___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant _X_
Filed by a Party other than the Registrant ___
Check the appropriate box:
_X_ Preliminary Proxy Statement
___ Confidential, Use of the Commission Only (as permitted by Rule
14a 6(e)(2))Proxy Statement
___ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to 240.14a 11(c) or 240.14a 12
SENTO TECHNICAL
INNOVATIONS CORPORATION
(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):
_X_ No fee required.
___ Fee computed on table below per Exchange Act Rules 14a 6(i)(4) and
0 11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0 11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
___ Fee paid previously with preliminary materials.
___ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0 11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
August 18, 1997
SENTO TECHNICAL INNOVATIONS CORPORATION
You are cordially invited to attend the Annual Meeting of Shareholders
of Sento Technical Innovations Corporation (the "Company"), which will be
held on Monday, August 18, 1997, at 10 a.m., at the offices of Kimball,
Parr, Waddoups, Brown & Gee, 185 South State Street, Suite 1300, Salt Lake
City, Utah 84111 (the "Annual Meeting"), for the following purposes, which
are more fully described in the Proxy Statement accompanying this Notice:
(i) To elect seven directors of the Company, each to serve until the
next annual meeting of shareholders and until their respective
successors have been duly elected and qualified;
(ii) To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to authorize a class of 5,000,000
shares of preferred stock of the Company and to increase the
number of shares of the Common Stock of the Company, $.25 par
value, which the Company is authorized to issue to 15,000,000
shares of Common Stock;
(iii) To consider and vote upon a proposal to amend the Sento Technical
Innovations Corporation Stock Incentive Plan to increase by
500,000 the number of shares of the Common Stock of the Company
available for issuance pursuant to grants thereunder;
(iv) To consider and vote upon a proposal to ratify the appointment of
KPMG Peat Marwick LLP as independent auditor of the Company for
the fiscal year ending March 31, 1998; and
(v) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on July 7, 1997
as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and at any adjournment
or postponement thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you
are urged to vote, sign, date and return the enclosed Proxy as promptly as
possible in the enclosed postage-prepaid envelope. Shareholders attending
the Annual Meeting may vote in person even if they have returned a Proxy.
By Order of the Board of Directors
_______________________________________________
Brian W. Braithwaite
Secretary and Treasurer
July 9, 1997
IMPORTANT
Whether or not you expect to attend the Annual Meeting in person, to
assure that your shares will be represented, please complete, date, sign
and return the enclosed proxy without delay in the enclosed envelope, which
requires no additional postage if mailed in the United States. Your proxy
will not be used if you are present at the Annual Meeting and desire to
vote your shares personally.
<PAGE>
Sento Technical Innovations Corporation
311 North State Street
Orem, Utah 84057
____________________
PROXY STATEMENT
____________________
Annual Meeting of Shareholders
August 18, 1997
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of Sento
Technical Innovations Corporation, a Utah corporation (the "Company"), in
connection with the solicitation by the Board of Directors of the Company
(the "Board") of proxies from holders of outstanding shares of the
Company's common stock, par value $.25 per share (the "Common Stock"), for
use at the Annual Meeting of Shareholders of the Company to be held Monday,
August 18, 1997 and at any adjournment or postponement thereof (the "Annual
Meeting"). This Proxy Statement, the Notice of Annual Meeting of
Shareholders and the accompanying form of proxy are first being mailed to
shareholders of the Company on or about July 9, 1997.
The Company will bear all costs and expenses relating to the
solicitation of proxies, including the costs of preparing, printing and
mailing to shareholders this Proxy Statement and accompanying materials.
In addition to the solicitation of proxies by mail, the directors, officers
and employees of the Company, without receiving additional compensation
therefor, may solicit proxies personally or by telephone. Arrangements
will be made with brokerage firms and other custodians, nominees and
fiduciaries representing beneficial owners of shares of the Common Stock
for the forwarding of solicitation materials to such beneficial owners and
the Company will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out of pocket expenses incurred by them in doing
so.
VOTING
Record Date
The Board has fixed the close of business on July 7, 1997 as the record
date for determination of shareholders entitled to notice of and to vote at
the Annual Meeting (the "Record Date"). As of the Record Date, there were
issued and outstanding __________ shares of Common Stock. The holders of
record of the shares of Common Stock on the Record Date entitled to be
voted at the Annual Meeting are entitled to cast one vote per share on each
matter submitted to a vote at the Annual Meeting. Accordingly, __________
votes are entitled to be cast on each matter submitted to a vote at the
Annual Meeting.
Proxies
Shares of the Common Stock which are entitled to be voted at the Annual
Meeting and which are represented by properly executed proxies will be
voted in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such shares will be voted (i) FOR the election
of each of the seven director nominees; (ii) FOR the amendment of the
Company's Articles of Incorporation (the "Articles") to authorize a class
of 5,000,000 shares of preferred stock of the Company (the "Preferred
Stock") and to increase the number of shares of Common Stock which the
Company is authorized to issue to 15,000,000 shares; (iii) FOR the
amendment to the Sento Technical Innovations Corporation Stock Incentive
Plan (the "Option Plan") to increase by 500,000 the number of shares of
Common Stock available for issuance pursuant to grants under the Option
Plan; (iv) FOR the ratification of the appointment by the Board of KPMG
Peat Marwick LLP to be the independent auditor of the Company for the
fiscal year ending March 31, 1998; and (v) in the discretion of the proxy
holders as to any other matters which may properly come before the Annual
Meeting.
A shareholder who has executed and returned a proxy may revoke it at
any time prior to its exercise at the Annual Meeting by executing and
returning a proxy bearing a later date, by filing with the Secretary of the
Company, at the address set forth above, a written notice of revocation
bearing a later date than the proxy being revoked, or by voting the Common
Stock covered thereby in person at the Annual Meeting.
Required Vote
A majority of the outstanding shares of Common Stock entitled to vote,
represented in person or by properly executed proxy, is required for a
quorum at the Annual Meeting. Abstentions and broker non-votes, which are
indications by a broker that it does not have discretionary authority to
vote on a particular matter, will be counted as "represented" for the
purpose of determining the presence or absence of a quorum. Under Utah
corporate law and the Articles and Bylaws of the Company (the "Bylaws"),
once a quorum is established, shareholder approval with respect to a
particular proposal is generally obtained when the votes cast in favor of
the proposal exceed the votes cast against such proposal.
In the election of directors, the seven nominees receiving the highest
number of votes will be elected. For approval of the proposed amendment to
the Articles, the proposed amendment to the Option Plan to increase the
number of shares available for issuance pursuant to grants thereunder and
the proposed ratification of the independent auditor, the votes cast in
favor of each such proposal must exceed the votes cast against the
proposal. Accordingly, abstentions and broker non votes will not have the
effect of being considered as votes cast against any matter considered at
the Annual Meeting.
ELECTION OF DIRECTORS
Nominees for Election as Directors
At the Annual Meeting, seven directors of the Company (constituting the
entire Board) are to be elected to serve until the next annual meeting of
shareholders and until their successors shall be duly elected and
qualified. Each of the nominees for director identified below is currently
a director of the Company. If any of the nominees should be unavailable to
serve, which is not now anticipated, the proxies solicited hereby will be
voted for such other persons as shall be designated by the present Board.
The seven nominees receiving the highest number of votes at the Annual
Meeting will be elected. Except with respect to the designation of Mr.
Sherman H. Smith to serve as a director of the Company upon consummation of
the share exchange pursuant to which, on April 18, 1996, the Company, which
was then known as Amacan Resources Corporation ("Amacan"), acquired all of
the capital stock of Spire Technologies, Inc. ("Spire Technologies") and
Spire Technologies Systems Division, Inc., which is now known as Spire
Systems Incorporated ("Spire Systems"), in exchange for the issuance of
3,501,883 shares of the Company's common stock to the shareholders of Spire
Technologies and Spire Systems (the "Share Exchange"), no arrangement or
understanding exists between any officer or director and any other person
pursuant to which he was nominated or elected as a director or selected as
an officer. The Company has no continuing obligation to retain Mr. Smith
as a director. Certain information with respect to each nominee for
director is set forth below.
Name Age Position Director Since
______________________ _____ ______________________________ _______________
Gary B. Godfrey . . . 37 Chairman of the Board and 1996
Chief Executive Officer
Robert K. Bench . . . 48 President, Chief Financial 1996
Officer and Director
Eng H. Lee . . . . . 37 Vice President, Chief 1996
Technical Officer and Director
Brian W. Braithwaite . 36 Secretary, Treasurer and Director 1996
William A. Fresh . . 68 Director 1996
Sherman H. Smith . . 53 Director 1996
Keith E. Sorenson . . 49 Director 1997
Gary B. Godfrey serves as Chairman of the Board and Chief Executive
Officer of the Company pursuant to his appointment as such following
consummation of the Share Exchange in April 1996. Mr. Godfrey has been
President and a director of Spire Technologies since its organization in
1986, exercising primary responsibility for financial management, marketing
and personnel. Mr. Godfrey has been President and a director of Spire
Systems since 1992.
Robert K. Bench serves as President, Chief Financial Officer and a
director of the Company pursuant to his appointment as such following
consummation of the Share Exchange in April 1996. In addition, he serves
as the Chief Financial Officer and a director of Spire Technologies, and as
the Chief Financial Officer and a director of Spire Systems, positions to
which he was appointed in January 1996. Mr. Bench served as the Chief
Financial Officer for CerProbe Corporation ("CerProbe"), a publicly-held
corporation which manufactures products for the semi-conductor industry,
from April 1995 through February 1996. CerProbe acquired, through a
merger, Fresh Test Technology Corporation ("Fresh Test") in April 1995.
Mr. Bench was president of Fresh Test from April 1993 to the time of the
merger. From 1991 through 1993, Mr. Bench served as Vice President and
Chief Operating Officer for Fresh Technology Company, an affiliate of Fresh
Test. From 1986 through 1991, Mr. Bench served as Vice President and Chief
Financial Officer at Clyde Digital Corporation, a private company engaged
in computerized software engineering.
Eng H. Lee has served as Vice President and Chief Technical Officer of
the Company since January 1997 and has served as a director of the Company
since September 1996. Mr. Lee is the founder and Managing Director of
Australian Software Innovations (Services) Pty., Ltd. ("ASI"), a position
he has held since 1987. See "--Certain Relationships and Related
Transactions."
Brian W. Braithwaite is Secretary, Treasurer and a director of the
Company, and has so served since consummation of the Share Exchange in
April 1996. Mr. Braithwaite has been Vice President, Secretary, Treasurer
and a director of Spire Technologies since its inception in 1986. Mr.
Braithwaite has also served as Vice President, Secretary, Treasurer and a
director of Spire Systems since 1992.
William A. Fresh has served as director of the Company since April
1996. Mr. Fresh also serves as Chairman of the Board and Chief Executive
Officer of Magellan Technology, Inc. ("Magellan"), a publicly-held
corporation engaged in the business of providing image-based data entry
services. Mr. Fresh founded EFI Electronics Corporation ("EFI"), a
publicly-held Utah manufacturer and marketer of surge suppression equipment
for computer, industrial, medical and telecommunication devices, in 1981
and subsequently served as its Chairman and President until 1986. Mr.
Fresh is currently President and Chairman of the Board of Orem Tek
Development Corporation, a consulting and business park development
corporation. In addition, Mr. Fresh has served as a director of CerProbe
since April 1985. Mr. Fresh co-founded Fresh Test and served as its
chairman and Chief Executive Officer from January 1986 through March 1995.
Sherman H. Smith has served as a director of the Company since
consummation of the Share Exchange in April 1996. Pursuant to the terms of
the Agreement and Plan of Reorganization executed by Amacan, Mr. Smith was
designated by the Board of Directors of Amacan to serve as a director of
the Company upon consummation of the Share Exchange; however, no
arrangement or understanding exists whereby Mr. Smith must be retained as a
director. Mr. Smith, a certified public accountant, is engaged in the
practice of accounting with the accounting firm of Schmitt, Griffiths,
Smith & Co. in Ogden, Utah, with whom he has practiced accounting since
1974.
Keith E. Sorenson has served as a director of the Company since his
appointment as such by the Board as of June 1, 1997. Mr. Sorenson is
currently a managing partner of Sorenson, Thomas & Co., which operates
Blanca Partners, a private investment partnership based in San Francisco,
California. From 1987 to 1993, Mr. Sorenson was president, chief executive
officer and chairman of Truevision, a computer graphics enterprise traded
on NASDAQ and formerly known as RasterOps, of which he currently serves as
a director. Prior to founding RasterOps, Mr. Sorenson served from 1979 to
1987 as vice president of engineering and product marketing for Ramtek, a
publicly traded computer graphics company. Mr. Sorenson is currently the
chairman and principal of Avtronix, a private aviation electronics and
manufacturing service company. In 1992, Mr. Sorenson was named
"Entrepreneur of the Year" in the technology category by Inc. magazine.
Committees and Meetings
The Board has formed a standing Audit Committee, the members of which
are Sherman H. Smith and William A. Fresh. The Audit Committee held three
meetings during the fiscal year ended March 31, 1997. The Audit
Committee's functions include the recommendation of the Company's
independent auditor, and the review of the Company's internal accounting
and financial practices and controls and all services performed by the
Company's independent auditor.
The Board also has formed a standing Compensation Committee comprised
solely of non-employee directors, the members of which are Sherman H. Smith
and William A. Fresh. The Compensation Committee held three meetings
during the fiscal year ended March 31, 1997. The Compensation Committee
currently serves as the committee which administers the Option Plan and the
Sento Technical Innovations Corporation 1996 Employee Stock Purchase Plan.
During the fiscal year ended March 31, 1997, there were five meetings
held by the Board. No director attended fewer than 75 percent of the total
number of meetings of the Board and of the committees on which he served.
The Company does not maintain a standing nominating committee of the Board.
Director Compensation
The directors of the Company are not presently compensated for
attendance at the Board and committee meetings. All directors are
reimbursed for expenses incurred in connection with attendance at Board and
committee meetings.
EXECUTIVE OFFICERS
There are no executive officers of the Company other than Gary B.
Godfrey, Robert K. Bench, Eng H. Lee and Brian W. Braithwaite. Certain
information regarding Messrs. Godfrey, Bench, Lee and Braithwaite is set
forth above under "Election of Directors--Nominees for Election as
Directors."
EXECUTIVE COMPENSATION
The following table sets forth the compensation for each of the last
three fiscal years, for services rendered to the Company by the one
individual who served as the Company's Chief Executive Officer at any time
during fiscal year 1997 (the "Named Executive Officer"). Except for the
Named Executive Officer, no executive officer or employee of the Company
was paid in excess of $100,000 in salary and bonus by the Company during
the fiscal year ended March 31, 1997. As Chief Executive Officer of the
Company until the consummation of the Share Exchange on April 18, 1996, Tad
M. Ballantyne received $10,008 and $10,000 in total compensation during the
years ended April 30, 1996 and 1995, respectively.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
____________________________
Annual Compensation Awards Payouts
________________________________________ ___________________ _______
Securi_
Other ties All
Annual Restricted Under_ Other
Compensa_ Stock lying LTIP Compensa_
Name and Fiscal Salary Bonus tion Award(s) Options Payouts tion
Principal Position Year Ended <F1> ($) ($) ($) ($) (#) ($) ($)
___________________ ______________ ______ _____ _________ __________ _______ _______ _________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary B. Godfrey, March 31, 1997 79,640 0 0 0 0 0 0
Chief Executive April 30, 1996 2,692 0 0 0 0 0 0
Office April 30, 1995 0 0 0 0 0 0 0
<FN>
<F1>
Fiscal year 1997 consists of the 11-month period from May 1, 1996 to March 31, 1997.
</FN>
</TABLE>
Certain Relationships and Related Transactions
Luff Exploration Company. During the fiscal year ended April 30, 1996,
the Company paid approximately $58,100 to Luff Exploration Company for the
Company's share of expenses associated with the production of oil and gas
prior to the Share Exchange. Such expense was allocated based on the
Company's interest in each oil or gas well. The president and principal
shareholder of Luff Exploration Company was Mr. Kenneth D. Luff, who served
as a director of the Company until the consummation of the Share Exchange.
Australian Software Innovations. Effective July 1, 1996, the Company,
through Spire Technologies, entered into an Exclusive License and Technical
Assistance Agreement (the "ASI License Agreement") with ASI. ASI, which
maintains its principal office in Sydney, Australia, develops and markets
performance monitoring software and provides related technical consulting
services to customers located in Asia, Europe, the United Kingdom and the
United States. Under the terms of the ASI License Agreement, and subject
to certain qualifications contained therein, the Company acquired an
exclusive license in North and South America during a five-year term (which
may be extended for up to three additional five-year periods) to use,
market, modify, manufacture, assemble, test and modify ASI's SYSMON
software program and technical information relating thereto. In
consideration of the grant of this license, the Company paid to ASI a non-
refundable license fee in the amount of $550,000 and agreed to pay
royalties to ASI during the term of the ASI License Agreement.
On September 10, 1996, the Company entered into an ASI Option Agreement
(the "ASI Option Agreement") by and among the Company, ASI, Kilat Holdings
Pty. Limited, the sole shareholder of ASI ("Kilat"), Eng H. Lee and Mary
Lee. Under the terms of the ASI Option Agreement, ASI granted to the
Company an option (the "ASI Option"), exercisable in the Company's
discretion at any time prior to September 10, 1997, to acquire all or any
portion of the tangible and intangible assets of ASI, as determined by the
Company. As consideration for the grant of the ASI Option, the Company
paid to ASI an option purchase payment in the amount of $130,000. In the
event the Company elects to exercise the ASI Option, the Company has agreed
to pay to ASI the exercise price of $1,405,000, consisting of cash in the
amount of $1,055,000 and 87,500 shares of Common Stock, subject to certain
adjustments to the cash portion of the exercise price to reflect the profit
or loss of ASI for the period from April 30, 1996 through October 31, 1996.
The Company has also agreed to assume certain liabilities associated with
the assets of ASI to be acquired by the Company. In the event the Company
does not exercise the ASI Option prior to September 10, 1997, the Company
will have no obligation to acquire any assets or liabilities of ASI. The
ASI Option Agreement also provides for the Company to make available to ASI
a revolving commercial credit facility (the "ASI Facility") in an amount
not to exceed $200,000 on terms to be determined by the mutual agreement of
the Company and ASI. The obligation of ASI to repay all amounts advanced
under the ASI Facility is secured by a pledge by ASI in favor of the
Company of all of ASI's intellectual property. The ASI Facility expires on
September 10, 1997.
On September 10, 1996, the Board appointed Mr. Eng H. Lee to serve as a
director of the Company. In January 1997, the Board appointed Mr. Lee to
serve as Vice President and Chief Technical Officer of the Company. Mr.
Lee is the record owner of fifty percent (50%), and through his wife, Mary
Lee, is the beneficial owner of one hundred percent (100%), of the capital
stock of Kilat, the sole shareholder of ASI.
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
Principal Holders
The following table sets forth information as of June 1, 1997 with
respect to the beneficial ownership of shares of the Common Stock by each
person known by the Company to be the beneficial owner of more than 5% of
the Common Stock, by each director or nominee, by the Named Executive
Officer and by all directors and officers as a group. Unless otherwise
noted, each person named has sole voting and investment power with respect
to the shares indicated. The percentages set forth below have been
computed based on the number of outstanding securities, excluding treasury
shares held by the Company, which was 4,351,228 shares of Common Stock as
of June 1, 1997.
Beneficial Ownership
as of June 1, 1997
_________________________________
Percentage of
Name and Address of Beneficial Owner Number of Shares Class (1)
______________________________________ ________________ ______________
Common Stock:
Gary B. Godfrey . . . . . . . . . . . 1,039,701 (2) 23.9%
149 North 835 East
Lindon, Utah 84042
Robert K. Bench . . . . . . . . . . . 496,090 (3) 11.2
626 East 1820 North
Orem, Utah 84057
Brian W. Braithwaite . . . . . . . . 460,765 10.6
1348 North 1400 West
Provo, Utah 84604
Douglas D. Yates . . . . . . . . . . 450,711 (4) 10.4
797 North 500 West
Lehi, Utah 84043
Jeffrey L. Webster . . . . . . . . . 429,470 9.9
465 West 320 North
American Fork, UT 84003
William A. Fresh . . . . . . . . . . 99,804 (5)(6) 2.3
Sherman H. Smith . . . . . . . . . . 6,360 (6)(7) *
Eng H. Lee . . . . . . . . . . . . . 0 0
Keith E. Sorenson . . . . . . . . . . 0 0
All officers and directors as a group
(7 persons) . . . . . . . . . . . . . 2,102,750 (3)(6) 47.4%
___________________________
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Beneficial ownership as a percentage of the class for each person
holding options exercisable within 60 days of the date of
computation has been calculated as though shares of Common Stock
subject to such options were outstanding, but such shares have not
been deemed outstanding for the purpose of calculating the
percentage of the class owned by any other person.
(2) Shares held by Gary B. Godfrey and Karie Godfrey, Trustees of the
Gary B. Godfrey Family Revocable Trust dated July 1, 1993.
(3) Includes presently exercisable options to purchase 83,658 shares of
Common Stock issued to Mr. Bench under the Option Plan in connection
with the Share Exchange in substitution for options to purchase
shares of Spire Technologies Common Stock.
(4) Shares held by Douglas D. Yates and Rita S. Yates, Trustees of the
Rita S. Yates Family Revocable Trust dated July 1, 1993.
(5) Includes 20,000 shares owned of record by Mr. Fresh's individual
retirement account.
(6) Includes presently exercisable options to purchase 2,000 shares of
Common Stock issued to each of Mr. Fresh and Mr. Smith pursuant to
the Option Plan.
(7) Includes 2,000 shares owned of record by the Gerald Smith Family
Partnership, of which Mr. Smith is a limited partner. Mr. Smith
disclaims beneficial ownership of such shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, as well as persons who
beneficially own more than ten percent of the Common Stock of the Company,
to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission (the "SEC") and the National
Association of Securities Dealers. Reporting persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms furnished
to the Company and written representations from the Company's executive
officers and directors, the Company believes that all required forms were
timely filed during the past fiscal year.
AMENDMENT OF ARTICLES OF INCORPORATION
TO AUTHORIZE A CLASS OF PREFERRED STOCK
AND TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Board has unanimously adopted a resolution setting forth a proposed
amendment to the Company's Articles to authorize a class of 5,000,000
shares of Preferred Stock and to increase the number of shares of Common
Stock which the Company is authorized to issue from 8,000,000 to 15,000,000
shares.
Description of Capital Stock
Common Stock. The Articles currently authorize the issuance of
8,000,000 shares of Common Stock, par value $.25 per share. As of June 1,
1997, there were 4,351,228 shares of Common Stock issued and outstanding,
held by approximately 435 stockholders of record. Except as otherwise
required by law, each share of Common Stock entitles the stockholder to one
vote on each matter which stockholders may vote on at all meetings of
stockholders of the Company. Holders of the Common Stock are not entitled
to cumulative voting in the election of directors. Holders of the Common
Stock do not have preemptive, subscription or conversion rights, and there
are no redemption or sinking fund provisions applicable thereto. Shares of
Common Stock are currently entitled to share equally and ratably in
dividends paid from the funds legally available for the payment thereof,
when, as and if declared by the Board. Holders of Common Stock are also
currently entitled to share ratably in the assets of the Company available
for distribution to holders of Common Stock after payment of liabilities of
the Company upon liquidation or dissolution of the Company, whether
voluntary or involuntary. If the proposal described herein to amend the
Articles is adopted, then the holders of Common Stock would be entitled to
such ratable distribution after payment of the Company's liabilities and
amounts, if any, due to holders of Preferred Stock. All the outstanding
shares of Common Stock are fully paid and nonassessable. The Company has
no present intention to issue any of the additional 7,000,000 shares of
Common Stock that will become authorized pursuant to approval of the
amendment to the Articles proposed herein. The declaration of dividends is
subject to the discretion of the Board. The Company has no present
intention of paying any cash dividends on the Common Stock and plans
currently to retain any earnings to finance the development and expansion
of its operations. The payment of cash dividends also may be restricted by
a number of other factors, including future earnings, capital requirements
and the financial condition of the Company, and restrictions on the payment
of dividends imposed under Utah law.
Preferred Stock. The amendment to the Articles proposed herein
authorizes a new class of 5,000,000 shares of Preferred Stock, par value
$1.00 per share, of the Company. The Board will be authorized, without any
further action by the stockholders of the Company, to (i) divide the
Preferred Stock into series, (ii) designate each such series, (iii) fix and
determine dividend rights, (iv) determine the price, terms and conditions
on which shares of Preferred Stock may be redeemed, (v) determine the
amount payable to holders of Preferred Stock in the event of voluntary or
involuntary liquidation, (vi) determine any sinking fund provisions, and
(vii) establish any voting, preemption or conversion privileges. The
future issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company and may adversely affect the
voting and other rights of the holders of Common Stock. The Company has no
present intention to issue any of the 5,000,000 shares of Preferred Stock
that will become authorized pursuant to approval of the amendment to the
Articles proposed herein.
Utah Control Shares Acquisition Act. No provision of the Articles or
Bylaws would delay, defer or prevent a change in control of the Company.
Nonetheless, the Utah Control Shares Acquisition Act (the "Control Shares
Act") provides that any person or entity which acquires 20% or more of the
outstanding voting shares of a publicly-held Utah corporation is denied
voting rights with respect to the acquired shares, unless a majority of the
disinterested shareholders of the corporation elects to restore such voting
rights. A "control share acquisition" is generally defined as the direct
or indirect acquisition of either ownership or voting power associated with
previously issued and outstanding control shares. The shareholders of a
corporation may elect to exempt the stock of the corporation from the
provisions of the Control Shares Act through adoption of a provision to
that effect in the articles of incorporation or bylaws of the corporation.
Neither the Company's Articles nor its Bylaws exempt the Common Stock from
the Control Shares Act.
Approval of the proposed amendment of the Articles requires that votes
cast in favor of the proposed amendment exceed votes cast against it. The
Board recommends a vote FOR amendment of the Articles to authorize a class
of 5,000,000 shares of preferred stock and to increase the number of shares
of Common Stock which the Company is authorized to issue to 15,000,000
shares.
AMENDMENT OF OPTION PLAN
TO INCREASE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
PURSUANT TO GRANTS THEREUNDER
The Board has unanimously adopted a resolution setting forth a proposed
amendment to the Option Plan to increase by 500,000, from 1,000,000 to
1,500,000, the number of shares of Common Stock, available for issuance
pursuant to grants under the Option Plan.
Description of the Option Plan
General. The Option Plan was adopted by the Board as of January 31,
1996. As part of the Share Exchange, the Company's shareholders approved
the Option Plan on April 18, 1996, and the Company substituted options to
purchase shares of the Common Stock pursuant to the Option Plan for then-
outstanding options to purchase shares of common stock of Spire
Technologies. The Option Plan was amended by the Board as of September 10,
1996, to provide for a formula award of options to non-employee directors
of the Company. The following description of the Option Plan does not
purport to be complete and is qualified in its entirety by reference to the
full text of the Option Plan.
Purpose. The purpose of the Option Plan is to promote the long-term
success of the Company and the creation of incremental stockholder value by
(a) encouraging directors and key employees of the Company and its
subsidiaries to focus on critical long-range objectives, (b) encouraging
the attraction and retention of key employees with exceptional
qualifications, and (c) linking the interests of key employees of the
Company directly to stockholder interests through increased stock
ownership.
Administration. The Option Plan is administered by a committee (the
"Option Plan Committee") of the Board consisting of two or more
disinterested directors appointed by the Board. The Option Plan Committee
is currently composed of the Compensation Committee of the Board. Except
with respect to the annual grant of options to non-employee directors
described below, the Option Plan Committee, in its sole discretion,
determines the number and type of awards granted to a participant under the
Option Plan and the terms and conditions of such awards, including any
vesting conditions. The Option Plan Committee executes agreements setting
forth the terms of such awards (each, a "Stock Award Agreement") and makes
all other decisions relating to the operation of the Option Plan.
Duration. The Option Plan will remain in effect until terminated by
the Board, except that no Incentive Option (as defined below) may be
granted under the Option Plan after March 1, 2006. Notwithstanding the
termination of the Option Plan, the Option Plan will continue in effect
after such termination for purposes of the administration of any Option
Plan award granted prior to such termination.
Shares Subject to the Option Plan. The Option Plan provides for the
issuance of Incentive Stock Options (the "Incentive Options"), as that term
is defined in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), nonqualified stock options which are not governed by the
provisions of Section 422 of the Code ("Nonqualified Options" and, together
with Incentive Options, "Options") for shares of Common Stock, certain
corresponding stock appreciation rights ("SARs"), restricted shares of
Common Stock ("Restricted Shares") and Stock Units (as defined below) or
any combination thereof (as the case may be, each an "Award"). The maximum
number of Options, Restricted Shares and Stock Units that may be awarded
under the Option Plan is currently 1,000,000, and the maximum number of
Options, Restricted Shares and Stock Units that may be awarded to a single
participant in any calendar year is 200,000. If any Options, Restricted
Shares or Stock Units are forfeited or if any Option terminates for any
reason before being exercised, then such Options, Restricted Shares or
Stock Units become available again for Awards under the Plan.
Notwithstanding the above, if any Options are surrendered because
corresponding SARs are exercised, such Options will not become available
again for Awards under the Option Plan. Common Stock issued pursuant to
the Option Plan may be authorized but unissued shares or treasury shares.
As of June 1, 1997, the Company had granted options for the purchase of
796,000 shares of Common Stock under the Option Plan.
In the event of a subdivision of the outstanding shares of Common
Stock, a declaration of a dividend payable in Common Stock, a declaration
of a dividend payable in a form other than Common Stock in an amount that
has a material effect on the price of the Common Stock, a combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a lesser number of shares of Common
Stock, a recapitalization or similar occurrence (the occurrence of each of
which may be referred to as a "Capital Change"), the Option Plan Committee
will make appropriate adjustments in the number of Options, Restricted
Shares and Stock Units available for future Awards under the Option Plan.
Eligibility. Awards may be granted to directors, officers and
employees of the Company and its subsidiaries that the Option Plan
Committee, in its sole discretion, determines to be key employees (the "Key
Employees"). Members of the Option Plan Committee are not eligible to
participate in the Option Plan. Because the Option Plan Committee has
complete discretion to determine the number and selection of Key Employees
eligible to participate in the Option Plan, it is not possible to estimate
accurately the number of persons who are or may become eligible to
participate therein. Nonetheless, because the Company's Bylaws provide
that the Company shall have not less than three and not more than nine
directors and because at least two of the Company's directors must serve on
the Option Plan Committee as disinterested directors pursuant to the Option
Plan, the number of persons eligible to participate in the Option Plan may
range from one non-Option Plan Committee director to as many as seven non-
Option Plan Committee directors and as many Key Employees as the Option
Plan Committee, in its discretion, may determine.
Options. The Option Plan Committee, in its sole discretion, may grant
both Incentive Options and Nonqualified Options from time to time. The
Option Plan provides that the exercise price of Options, restrictions upon
the exercise of Options and restrictions on the transferability of shares
issued upon the exercise of Options, will be determined by the Option Plan
Committee in its sole discretion, except that (i) the exercise price of any
Incentive Option will not be less than the fair market value of a share of
Common Stock as of the date of the grant and (ii) in the case of an
Incentive Option granted to any individual who, at the time that the
Incentive Option is granted, owns more than ten percent of the total
combined voting power of all classes of stock of the Company or any of its
subsidiaries (a "Restricted Stockholder"), the exercise price of such
Incentive Option will not be less than 110% of the fair market value,
determined pursuant to the Option Plan, of a share of Common Stock as of
the date on which the Option is granted. The Option Plan Committee has
sole discretion to determine the time or times when each Option vests and
becomes exercisable. The term of an Incentive Option, however, may not be
more than ten years from the date of grant, and the term of any Incentive
Option granted to a Restricted Stockholder may not be more than five years
from the date of grant. During the lifetime of the employee receiving the
Option (the "Optionee"), the Option will be exercisable only by the
Optionee and will not be assignable or transferrable. Each Option will
become exercisable in such installments, at such time or times, and is
subject to such conditions, as the Option Plan Committee, in its
discretion, may determine at or before the time the Option is granted. The
Option Plan Committee may provide for the accelerated exercisability of an
Option in the event of the death, disability or retirement of the Optionee.
Unless otherwise provided by the Option Plan Committee, all Options will
terminate ninety days after the termination of the employment of an
Optionee, unless the Optionee's employment was terminated for cause, in
which event the Options will immediately terminate upon the termination of
such Optionee's employment.
Formula Award to Non-Employee Directors. The Option Plan specifically
provides for an initial grant to each non-employee director of the Company
of 5,000 Options upon election or appointment as a director of the Company.
These Options vest in increments of 1,667 Options over a three-year period.
In addition, the Option Plan provides for an annual grant to each non-
employee director of the Company of 2,000 Options which are immediately
exercisable. Options under the formula award provisions of the Option Plan
are exercisable at the fair market value of shares of Common Stock on the
date of grant.
Payment. The exercise price of Options granted under the Option Plan
is payable at the time of exercise in cash or, in the discretion of the
Option Plan Committee, in shares of Common Stock or other forms approved by
the Option Plan Committee. In the case of an Incentive Option, payment
must be made only pursuant to the express provisions with regard to
exercise that the Option Plan Committee determines to include in the
applicable Stock Award Agreement. Any payment method approved by the
Option Plan Committee must be consistent with applicable law, regulations
and rules as well as the terms and conditions of the Option Plan.
Stock Appreciation Rights. In connection with the grant of any Option,
the Option Plan Committee, in its sole discretion, may also grant an SAR,
which will relate to a specific Option granted to the Optionee. An SAR
entitles the Optionee to surrender to the Company, unexercised, all or any
part of that portion of the Option which then is exercisable and to receive
from the Company an amount equal to the difference between the aggregate
exercise price of the shares of Common Stock subject to the Option and the
fair market value, as determined under the Option Plan, of such shares on
the date of such exercise. Payment by the Company of any amount owing
pursuant to the exercise of an SAR may be made in shares of Common Stock,
cash or any combination of cash and shares, as determined in the sole
discretion of the Option Plan Committee. The determination of the Option
Plan Committee to include an SAR in an Incentive Option may be made only at
the time of the grant of the Incentive Option. The Option Plan Committee
may include an SAR in a Nonqualified Option at the time of the grant, and
any time thereafter until six months before the expiration of the
Nonqualified Option.
An SAR may be exercised only to the extent the Option to which it is
applicable is exercisable and may not be exercised unless both the SAR and
the related Option have been outstanding for more than six months. If, on
the date an Option expires, the exercise price of the Option is less than
the fair market value of the shares of Common Stock on such date, then any
SARs included in such Option is automatically deemed to be exercised as of
such date with respect to any portion of such Option that has not been
exercised or surrendered.
Restricted Shares. The Option Plan Committee may grant shares of
Common Stock which are subject to vesting conditions as an Award under the
Option Plan ("Restricted Shares"). The award of Restricted Shares may be
made at any time and for any year of the Option Plan. Restricted Shares
become vested, in full or in installments, upon satisfaction of the
conditions specified in the relevant Stock Award Agreement. The Option
Plan Committee selects the vesting conditions, which may be based upon the
recipient's service and/or performance, the Company's performance, or such
other criteria as the Committee may adopt. The Stock Award Agreement may
also provide for accelerated vesting in the event of the recipient's death,
disability or retirement. A recipient of Restricted Shares, as a condition
to their grant, may be required to pay the Company, in cash, an amount
equal to the par value of the Restricted Shares. Holders of Restricted
Shares have the same voting, dividend and other rights as the other holders
of Common Stock.
Stock Units. A Stock Unit is an unfunded and unsecured bookkeeping
entry representing the equivalent of one share of Common Stock which is
subject to certain vesting conditions (a "Stock Unit"). Holders of Stock
Units have no voting rights or other rights of a stockholder, but are
entitled to receive "Dividend Equivalents" in an amount equal to the amount
of cash dividends paid on the number of shares of Common Stock represented
by the Stock Units while the Stock Units are outstanding. Stock Units and
corresponding Dividend Equivalents will be settled at a time determined by
the Option Plan Committee and may be paid, in the discretion of the Option
Plan Committee, in the form of cash, shares of Common Stock or a
combination thereof.
Stock Units may be awarded in combination with Restricted Shares or
Nonqualified Options, and the Option Plan Committee may provide that the
Stock Units be forfeited in the event that the related Nonqualified Options
are exercised. No cash consideration will be required for an award of a
Stock Unit. The Option Plan Committee may grant Stock Units at anytime
during the term of the Option Plan. The Option Plan Committee, in its sole
discretion, selects the vesting conditions for each award of a Stock Unit.
The vesting conditions may be based upon the recipient's service or
performance, the Company's performance, or such other criteria that the
Option Plan Committee may adopt.
Amendments. The Board may, at any time and for any reason, amend or
terminate the Option Plan; provided, that any amendment to the Option Plan
will be subject to the approval of the Company's stockholders to the extent
required by applicable laws, regulations or rules. No amendment,
suspension or termination of the Option Plan will affect an Award granted
on or prior to the effective date of such amendment.
General Provisions. Neither the Option Plan nor the grant of any Award
thereunder gives any individual the right to remain employed by the Company
or any of its subsidiaries. The Option Plan does not inhibit the Company's
ability to terminate or modify the terms of the employment of any employee
at anytime, with or without cause. Participants in the Option Plan have no
rights with respect to dividends, voting or any other privileges accorded
to the Company's stockholders at the issuance of stock certificates for
shares of Common Stock. Recipients of Options have no obligation to
exercise such Options. Participants in the Option Plan have no rights or
interest under the Option Plan in any Option or shares of the Common Stock
prior to the grant of an Option, Restricted Share or Stock Unit.
New Plan Benefits
Because the Option Plan Committee has complete discretion to determine
the number and selection of Key Employees, as well as the recipients,
number, type, vesting requirements and other terms of any Award under the
Option Plan, it is not possible to determine the benefits or amounts, if
any, that will be received by or allocated to any person under the Option
Plan, except that each non-employee director of the Company will receive
Options pursuant to the formula award provisions of the Option Plan.
During fiscal year 1997, the Company granted 2,000 currenlty exercisable
Options pursuant to such formula award provisions to each of Messrs. Fresh
and Smith.
Federal Income Tax Consequences
The following tax discussion is a brief summary of federal income tax
law applicable to the Option Plan. The discussion is intended solely for
general information and omits certain information which does not apply
generally to all participants in the Option Plan.
Initial Grant of Options and SARs. A recipient of Options, whether
Nonqualified Options or Incentive Options, or SARs incurs no income tax
liability, and the Company obtains no deduction, from the grant of Options
or SARs.
Incentive Options. The holder of an Incentive Option is not subject to
federal income tax upon the exercise of the Incentive Option, and the
Company is not entitled to a tax deduction by reason of such exercise,
provided that the holder is still employed by the Company (or terminated
employment no longer than three months before the exercise date).
Additional exceptions to this exercise timing requirement apply upon the
death or disability of the Optionee. A sale of the shares of Common Stock
received upon the exercise of an Incentive Option which occurs both more
than one year after the exercise of the Incentive Option and more than two
years after the grant of the Incentive Option will result in the
realization of long-term capital gain or loss to the Optionee in the amount
of the difference between the amount realized on the sale and the exercise
price for such shares. Generally, upon a sale or disposition of the shares
prior to the foregoing holding requirements (referred to as a
"disqualifying disposition"), the Optionee will recognize ordinary
compensation income, and the Company will receive a corresponding
deduction, equal to the lesser of (i) the excess of the fair market value
of the shares on the date of transfer to the Optionee over the exercise
price or (ii) the excess of the amount realized on the disposition over the
exercise price.
The excess of the fair market value of the shares of Common Stock at
the time of the exercise of an Incentive Option over the Option price will
increase the Optionee's alternative minimum taxable income subject to the
alternative minimum tax, unless a subsequent disqualifying disposition
occurs in the same taxable year of the Optionee in which the Common Stock
was purchased.
Nonqualified Options. Upon the exercise of a Nonqualified Option, the
amount by which the fair market value of the shares of Common Stock on the
date of exercise exceeds the exercise price is taxed to the Optionee as
ordinary compensation income. The Company is generally entitled to a
deduction in the same amount, provided it satisfies certain requirements
relating to the terms of the Option and makes all required wage
withholdings on the compensation element attributable to the exercise. In
general, the Optionee's tax basis in the shares acquired by exercising a
Nonqualified Option is equal to the fair market value of such shares on the
date of exercise. Upon a subsequent sale of any such shares in a taxable
transaction, the Optionee will realize capital gain or loss in an amount
equal to the difference between the sale price and his or her basis in the
shares.
Restricted Shares. The recipient of an award of Restricted Shares must
recognize income in the first year that (i) the Restricted Shares become
transferable by the recipient or (ii) the Restricted Shares are not subject
to a substantial risk of forfeiture. The various vesting conditions
imposed upon the Restricted Shares in the applicable Stock Award Agreement
determine if the Restricted Shares are subject to a substantial risk of
forfeiture. The amount of income that must be recognized in connection
with a grant of Restricted Shares will be equal to the difference between
the fair market value of the Restricted Shares in the year that income is
recognized and the value paid by the recipient for the Restricted Shares.
The income recognized will be taxed as ordinary income. The tax basis in
the Restricted Shares will be the value paid by the recipient plus any
income recognized by the recipient.
A recipient may elect to recognize income in the year he or she
receives an award of Restricted Shares even if the Restricted Shares are
non-transferable and subject to a substantial risk of forfeiture. The
recipient will recognize as income the difference between the fair market
value of the Restricted Shares and the value paid for such Restricted
Shares. The tax basis in the Restricted Shares will be the value paid by
the recipient plus any income recognized by the recipient. By making such
election, the recipient can defer recognizing as income the increase in
value of the Restricted Shares during such period until the Restricted
Shares are sold or transferred. Upon the subsequent sale of any Restricted
Shares in a taxable transaction, the recipient will realize capital gain or
loss (long-term or short-term, depending on whether the Restricted Shares
were held for more than twelve months before the sale) in an amount equal
to the difference between the sale price and his or her basis in the
Restricted Shares.
Stock Units and SARs. Upon the exercise of an SAR and/or the payment
of Stock Units and corresponding Dividend Equivalents, a participant under
the Option Plan will recognize ordinary compensation income in the amount
of both the cash and the fair market value of the shares of Common Stock
received upon the exercise of the SAR or the payment of the Stock Unit and
Dividend Equivalent, and generally the Company will be entitled to a
corresponding deduction. In the event the participant receives shares of
Common Stock upon the exercise of the SAR or the payment of the Stock Unit
or Dividend Equivalent, any shares so acquired will have a tax basis equal
to their fair market value on the date of such exercise or payment, and the
holding period of the shares will commence on the day following that date.
Upon a subsequent sale of such shares, the participant will recognize
capital gain or loss (long-term or short-term, depending on whether the
shares were held for more than twelve months before the sale) in an amount
equal to the difference between the sale price and his or her basis in the
shares.
Withholding Tax Obligations. To the extent required by applicable
federal, state, local or foreign law, the recipient of any payment or
distribution under the Option Plan must make arrangements satisfactory to
the Company for the satisfaction of any withholding tax obligations that
arise by reason of such payment or distribution. The Company is not
required to make such payment or distribution until such obligations are
satisfied. The Committee may permit an Option Plan participant who
exercises a Nonqualified Option to satisfy all or part of his or her
withholding tax obligation by having the Company withhold a portion of the
Common Stock that otherwise would be issued to the participant under such
Nonqualified Option.
Approval of Amendment of Option Plan
Approval of the proposed amendment of the Option Plan requires that
votes cast in favor of the proposed amendment exceed votes cast against it.
The Board recommends a vote FOR amendment of the Option Plan to increase by
500,000 the number of shares of Common Stock, available for issuance
pursuant to grants under the Option Plan.
Certain Interests of Directors
In considering the recommendation of the Board with respect to the
amendment of the Option Plan, stockholders should be aware that the members
of the Board have certain interests which may present them with conflicts
of interest in connection with such proposal. As discussed above, all
directors, except those who may be serving as members of the Option Plan
Committee, are eligible to participate in the Option Plan. The Board
recognizes that adoption of the proposed amendment to the Option Plan may
benefit individual directors of the Company and their successors, but it
believes that approval of the amendment of the Option Plan will strengthen
the Company's ability to continue to attract, motivate and retain qualified
employees, officers and directors. As of June 1, 1997, current members of
the Board owned, in the aggregate, approximately 47.4% of the outstanding
shares of Common Stock. See "Principal Holders of Voting Securities."
<PAGE>
RATIFICATION OF SELECTION OF AUDITOR
AND CHANGES IN AUDITOR
The Audit Committee has recommended, and the Board has selected, the
firm of KPMG Peat Marwick LLP ("KPMG") of Salt Lake City, Utah, independent
certified public accountants, to audit the financial statements of the
Company for the fiscal year ending March 31, 1998, subject to ratification
by the shareholders. The Board anticipates that one or more
representatives of KPMG will be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions. The Board recommends that shareholders
vote FOR ratification of the appointment of KPMG as the Company's
independent auditor.
On July 14, 1995, upon the recommendation and approval of the Board,
Amacan engaged Tanner + Co. as independent auditor to audit Amacan's
financial statements for the year ending April 30, 1995. Upon consummation
of the Share Exchange on April 18, 1996, and pursuant to the recommendation
and approval of the Board, the Company determined to retain the services of
KPMG, who had served as the independent auditor of the Spire Companies
since October 1995, to audit the financial statements of the Company for
the fiscal year ending April 30, 1996, and to dismiss Tanner + Co. Tanner
+ Co.'s reports on Amacan's financial statements for the fiscal year ended
April 30, 1995 contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles. The Company had no disagreements with Tanner + Co. on any
matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved, would
have caused Tanner + Co. to make reference to the subject matter of the
disagreement in connection with its reports. In addition, during the two
fiscal years and the interim period preceding Tanner + Co.'s dismissal, the
Company had no reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K. No consultations occurred between the Company and KPMG
during the relevant fiscal year and any interim period preceding the recent
retention of KPMG regarding the application of accounting principles, the
type of audit opinion that might be rendered or other information
considered by the Company in reaching a decision as to an accounting,
auditing or financial reporting issue.
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no other
matters to be presented for action at the Annual Meeting. However, if any
further business should properly come before the meeting, the persons named
as proxies in the accompanying form will vote on such business in
accordance with their best judgment.
PROPOSALS OF SHAREHOLDERS
In order to be included in the proxy statement and form of proxy
relating to the Company's annual meeting of shareholders to be held in
1998, proposals which shareholders intend to present at such annual meeting
must be received by the corporate secretary of the Company, at the
Company's executive offices, 311 North State Street, Orem, Utah 84057, no
later than March 1, 1998.
ADDITIONAL INFORMATION
The Company will provide without charge to any person from whom a Proxy
is solicited by the Board, upon the written request of such person, a copy
of the Company's Annual Report on Form 10 KSB for the fiscal year ended
March 31, 1997, including the financial statements and schedules thereto
(as well as exhibits thereto, if specifically requested), required to be
filed with the Securities and Exchange Commission. Written requests for
such information should be directed to Brian W. Braithwaite, Secretary of
the Company, at 311 North State Street, Orem, Utah 84057.
<PAGE>
SENTO TECHNICAL
INNOVATIONS CORPORATION
STOCK INCENTIVE PLAN
<PAGE>
SENTO TECHNICAL
INNOVATIONS CORPORATION
STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 The Committee . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Disinterested Directors . . . . . . . . . . . . . . . . . 1
2.3 Committee Responsibilities . . . . . . . . . . . . . . . 1
3. LIMITATION ON AWARDS . . . . . . . . . . . . . . . . . . . . . 2
4. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 General Rule . . . . . . . . . . . . . . . . . . . . . . 2
4.2 Ten-Percent Stockholders . . . . . . . . . . . . . . . . 2
4.3 Attribution Rules . . . . . . . . . . . . . . . . . . . . 2
5. OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.1 Stock Option Agreement . . . . . . . . . . . . . . . . . 3
5.2 Options Nontransferable . . . . . . . . . . . . . . . . . 3
5.3 Number of Shares . . . . . . . . . . . . . . . . . . . . 3
5.4 Exercise Price . . . . . . . . . . . . . . . . . . . . . 3
5.5 Exercisability and Term . . . . . . . . . . . . . . . . . 3
5.6 Effect of Change in Control . . . . . . . . . . . . . . . 3
5.7 Modification, Extension and Renewal of Options . . . . . 4
5.8 Termination of Employment . . . . . . . . . . . . . . . 4
6. PAYMENT FOR OPTION SHARES . . . . . . . . . . . . . . . . . . 4
6.1 General Rule . . . . . . . . . . . . . . . . . . . . . . 4
6.2 Surrender of Stock . . . . . . . . . . . . . . . . . . . 5
6.3 Exercise/Sale . . . . . . . . . . . . . . . . . . . . . . 5
6.4 Exercise/Pledge . . . . . . . . . . . . . . . . . . . . . 5
6.5 Other Forms of Payment . . . . . . . . . . . . . . . . . 5
7. FORMULA AWARDS . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.2 Grants . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.3 Option Agreement . . . . . . . . . . . . . . . . . . . . 6
7.4 Formula Award Exercise Price . . . . . . . . . . . . . . 6
7.5 Exercisability . . . . . . . . . . . . . . . . . . . . . 6
7.6 Method of Payment . . . . . . . . . . . . . . . . . . . . 6
7.7 Term of Formula Awards . . . . . . . . . . . . . . . . . 6
7.8 Non-Transferability . . . . . . . . . . . . . . . . . . . 7
7.9 Limitation of Rights . . . . . . . . . . . . . . . . . . 7
7.10 Limitation as to Directorship . . . . . . . . . . . . . . 7
7.11 Capital Adjustments . . . . . . . . . . . . . . . . . . . 7
7.12 Termination of Formula Awards . . . . . . . . . . . . . . 7
7.13 Change in Control . . . . . . . . . . . . . . . . . . . . 8
7.14 Other Plan Provisions . . . . . . . . . . . . . . . . . . 8
8. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . 8
8.1 Grant of SARs . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Manner of Exercise of SARs . . . . . . . . . . . . . . . 8
8.3 Special Holding Period . . . . . . . . . . . . . . . . . 8
8.4 Special Exercise Window . . . . . . . . . . . . . . . . . 9
8.5 Limited SARs . . . . . . . . . . . . . . . . . . . . . . 9
9. RESTRICTED SHARES AND STOCK UNITS . . . . . . . . . . . . . . 9
9.1 Time, Amount and Form of Awards . . . . . . . . . . . . . 9
9.2 Payment for Awards . . . . . . . . . . . . . . . . . . . 9
9.3 Vesting Conditions . . . . . . . . . . . . . . . . . . . 9
9.4 Form of Settlement of Stock Units . . . . . . . . . . . . 9
9.5 Time of Settlement and Payment of Stock Units . . . . . . 10
9.6 Death of Recipient . . . . . . . . . . . . . . . . . . . 10
10. VOTING RIGHTS AND DIVIDENDS OR DIVIDEND EQUIVALENTS . . . . . 10
10.1 Restricted Shares . . . . . . . . . . . . . . . . . . . . 10
10.2 Stock Units . . . . . . . . . . . . . . . . . . . . . . . 10
11. PROTECTION AGAINST DILUTION . . . . . . . . . . . . . . . . . 11
11.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Reorganizations . . . . . . . . . . . . . . . . . . . . . 11
11.3 Reservation of Rights . . . . . . . . . . . . . . . . . . 11
12. LIMITATION OF RIGHTS . . . . . . . . . . . . . . . . . . . . . 11
12.1 Employment Rights . . . . . . . . . . . . . . . . . . . . 11
12.2 Stockholders' Rights . . . . . . . . . . . . . . . . . . 11
12.3 Creditors' Rights . . . . . . . . . . . . . . . . . . . . 12
12.4 Government Regulations . . . . . . . . . . . . . . . . . 12
13. LIMITATION ON PAYMENTS . . . . . . . . . . . . . . . . . . . . 12
13.1 Basic Rule . . . . . . . . . . . . . . . . . . . . . . . 12
13.2 Reduction of Payments . . . . . . . . . . . . . . . . . . 12
13.3 Overpayments and Underpayments . . . . . . . . . . . . . 13
13.4 Related Corporations . . . . . . . . . . . . . . . . . . 13
14. WITHHOLDING TAXES . . . . . . . . . . . . . . . . . . . . . . 13
14.1 General . . . . . . . . . . . . . . . . . . . . . . . 13
14.2 Nonstatutory Options . . . . . . . . . . . . . . . . . . 13
15. ASSIGNMENT OR TRANSFER OF AWARD . . . . . . . . . . . . . . . 14
16. FUTURE OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . 14
16.1 Term of the Plan . . . . . . . . . . . . . . . . . . . . 14
16.2 Amendment or Termination . . . . . . . . . . . . . . . . 14
16.3 Effect of Amendment or Termination . . . . . . . . . . . 14
17. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 14
18. EXECUTION . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION
STOCK INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
_________________________
The Plan was adopted by the Board on January 31, 1996, and was
approved by the Company's stockholders on April 18, 1996. The purpose of
the Plan is to promote the long-term success of the Company and the
creation of incremental stockholder value by (a) encouraging Key Employees
and Directors to focus on critical long-range objectives, (b) encouraging
the attraction and retention of Key Employees and Directors with
exceptional qualifications, and (c) linking Key Employees and Directors
directly to stockholder interests through increased stock ownership. The
Plan seeks to achieve this purpose by providing for Awards in the form of
Restricted Shares, Stock Units, Options, which may constitute incentive
stock options or nonstatutory stock options, or SARs. The Plan shall be
governed by, and construed in accordance with, the laws of the State of
Utah.
ARTICLE 2. ADMINISTRATION.
___________________________
2.1 The Committee. The Plan shall be administered by the Committee.
The Committee shall consist of two or more disinterested directors of the
Company, who shall be appointed by the Board. A member of the Committee
shall not be eligible to receive any Award under the Plan.
2.2 Disinterested Directors. A director shall be deemed to be
"disinterested" only if he or she satisfies such requirements as the SEC
may establish for disinterested administrators acting under plans intended
to qualify for exemption under Rule 16b-3 (or its successor) under the
Exchange Act.
2.3 Committee Responsibilities. The Committee shall select the Key
Employees and Directors who are eligible to receive Awards under the Plan,
determine the amount, vesting requirements and other conditions of such
Awards, interpret the Plan, and make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as
it deems appropriate to implement the Plan. The Committee's determinations
under the Plan shall be final and binding on all persons.
Notwithstanding the above or anything to the contrary in the Plan, the
Committee shall have no authority, discretion or power to select the
individuals who are or will be eligible to receive Formula Awards under
Article 7 of this Plan and shall not have any discretion to determine the
amount, price or timing of any Formula Awards granted or to be granted
under Article 7 of the Plan. Subject to the foregoing, the Committee shall
have the power, subject to, and within the limitations of, the express
provisions of Article 7 of this Plan:
(i) To construe and interpret Article 7 of this Plan and
any Formula Award, to construe or interpret any conditions or
restrictions imposed on Common Shares acquired pursuant to the
exercise of a Formula Award, to define the terms used herein and
to establish, amend and revoke rules and regulations for
administration of such Article 7. The Committee in the exercise
of this power may correct any defect, omission or inconsistency
in Article 7 hereof or in any Formula Award Agreement, in a
manner and to the extent it shall deem necessary or expedient to
make such Article 7 fully effective; and
(ii) To recommend amendment, modification, suspension or
termination of Article 7 of this Plan by the Board in accordance
with Article 16 hereof, and to recommend to shareholders
amendments to, or termination of, such Article 7.
ARTICLE 3. LIMITATION ON AWARDS.
_________________________________
The aggregate number of Restricted Shares, Stock Units and Options
awarded under the Plan shall not exceed 1,000,000. If any Restricted
Shares, Stock Units or Options are forfeited or if any Options terminate
for any other reason before being exercised, then such Restricted Shares,
Stock Units or Options shall again become available for Awards under the
Plan. However, if Options are surrendered upon the exercise of related
SARs, then such Options shall not be restored to the pool available for
Awards. Any dividend equivalents distributed under the Plan shall not be
applied against the number of Restricted Shares, Stock Units or Options
available for Awards, whether or not such dividend equivalents are
converted into Stock Units. In addition, the maximum number of Restricted
Shares, Stock Units and Options which may be granted to any single
Participant during any one (1) Award Year is 100,000. The limitations set
forth in this Article 3 shall be subject to adjustment pursuant to Article
11. Any Common Shares issued pursuant to the Plan may be authorized but
unissued shares or treasury shares.
ARTICLE 4. ELIGIBILITY.
________________________
4.1 General Rule. Only Key Employees and Directors shall be eligible
for designation as Participants by the Committee.
4.2 Ten-Percent Stockholders. A Key Employee who owns more than 10%
of the total combined voting power of all classes of outstanding stock of
the Company or any of its Subsidiaries shall not be eligible for the grant
of an ISO unless (a) the Exercise Price under such ISO is at least 110% of
the Fair Market Value of a Common Share on the date of grant and (b) such
ISO by its terms is not exercisable after the expiration of five years from
the date of grant.
4.3 Attribution Rules. For purposes of Section 4.2, the number of
shares owned by a Key Employee shall be determined in accordance with the
attribution rules as set forth in the Code and the regulations promulgated
thereunder, as they may be amended or modified from time to time.
ARTICLE 5. OPTIONS.
____________________
5.1 Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and
conditions of the Plan and may be subject to any other terms and conditions
which are not inconsistent with the Plan and which the Committee deems
appropriate for inclusion in a Stock Option Agreement. The provisions of
the various Stock Option Agreements entered into under the Plan need not be
identical. The Committee may designate all or any part of an Option as an
ISO; provided, however, that only Key Employees will be eligible to receive
an ISO, and the Stock Option Agreement evidencing the ISO shall contain
such terms and conditions as may be necessary in the opinion of the
Committee to qualify them as incentive stock options under Section 422 of
the Code.
5.2 Options Nontransferable. No Option granted under the Plan shall
be transferable by the Optionee other than by will or by the laws of
descent and distribution, and no Option may be exercised during the
lifetime of the Optionee except by him or her. No option or interest
therein may be transferred, assigned, pledged or hypothecated by the
Optionee during his or her lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process.
5.3 Number of Shares. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 11. The Stock Option
Agreement shall also specify whether the Option is an ISO or an NSO.
5.4 Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. Subject to the preceding two sentences, the Exercise Price
under any Option shall be determined by the Committee. In the case of an
ISO, the Exercise Price shall not be less than 100% of the Fair Market
Value of a Common Share on the date of grant. The Exercise Price shall be
payable in accordance with Article 6.
5.5 Exercisability and Term. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option. The term of an ISO shall in no event exceed 10 years from the date
of grant, and Section 4.2 may require a shorter term. Subject to Sections
5.8, 8.3 and 8.4 and the preceding sentence, the Committee shall determine
when all or any part of an Option (and any SARs included therein) is to
become exercisable and when such Option is to expire. A Stock Option
Agreement may provide for accelerated exercisability in the event of the
Optionee's death, disability or retirement. NSOs may also be awarded in
combination with Restricted Shares or Stock Units, and such an Award may
provide that the NSOs will not be exercisable unless the related Restricted
Shares or Stock Units are forfeited.
5.6 Effect on Change in Control. The Committee (at its sole
discretion) may determine, at the time of granting an Option or thereafter,
that such Option (and any SARs included therein) shall become fully
exercisable as to all Common Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company. If the
Committee finds that there is a reasonable possibility that, within the
succeeding six months, a Change in Control will occur with respect to the
Company, then the Committee may determine that all outstanding Options (and
any SARs included therein) shall become fully exercisable as to all Common
Shares subject to such Options.
5.7 Modification, Extension and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend or renew
outstanding Options or may accept the cancellation of outstanding Options
(to the extent not previously exercised) in return for the grant of new
Options at the same or a different price. The foregoing notwithstanding,
no modification of an Option shall, without the consent of the Optionee,
alter or impair his or her rights or obligations under such Option.
5.8 Termination of Employment. Except as otherwise expressly
provided by the Committee in a Stock Option Agreement, or amendment
thereto:
(i) If an Optionee's service as a Director or employment with
the Company or a Subsidiary terminates for any reason other than
Cause, the Optionee may for a period of ninety (90) days after such
termination exercise his or her Options to the extent, and only to the
extent, that such Options or portion thereof were vested and
exercisable as of the date the Optionee's service as a Director or
employment with the Company or a Subsidiary terminated, after which
time the unexercised portion of any Options shall automatically
terminate in full.
(ii) If an Optionee's service as a Director or employment with
the Company or a Subsidiary terminates for Cause, the unexercised
portion of any Options granted to the Optionee hereunder shall
immediately terminate in full and no rights or Options thereunder may
be exercised.
This Section 5.8 shall not be construed to extend the term of any Option or
to permit anyone to exercise any Option after the expiration of its term,
nor shall it be construed to increase the number of Common Shares as to
which any Option is exercisable from the amount exercisable on the date of
termination of the Optionee's service as a Director or employment with the
Company or a Subsidiary.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
______________________________________
6.1 General Rule. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash at the time when such
Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment
shall be made only pursuant to the express provisions of the
applicable Stock Option Agreement. However, the Committee may
specify in the Stock Option Agreement that payment may be made
pursuant to Section 6.2, 6.3, 6.4 or 6.5.
(b) In the case of an NSO, the Committee may at any time
accept payment pursuant to Section 6.2, 6.3, 6.4 or 6.5.
6.2 Surrender of Stock. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made
with Common Shares which have already been owned by the Optionee for more
than six months and which are surrendered to the Company. Such Common
Shares shall be valued at their Fair Market Value on the date when the new
Common Shares are purchased under the Plan. In the event that the Common
Shares being surrendered are Restricted Shares that have not yet become
vested, the same restrictions shall be imposed upon the new Common Shares
being purchased.
6.3 Exercise/Sale. To the extent this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company)
of an irrevocable direction to a securities broker approved by the Company
to sell Common Shares and to deliver all or part of the sales proceeds to
the Company in payment of all or part of the Exercise Price and any
withholding taxes. This Section 6.3 shall be inapplicable to a person who
is considered a director or officer of the Company, to the extent required
by Section 16 of the Exchange Act or any rule thereunder.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is
applicable, payment may be made by the delivery (on a form prescribed by
the Company) of an irrevocable direction to pledge Common Shares to a
securities broker or lender approved by the Company as security for a loan
and to deliver all or part of the loan proceeds to the Company in payment
of all or part of the Exercise Price and any withholding taxes.
6.5 Other Forms of Payment. To the extent that this Section 6.5 is
applicable, payment may be made in any other form approved by the
Committee, consistent with applicable laws, regulations and rules.
ARTICLE 7. FORMULA AWARDS.
___________________________
7.1 General. The provisions of this Article 7 are applicable only to
Options granted to Non-Employee Directors pursuant to Section 7.2 below.
All other Options granted to Directors and Key Employees under the Plan
shall be governed by the provisions of Articles 5 and 6.
7.2 Grants.
(a) Initial Grant to New Directors. Subject to the limitation
in Section 7.12, on the date on which an individual who is not a full-time
employee of the Company or a Subsidiary first becomes a Director, whether
by election or appointment, that Non-Employee Director shall automatically
be granted NSOs to purchase 5,000 Common Shares (the "Initial Grant").
(b) Annual Grants. Subject to the limitation in Section 7.12,
NSOs to purchase 2,000 Common Shares shall be granted automatically each
year on the date of the annual meeting of the shareholders of the Company
(the "Annual Meeting") to each individual who is elected to serve or
continues to serve as a Non-Employee Director following the Annual Meeting
and who is not entitled to receive an Initial Grant pursuant to Section
7.2(a) immediately following the Annual Meeting. All of such NSOs shall be
fully vested and exercisable on the date of grant and shall not be subject
to the vesting schedule set forth in Section 7.5.
7.3 Option Agreement. Each Formula Award granted under this Article
7 shall be evidenced by a Formula Award Agreement duly executed on behalf
of the Company and by the Non-Employee Director to whom such Formula Award
is granted and dated as of the applicable date of grant. All Formula
Awards granted under this Article 7 shall be nonstatutory options not
intended to qualify under Section 422 of the Code.
7.4 Formula Award Exercise Price. The exercise price of the Common
Shares subject to each Formula Award shall be 100% of the Fair Market Value
for such Common Shares on the date the Formula Award is granted.
7.5 Exercisability. Except as otherwise set forth in Section 7.7 or
7.13, a Formula Award granted pursuant to Section 7.2(a) shall vest and
become exercisable in three equal installments on the first, second and
third anniversaries of the date of grant. If an Optionee ceases to serve
as a Director for any reason, the Optionee shall have no rights with
respect to that portion of a Formula Award which has not yet vested in
accordance with this Section or Section 7.13.
7.6 Method of Payment. A Formula Award may be exercised, in whole or
in part, by giving written notice to the Company specifying the number of
Common Shares to be purchased pursuant thereto. Such notice shall be
accompanied by payment in full of the purchase price in cash or in Common
Shares already owned by the Optionee as provided by Section 6.2. In
addition, payment may also be made (i) by delivery (on a form prescribed by
the Committee) of an irrevocable direction to a securities broker approved
by the Committee to sell Common Shares and to deliver all or part of the
sales proceeds to the Company in payment of all or part of the Exercise
Price and any withholding taxes as provided by Section 6.3 or (ii) by the
delivery (on a form prescribed by the Committee) of an irrevocable
direction to pledge Common Shares to a securities broker or lender approved
by the Committee as security for a loan and to deliver all or part of the
loan proceeds to the Company in payment of all or part of the Exercise
Price and any withholding taxes as provided by Section 6.4.
7.7 Term of Formula Awards. Each Formula Award shall expire five (5)
years from its date of grant, but shall be subject to earlier termination
as follows:
(a) If an Optionee's service as a Director terminates for
any reason other than Cause, the Optionee may for a period of one
(1) year after such termination exercise his or her Formula
Awards to the extent, and only to such extent, that such Formula
Awards or portions thereof were vested and exercisable as of the
date the Optionee's service as a Director terminated, after which
time the unexercised portion of any Formula Awards shall
automatically terminate in full.
(b) If an Optionee's service as a Director terminates for
Cause, the unexercised portions of any Formula Awards granted to
the Optionee hereunder shall immediately terminate in full and no
rights or Options thereunder may be exercised.
This Section 7.7 shall not be construed to extend the term of any Formula
Award or to permit anyone to exercise any Formula Award after the
expiration of its term nor shall it be construed to increase the number of
Common Shares as to which any Formula Award is exercisable from the amount
exercisable on the date of termination of the Optionee's service as a
Director.
7.8 Non-Transferability. No Formula Award granted hereunder shall be
transferable by the Optionee to whom it was granted otherwise than by will
or the laws of descent and distribution, and a Formula Award may be
exercised during the lifetime of such Optionee only by the Optionee or his
or her guardian or legal representative.
7.9 Limitation of Rights. Neither the recipient of a Formula Award
under this Article 7 nor the recipient's successor or successors in
interest shall have any rights as a shareholder of the Company with respect
to any Common Shares subject to a Formula Award granted to such person
until the date of issuance of a stock certificate for such Common Shares,
except as provided in Article 11.
7.10 Limitation as to Directorship. Neither this Article 7 nor the
granting of a Formula Award, nor any other action taken pursuant to this
Article 7, shall constitute or be evidence of any agreement or
understanding, express or implied, that a Director has a right to continue
as a Director for any period of time or at any particular rate of
compensation.
7.11 Capital Adjustments. The number and class of shares subject to
each Formula Award and the exercise price per share specified in such
Formula Award Agreement shall be proportionately adjusted as provided in
Article 11 in the event of any of the capital adjustments described in
Article 11.
7.12 Termination of Formula Awards. Notwithstanding any provision to
the contrary, no Formula Award shall be granted pursuant to Section 7.2 on
a date when the number of Common Shares authorized for issuance pursuant to
the Plan and then available for issuance pursuant to the new Formula Awards
is less than the aggregate number of such Common Shares which would be
issuable pursuant to Formula Awards otherwise required to be granted on
such date assuming the full vesting and exercise of such Formula Awards.
In the event Formula Awards are not granted as a result of the application
of this Section 7.12, no Formula Award shall thereafter be granted pursuant
to the Plan.
7.13 Change in Control. In the event that a Change in Control occurs
with respect to the Company, then each outstanding Formula Award granted
hereunder shall become fully exercisable as to all Common Shares subject to
Formula Award.
7.14 Other Plan Provisions. All provisions of the Plan not
inconsistent with this Article 7 shall apply to Formula Awards granted to
Directors, except that the provisions of Articles 5, 6 and 8 shall not
apply to the grant of Formula Awards. In the event of any conflict between
a provision of this Article 7 and a provision in any other Article of the
Plan, such provision of this Article 7 shall be deemed to control with
respect to Formula Awards.
ARTICLE 8. STOCK APPRECIATION RIGHTS.
______________________________________
8.1 Grant of SARs. Each Option granted under Article 5 of the Plan
may, at the discretion of the Committee, include a SAR. Such SAR shall
entitle the Optionee (or any person having the right to exercise the Option
after his or her death) to surrender to the Company, unexercised, all or
any part of that portion of the Option which then is exercisable and to
receive from the Company Common Shares and cash, or a combination of Common
Shares and cash, as the Committee shall determine. If a SAR is exercised,
the number of Common Shares remaining subject to the related Option shall
be reduced accordingly, and vice versa. The amount of cash and/or the Fair
Market Value of Common Shares received upon exercise of a SAR shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the
date of surrender) of the Common Shares subject to the surrendered portion
of the Option exceeds the Exercise Price. In no event shall any SAR be
exercised if such Fair Market Value does not exceed the Exercise Price.
The discretion of the Committee to include a SAR in an ISO may be exercised
only at the time of the grant of such ISO. The discretion of the Committee
to include a SAR in an NSO may be exercised at the time of the grant of
such NSO or at any subsequent time, but not later than six months before
the expiration of such NSO.
8.2 Manner of Exercise of SARs. A SAR may be exercised by written
notice to the Company. Subject to Sections 8.3 and 8.4, a SAR may be
exercised to the extent, and only to the extent, that the Option in which
it is included is exercisable. If, on the date when an Option expires, the
Exercise Price under such Option is less than the Fair Market Value on such
date but any portion of such Option has not been exercised or surrendered,
then any SAR included in such Option shall automatically be deemed to be
exercised as of such date with respect to such portion.
8.3 Special Holding Period. To the extent required by Section 16 of
the Exchange Act or any rule thereunder, a SAR shall not be exercised for
cash unless both it and the related Option have been outstanding for more
than six months. If the Stock Option Agreement so provides, this Section
8.3 shall not apply in the event of the Optionee's death or disability.
8.4 Special Exercise Window. To the extent required by Section 16 of
the Exchange Act or any rule thereunder, a SAR may only be exercised for
cash during a period which (a) begins on the third business day following a
date when the Company's quarterly summary statement of sales and earnings
is released to the public and (b) ends on the 12th business day following
such date. This Section 8.4 shall not apply if the exercise occurs
automatically on the date when the related Option expires, and the
Committee may determine that it shall not apply to limited SARs granted
under Section 8.5.
8.5 Limited SARs. An Option granted under the Plan may, at the
discretion of the Committee, provide that it will be exercisable as a SAR
only in the event of a Change in Control.
ARTICLE 9. RESTRICTED SHARES AND STOCK UNITS.
______________________________________________
9.1 Time, Amount and Form of Awards. The Committee may grant
Restricted Shares or Stock Units with respect to an Award Year during such
Award Year or at any time thereafter. The amount of each Award of
Restricted Shares or Stock Units shall be determined by the Committee.
Awards under the Plan may be granted in the form of Restricted Shares, in
the form of Stock Units, or in any combination of both, as the Committee
shall determine at its sole discretion at the time of the grant.
Restricted Shares or Stock Units may also be awarded in combination with
NSOs, and such an Award may provide that the Restricted Shares or Stock
Units will be forfeited in the event that the related NSOs are exercised.
9.2 Payment for Awards. To the extent that an Award is granted in
the form of Restricted Shares, the Committee may require the Award
recipient, as a condition to the grant of such Award, to pay the Company in
cash an amount equal to the par value of such Restricted Shares. To the
extent that an Award is granted in the form of Stock Units, no cash
consideration shall be required of Award recipients.
9.3 Vesting Conditions. Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction of
the conditions specified in the Stock Award Agreement. The Committee shall
select the vesting conditions, which may be based upon the Participant's
service, the Participant's performance, the Company's performance or such
other criteria as the Committee may adopt. A Stock Award Agreement may
also provide for accelerated vesting in the event of the Participant's
death, disability or retirement. The Committee (at its sole discretion)
may determine, at the time of making an Award or thereafter, that such
Award shall become fully vested in the event that a Change in Control
occurs with respect to the Company.
9.4 Form of Settlement of Stock Units. Settlement of vested Stock
Units may be made in the form of cash, in the form of Common Shares, or in
any combination of both, as the Committee shall determine at or before the
time when distribution commences. The Committee may designate a method of
converting Stock Units into cash, including (without limitation) a method
based on the Fair Market Value of Common Shares over a series of trading
days. Until an Award of Stock Units is settled, the number of such Stock
Units shall be subject to adjustment pursuant to Article 11.
9.5 Time of Settlement and Payment of Stock Units. Settlement of
vested Stock Units shall be made on the date or dates set forth in the
applicable Stock Award Agreement and may be settled in a lump sum or in
installments. Subject to the provisions set forth below in this Section
9.5, the Committee shall determine when all or any part of a settlement of
Stock Units is to be paid, and it may modify its original determination
with respect to the time of payment at any time before settlement of the
Stock Units is completed. If Stock Units, or any portion thereof, are
settled in the form of cash, payment may occur or commence on the
Settlement Date, or it may be deferred to any later date and may be paid in
a lump sum or in installments. If the Stock Units, or any portion thereof,
are settled in the form of Common Shares, a certificate representing the
applicable number of Common Shares shall be issued to the Participant
within a reasonable time following the Settlement Date. The Committee may
also permit Participants to request a deferral of any payment under this
Section 9.5. In the case of any deferred payment, the Committee may
increase the amount of such payment by an interest factor or by dividend
equivalents, as it deems appropriate.
9.6 Death of Recipient. Any Stock Units which become payable after
the recipient's death shall be delivered or distributed to the recipient's
beneficiary of beneficiaries. Each recipient of Stock Units under the Plan
shall designate one or more beneficiaries for this purpose by filing the
prescribed form with the Company. A beneficiary designation may be changed
by filing the prescribed form with the Company at any time before the Award
recipient's death. If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units which become
payable after the recipient's death shall be delivered or distributed to
the recipient's estate. The Committee, at its sole discretion, shall
determine the form and time of any distribution(s) to a recipient's
beneficiary or estate.
ARTICLE 10. VOTING RIGHTS AND DIVIDENDS OR DIVIDEND EQUIVALENTS.
_________________________________________________________________
10.1 Restricted Shares. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders.
10.2 Stock Units. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan shall carry with it a right to dividend equivalents. Such right
entitles the holder to be credited with an amount equal to all cash
dividends paid on one Common Share while the Stock Unit is outstanding.
Dividend equivalents may be converted into additional Stock Units. The
Committee shall determine at what time(s) any dividend equivalents are to
be paid. Payment of dividend equivalents may be made in the form of cash,
in the form of Common Shares, or in a combination of both. Prior to
payment, any dividend equivalents which are not paid on or about the date
when dividends on Common Shares are paid shall be subject to the same
conditions and restrictions (including, without limitation, any forfeiture
conditions) as the Stock Units to which they attach. The Committee, at its
sole discretion, shall make all determinations relating to dividend
equivalents.
ARTICLE 11. PROTECTION AGAINST DILUTION.
_________________________________________
11.1 General. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration
of a dividend payable in a form other than Common Shares in an amount that
has a material effect on the price of Common Shares, a combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization or a
similar occurrence, the Committee shall make appropriate adjustments in one
or more of (a) the number of Options, Restricted Shares and Stock Units
available for future Awards under Section 3.1, (b) the number of Stock
Units included in any prior Award which has not yet been settled, (c) the
number of Common Shares covered by each outstanding Option or (d) the
Exercise Price under each outstanding Option.
11.2 Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, Restricted Shares and
Stock Units shall be subject to the agreement of merger or reorganization.
Such agreement may provide, without limitation, for the assumption of
outstanding Awards by the surviving corporation or its parent, for their
continuation by the Company (if the Company is a surviving corporation),
for accelerated vesting or for settlement in cash.
11.3 Reservation of Rights. Except as provided in this Article 11, a
Participant shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any stock
dividend or any other increase or decrease in the number of shares of stock
of any class. Any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the
number or Exercise Price of Common Shares subject to an Option. The grant
of an Award pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge
or consolidate or to dissolve, liquidate, sell or transfer all or any part
of its business or assets.
ARTICLE 12. LIMITATION OF RIGHTS.
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12.1 Employment Rights. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain employed
by the Company or a Subsidiary. The Company and its Subsidiaries reserve
the right to terminate the employment of any employee at any time, with or
without cause, subject only to a written employment agreement (if any).
12.2 Stockholders' Rights. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the issuance of a stock
certificate for such Common Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date
when such certificate is issued, except as expressly provided in Articles
9, 10 and 11.
12.3 Creditors' Rights. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Stock Award Agreement.
12.4 Government Regulations. Any other provision of the Plan
notwithstanding, the obligations of the Company with respect to Common
Shares to be issued pursuant to the Plan shall be subject to all applicable
laws, rules and regulations and such approvals by any governmental agencies
as may be required. The Company reserves the right to restrict, in whole
or in part, the delivery of Common Shares pursuant to any Award until such
time as:
(a) Any legal requirements or regulations have been met
relating to the issuance of such Common Shares or to their
registration, qualification or exemption from registration or
qualification under the Securities Act of 1933, as amended, or
any applicable state securities laws; and
(b) Satisfactory assurances have been received that such
Common Shares, when issued, will be duly listed or quoted on The
NASDAQ Stock Market (National Market System) or any other
securities exchange or quotation system on which Common Shares
are then listed or quoted.
ARTICLE 13. LIMITATION ON PAYMENTS.
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13.1 Basic Rule. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or
transfer by the Company to or for the benefit of a Key Employee, whether
paid or payable (or transferred or transferable) pursuant to the terms of
this Plan or otherwise (a "Payment"), would be nondeductible by the Company
for federal income tax purposes because of the provisions concerning
"excess parachute payments" in Section 280G of the Code, then the aggregate
present value of all Payments shall be reduced (but not below zero) to the
Reduced Amount; provided, that the Committee, at the time of making an
Award under this Plan or at any time thereafter, may specify in writing
that such Award shall not be so reduced and shall not be subject to this
Article 13. For purposes of this Article 13, the "Reduced Amount" shall be
the amount, expressed as a present value, which maximizes the aggregate
present value of the Payments without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code.
13.2 Reduction of Payments. If the Auditors determine that any
Payment would be nondeductible by the Company because of Section 280G of
the Code, then the Company shall promptly give the Key Employee notice to
that effect and a copy of the detailed calculation thereof and of the
Reduced Amount, and the Key Employee may then elect, in his or her sole
discretion, which and how much of the Payments shall be eliminated or
reduced (as long as after such election the aggregate present value of the
Payments equals the Reduced Amount) and shall advise the Company in writing
of his or her election within 10 days of receipt of notice. If no such
election is made by the Key Employee within such 10-day period, then the
Company may elect which and how much of the Payments shall be eliminated or
reduced (as long as after such election the aggregate present value of the
Payments equals the Reduced Amount) and shall notify the Key Employee
promptly of such election. For purposes of this Article 13, present value
shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 13 shall be binding
upon the Company and the Key Employee and shall be made within 60 days of
the date when a payment becomes payable or transferable. As promptly as
practicable following such determination and the elections hereunder, the
Company shall pay or transfer to or for the benefit of the Key Employee
such amounts as are then due to him or her under the Plan and shall
promptly pay or transfer to or for the benefit of the Key Employee in the
future such amounts as become due to him or her under the Plan.
13.3 Overpayments and Underpayments. As a result of uncertainty in
the application of Section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will
have been made by the Company which should not have been made (an
"Overpayment") or that additional Payments which will not have been made by
the Company could have been made (an "Underpayment"), consistent in each
case with the calculation of the Reduced Amount hereunder. In the event
that the Auditors, based upon the assertion of a deficiency by the Internal
Revenue Service against the Company or the Key Employee which the Auditors
believe has a high probability of success, determine that an Overpayment
has been made, such Overpayment shall be treated for all purposes as a loan
to the Key Employee which he or she shall repay to the Company, together
with interest at the applicable federal rate provided in Section 7872(f)(2)
of the Code; provided, however, that no amount shall be payable by the Key
Employee to the Company if and to the extent that such payment would not
reduce the amount which is subject to taxation under Section 4999 of the
Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the
Company to or for the benefit of the Key Employee, together with interest
at the applicable federal rate provided in Section 7872(f)(2) of the Code.
13.4 Related Corporations. For purposes of this Article 13, the term
"Company" shall include affiliated corporations to the extent determined by
the Auditors in accordance with Section 280G(d)(5) of the Code.
ARTICLE 14. WITHHOLDING TAXES.
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14.1 General. To the extent required by applicable federal, state,
local or foreign law, the recipient of any payment or distribution under
the Plan shall make arrangements satisfactory to the Company for the
satisfaction of any withholding tax obligations that arise by reason of
such payment or distribution. The Company shall not be required to make
such payment or distribution until such obligations are satisfied.
14.2 Nonstatutory Options. The Committee may permit an Optionee who
exercises NSOs to satisfy all or part of his or her withholding tax
obligations by having the Company withhold a portion of the Common Shares
that otherwise would be issued to him or her under such NSOs. Such Common
Shares shall be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash. The payment of withholding taxes by
surrendering Common Shares to the Company, if permitted by the Committee,
shall be subject to such restrictions as the Committee may impose,
including any restrictions required by rules of the Securities and Exchange
Commission.
ARTICLE 15. ASSIGNMENT OR TRANSFER OF AWARD.
_____________________________________________
Any Award granted under the Plan shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of
law. Any act in violation of this Article 15 shall be void. However, this
Article 15 shall not preclude a Participant from designating a beneficiary
who will receive any undistributed Awards in the event of the Participant's
death, nor shall it preclude a transfer by will or by the laws of descent
and distribution.
ARTICLE 16. FUTURE OF THE PLAN.
________________________________
16.1 Term of the Plan. The Plan, as set forth herein, became
effective on January 31, 1996, subject to receipt of shareholder approval.
The Plan was amended by the Board as of September 10, 1996, in order to
change the name of the Plan and to included in the Plan the provisions now
included in Article 7 and other provisions related thereto. The Plan shall
remain in effect until it is terminated under Section 16.2, except that no
ISOs shall be granted after January 31, 2006.
16.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. However, any amendment of the Plan
shall be subject to the approval of the Company's stockholders to the
extent required by applicable laws, regulations or rules. Notwithstanding
the above, the provisions of the Plan governing (i) the number of Formula
Awards to be awarded to a Non-Employee Director pursuant to Article 7, (ii)
the number of Common Shares to be covered by such Formula Awards, (iii) the
exercise price per Common Share under each such Formula Award, and (iv)
when and under what circumstances each such Formula Award may be exercised
shall not be amended more often than once every six (6) months, other than
to comport with changes in the Code, the Employee Retirement Income
Security Act, the Exchange Act or the rules thereunder.
16.3 Effect of Amendment or Termination. No Awards shall be made
under the Plan after the termination thereof. The termination of the Plan,
or any amendment thereof, shall not affect any Option, Restricted Share or
Stock Unit previously granted under the Plan.
ARTICLE 17. DEFINITIONS.
_________________________
17.1 "Award" means any award of an Option (with or without a related
SAR), a Restricted Share or a Stock Unit under the Plan.
17.2 "Award Year" means a calendar year with respect to which an Award
may be granted.
17.3 "Board" means the Company's Board of Directors, as constituted
from time to time.
17.4 "Cause" means the commission of an act of fraud or intentional
misrepresentation or an act of embezzlement, misappropriation or conversion
of assets or opportunities of the Company or any direct or indirect
majority-owned subsidiary of the Company.
17.5 "Change in Control" means the occurrence of any of the following
events:
(a) A change in control required to be reported pursuant to
Item 6(e) of Schedule 14A of Regulation 14A under the Exchange
Act;
(b) A change in the composition of the Board, as a result
of which fewer than two-thirds of the incumbent directors are
directors who either (i) had been directors of the Company 24
months prior to such change, or (ii) were elected, or nominated
for election, to the Board with the affirmative votes of at least
a majority of the directors who had been directors of the Company
24 months prior to such change and who were still in office at
the time of the election or nomination; or
(c) Any "person" (as such term is used in Section 13(d) of
the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more
of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of
directors (the "Base Capital Stock"); provided, however, that any
change in the relative beneficial ownership of securities of any
person resulting solely from a reduction in the aggregate number
of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly
or indirectly, such person's beneficial ownership of any
securities of the Company.
17.6 "Code" means the Internal Revenue Code of 1986, as amended.
17.7 "Committee" means the Compensation Committee of the Board, as
constituted from time to time.
17.8 "Common Share" means one share of the common stock of the
Company.
17.9 "Company" means Sento Technical Innovations Corporation, a Utah
corporation.
17.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
17.11 "Exercise Price" means the amount for which one Common Share
may be purchased upon exercise of an Option, as specified by the Committee
in the applicable Stock Option Agreement.
17.12 "Fair Market Value" shall mean the closing price of a Common
Share on the trading day immediately preceding the day in question, as
reported by The Nasdaq Stock Market (National Market System) or by such
other exchange or quotation system on which the Common Shares are listed or
quoted.
17.13 "Fiscal Year" means the fiscal year of the Company.
17.14 "Formula Award" means an NSO to purchase Common Shares
granted to a Non-Employee Director pursuant to the provisions of Article 7
of this Plan.
17.15 "Formula Award Agreement" means the written agreement
between the Company and Optionee evidencing the grant of a Formula Award
and containing the terms and conditions pertaining to the Formula Award.
17.16 "ISO" means an incentive stock option described in Section
422 of the Code.
17.17 "Key Employee" means a key employee of the Company or any
Subsidiary, as determined by the Committee.
17.18 "NSO" means an employee stock option not described in
Sections 422 through 424 of the Code.
17.19 "Non-Employee Director" means a member of the Board who is
not an employee of the Company.
17.20 "Option" means an ISO or NSO granted under the Plan and
entitling the holder
to purchase one Common Share.
17.21 "Optionee" means an individual who holds an Option.
17.22 "Participant" means a Key Employee who has received an
Award.
17.23 "Plan" means this Sento Technical Innovations Corporation
Stock Incentive Plan, as it may be amended from time to time.
17.24 "Restricted Share" means a Common Share awarded to a
Participant under the Plan subject to vesting conditions.
17.25 "SAR" means a stock appreciation right granted under the
Plan as part of an Option or as a subsequent addition to an Option.
17.26 "Stock Award Agreement" means the agreement between the
Company and the recipient of a Restricted Share or Stock Unit which
contains the terms, conditions and restrictions pertaining to such
Restricted Share or Stock Unit.
17.27 "Stock Option Agreement" means the agreement between the
Company and an Optionee which contains the terms, conditions and
restrictions pertaining to his or her Option.
17.28 "Stock Unit" means a bookkeeping entry representing the
equivalent of one Common Share and awarded to a Participant under the Plan.
17.29 "Subsidiary" means any corporation, if the Company and/or
one or more other Subsidiaries own not less than 50% of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
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ARTICLE 18. EXECUTION.
_______________________
To record the adoption of the Plan by the Board and approval by the
stockholders, the Company has caused its duly authorized officer to affix
the corporate name and seal hereto.
SENTO TECHNICAL INNOVATIONS
CORPORATION, a Utah corporation
By /s/ Robert K. Bench
Robert K. Bench, President
