
option,
the exercise price therefore and the periods during which options are
exercisable, interprets the provisions of the plans and, subject to certain
limitations, may amend the plans. Each option granted under the plans shall
be
evidenced by a written agreement between the Company and the
optionee.
Options
may be granted to employees (including officers) and directors and certain
consultants and advisors.
Options
Grants in Last Fiscal Year
The
following table sets forth information with respect to grants of options
to
purchase our common stock under the 2003 Stock Option Plan, the 2004 Stock
Option Plan and the 2005 Stock Option Plan to the named executive officers
during the fiscal year ended December 31, 2005.
|
Options
in Year Ended December 31, 2005
|
|
Individual
Grants
|
|
Name
|
|
Number
of Shares Underlying Options
|
|
%
of Total Options Granted to Employees
|
|
Exercise
Price
|
|
Market
Price
|
|
Expiration
Date
|
|
|
Walter
K. Weisel
|
|
|
15,000,000
|
|
|
30.8%
|
|
$
|
.017
|
|
$
|
.017
|
|
|
4/11/2015
|
|
|
Martin
Nielson
|
|
|
0
|
|
|
0
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
Eugene
V. Gartlan
|
|
|
18,000,000
|
|
|
37.0
%
|
|
$
|
.036
|
|
$
|
.035
|
|
|
6/21/2015
|
|
(1)
Mr.
Weisel received 15,000,000 options in April 2005 for services as Chief
Executive
Officer of the Company. Originally these options had an exercise price
of $.017
per share but were modified in March 2006 to have an exercise price of
$.01 per
share. These options vest annually over a three year period and expire
in April
2015.
(2)
Mr.
Gartlan was employed as the Company’s Chief Financial Officer effective June 14,
2005. He did not receive any cash compensation, including salary or bonus
in
2005. These 18,000,000 options granted were in lieu of a cash salary. In
March
2006 the Company modified the 18,000,000 options granted to Mr. Gartlan as
part
of his employment agreement dated June 30, 2005 by changing their vesting
from a
three year period to 100% vested as of December 14, 2005, and by modifying
the
exercise price from $.036 to $.01. The term remains ten years with expiration
in
June 2015.
Aggregate
Option Exercises In Last Fiscal Year and Fiscal Year End Option Values
The
following table sets forth information as of December 31, 2005 with respect
to
the named executive officers information with respect to options exercised,
unexercised options and year-end option values in each case with respect
to
options to purchase shares of our common stock.
|
|
|
|
|
|
|
Number
of Securities Underlying
|
|
Value
of Unexercised In The
|
|
|
|
|
|
|
|
|
Unexercised
Options at
|
|
Money
Options At
|
|
|
|
|
|
|
|
|
December
31, 2005
|
|
December
31, 2005
|
|
|
|
|
Shares
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired
on
|
|
Realized
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|
|
Name
|
|
Exercise
(#)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
|
Walter
K. Weisel
|
|
|
0
|
|
|
|
|
|
2,495,287
|
|
|
18,333,333
|
|
|
3,154
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin
Nielson
|
|
|
0
|
|
|
|
|
|
0
|
|
|
5,000,000
|
|
|
0
|
|
|
3,000
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene
V. Gartlan
|
|
|
0
|
|
|
|
|
|
4,040,426
|
|
|
26,080,850
|
|
|
22,626
|
|
|
45,253
|
|
Equity
Compensation Plan Information
The
following table set forth the information as of December 31, 2005 with respect
to compensation plans under which equity securities of the Company are
authorized for issuance:
|
Plan
Category
|
|
|
Number
of shares to be issued upon exercise of outstanding
options
|
|
|
Weighted
average exercise price of outstanding options
|
|
|
Number
of securities remaining available for future issuance
|
|
|
Equity
compensation
plans approved
by security holders
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation
plans not
approved by security holders
|
|
|
103,107,400
|
|
$
|
0.016
|
|
|
5,042,600
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
103,107,400
|
|
$
|
0.016
|
|
|
5,042,600
|
|
On
April
12, 2005 the Company adopted a Stock Option Plan authorizing options on
100,000,000 shares. On July 15, 2003 the Company adopted a Stock Option Plan
authorizing options on 5,000,000 shares. On October 29, 2003 the Company
authorized options on 10,900,000 shares to be issued to senior management.
On
April 15, 2004 the Company adopted a Stock Option Plan authorizing options
on
3,150,000 shares. Under all of these plans, the Company issued options for
1,000,000 shares. During 2004 the Company authorized 33,962,655 options to
be
awarded to directors, an employee and an independent contractor. During
2005, the Company awarded a net amount of options totaling 54,719,259 to
employees and an independent contractor. And on April 12, 2006 the Company
authorized an increase in the Stock Option Plan for an additional 50,000,000
shares, bring the total options authorized to 150,000,000 shares. On July
24,
2006, the Company authorized an increase of the authorized shares of common
stock available under the Stock Option Plan from 150,000,000 to 200,000,000
share.
The
Company is planning to file an S-8 registration statement in September 2006
for
the Company's stock option plan. Options granted through December 31, 2005
to be
included are 71,500,000 shares to directors and management, 13,000,000 shares
for employees and 12,121,276 shares to Stratex Solutions, LLC, a consulting
firm that provided financial and accounting support services to the
Company. Additionally, options were granted for another 20,000,000 shares in
March 2006 to directors and another 5,500,000 to employees.
Robotic
Workspace Technologies, Inc. had a stock option plan in effect at the time
of
the merger with the Company, under which plan there were options granted for
the
equivalent of 15,266,865 shares of the Company, after adjusting for the ratio
of
stock exchange in the merger agreement, which will also be included in the
S-8
filing. There are no remaining shares to be granted under that
plan.
Employment
Agreement
Currently
there are employment agreements with three executives, Walter Weisel, Chairman,
CEO, Eugene V. Gartlan, CFO and Sheri Aws, Vice President and
Secretary.
Mr.
Weisel's employment agreement is dated July 19, 2000. Mr. Weisel's salary is
$150,000 per annum plus a bonus at the discretion of the Board of Directors.
The
agreement stipulates that Mr. Weisel's salary will be increased to $200,000
and
$250,000 when certain sales and profit objectives are met. The agreement is
for
a term of three years and automatically renews for successive one-year periods
unless terminated by either party upon not less than sixty days prior to the
renewal date. Mr. Weisel has agreed not to compete with the Company or solicit
its customers or employees for a period of two years following the termination
of his employment. The agreement also requires the Company to pay Mr. Weisel
all
accrued compensation, which amounted to $487,500 as of December 31, 2005, upon
receipt of additional capital of no less than $3,000,000.
On
June
30, 2005, the Company and Mr. Gartlan entered into an Employment Agreement
effective as of June 14, 2005. The term of the employment agreement is five
years. The agreement is automatically extended for one year periods unless
terminated on not less than thirty days notice by either party prior to any
termination date. For all the services to be rendered by Mr. Gartlan from June
14, 2005 through December 14, 2005, Mr. Gartlan shall be granted stock options
to purchase 18,000,000 shares of common stock of the Company at the purchase
price of $.036. Such options shall be granted under the terms of the Company's
Stock Option Plan and shall vest equally over a period of three years, or upon
death if sooner. After December 14, 2005, Mr. Gartlan shall be paid a salary
of
fifteen thousand dollars per month. The Company shall have the option to pay
the
salary in cash or in shares of common stock of the Company registered on Form
S-8. The stock price shall be determined by the market price for the shares
on
the first business day of the month in which the salary is earned. If the
Executive is terminated without cause, all remaining outstanding stock options
that have not been exercised by Mr. Gartlan, including stock options to purchase
12,121,276 shares of common stock of the Company awarded by the Board of
Directors of the Company to Stratex Solutions, LLC on December 15, 2004, shall
immediately vest on the effective date of termination. If there is a change
of
ownership of the Company or any of its subsidiaries, all remaining outstanding
stock options, including the Stratex Solutions options, that have not been
exercised by Mr. Gartlan, shall immediately vest on the day immediately
preceding the effective date of the change of ownership. Stratex Solutions
is
owned by Mr. Gartlan.
If
employment is terminated by the Company without cause, Mr. Gartlan shall receive
a payment equal to twenty four months of salary paid prior to the effective
date
of termination. The Company has the option to make this payment either in cash
or in the common stock of the Company based on the per share market price of
common stock at the time of termination. If during Mr. Gartlan's employment,
the
Company enters into an agreement which effectively will result in a change
of
control of the ownership of either the Company or Robotic Workspace
Technologies, Inc. ("RWT"), the Company's wholly-owned subsidiary, or if the
Company enters into an agreement which effectively will result in a change
of
ownership of the assets of the Company or RWT, Mr. Gartlan shall receive a
payment equal to twenty four months of the salary paid prior to the effective
date of the change of control. The Company shall make such payment in the common
stock of the Company based on a price per share of $.005 if the effective date
of the change of control is December 14, 2005 or sooner; thereafter the price
per share shall be the market price of common stock at the time of the change
in
control. Regarding the change of ownership of the assets of the Company or
RWT,
such change of ownership shall be deemed to have occurred if the rights to
use
the software of Robotic Workspace Technologies, Inc., is granted or sold in
settlement of claims made by the Company or RWT of trade secret violations
or
patent infringements, and such rights to use the software results in a
settlement payment to the Company or RWT in a single payment or multiple
payments, other than a long term licensing agreement typical of software
licensing agreements.
In
March
2006 the Company modified the 18,000,000 options granted to Mr. Gartlan as
part
of his employment agreement dated June 30, 2005 by changing their vesting from
a
three year period to 100% vested as of December 14, 2005, and by modifying
the
exercise price from $.036 to $.01. Additionally, Mr. Gartlan has 12,121,276
options that were granted to Stratex Solutions, Inc in December 2004 with an
exercise price of $.005 per share and vest monthly over 5 years. These options
were modified in March 2006 to vest over three years. Additionally, Mr. Gartlan
received a bonus of 5,625,000 on March 10, 2006 which were valued at $50,000,
based on $.009 per share, the closing price of the Company stock on the previous
day.
Ms.
Aws
is employed as Vice President of Administration by RWT under an Employment
Agreement dated February 24, 2004. Ms. Aws compensation is $60,000 per annum
plus a bonus in the discretion of RWT. The agreement is for a term of one year,
and automatically renews for successive one-year periods unless terminated
by
either party upon not less than thirty days notice prior to the renewal date.
Ms
Aws has agreed not to compete with RWT or solicit its customers or employees
for
a period of one year following the termination of her employment. Ms. Aws is
also employed as Corporate Secretary of the Company for no additional
compensation.
Certain
Relationships and Related Transactions
On
July
22, 2005 the Company borrowed $30,000 from a beneficial shareholder, Rick Wynns,
and entered into a short term note for that amount, the terms of which are:
interest at the annual rate of 5%, due date in six months, and principal and
accrued interest are convertible into common stock of the Company at $.015
per
share. The due date of the note has been extended to December 31, 2006. To
date
there have been no conversions.
In
May 2006 the Company recorded a liability associated with the indemnification
of
Gary McNear, a director, for his personal liability in an amount of $110,000
resulting from his personal guarantee of amounts owed by a former subsidiary
of
the Company and the settlement of such indebtedness of the Company’s former
subsidiary incurred in the ordinary course of business in accordance with
the
provisions of Article V, Paragraph 6.2 (k) of the Merger Agreement the
Company
entered into with RWT Acquisition, Inc., and Robotic Workspace Technologies,
Inc. dated July 21, 2004.
During
September through December 2005, the Company also entered into short-term debt
obligations other than in the ordinary course of business. All of the short-term
debt bears interest at the rate of 10% per annum. The following table sets
forth
the names of the lenders, the amount of the loans, the dates of the loans and
the due date of the loans:
|
Lender
|
|
Amount
of Loan
|
|
Date
of Loan
|
|
Due
Date
|
|
|
Eugene
Gartlan
|
|
$
|
40,000
|
|
|
September
19, 2005
|
|
|
October
19, 2005
|
|
|
Jerry
Horne
|
|
$
|
50,000
|
|
|
September
22, 2005
|
|
|
October
22, 2005
|
|
|
Eugene
Gartlan
|
|
$
|
5,000
|
|
|
October
5, 2005
|
|
|
January
5, 2006
|
|
|
Rick
Wynns
|
|
$
|
30,000
|
|
|
October
3, 2005
|
|
|
November
3, 2005
|
|
|
Rick
Wynns
|
|
$
|
30,000
|
|
|
October
14, 2005
|
|
|
February
14, 2006
|
|
|
Gary
McNear
|
|
$
|
1,000
|
|
|
November
22, 2005
|
|
|
February
22, 2006
|
|
|
Jerry
Horne
|
|
$
|
50,000
|
|
|
November
28, 2005
|
|
|
December
28, 2005
|
|
All
of
the lenders are shareholders of the Company. Mr. Gartlan is also the Chief
Financial Officer of the Company. Mr. McNear is a Director of the Company.
All
lenders have agreed to repayment terms that extend the due date to December
31,
2006. As of the date hereof, an aggregate of $85,000 of these loans have been
repaid.
On
June
23, 2004, the Company entered into and simultaneously closed an Agreement with
Encompass Group Affiliates, Inc. (Encompass"), pursuant to which the Company
granted to Encompass an exclusive, worldwide, royalty free and fully paid up
perpetual and irrevocable licenses to use the customer list associated with
its
computer and systems related products business and its related websites; this
business was subsequently closed down. Additionally, the Company assigned to
Encompass the Company's rights to enter into acquisitions with three companies.
In consideration for this transaction, Encompass assumed all of the Company's
obligations under certain Convertible Debentures (the "Convertible Debentures")
in the aggregate principal amount of $503,300. The holders of the Convertible
Debentures released the Company from all claims arising under the Convertible
Debentures.
In
January 2003, Craig W. Conklin, our President, and Gary F. McNear, our Chief
Executive Officer, entered into a consulting agreement with the Company's
subsidiary relating to the negotiation of a reduced loan amount due SunTrust
Bank. Pursuant to the consulting agreement, the subsidiary agreed to pay each
of
Messrs. Conklin and McNear six percent of the discounted amount of the loan
due
SunTrust Bank. In consideration for six percent of the discounted amount,
Messrs. Conklin and McNear agreed to forego any compensation due them for the
past two years and each received. In connection with the SunTrust settlement,
the Company issued common stock valued at $225,772 to each individual, Mr.
Conklin and Mr. McNear.
On
August
18, 2004 the Company entered into an agreement with Aegis Funds, Inc (AFI)
to
sell all of the issued and outstanding capital stock of its subsidiary Hy Tech
Computer Systems (HTCS) to AFI. The sale of HTCS to AFI closed on August 25,
2004. At the closing date, for and in consideration for the transfer to AFI
of
the HTCS Capital Stock, AFI became the record and beneficial owner of the HTCS
Capital Stock, the Company transferred as directed by AFI and for the benefit
of
HTCS the sum of fifteen thousand dollars ($15,000) in good funds, and the
judgment of Sun Trust Bank against HTCS was transferred to AFI free of all
claims and liens. AFI is controlled by Gary McNear and Craig Conklin, who are
directors of the Company. The transaction was approved by the member of the
board of directors who had no interest in the transaction.
On
July
22, 2002, the Company entered into a revolving line of credit of $225,000 with
Fifth Third Bank, Florida, secured by the assets of the Company. The annual
interest rate on unpaid principal is the prime rate plus 2%, due in monthly
installments. Principal and interest were due on July 22, 2003. In November
2004, a principal shareholder, Jerry E. Horne, loaned the Company $165,000
to
pay down the line of credit with Fifth Third Bank. The loan has the same terms
as the Fifth Third Bank line of credit, except that it remains unsecured until
such time as the Fifth Third Bank line of credit is fully paid, including
principal and accrued interest, and is due upon demand. In January 2005, the
Fifth Third Bank line of credit was paid off.
On
August
25, 2004 the Company issued 280,000,000 shares of common stock for 100% of
the
outstanding stock of Robotic Workspace Technology, Inc ("RWT"). For financial
reporting purposes this transaction was treated as an acquisition of Innova
and
a recapitalization of RWT using the purchase method of accounting. As part
of
this transaction, Walter K. Weisel received 53,172,765 shares of the Company
and
Jerry E. Horne received 74,329,227 shares of the Company.
We
believe that these transactions were advantageous to us and were on terms no
less favorable to us than could have been obtained from unaffiliated third
parties.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under
the
Exchange Act, our directors, our executive officers, and any persons holding
more than 10% of our common stock are required to report their ownership of
the
common stock and any changes in that ownership to the Commission. Specific
due
dates for these reports have been established and we are required to report
in
this Proxy Statement any failure to file by these dates during the fiscal year
ended December 31, 2005. All of these filing requirements were satisfied by
our
directors, officers and 10% holders. In making these statements, we have relied
on the written representations of our directors, officers and our 10% holders
and copies of the reports that they have filed with the Commission.
PROPOSAL
1: ELECTION OF DIRECTORS
Pursuant
to our Certificate of Incorporation, the holders of our common stock may elect
our 5 directors. All nominees have advised us that they are able and willing
to
serve as directors. However, if any nominee is unable to or for good cause
will
not serve, the persons named in the accompanying proxy will vote for any other
person nominated by our Board of Directors.
Except
as
set forth below, no arrangement or understanding exists between any nominee
and
any other person or persons pursuant to which any nominee was or is to be
selected as a director or nominee.
The
Board of Directors Recommends a Vote "FOR" the Election of
the Nominees Listed Below.
The
following table sets forth the names and ages of the nominees of our Board
of
Directors.
|
Name
|
Age
|
Position
|
|
|
|
|
|
Walter
K. Weisel (1)
|
66
|
Chairman,
Chief Executive Officer and Director
|
|
|
|
|
|
Martin
Nielson (1)
|
54
|
Previously
Chief Executive Officer and Chairman of the Board of Directors;
Director
|
|
|
|
|
|
Gary
F. McNear (2)
|
61
|
Director;
Previously C F O, Vice President, and Secretary
|
|
|
|
|
|
Craig
W. Conklin (2)
|
56
|
Director;
Previously Chief Operating Officer and Vice President
|
| |
|
|
|
Rick
Wynns* (3)
|
59
|
Director
|
*On
July
12, 2006, our Board of Directors appointed Rick Wynns to our Board of Directors
in accordance with our Certificate of Incorporation and By-laws.
(1)
To
serve until our 2009 Annual Meeting of Stockholders.
(2)
To
serve until our 2008 Annual Meeting of Stockholders.
(3)
To
serve until our 2007 Annual Meeting of Stockholders.
The
principal occupations for the past five years (and, in some instances, for
prior
years) of each of our directors are as follows:
WALTER
K. WEISEL
became
the Company's Chairman and Chief Executive Officer on August 25, 2004, the
date
the merger closed between the Company and RWT. With over thirty year’s
experience, Mr. Weisel is recognized as a pioneer and leader in the robotics
industry. An original founding member of the Robotic Industries Association
(RIA), the U.S. robot manufacturers' trade association, Mr. Weisel served three
terms as President. He served on the RIA Board of Directors and Executive
Committee and, as a spokesperson for the industry, served as an advisor to
members of the U.S. Trade Commission and the U.S. Department of Commerce. Mr.
Weisel was a founding member of Robotics International (RI), a member society
dedicated to the advancement of robotic technology. During his term as President
the membership grew to over 16,000 members. In 1992 Mr. Weisel was awarded
the
Joseph F. Engelberger Award, which recognizes the most significant contribution
to the advancement of robotics and automation in the service of mankind. Each
year nominations are received from 26 nations worldwide. This award has been
presented since 1977.
Mr.
Weisel has a long record of advancing technology and growing companies that
develop and commercialize technology. Mr. Weisel served 13 years with Prab
Robots, Inc. as Chief Executive Officer, President, and Chief Operating Officer.
During his tenure, Prab Robots, Inc. was transformed into an international
organization and leader in the fields of industrial robots and automation.
While
under his direction, Prab Robots, Inc. was taken public in an Initial Public
Offering and Unimation, Inc. and several other companies in the U.S. and Europe
were acquired. By 1990, Prab Robots, Inc. was responsible for the largest
installed base of robots in North America and had developed a very successful
robot retrofit business with customers such as General Motors, Ford, and
Chrysler. Mr. Weisel has served as Chairman and Chief Executive Officer of
RWT
since its incorporation in 1994, and continues to serve in that
capacity.
MARTIN
NIELSON
was the
Company's Chief Executive Officer and Chairman of the Board of Directors since
May 2003. He resigned effective June 1, 2004. Mr. Nielson is a principal of
Altos Bancorp, Inc., serving as its Chairman and Chief Executive Officer since
November 2002. He has also served as Chief Executive Officer and director of
Inclusion Inc. since September, 2000. Mr. Nielson and Altos were instrumental
in
assisting the Company in the negotiations that led to the Company's settlement
of its litigation with SunTrust Bank and in securing the financing that funded
that settlement. Mr. Nielson will continue as a director of the Company. Mr.
Nielson is a senior executive with extensive experience in operations and
finance. He has been a business builder for 30 years with such companies as
Gap,
Businessland, and Corporate Express.
Altos,
which is an outgrowth of Nielson's M&A practice during his ten years in
London is engaged in providing investment banking and business development
services to growth oriented, emerging companies throughout the United States
and
Europe. Altos was retained by the Company to act as its business advisor, but
that contract was concluded to coincide with the acquisition of RWT. Mr. Nielson
is also a director of Advanced Communications Technologies, Inc.
GARY
F. MCNEAR
was the
Chief Financial Officer, Vice President and Secretary since May 2003 through
August 25, 2004, and a Director since May 2003. From January 2003, through
May
2003 he served as Chief Executive Officer and Director of the Company. Mr.
McNear has served as the Chief Executive Officer, Chairman of the Board, and
Treasurer of Hy-Tech Computer Systems(HTCS) since HTCS's inception in November
1992, and was a founding shareholder. Mr. McNear has also served as Secretary
of
HTCS since March 2001. HTCS acquired the Company in a reverse acquisition in
January 2003. Mr. McNear's duties included banking relationships, cash
management, and financial reporting. Mr. McNear's formal education is in
Industrial Administration at Iowa State University. Mr. McNear is a former
officer and pilot in the U.S. Air Force, and a former airline
pilot.
CRAIG
W. CONKLIN
was the
Chief Operating Officer and Vice President since May 2003 through August 25,
2004, and a Director since May 2003. From January 2003 through May 2003, he
served as President and Director of the Company. Mr. Conklin has served as
President and Director of HTCS since HTCS's inception in November 1992, and
was
a founding shareholder. HTCS acquired the Company in a reverse acquisition
in
January 2003. Mr. Conklin's duties included marketing and operations of the
Company. Mr. Conklin holds a B.S. in engineering from the Dartmouth College,
and
an MBA from the Amos Tuck School of business. Mr. Conklin was formerly employed
by Owens-Corning Fiberglas, Inc. and he successfully operated and sold Golf
& Electric Carriages, Inc., a local distributorship for Club Car Golf
Carts.
RICK
WYNNS is
a
successful businessman, owning one of the most flourishing State Farm Insurance
Agencies in the country for 26 years. Currently his business has over 5,000
households as customers, representing nearly 12,000 accounts, all of this from
a
customer base of virtually nothing at the start of his insurance career. This
was accomplished by excellent sales and marketing skills, both direct and
telephone. Mr. Wynns graduated from the University of South Florida with a
Bachelor of Science degree.
PROPOSAL
2: REVERSE STOCK SPLIT
The
Board
of Directors has unanimously adopted a resolution approving, declaring advisable
and recommending to the stockholders for their approval an amendment to our
certificate of incorporation to effect a reverse stock split of outstanding
shares of common stock at a ratio of either one-for-eight or one-for-ten, as
determined at the discretion of the Board of Directors to be in the best
interests of the Company and its stockholders. The Board of Directors believes
that approval of a range of reverse split ratios, rather than approval of a
specific reverse split ratio, provides the Board of Directors with maximum
flexibility to achieve the purposes of the reverse stock split.
The
reverse stock split will be affected by filing an amendment to our certificate
of incorporation with the State of Delaware. The certificate of amendment will
effect a reverse stock split of the shares by reducing the number of issued
and
outstanding shares of common stock by the ratio determined by the board of
directors to be in the best interests of the Company and its stockholders,
but
will not change the number of authorized shares of common stock or preferred
stock or the par value of the common stock or preferred stock. A copy of the
proposed amendment to our certificate of incorporation effecting the 1-for-8
or
1-for-10 reverse stock split is attached at the back of this proxy statement
as
Exhibit 1.
Reasons
for Board Recommendation
If
the
board of directors otherwise determines that a reverse stock split is in our
best interests or in the best interests of our stockholders, we would like
the
authority to proceed with a reverse stock split without further authorization
of
our stockholders.
The
Board
of Directors is recommending that you empower the Board of Directors to
effectuate, in the Board of Directors’ discretion, the reverse stock split
within the foregoing ratios for the following reasons:
|
|
· |
Because
the Board of Directors believes a higher stock price may help
generate
investor interest in the Company and help the Company attract
and retain
employees and other service providers;
and
|
|
|
· |
Because
the Company requires additional authorized but unissued shares of
common
stock.
|
Although
the Board of Directors of the Company determined to seek shareholder approval
for the reverse stock split prior to the consummation of the Company’s recent
private placement with Cornell Capital Partners, L.P. (as described on
page 17
below), and therefore did not directly contribute to the Board’s decision to
undertake a reverse stock split, the number of shares currently available
for
issuance is not sufficient to cover the convertible securities that were
sold in
the private placement and a portion of such additional authorized and unissued
shares available to the Company post stock split will be used for
Cornell.
As
of
July 26, 2006, the closing price of our common stock as reported on the
Over-The-Counter Bulletin Board was $0.014 per share. The Board of Directors
believes that a higher stock price would help the Company attract and retain
employees and other service providers. The Board of Directors believes that
some
potential employees and service providers are less likely to work for a company
with a low stock price, regardless of the size of the company’s market
capitalization. If the reverse stock split successfully increases the per share
price of our common stock, the Board of Directors believes this increase will
enhance our ability to attract and retain employees and service providers.
Further, in deciding at what ratio to effectuate the reverse stock split, the
Board of Directors will consider that our common stock may not appeal to
brokerage firms that are reluctant to recommend lower priced securities to
their
clients. Investors may also be dissuaded from purchasing lower priced stocks
because the brokerage commissions, as a percentage of the total transaction,
tend to be higher for such stocks. Moreover, the analysts at many brokerage
firms do not monitor the trading activity or otherwise provide coverage of
lower
priced stocks. Most investment funds are reluctant to invest in lower priced
stocks.
The
increase in the number of authorized but unissued shares of common stock would
enable the Company, without further stockholder approval, to issue shares from
time to time as may be required for proper business purposes, such as raising
additional capital for ongoing operations, acquisitions of businesses and
assets, stock splits and dividends, present and future employee benefit programs
and other corporate purposes. In addition, the Board of Directors believes
that
having additional authorized but unissued shares of common stock through the
effectuation of the reverse stock split could have a number of effects on the
Company's stockholders depending upon the exact nature and circumstances of
any
actual issuances of authorized but unissued shares. The increase could have
an
anti-takeover effect, in that additional shares could be issued (within the
limits imposed by applicable law) in one or more transactions that could make
a
change in control or takeover of the Company more difficult. For example,
additional shares could be issued by the Company so as to dilute the stock
ownership or voting rights of persons seeking to obtain control of the Company.
Similarly, the issuance of additional shares to certain persons allied with
the
Company's management could have the effect of making it more difficult to remove
the Company's current management by diluting the stock ownership or voting
rights of persons seeking to cause such removal. Our
board
members serve under staggered terms, pursuant to which, if approved by the
requisite vote of our stockholders: (i) Walter Weisel, Chairman of the board,
and Martin Nielson will each serve until our 2009 Annual Meeting, (ii) Gary
McNear and Craig Conklin will each serve until our 2008 Annual Meeting, and
(iii) Rick Wynns will serve until our 2007 Annual Meeting. This will make it
more difficult for those seeking to control the Company and remove its board
at
one time. Except as further discussed herein, the Board of Directors is
not aware of any attempt, or contemplated attempt, to acquire control of the
Company, and this proposal is not being presented with the intent that it be
utilized as a type of anti-takeover device.
Except
for the following, there are currently no plans, arrangements, commitments
or
understandings for the issuance of the additional shares of Common Stock
which
are proposed to be authorized:
JULY
2006 SECURITIES PURCHASE AGREEMENT
On
July
21, 2006, we consummated a Securities Purchase Agreement (the "Purchase
Agreement") dated July 21, 2006 with Cornell Capital Partners L.P. ("Cornell")
providing for the sale by us to Cornell of our 10% secured convertible
debentures in the aggregate principal amount of $2,825,000 (the "Debentures")
of
which $1,250,000 was advanced immediately. The second installment of $575,000
will be advanced on the date of the filing by us with the Securities and
Exchange Commission (the "Commission") of the Registration Statement (as
defined
below). The last installment of $1,000,000 will be advanced three business
days
after the date the Registration Statement is declared effective by the
Commission.
The
Debentures mature on the third anniversary of the date of issuance (the
"Maturity Date"). The holder of the Debentures may convert at any time amounts
outstanding under the Debentures into shares of our common stock (the "Common
Stock") at a fixed conversion price per share equal to $0.04 (the “Conversion
Price”). Cornell has agreed not to short any of the shares of Common Stock. Our
obligations under the Purchase Agreement are secured by substantially all
of
our, and our wholly owned subsidiary’s (Coroware Technologies, Inc.)
assets.
Under
the
Purchase Agreement, we also issued to Cornell five-year warrants to purchase
10,000,000 and 15,000,000 shares of Common Stock at a price equal to $0.05
and
$0.10, respectively, together with three-year warrants to purchase 23,000,000,
20,000,000 and 25,000,000 shares of Common Stock at a price equal to $0.025,
$0.065 and $0.075, respectively (collectively, the "Warrants").
In
connection with the Purchase Agreement, we also entered into a registration
rights agreement with Cornell (the "Registration Rights Agreement") providing
for the filing of a registration statement (the "Registration Statement")
with
the Securities and Exchange Commission registering the Common Stock issuable
upon conversion of the Debentures and exercise of the Warrants. We are obligated
to use out best efforts to cause the Registration Statement to be filed no
later
than 30 days after the closing date. In the event of a default of our
obligations under the Registration Rights Agreement, including our agreement
to
file the Registration Statement with the Commission no later than 30 days
after
the closing date, or if the Registration Statement is not declared effective
within 120 days after the closing date, we are required to pay to Cornell,
as
liquidated damages, for each month that the registration statement has not
been
filed or declared effective, as the case may be, either a cash amount or
shares
of our common stock equal to 2% of the liquidated value of the
Debentures.
We
claim
an exemption from the registration requirements of the Act for the private
placement of these securities pursuant to Section 4(2) of the Act and/or
Regulation D promulgated thereunder since, among other things, the transaction
did not involve a public offering, Cornell is an accredited investor and/or
qualified institutional buyer, Cornell had access to information about us
and
its investment, Cornell took the securities for investment and not resale,
and
we took appropriate measures to restrict the transfer of the
securities.
The
following are the risks associated with the July 2006 Securities Purchase
Agreement:
THERE
ARE A LARGE NUMBER OF SHARES UNDERLYING OUR CONVERTIBLE NOTES AND WARRANTS
THAT
ARE BEING REGISTERED IN THIS PROSPECTUS AND THE SALE OF THESE SHARES MAY
DEPRESS
THE MARKET PRICE OF OUR COMMON STOCK.
As
of
August 10, 2006, we had 750,998,259 shares of common stock issued and
outstanding. In connection with our July 2006 Securities Purchase Agreement,
we
also have outstanding secured convertible debentures or an obligation to
issue
secured convertible debentures that may be converted into 70,625,000 shares
of
common stock, and outstanding warrants or an obligation to issue warrants
to
purchase 93,000,000 shares of common stock. Upon effectiveness of the
registration statement, all of the shares, including all of the shares
issuable
upon conversion of the debentures and upon exercise of our warrants, may
be sold
without restriction. The sale of these shares may adversely affect the
market
price of our common stock.
THE
ISSUANCE OF OUR STOCK UPON CONVERSION OF THE DEBENTURES COULD ENCOURAGE SHORT
SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE DECLINE OF OUR
STOCK PRICE AND MATERIALLY DILUTE EXISTING STOCKHOLDERS' EQUITY AND VOTING
RIGHTS.
The
debentures have the potential to cause significant downward pressure on the
price of our common stock. This is particularly the case if the shares being
placed into the market exceed the market's ability to absorb the increased
number of shares of stock. Such an event could place further downward pressure
on the price of our common stock which presents an opportunity for short
sellers
and others to contribute to the future decline of our stock price. If there
are
significant short sales of our stock, the price decline that would result
from
this activity will cause the share price to decline more so, which, in turn,
may
cause long holders of the stock to sell their shares thereby contributing
to
sales of stock in the market. If there is an imbalance on the sell side of
the
market for the stock, our stock price will decline.
IF
WE ARE REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING SECURED CONVERTIBLE
DEBENTURES, WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL, IF AVAILABLE,
OR RAISE ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE SECURED CONVERTIBLE
DEBENTURES, IF REQUIRED, COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD
REQUIRE THE SALE OF SUBSTANTIAL ASSETS.
In
July
2006, we entered into a Securities Purchase Agreement for the sale of an
aggregate of $2,825,000 principal amount of secured convertible debentures.
These debentures are due and payable, with interest, three years from their
respective dates of issuance, unless sooner converted into shares of our
common
stock. Any event of default such as our failure to repay the principal or
interest when due, our failure to issue shares of common stock upon conversion
by the holder, or our failure to timely file a registration statement or
have
such registration statement declared effective, could require the early
repayment of the convertible debentures. We anticipate that the full amount
of
the convertible debentures will be converted into shares of our common stock,
in
accordance with the terms of these debentures. If we were required to repay
the
convertible debentures, we would be required to use our limited working capital
and raise additional funds. If we were unable to repay the debentures when
required, the holders could commence legal action against us and foreclose
on
all of our assets to recover the amounts due. Any such action would require
us
to curtail or cease operations.
IF
AN EVENT OF DEFAULT OCCURS UNDER THE SECURITIES PURCHASE AGREEMENT, SECURED
CONVERTIBLE DEBENTURES,
WARRANTS, SECURITY AGREEMENT OR AMENDED AND RESTATED SECURITY AGREEMENT,
THE
INVESTORS COULD TAKE POSSESSION OF ALL OUR GOODS, INVENTORY, CONTRACTUAL
RIGHTS
AND GENERAL INTANGIBLES, RECEIVABLES, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER,
AND
INTELLECTUAL PROPERTY.
In
connection with the Securities Purchase Agreement we entered into in July
2006,
we executed an Amended and Restated Security Agreement and our wholly owned
subsidiary, Coroware Technologies, Inc., entered into an Security Agreement
in
favor of the investors granting them a first priority security
interest in all of our goods, inventory, contractual rights and general
intangibles, receivables, documents, instruments, chattel paper, and
intellectual property. The Security Agreement and the Amended and Restated
Security Agreement state that if an even of default occurs under the Securities
Purchase Agreement, Secured Convertible Debentures, Warrants, Security Agreement
or Amended and Restated Security Agreement, the investors have the right
to take
possession of the collateral, to operate our business using the collateral,
and
have the right to assign, sell, lease or otherwise dispose of and deliver
all or
any part of the collateral, at public or private sale or otherwise to satisfy
our obligations under these agreements.
Potential
Disadvantages to the Reverse Stock Split
Reduced
Market Capitalization.
As
noted above, the principal purpose of the reverse stock split would be to
help
maintain the price of our common stock at a higher level. As of July 26,
2006,
the closing price of our common stock as reported on the Over-The-Counter
Bulletin Board was $0.014 per share. We cannot assure you that the reverse
stock
split will accomplish this objective. While we expect that the reduction
in our
outstanding shares of common stock will increase the market price of our
common
stock, we cannot assure you that the reverse stock split will increase the
market price of our common stock by a multiple equal to the number of pre-split
shares in the reverse split ratio determined by the board of directors, which
will be either 8 or 10, or result in any permanent increase in the market
price,
which can be dependent upon many factors, including our business and financial
performance and prospects. Should the market price decline after the reverse
stock split, the percentage decline may be greater, due to the smaller number
of
shares outstanding, than it would have been prior to the reverse stock split.
In
some cases the stock price of companies that have effected reverse stock
splits
has subsequently declined back to pre-reverse split levels. Accordingly,
we
cannot assure you that the market price of our common stock immediately after
the effective date of the proposed reverse stock split will be maintained
for
any period of time or that the ratio of post and pre-split shares will remain
the same after the reverse stock split is effected, or that the reverse stock
split will not have an adverse effect on our stock price due to the reduced
number of shares outstanding after the reverse stock split. A reverse stock
split is often viewed negatively by the market and, consequently, can lead
to a
decrease in our overall market capitalization. If the per share price does
not
increase proportionately as a result of the reverse stock split, then our
overall market capitalization will be reduced.
Increased
Transaction Costs.
The
number of shares held by each individual stockholder will be reduced if the
reverse stock split is implemented. This will increase the number of
stockholders who hold less than a "round lot," or 100 shares. Typically, the
transaction costs to stockholders selling "odd lots" are higher on a per share
basis. Consequently, the reverse stock split could increase the transaction
costs to existing stockholders in the event they wish to sell all or a portion
of their position.
Liquidity.
Although the board believes that the decrease in the number of shares of our
common stock outstanding as a consequence of the reverse stock split and the
anticipated increase in the price of our common stock could encourage interest
in our common stock and possibly promote greater liquidity for our stockholders,
such liquidity could also be adversely affected by the reduced number of shares
outstanding after the reverse stock split.
Authorized
Shares; Future Financings.
Upon
effectiveness of such a 1-for-8 or 1-for-10 reverse stock split, the number
of
authorized shares of common stock that are not issued or outstanding, as of
July
7, 2006, would increase from approximately 158,000,000 shares to approximately
807,000,000 and 826,000,000 shares, respectively. As a result, we will have
an
increased number of authorized but unissued shares of common stock. Authorized
but unissued shares will be available for issuance, and we may issue such shares
in financings or otherwise. If we issue additional shares, the ownership
interests of our current stockholders may be diluted.
Effect
on Number of Shares Outstanding, Reserved for Issuance and Available for
Issuance
The
following tables set forth the effect of the proposed reverse stock split
ratios
on the number of shares currently outstanding, reserved for issuance, and
available for issuance, together with the effect of the private placement
with
Cornell Capital on our post-split capitalization. Also included in the
post-split capitalization is a reserve for the 200,000,000 shares associated
with the 2005 Stock Option Plan.
| |
|
|
|
|
|
Share
Capital
|
|
| |
|
Share
Capital
|
|
Share
Capital
|
|
after
|
|
| |
|
at
|
|
after
|
|
Issuance
of
|
|
| |
|
8/10/2006
|
|
1
for 10 Split
|
|
Shares
to Cornell
|
|
| |
|
|
|
|
|
|
|
|
Issued
and Outstanding
|
|
|
750,998,259
|
|
|
75,099,826
|
|
|
101,899,826
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Reserved
for Issuance
|
|
|
140,866,800
|
|
|
53,386,680
|
|
|
26,586,680
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Available
for Issuance
|
|
|
8,134,941
|
|
|
771,513,494
|
|
|
771,513,494
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total
Authorized
|
|
|
900,000,000
|
|
|
900,000,000
|
|
|
900,000,000
|
|
| |
|
|
|
|
|
Share
Capital
|
|
| |
|
Share
Capital
|
|
Share
Capital
|
|
after
|
|
| |
|
at
|
|
after
|
|
Issuance
of
|
|
| |
|
8/10/2006
|
|
1
for 8 Split
|
|
Shares
to Cornell
|
|
| |
|
|
|
|
|
|
|
|
Issued
and Outstanding
|
|
|
750,998,259
|
|
|
93,874,783
|
|
|
127,374,783
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Reserved
for Issuance
|
|
|
140,866,800
|
|
|
66,733,350
|
|
|
33,233,350
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Available
for Issuance
|
|
|
8,134,941
|
|
|
739,391,867
|
|
|
739,391,867
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total
Authorized
|
|
|
900,000,000
|
|
|
900,000,000
|
|
|
900,000,000
|
|
Effect
on Fractional Shares
A
reverse
stock split would result in some stockholders owning a fractional share of
common stock. For example, if a 1-for-10 reverse stock split were to be
implemented, the shares owned by a stockholder with 112 shares would be
converted into 11.2 shares. In lieu of issuing fractional shares, the Company
will issue to any shareholder who otherwise would have been entitled to receive
a fractional share as a result of the reverse split an additional full share
of
its common stock.
Effect
of Reverse Stock Split on Options
The
number of shares subject to outstanding options to purchase shares of our
common
stock also would automatically be reduced in the same ratio as the reduction
in
the outstanding shares. Correspondingly, the per share exercise price of
those
options will be increased in direct proportion to the reverse stock split
ratio,
so that the aggregate dollar amount payable for the purchase of the shares
subject to the options will remain unchanged. For example, a 1-for-10 reverse
stock split is implemented and that an optionee holds options to purchase
1,000
shares at an exercise price of $0.66 per share. On the effectiveness of the
1-for-10 reverse stock split, the number of shares subject to that option
would
be reduced to 100 shares and the exercise price would be proportionately
increased to $6.60 per share.
Effect
of Reverse Stock Split on Warrants
The
agreements governing the outstanding warrants to purchase shares of our common
stock include provisions requiring adjustments to both the number of shares
issuable upon exercise of such warrants, and the exercise prices of such
warrants, in the event of a reverse stock split. For example, assume that a
1-for-10 reverse stock split is implemented and a warrant holder holds a warrant
to purchase 10,000 shares of our common stock at an exercise price of $.75
per
share. On the effectiveness of the reverse stock split, the number of shares
subject to that warrant would be reduced to 1,000 shares and the exercise price
would be proportionately increased to $7.50 per share.
Implementation
and Effect of the Reverse Stock Split
If
approved by our stockholders at the annual meeting, and if a majority of our
board of directors determines that effecting a reverse stock split at either
a
1-for-8 or 1-for-10 ratio is in our best interests and the best interests of
our
stockholders, following such determinations, the board will effect the reverse
stock split by directing management to file the certificate of amendment with
the Delaware Secretary of State at such time as the board has determined is
the
appropriate effective time for the reverse stock split. The reverse stock split
will become effective at the time specified in the certificate of amendment
after the filing of the amendment with the Delaware Secretary of State, which
we
refer to as the “effective time”. At the effective time, the other amendments
approved by our stockholders will be deemed abandoned.
We
estimate that, following the reverse stock split, we would have approximately
the same number of stockholders and the completion of the reverse stock split
would not affect any stockholder's proportionate equity interest in our company.
By way of example, a stockholder who owns a number of shares that prior to
the
reverse stock split represented one-half of a percent of the outstanding shares
of the company would continue to own one-half of a percent of our outstanding
shares after the reverse stock split. The reverse stock split also will not
affect the number of shares of common stock that our board of directors is
authorized to issue under our certificate of incorporation, which will remain
unchanged at 900,000,000 shares. However, it will have the effect of increasing
the number of shares available for future issuance because of the reduction
in
the number of shares that will be outstanding after giving effect to the reverse
stock split.
Exchange
of Stock Certificates and Payment for Fractional Shares
Exchange
of Stock Certificates.
Promptly after such an effective time, you would be notified that the reverse
stock split has been effected and the applicable ratio. Our stock transfer
agent, Continental Stock Transfer & Trust Company, whom we refer to as the
“exchange agent”, would implement the exchange of stock certificates
representing outstanding shares of common stock. You would be asked to surrender
to the exchange agent certificates representing your pre-split shares in
exchange for certificates representing your post-split shares in accordance
with
the procedures to be set forth in a letter of transmittal which we would send
to
you. You would not receive a new stock certificate representing your post-split
shares until you surrender your outstanding certificate(s) representing your
pre-split shares, together with the properly completed and executed letter
of
transmittal to the exchange agent. We would not issue scrip or fractional
shares, or certificates for fractional shares, in connection with the reverse
stock split. Should you be entitled to receive fractional shares because you
hold a number of shares not evenly divisible by the relevant reverse split
number selected by our board of directors (which will be either eight or ten),
you will be entitled, upon surrender to the exchange agent of certificates
representing such shares, to receive an additional full share of common
stock.
IF
THIS REVERSE SPLIT WERE TO BE EFFECTED, PLEASE DO NOT DESTROY ANY STOCK
CERTIFICATE OR SUBMIT ANY OF YOUR CERTIFICATES UNTIL YOU ARE REQUESTED TO DO
SO.
Effect
of Failure to Exchange Stock Certificates.
Upon
the filing of the amendment to our certificate of incorporation with the
Delaware Secretary of State, each certificate representing shares of our common
stock outstanding prior to the that time would, until surrendered and exchanged
as described above, be deemed, for all corporate purposes, to evidence ownership
of the whole number of shares of our common stock. However, a holder of such
unexchanged certificates would not be entitled to receive any dividends or
other
distributions payable by us after the effective date, until the old certificates
have been surrendered. Such dividends and distributions, if any, would be
accumulated, and at the time of surrender of the old certificates, all such
unpaid dividends or distributions will be paid without interest.
No
Appraisals Rights
Under
the
Delaware General Corporation Law and our certificate of incorporation and
bylaws, you are not entitled to appraisal rights with respect to the reverse
stock split.
Federal
Income Tax Consequences
The
following description of the material federal income tax consequences of the
reverse stock split is based on the Internal Revenue Code, applicable Treasury
Regulations promulgated under the Code, judicial authority and current
administrative rulings and practices as in effect on the date of this proxy
statement. Changes to the laws could alter the tax consequences described below,
possibly with retroactive effect. We have not sought and will not seek an
opinion of counsel or a ruling from the Internal Revenue Service regarding
the
federal income tax consequences of any of the proposed reverse stock splits.
This discussion is for general information only and does not discuss the tax
consequences that may apply to special classes of taxpayers (e.g., non-resident
aliens, broker/dealers or insurance companies). The state and local tax
consequences of the reverse stock split may vary significantly as to each
stockholder, depending upon the jurisdiction in which such stockholder resides.
We urge stockholders to consult their own tax advisors to determine the
particular consequences to them.
We
believe that because the reverse stock split is not part of a plan to increase
periodically a stockholder's proportionate interest in our assets or earnings
and profits, the reverse stock split will likely have the following federal
income tax effects.
A
stockholder who receives solely a reduced number of shares of our common stock
will not recognize gain or loss. In the aggregate, such a stockholder's basis
in
the reduced number of shares of our common stock will equal the stockholder's
basis in its old shares of common stock and the holding period of the common
stock received after the reverse stock split will include the holding period
of
the common stock held prior to the reverse stock split exchanged therefore.
We
will
not recognize any gain or loss as a result of the reverse stock
split.
RECOMMENDATION
OF THE BOARD FOR PROPOSAL NO. 2:
THE
BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE REVERSE STOCK
SPLIT.
PROPOSAL
3: APPROVAL
OF THE AMENDED
AND RESTATED 2005 STOCK
OPTION PLAN
At
the Special Meeting, the Company's stockholders are being asked to approve
the
Amended and Restated 2005 Stock Option Plan (the “2005 Stock Option Plan”). The
Board has unanimously approved the 2005 Stock Option Plan and has directed
that
it be submitted for the approval of the stockholders at the special meeting.
On
July 24, 2006, Board approved of the Amended and Restated 2005 Stock Option
Plan
under which the only amendment to the 2005 Stock Option Plan was to increase
the
authorized shares of common stock available under the 2005 Stock Option
Plan
from 150,000,000 to 200,000,000 shares.
At
the
Special Meeting, the Company's stockholders are being asked to approve the
Amended and Restated 2005 Stock Option Plan (the “2005 Stock Option Plan”). The
Board has unanimously approved the 2005 Stock Option Plan and has directed
that
it be submitted for the approval of the stockholders at the special meeting.
The
following description of the 2005 Stock Option Plan is only a summary of the
important provisions of the 2005 Stock Option Plan and does not contain all
of
the terms and conditions of the 2005 Stock Option Plan. A copy of the 2005
Stock
Option Plan is attached to this Proxy Statement as Exhibit “2”. The 2005 Stock
Option Plan and the right of participants to make purchases thereunder are
intended to qualify as an "employee stock purchase plan" under Section 423
of
the Internal Revenue Code of 1986, as amended (the "Code"). The 2005 Stock
Option Plan is not a qualified deferred compensation plan under Section 401(a)
of the Internal Revenue Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
The
primary purpose of the 2005 Stock Option Plan is to attract and retain the
best
available personnel for the Company, as well as key non-employees of the
Company, in order to promote the success of the Company's business. In the
event
that the 2005 Stock Option Plan is not adopted, the Company may have
considerable difficulty in retaining and attracting qualified personnel and
consultants.
SHARE
RESERVATION
We
will
reserve a total 200,000,000 shares of our common stock for issuance under the
2005 Stock Option Plan. If the recipient of an option grant does not purchase
the shares subject to the option grant before it expires or terminates, the
shares that are not purchased again become available for issuance under the
2005
Stock Option Plan.
ADMINISTRATION
The
2005
Stock Option Plan is administered by the Company's Board of Directors as the
Board of Directors may be composed from time to time. The Board determines
all
questions of interpretation of the 2005 Stock Option Plan, and its decisions
are
final and binding upon all participants. Any determination by a majority of
the
members of the Board of Directors at any meeting, or by written consent in
lieu
of a meeting, shall be deemed to have been made by the whole Board of Directors.
Notwithstanding
the foregoing, the Board of Directors may at any time, or from time to time,
appoint a committee (the "Committee") of at least two members of the Board
of
Directors, and delegate to the Committee the authority of the Board of Directors
to administer the Plan. Upon such appointment and delegation, the Committee
shall have all the powers, privileges and duties of the Board of Directors,
and
shall be substituted for the Board of Directors, in the administration of the
Plan, subject to certain limitations.
ELIGIBILITY
Under
the
2005 Stock Option Plan, options may be granted to key employees of the Company
or any of its participating subsidiaries, and key non-employees such as a
non-employee directors, consultants or independent contractors of the Company
or
any of its participating subsidiaries, as provided in the 2005 Stock Option
Plan
(the participant is referred to herein as an “Optionee”).
TERMS
OF OPTIONS
The
term
of each Option or stock award granted under the Plan shall be contained in
a
stock agreement between the Optionee and the Company and such terms shall be
determined by the Board of Directors consistent with the provisions of the
Plan,
including the following:
(a)
OPTION PRICE. The purchase price of the common stock subject to each Option
shall be determined by the Board of Directors in its sole discretion as of
the
date of grant of the Option.
(b)
NUMBER OF SHARES. The number of shares under each option award should be stated
as to which it pertains.
(c)
VESTING. The dates on which each Option (or portion thereof) shall be
exercisable or shall vest and the conditions precedent to such exercise or
vesting, if any, shall be fixed by the Board of Directors, in its discretion,
at
the time such Option is granted.
(d)
EXPIRATION. The Board of Directors, in its discretion, shall fix the expiration
of each Option, at the time such Option is granted; however, unless otherwise
determined by the Board of Directors at the time such Option is granted, an
Option shall be exercisable for ten (10) years after the date on which it was
granted (the "Grant Date"). Each Option shall be subject to earlier termination
as expressly provided in the 2005 Stock Option Plan or as determined by the
Board of Directors, in its discretion, at the time such Option is granted.
(e)
TRANSFERABILITY. No Option shall be transferable, except by will or the laws
of
descent and distribution, and any Option may be exercised during the lifetime
of
the Optionee only by him. No Option or stock award granted under the Plan shall
be subject to execution, attachment or other process.
(f)
OPTION ADJUSTMENTS. The aggregate number and class of shares as to which Options
may be granted under the 2005 Stock Option Plan, the number and class shares
covered by each outstanding Option and the exercise price or purchase per share
thereof (but not the total price), and all such Options, shall each be
proportionately adjusted for any increase decrease in the number of issued
Common Stock resulting from split-up spin-off or consolidation of shares,
additional issuance of shares, or any like capital adjustment or the payment
of
any stock dividend. The total number of shares approved in the 2005 Stock Option
Plan would not decrease as a result of the exercising of options.
(g)
TERMINATION, MODIFICATION AND AMENDMENT. The 2005 Stock Option Plan (but not
Options previously granted under the Plan) shall terminate ten (10) years from
the earlier of the date of its adoption by the Board of Directors, and no Option
shall be granted after termination of the Plan. Subject to certain restrictions,
the Plan may at any time be terminated and from time to time be modified or
amended by the affirmative vote of the holders of a majority of the outstanding
shares of the capital stock of the Company present, or represented, and entitled
to vote at a meeting duly held in accordance with the applicable laws of the
State of Delaware.
New
Plan Benefits
The
table
below sets forth the stock options that the individuals and groups referred
to
below have received with respect to the 50,000,000 additional shares underlying
options proposed to be authorized pursuant to this Proposal 3, subject
to
stockholder approval, as of June 30, 2006 under the amended and restated
2005
Stock Option Plan.
|
Name
and Position
|
|
Innova
Holdings, Inc.
|
|
| |
|
2005
Stock Option Plan
|
|
| |
|
Dollar
Value
|
|
Number
of Options
|
|
|
Friedland
Corporate Investor Services, LLC (1)
|
|
$
|
79,500
|
|
|
9,937,400
|
|
|
David
Murphy - Assistant Controller (2)
|
|
$
|
46,000
|
|
|
4,000,000
|
|
(1)
Includes options to purchase shares of common stock at $.013 per share,
exercisable beginning on December 31, 2006 and
expiring on April 6, 2016.
Such
options were issued as compensation for consulting services performed on
our
behalf. The Company has estimated the dollar value as the fair value at
the date
of grant using the Black Scholes Model, which includes a volatility assumption
of 44.19% and a risk-free rate of 2.45%.
(2)
Includes options to purchase shares of common stock at $.018 per share,
exercisable beginning on May 15, 2007 and
expiring on May 15, 2016.
Such
options were issued as compensation for services performed on our behalf
in Mr.
Murphy’s capacity as our Assistant Controller. The Company has estimated the
dollar value as the fair value at the date of grant using the Black Scholes
Model, which includes a volatility assumption of 44.19% and a risk-free
rate of 2.45%.
Other
than as set forth above, we have not issued any additional options with
respect
to the 50,000,000 additional shares underlying options proposed to be authorized
pursuant to this Proposal 3, subject to stockholder approval, nor do we
currently have any plans to issue any additional
options.
RECOMMENDATION
OF THE BOARD FOR PROPOSAL NO. 3:
AMENDED
AND RESTATED 2005 STOCK OPTION PLAN.
FORM
10-KSB
OUR
ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED,
IS BEING
DELIVERED TO YOU WITH THIS PROXY STATEMENT. IN ADDITION, UPON
ORAL
OR WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE MEETING, ADDRESSED
TO
US, ATTENTION: SECRETARY, INNOVA HOLDINGS, INC., 17105 SAN CARLOS BOULEVARD,
SUITE A6151, FORT MYERS, FL 33931, WE WILL PROVIDE WITHOUT CHARGE, A COPY OF
OUR
ANNUAL REPORT WITHIN ONE (1) BUSINESS DAY OF THE COMPANY’S RECIEPT OF SUCH
REQUEST. THE
ANNUAL REPORT IS INCORPORATED IN THIS PROXY STATEMENT. YOU ARE ENCOURAGED TO
REVIEW THE ANNUAL REPORT TOGETHER WITH SUBSEQUENT INFORMATION FILED BY THE
COMPANY WITH THE SEC AND OTHER PUBLICLY AVAILABLE INFORMATION.
COMMUNICATIONS
WITH STOCKHOLDERS
Anyone
who has a concern about our conduct, including accounting, internal accounting
controls or audit matters, may communicate directly with our Chief Executive
Officer or our non-management directors. Such communications may be confidential
or anonymous, and may be submitted in writing addressed care of Sheri Aws,
Corporate Secretary, Innova Holdings, Inc., 17105 San Carlos Blvd., Suite A6151,
Fort Myers Beach, FL 33931. All such concerns will be forwarded to the
appropriate directors for their review, and will be simultaneously reviewed
and
addressed by the proper executive officers in the same way that other concerns
are addressed by us.
DEADLINE
FOR FUTURE PROPOSALS OF STOCKHOLDERS
Proposals
that a stockholder desires to have included in our proxy materials for our
2007
Annual Meeting of Stockholders must comply with the applicable rules and
regulations of the Securities and Exchange Commission, including that any such
proposal must be received by our Secretary at our principal office no later
than
*, 2006
[120
days before first anniversary of the date of mailing of this proxy
statement].
It is
suggested that such proposals be sent by Certified Mail, Return Receipt
Requested. Our By-laws require a stockholder to give advance notice of any
business, including the nomination of candidates for the Board of Directors,
which the stockholder wishes to bring before a meeting of our stockholders.
In
general, for business to be brought before an annual meeting by a stockholder,
written notice of the stockholder proposal or nomination must be received by
our
Secretary not more than 180 days prior to the anniversary of the preceding
year's annual meeting. With respect to stockholder proposals, the stockholder's
notice to our Secretary must contain a brief description of the business to
be
brought before the meeting and the reasons for conducting such business at
the
meeting, as well as other information set forth in our By-laws or required
by
law. With respect to the nomination of a candidate for the Board of Directors
by
a stockholder, the stockholder's notice to our Secretary must contain certain
information set forth in our By-laws about both the nominee and the stockholder
making the nominations. If a stockholder desires to have a proposal included
in
our proxy materials for our 2006 Special Meeting of Stockholders and desires
to
have such proposal brought before the same annual meeting, the stockholder
must
comply with both sets of procedures described in this paragraph. Any required
written notices should be sent to Innova Holdings, Inc., 17105 San Carlos Blvd.,
Suite A6151, Fort Myers Beach, FL 33931 Attn: Secretary.
OTHER
MATTERS WHICH MAY COME BEFORE THE SPECIAL MEETING
We
know
of no other matters to be presented at the Special Meeting, but if any other
matters should properly come before the meeting, it is intended that the persons
named in the accompanying form of proxy will vote the same in accordance with
their best judgment and their discretion, and authority to do so is included
in
the proxy.
SOLICITATION
OF PROXIES
The
expense of this solicitation of proxies will be borne by us. Solicitations
will
be made only by use of the mail except that, if deemed desirable, our officers
and regular employees may solicit proxies by telephone, telegraph or personal
calls. Brokerage houses, custodians, nominees and fiduciaries will be requested
to forward the proxy soliciting material to the beneficial owners of the stock
held of record by such persons and we will reimburse them for their reasonable
expenses incurred in this effort.
BY
ORDER
OF THE BOARD OF DIRECTORS
WALTER
K.
WEISEL
Chairman
of the Board of Directors
Exhibit
1
CERTIFICATE
OF AMENDMENT
TO
CERTIFICATE
OF INCORPORATION
OF
INNOVA
HOLDINGS, INC.
The
undersigned, being the Chief Executive Officer and Secretary of INNOVA HOLDINGS,
INC., a corporation existing under the laws of the State of Delaware, do hereby
certify under the seal of the said corporation as follows:
1. The
Certificate of Incorporation of the Corporation is hereby amended by inserting
the following paragraph to the end of Article FOURTH:
“Upon
the
filing and effectiveness (the "Effective Time") of this Certificate of Amendment
with the Delaware Secretary of State, every [eight/ten] outstanding shares
of
Common Stock shall without further action by this Corporation or the holder
thereof be combined into and automatically become one share of Common Stock.
The
number of authorized shares of Common Stock of the Corporation and the par
value
of the Common Stock shall remain as set forth in this Certificate of
Incorporation, as amended. No fractional share shall be issued in connection
with the foregoing combination. All fractional shares shall be rounded up to
the
next whole number of shares. The capital of the Corporation will not be reduced
under or by reason of any amendment herein certified.”
2. The
amendment of the certificate of incorporation herein certified has been duly
adopted by the unanimous written consent of the Corporation’s Board of Directors
and a majority of the Corporation’s stockholders in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN
WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto
affixed and this Certificate of Amendment of the Corporation's Certificate
of
Incorporation, as amended, to be signed by Walter K. Weisel, its Chief Executive
Officer, and Sheri Aws, its Secretary, this __th
day of
_______________________, 2006.
INNOVA
HOLDINGS, INC.
By:
__________________________________
Walter
K.
Weisel, Chief Executive Officer
By:
__________________________________
Sheri
Aws, Secretary
Exhibit
2
INNOVA
HOLDINGS, INC.
AMENDED
AND RESTATED
STOCK
OPTION PLAN
I. PURPOSE
AND DEFINITIONS
A. PURPOSE
OF THE PLAN
The The
Plan
is intended to encourage ownership of Shares by Key Employees and Key
Non-Employees in order to attract and retain such Key Employees in the employ
of
the Company or an Affiliate, or to attract such Key Non-Employees to provide
services to the Company or an Affiliate, and to provide additional incentive
for
such persons to promote the success of the Company or an Affiliate.
B. DEFINITIONS
Unless
otherwise specified or unless the context otherwise requires, the following
terms, as used in this Plan, have the following meanings:
| |
1.
|
Affiliate
means a corporation which is a parent or subsidiary of the Company,
direct
or indirect.
|
| |
2.
|
Board
means the Board of Directors of the
Company.
|
| |
3.
|
Committee
means the committee to which the Board delegates the power to act
under or
pursuant to the provisions of the Plan, or the Board if no committee
is
selected. If the Board delegates powers to a committee, and if
the Company
is or becomes subject to Section 16 of the Exchange Act, then,
if
necessary for compliance therewith, such committee shall consist
initially
of not less than two (2) members of the Board, each member of which
must
be a "non-employee director," within the meaning of the applicable
rules
promulgated pursuant to the Exchange Act. If the Company is or
becomes
subject to Section 16 of the Exchange Act, no member of the Committee
shall receive any Option pursuant to the Plan or any similar plan
of the
Company or any Affiliate while serving on the Committee unless
the Board
determines that the grant of such an Option satisfies the then
current
Rule 16b-3 requirements under the Exchange Act. Notwithstanding
anything herein to the contrary, and insofar as it is necessary
in order
for compensation recognized by Participants pursuant to the Plan
to be
fully deductible to the Company for federal income tax purposes,
each
member of the Committee also shall be an "outside director" (as
defined in
regulations or other guidance issued by the Internal Revenue Service
under
Code Section 162(m)).
|
| |
4.
|
Company
means Innova Holdings, Inc. a Delaware corporation, and includes
any
successor or assignee corporation or corporations into which the
Company
may be merged, changed, or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; and
any
assignee of or successor to substantially all of the assets of
the
Company.
|
| |
5.
|
Disability
or
Disabled
means permanent and total disability as defined in Section 22(e)(3)
of the
Code.
|
| |
6.
|
Exchange
Act
means the Securities Exchange Act of 1934, as amended from time
to time,
or any successor statute thereto.
|
| |
7.
|
Key
Employee
means an employee of the Company or of an Affiliate (including,
without
limitation, an employee who also is serving as an officer or director
of
the Company or of an Affiliate), designated by the Board or the
Committee
as being eligible to be granted one or more Options under the
Plan.
|
| |
8.
|
Key
Non-Employee
means a non-employee director, consultant, or independent contractor
of
the Company or of an Affiliate who is designated by the Board or
the
Committee as being eligible to be granted one or more Options under
the
Plan.
|
| |
9.
|
Option
means a right or option granted under the Plan all of which shall
be
nonstatutory options which are not intended to be Incentive
Options.
|
| |
10.
|
Option
Agreement
means an agreement between the Company and a Participant executed
and
delivered pursuant to the Plan.
|
| |
11.
|
Participant
means a Key Employee to whom one or more Options are granted under
the
Plan, and a Key Non-Employee to whom one or more Options are granted
under
the Plan.
|
| |
12.
|
Plan
means this Stock Option Plan, as amended from time to
time.
|
| |
13.
|
Shares
means the following shares of the capital stock of the Company
as to which
Options have been or may be granted under the Plan: treasury shares
or
authorized but unissued Common Stock, or any shares of capital
stock into
which the Shares are changed or for which they are exchanged within
the
provisions of Article VI of the
Plan:
|
II. SHARES
SUBJECT TO THE PLAN
The
aggregate number of Shares as to which Options may be granted from time to
time
shall be Two Hundred Million (200,000,000) Shares (subject to adjustment
for stock splits, stock dividends, and other adjustments described in
Article VI hereof).
If
an
Option ceases to be "outstanding," in whole or in part, the Shares which
were
subject to such Option, if the Option was not exercised, shall be available
for the
granting of other Options. Any Option shall be treated as "outstanding" until
such Option is exercised in full, terminates or expires under the provisions
of
the Plan or Option Agreement, or is canceled by agreement of the Company
and the
Participant.
Subject
to the provisions of Article VI, the aggregate number of Shares as to which
Options may be granted shall be subject to change only by means of an amendment
of the Plan duly adopted by the Board of Directors of the Company.
III. ADMINISTRATION
OF THE PLAN
The
Plan
shall be administered by the Committee. A majority of the Committee shall
constitute a quorum at any meeting thereof (including by telephone conference)
and the acts of a majority of the members present, or acts approved in writing
by a majority of the entire Committee without a meeting, shall be the acts
of
the Committee for purposes of this Plan. The Committee may authorize one
or more
of its members or an officer of the Company to execute and deliver documents
on
behalf of the Committee. A member of the Committee shall not exercise any
discretion respecting himself or herself under the Plan. The Board shall
have
the authority to remove, replace or fill any vacancy of any member of the
Committee upon notice to the Committee and the affected member. Any member
of
the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more of its agents,
such duties and responsibilities as it determines.
Subject
to the provisions of the Plan, the Committee is authorized to:
| |
A.
|
interpret
the provisions of the Plan or of any Option or Option Agreement
and to
make all rules and determinations which it deems necessary or advisable
for the administration of the Plan;
|
| |
B.
|
determine
which employees of the Company or of an Affiliate shall be designated
as
Key Employees and which of the Key Employees shall be granted
Options;
|
| |
C.
|
determine
the Key Non-Employees to whom Options shall be
granted;
|
| |
D.
|
determine
the number of Shares for which an Option or Options shall be
granted;
|
| |
E.
|
provide
for the acceleration of the right to exercise an Option (or portion
thereof); and
|
| |
F.
|
specify
the terms and conditions upon which Options may be granted.
|
All
determinations of the Committee shall be reduced to writing and signed by
or on
behalf of the Committee. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option.
IV. ELIGIBILITY
FOR PARTICIPATION
The
Committee may at any time and from time to time grant one or more Options
to one
or more Key Employees or Key Non-Employees and may designate the number of
Shares to be subject to each Option so granted.
Notwithstanding
the foregoing, if the Company is or becomes subject to Section 16 of the
Exchange Act, then no individual who is a member of the Committee shall be
eligible to receive an Option, unless the Board determines that the grant
of the
Option satisfies the then current Rule 16b-3 requirements under the Exchange
Act. If the Company is not subject to Section 16 of the Exchange Act, then
no
individual who is a member of the Committee shall be eligible to receive
an
Option under the Plan unless the granting of such Option shall be approved
by
the Committee.
Notwithstanding
any of the foregoing provisions, the Committee may authorize the grant of
an
Option to a person not then in the employ of or serving as a director,
consultant, or independent contractor of the Company or of an Affiliate,
conditioned upon such person becoming eligible to become a Participant at
or
prior to the execution of the Option Agreement evidencing the actual grant
of
such Option.
V. TERMS
AND CONDITIONS OF OPTIONS
Each
Option shall be set forth in an Option Agreement, duly executed on behalf
of the
Company and by the Participant to whom such Option is granted. No Option
shall
be granted and no purported grant of any Option shall be effective until
such
Option Agreement shall have been duly executed on behalf of the Company and
by
the Participant. Each such Option Agreement shall be subject to at least
the
following terms and conditions:
A. OPTION
PRICE
The
exercise price of the Shares covered by each Option granted under the Plan
shall
be determined by the Committee. The Option price per share shall be such
amount
as may be determined by the Committee in its sole discretion on the date
of the
grant of the Option.
B. NUMBER
OF SHARES
Each
Option shall state the number of Shares to which it pertains.
C. TERM
OF OPTION
Each
Option shall terminate not more than ten (10) years from the date of the
grant
thereof, or at such earlier time as the Option Agreement may provide, and
shall
be subject to earlier termination as herein provided.
D. DATE
OF EXERCISE
Upon
the
authorization of the grant of an Option, or at any time thereafter, the
Committee may, subject to the provisions of Paragraph C of this Article V,
prescribe the date or dates on which the Option becomes exercisable, and
may
provide that the Option rights become exercisable in installments over a
period
of years, or upon the attainment of stated goals.
E. MEDIUM
OF PAYMENT
The
Option price shall be paid on the date of purchase specified in the notice
of
exercise, as set forth in Paragraph I. It shall be paid in such form
(permitted by Section 422 of the Code in the case of Incentive Options) as
the
Committee shall, either by rules promulgated pursuant to the provisions of
Article III of the Plan, or in the particular Option Agreement,
provide.
F. TERMINATION
OF EMPLOYMENT
| |
1.
|
A
Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate for any reason may exercise any Option
granted
to such Participant, to the extent that the right to purchase Shares
thereunder has become exercisable on the date of such termination
within
the originally prescribed term of the Option, and subject to the
condition
that no Option shall be exercisable after the expiration of the
term of
the Option. A Participant's employment shall not be deemed terminated
by
reason of a transfer to another employer that is the Company or
an
Affiliate.
|
| |
2.
|
A
Participant who ceases to be an employee or Key Non-Employee for
cause
shall, upon such termination, cease to have any right to exercise
any
Option. For purposes of this Plan, cause shall be deemed to include
(but
shall not be limited to) wrongful appropriation of funds of the
Company or
an Affiliate, divulging confidential information about the Company
or an
Affiliate to the public, the commission of a gross misdemeanor
or felony,
or the performance of any similar action that the Board or the
Committee,
in their sole discretion, may deem to be sufficiently injurious
to the
interests of the Company or an Affiliate to constitute substantial
cause
for termination. The determination of the Board or the Committee
as to the
existence of cause shall be conclusive and binding upon the Participant
and the Company.
|
| |
3.
|
A
Participant who is absent from work with the Company or an Affiliate
because of temporary disability (any disability other than a permanent
and
total Disability as defined at Paragraph A (6) of Article I hereof),
or
who is on leave of absence for any purpose permitted by any authoritative
interpretation (i.e., regulation, ruling, case law, etc.) of Section
422
of the Code, shall not, during the period of any such absence,
be deemed,
by virtue of such absence alone, to have terminated his employment
or
relationship with the Company or with an Affiliate, except as the
Committee may otherwise expressly provide or
determine.
|
G. EXERCISE
OF OPTION AND ISSUE OF STOCK
Options
shall be exercised by giving written notice to the Company. Such written
notice
shall: (l) be signed by the person exercising the Option, (2) state the number
of Shares with respect to which the Option is being exercised, (3) contain
the
warranty required by paragraph M of this Article V, and (4) specify a date
(other than a Saturday, Sunday or legal holiday) not less than five (5) nor
more
than ten (10) days after the date of such written notice, as the date on
which
the Shares will be purchased. Such tender and conveyance shall take place
at the
principal office of the Company during ordinary business hours, or at such
other
hour and place agreed upon by the Company and the person or persons exercising
the Option. On the date specified in such written notice (which date may
be
extended by the Company in order to comply with any law or regulation which
requires the Company to take any action with respect to the Option Shares
prior
to the issuance thereof, whether pursuant to the provisions of Article VI
or
otherwise), the Company shall accept payment for the Option Shares and shall
deliver to the person or persons exercising the Option in exchange therefor
an
appropriate certificate or certificates for fully paid non-assessable Shares.
In
the event of any failure to take up and pay for the number of Shares specified
in such written notice on the date set forth therein (or on the extended
date as
above provided), the right to exercise the Option shall terminate with respect
to such number of Shares, but shall continue with respect to the remaining
Shares covered by the Option and not yet acquired pursuant thereto.
H. RIGHTS
AS A STOCKHOLDER
No
Participant to whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option except as to
such
Shares as have been issued to or registered in the Company's share register
in
the name of such Participant upon the due exercise of the Option and tender
of
the full Option price.
I. ASSIGNABILITY
AND TRANSFERABILITY OF OPTION
Unless
otherwise permitted by Rule 16b-3 of the Exchange Act, if applicable, and
approved in advance by the Committee, an Option granted to a Participant
shall
not be transferable by the Participant and shall be exercisable, during the
Participant's lifetime, only by such Participant or, in the event of the
Participant’s incapacity, his guardian or legal representative. Except as
otherwise permitted herein, such Option shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall
not
be subject to execution, attachment, or similar process. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of any Option or of
any
rights granted thereunder contrary to the provisions of this Paragraph K,
or the
levy of any attachment or similar process upon an Option or such rights,
shall
be null and void.
J. OTHER
PROVISIONS
The
Option Agreements authorized under the Plan shall be subject to such other
terms
and conditions including, without limitation, restrictions upon the exercise
of
the Option, the right to receive cash in an amount equal to the difference
between the purchase price and the fair market value on the date of the deemed
exercises, as the Committee shall deem advisable.
K. PURCHASE
FOR INVESTMENT
Unless
the Shares to be issued upon the particular exercise of an Option shall have
been effectively registered under the Securities Act of 1933, as now in force
or
hereafter amended, the Company shall be under no obligation to issue the
Shares
covered by such exercise unless and until the following conditions have been
fulfilled. In accordance with the direction of the Committee, the persons
who
exercise such Option shall warrant to the Company that, at the time of such
exercise, such persons are acquiring their Option Shares for investment and
not
with a view to, or for sale in connection with, the distribution of any such
Shares, and shall make such other representations, warranties, acknowledgments
and affirmations, if any, as the Committee may require. In such event, the
persons acquiring such Shares shall be bound by the provisions of the following
legend (or similar legend) which shall be endorsed upon the certificate(s)
evidencing their Option Shares issued pursuant to such exercise.
"The
shares represented by this certificate have been acquired for investment
and
they may not be sold or otherwise transferred by any person, including a
pledgee, in the absence of an effective registration statement for the shares
under the Securities Act of 1933 or an opinion of counsel satisfactory to
the
Company that an exemption from registration is then available."
Without
limiting the generality of the foregoing, the Company may delay issuance
of the
Shares until completion of any action or obtaining any consent that the Company
deems necessary under any applicable law (including without limitation state
securities or "blue sky" laws).
VI. ADJUSTMENTS
UPON CHANGES IN CAPITALIZATION; SALE OF COMPANY SHARES
In
the
event that the outstanding Shares of the Company are changed into or exchanged
for a different number or kind of shares or other securities of the Company
or
of another corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, change in par value, stock split-up,
combination of shares or dividend payable in capital stock, or the like,
appropriate adjustments to prevent dilution or enlargement of the rights
granted
to, or available for, Participants shall be made in the manner and kind of
shares for the purchase of which Options may be granted under the Plan, and,
in
addition, appropriate adjustment shall be made in the number and kind of
Shares
and in the Option price per share subject to outstanding Options.
Notwithstanding
anything herein to the contrary, the Company may, in its sole discretion,
accelerate the timing of the exercise provisions of any Option in the event
of a
tender offer for the Company's Shares, the adoption of a plan of merger or
consolidation under which all the Shares of the Company would be eliminated,
or
a sale of substantially all of the Company's assets. Alternatively, the Company
may, in its sole discretion, cancel any or all Options upon any of the foregoing
events and provide for the payment to Participants in cash of an amount equal
to
the difference between the Option price and the price of a Share, as determined
in good faith by the Committee, at the close of business on the date of such
event, multiplied by the number of Shares subject to Option so canceled.
The
preceding two sentences of this Article VI notwithstanding, the Company
shall be required to accelerate the timing of the exercise provisions of
any
Option if (i) any such business combination is to be accounted for as a
pooling-of-interests under APB Opinion 16 and (ii) the timing of such
acceleration does not prevent such pooling-of-interests treatment.
Upon
a
business combination by the Company or any of its Affiliates with any
corporation or other entity through the adoption of a plan of merger or
consolidation or a share exchange or through the purchase of all or
substantially all of the capital stock or assets of such other corporation
or
entity, the Board or the Committee may, in its sole discretion, grant Options
pursuant hereto to all or any persons who, on the effective date of such
transaction, hold outstanding options to purchase securities of such other
corporation or entity and who, on and after the effective date of such
transaction, will become employees or directors of, or consultants to, the
Company or its Affiliates. The number of Shares subject to such substitute
Options shall be determined in accordance with the terms of the transaction
by
which the business combination is effected. Notwithstanding the other provisions
of this Plan, the other terms of such substitute Options shall be substantially
the same as or economically equivalent to the terms of the options for which
such Options are substituted, all as determined by the Board or by the
Committee, as the case may be. Upon the grant of substitute Options pursuant
hereto, the options to purchase securities of such other corporation or entity
for which such Options are substituted shall be canceled
immediately.
VII. DISSOLUTION
OR LIQUIDATION OF THE COMPANY
Upon
the
dissolution or liquidation of the Company other than in connection with a
transaction to which the preceding Article VI is applicable, all Options
granted
hereunder shall terminate and become null and void; provided, however, that
if
the rights of a Participant under the applicable Options have not otherwise
terminated and expired, the Participant shall have the right immediately
prior
to such dissolution or liquidation to exercise any Option granted hereunder
to
the extent that the right to purchase shares thereunder has become exercisable
as of the date immediately prior to such dissolution or
liquidation.
VIII. TERMINATION
OF THE PLAN
The
Plan
shall terminate (10) years from the date of its adoption. The Plan may be
terminated at an earlier date by vote of the stockholders or the Board;
provided, however, that any such earlier termination shall not affect any
Options granted or Option Agreements executed prior to the effective date
of
such termination. Except as may otherwise be provided for under Articles
VI and
VII, and notwithstanding the termination of the Plan, any Options granted
prior
to the effective date of the Plan's termination may be exercised until the
earlier of (i) the date set forth in the Option Agreement, or (ii) ten
(10) years from the date the Option is granted, and the provisions of the
Plan
with respect to the full and final authority of the Committee under the Plan
shall continue to control.
IX. AMENDMENT
OF THE PLAN
The
Plan
may be amended by the Board and such amendment shall become effective upon
adoption by the Board; provided, that if an amendment requires the approval
of
the stockholders of the Company in accordance with the then Rule 16b-3
requirements of the Exchange Act, such amendment shall be subject to approval
of
the stockholders within the requisite time period of such Act.
X. EMPLOYMENT
RELATIONSHIP
Nothing
herein contained shall be deemed to prevent the Company or an Affiliate from
terminating the employment of a Participant, nor to prevent a Participant
from
terminating the Participant's employment with the Company or an
Affiliate.
XI. INDEMNIFICATION
OF COMMITTEE
In
addition to such other rights of indemnification as they may have as directors
or as members of the Committee, the members of the Committee shall be
indemnified by the Company against all reasonable expenses, including attorneys'
fees, actually and reasonably incurred in connection with the defense of
any
action, suit or proceeding, or in connection with any appeal therein, to
which
they or any of them may be a party by reason of any action taken by them
as
members of the Committee and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in
any
such action, suit or proceeding, except in relation to matters as to which
it
shall be adjudged in such action, suit or proceeding that the Committee member
is liable for gross negligence or willful misconduct in the performance of
his
or her duties. To receive such indemnification, a Committee member must first
offer in writing to the Company the opportunity, at its own expense, to defend
any such action, suit or proceeding.
XII. MITIGATION
OF EXCISE TAX
If
any
payment or right accruing to a Participant under this Plan (without the
application of this Article XII), either alone or together with other
payments or rights accruing to the Participant from the Company or an Affiliate
("Total
Payments")
would
constitute a "parachute payment" (as defined in Section 280G of the Code
and
regulations thereunder), such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable
or
right accruing under the Plan being subject to an excise tax under Section
4999
of the Code or being disallowed as a deduction under Section 280G of the
Code. The determination of whether any reduction in the rights or payments
under
this Plan is to apply shall be made by the Company. The Participant shall
cooperate in good faith with the Company in making such determination and
providing any necessary information for this purpose.
XIII. SAVINGS
CLAUSE
This
Plan
is intended to comply in all respects with applicable law and regulations,
including, (i) with respect to those Participants who are officers or
directors for purposes of Section 16 of the Exchange Act, Rule 16b-3
of the Securities and Exchange Commission, if applicable, and (ii) with
respect to executive officers, Code Section 162(m). In case any one or more
provisions of this Plan shall be held invalid, illegal, or unenforceable
in any
respect under applicable law and regulation (including Rule 16b-3 and Code
Section 162(m)), the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and the invalid,
illegal, or unenforceable provision shall be deemed null and void; however,
to
the extent permitted by law, any provision that could be deemed null and
void
shall first be construed, interpreted, or revised retroactively to permit
this
Plan to be construed in compliance with all applicable law (including
Rule 16b-3 and Code Section 162(m)) so as to foster the intent of this
Plan. Notwithstanding anything herein to the contrary, with respect to
Participants who are officers and directors for purposes of Section 16 of
the Exchange Act, no grant of an Option to purchase Shares shall permit
unrestricted ownership of Shares by the Participant for at least six (6)
months
from the date of the grant of such Option, unless the Board determines that
the
grant of such Option to purchase Shares otherwise satisfies the then current
Rule 16b-3 requirements.
XIV. WITHHOLDING
Except
as
otherwise provided by the Committee,
| |
A.
|
The
Company shall have the power and right to deduct or withhold, or
require a
Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes required by law to be withheld
with
respect to any grant, exercise, or payment made under or as a result
of
this Plan; and
|
| |
B.
|
In
the case of any taxable event hereunder, a Participant may elect,
subject
to the approval in advance by the Committee, to satisfy the withholding
requirement, if any, in whole or in part, by having the Company
withhold
Shares of Common Stock that would otherwise be transferred to the
Participant having a Fair Market Value, on the date the tax is
to be
determined, equal to the minimum marginal tax that could be imposed
on the
transaction. All elections shall be made in writing and signed
by the
Participant.
|
XV. EFFECTIVE
DATE
This
Plan
shall become effective upon adoption by the Board.
XVI. GOVERNING
LAW
This
Plan
shall be governed by the laws of the State of Florida and construed in
accordance therewith.
Adopted
as of this 24th day of July, 2006.
SPECIAL
MEETING OF STOCKHOLDERS OF
[logo
to come]
Innova
Holdings, Inc.
October
6, 2006
--
FOLD AND DETACH HERE AND READ THE REVERSE SIDE --
PROXY
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
INNOVA
HOLDINGS, INC.
The
undersigned appoints Walter K. Weisel and Sheri Aws, and each of them,
as
proxies, each with the power to appoint his substitute, and authorizes
each of
them to represent and to vote, as designated on the reverse side hereof,
all
shares of Common Stock of Innova Holdings, Inc., held of record by the
undersigned at the close of business on September 5, 2006, at the Special
Meeting of Stockholders to be tentatively held at 10:00 a.m. on October
6, 2006,
at Sanibel Harbour Resort & Spa, Island Room, 17260 Harbour Pointe Drive,
Ft. Myers, FL 33908, and at any adjournment thereof. Any and all proxies
heretofore given are hereby revoked.
(Continued,
and to be marked, dated and signed, on the other side)
--
FOLD AND DETACH HERE AND READ THE REVERSE SIDE --
PROXY
THIS
PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED
"FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
|
1.
|
ELECTION
OF DIRECTORS:
|
FOR
|
WITHHOLD
AUTHORITY
|
|
(To
withhold authority to vote for any individual nominee, strike a line
through that nominee's name in the list below)
|
o
|
o
|
|
Nominees
are: Walter K. Weisel, Martin Nielson, Gary F. McNear, Craig W. Conklin
and Rick Wynns
|
|
|
| |
|
|
|
|
|
2.
|
PROPOSAL
TO AMEND
THE COMPANY’S CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
OF THE OUTSTANDING SHARES OF THE COMPANY’S COMMON STOCK AT A RATIO OF
EITHER ONE-FOR-EIGHT OR ONE-FOR-TEN, AS DETERMINED AT THE DISCRETION
OF
THE BOARD OF DIRECTORS TO BE IN THE BEST INTERESTS OF THE COMPANY
WITHOUT
FURTHER APPROVAL FROM STOCKHOLDERS.
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
|
|
|
|
3.
|
PROPOSAL
TO APPROVE
OF THE COMPANY’S AMENDED AND RESTATED 2005 STOCK OPTION
PLAN
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
|
|
|
|
4.
|
In
their discretion, the proxies are authorized to vote on such other
business as may property come before the meeting
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
|
|
| |
|
COMPANY
ID:
|
|
| |
|
PROXY
NUMBER:
|
|
| |
|
ACCOUNT
NUMBER:
|
|
|
Signature:
________________
|
Signature:
________________
|
Date:
___________________
|
NOTE:
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation, please sign
in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.