<PAGE> 1
DATAMARK HOLDING, INC.
448 E. 6400 S., SUITE 400
SALT LAKE CITY, UTAH 84107
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 21, 1997
TO THE STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of DataMark Holding, Inc. (the "Company"), which will be
held at the Company's offices at 448 E. 6400 S., Suite 400, Salt Lake City,
Utah, on Friday, November 21, 1997, at 10:00 a.m.
Mountain time, to consider and act upon the following matters;
1. The election of six directors;
2. To consider and vote upon a proposal to approve the Amended and
Restated DataMark Holding, Inc. Stock Incentive Plan (formerly
the Omnibus Stock Option Plan);
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the year ending June 30, 1998;
and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments of the Annual Meeting.
Only holders of record of Common Stock of the Company at the close of
business on September 30, 1997 will be entitled to notice of and to vote at the
Annual Meeting and any adjournments of the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE
ANNUAL MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY
AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
James D. Egide
Chairman of the Board
<PAGE> 2
DATAMARK HOLDING, INC.
-------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 21, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies ("Proxies") by the Board of Directors of DataMark Holding, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held at the Company's offices at 448 E. 6400 S., Suite 400,
Salt Lake City, Utah, on Friday, November 21, 1997, at 10:00 a.m. Mountain time.
Accompanying this Proxy Statement is the Board of Directors' Proxy for the
Annual Meeting, which you may use to indicate your vote as to the proposals
described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted as specified by the stockholder, or, if no vote is indicated, the Proxy
will be voted in favor of the proposals described in this Proxy Statement. A
stockholder may revoke his or her Proxy at any time before it is voted either by
filing with the Secretary of the Company, at its principal executive offices, a
written notice of revocation or a duly executed Proxy bearing a later date, or
by attending the Annual Meeting and expressing a desire to vote his or her
shares in person.
The cost of the Annual Meeting, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. The Company may, in
addition, use the services of its directors, officers and employees to solicit
Proxies, personally or by telephone, but at no additional salary or
compensation. The Company also requests banks, brokers and others who hold
Common Stock of the Company in nominee names to distribute annual reports and
Proxy soliciting materials to beneficial owners and shall reimburse such banks
and brokers for reasonable out-of-pocket expenses which they may incur in so
doing.
The Company's principal executive offices are located at 448 East 6400
S., Suite 400, Salt Lake City, Utah 84107. This Proxy Statement and the
accompanying Proxy were first mailed to stockholders on or about October 27,
1997.
VOTING RIGHTS AND VOTES REQUIRED
The close of business on September 30, 1997 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting or any adjournments of the Annual Meeting. As of the record
date, the Company had outstanding 8,560,932 shares of common stock, par value
$0.0001 per share (the "Common Stock"), the only outstanding voting security of
the Company. As of the record date, the Company had approximately 674
stockholders of record. A stockholder is entitled to cast one vote for each
share held on the record date on all matters to be considered at the Annual
Meeting.
A majority of the outstanding shares of Common Stock entitled to vote at
the Annual Meeting must be present in person or represented by proxy at the
Annual Meeting in order to constitute a quorum for the transaction of business.
All shares represented by the accompanying Proxy, if the Proxy is
properly executed and returned, will be voted as specified by the stockholder,
or, if no vote is indicated, the Proxy will be voted FOR the nominees for
director, FOR the ratification of the selection of Arthur Andersen LLP as
independent public accountants for the Company, and FOR the proposal to approve
the Amended and Restated DataMark Holding, Inc. Stock Incentive Plan (the
"Incentive Plan"). As to any other matter of business which may properly be
brought before the Annual Meeting, a vote may be cast pursuant to the
accompanying Proxy in
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accordance with the judgment and discretion of the person or persons voting the
same, although management does not presently know of any such other matter of
business. Votes withheld by nominee recordholders who did not receive specific
instructions from the beneficial owners of shares and abstentions will not be
treated as votes cast or as shares present or represented and will reduce the
absolute number (although not the percentage) of affirmative votes needed for
approval.
In the election of directors, the six candidates receiving the highest
number of votes at the Annual Meeting will be elected as directors. In order to
approve the ratification of the selection of Arthur Andersen LLP as independent
public accountants of the Company and to approve the Incentive Plan, the
affirmative vote of the holders of a majority of the Common Stock present in
person or represented by proxy and properly voting at the Annual Meeting will be
required.
In the event that the votes necessary to approve any of the foregoing
proposals have not been obtained by the date of the Annual Meeting or a quorum
is not present at the Meeting, the Chairman of the Meeting may, in his
discretion, adjourn the Annual Meeting from time-to-time to permit the
solicitation of additional Proxies by the Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS
The stockholders are being asked to elect six directors to serve until
the next Annual Meeting of Stockholders and until their successors are duly
elected and qualified. The Proxies will be voted in favor of the nominees unless
otherwise specifically instructed. Although the Board of Directors does not
anticipate that any nominee will be unavailable for election, in the event of
such occurrence the Proxies will be voted for such substitute, if any, as the
Board of Directors may designate. The six nominees receiving the highest number
of affirmative votes of the shares entitled to be voted will be elected
directors; votes withheld and broker non-votes have no legal effect.
The following table sets forth certain information with respect to each
director, nominee and executive officer of the Company as of October 27, 1997:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James D. Egide* 63 Director and Chairman
Stanton D. Jones 39 Director and President of
WorldNow Online Network
Mitchell L. Edwards 38 Director, Executive Vice President
and Secretary
J. Henry Smith 34 Director, Chief Technical Officer
of WorldNow Online Network
C. Scott Stone* 35 Director
Kenneth M. Woolley* 51 Director
Terry R. Haas 48 Nominee for Director
James A. Kizer 38 Senior Vice President and
Chief Operating Officer WorldNow
Online Network
Michael D. Bard 50 Chief Financial Officer
Chad L. Evans 44 Chief Executive Officer of
DataMark Systems
Arthur E. Benjamin 50 President of DataMark Systems
</TABLE>
*Serves on compensation and audit committees.
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NOMINEES FOR DIRECTOR. The following individuals have been nominated by
the Board of Directors of the Company to stand for election at the Annual
Meeting:
James D. Egide: Director and Chairman
Mr. Egide was appointed as a Director of the Company in January 1995 and
Chairman in September 1997. Since 1990, Mr. Egide has primarily been involved in
managing his personal investments, including multiple international and national
business enterprises. In 1978 he co-founded Carme, a public company, and served
as CEO and Chairman of the Board until 1989 when it was sold.
Stanton D. Jones: Director and President of WorldNow Online Network, Inc.
Mr. Jones joined the Company and became a Director in April 1996. Prior
to joining the Company, Mr. Jones was Vice President and General Sales Manager
of KSTU-TV, a television station in Salt Lake City owned and operated by Fox
Television Stations, Inc. from 1993 to 1996. Prior to joining Fox, Mr. Jones was
Vice-President, National Sales Manager for the Katz Media Group where he was
responsible for their West Coast operations including 25 television stations and
6 media sales offices. Mr. Jones held various management and sales positions for
Katz in Los Angeles, San Francisco and New York City from 1981 to 1993. Mr.
Jones received a bachelors degree in communications with an emphasis in media
sales management from Brigham Young University.
Mitchell L. Edwards: Director and Executive Vice President / Finance and Legal
Mr. Edwards has been Executive Vice President of the Company since June
1997 and was appointed as a Director in September 1997. From 1995 until joining
the Company, Mr. Edwards was Managing Director of Law and Business Counselors, a
mergers & acquisitions and corporate finance consulting firm with offices in
California and Utah, and prior to that was a Partner in the law firm of Brobeck,
Phleger & Harrison in Los Angeles. Mr. Edwards' practice for over 12 years has
specialized in mergers & acquisitions, corporate finance, public offerings,
venture capital and other transactions for high technology and emerging growth
companies throughout the country. Mr. Edwards received a J.D. from Stanford Law
School, a B.A/M.A. in International Business Law from Oxford University
(Marshall Scholar), and a B.A. in Economics from Brigham Young University
(Valedictorian).
J. Henry Smith: Director and Chief Technical Officer of
WorldNow Online Network, Inc.
Mr. Smith has joined the Company and has been a Director since January
1997. Mr. Smith has over 15 years of computer industry experience in management
capacity including high level online technology development. In 1991, he founded
A&S Technologies/SISNA, Inc. This company was acquired by the Company in January
1997. Prior to A&S Technologies, Inc., Mr. Smith performed all engineering
functions for ValCom of Salt Lake City. Mr. Smith has also engineered solutions
for Hercules, Inc., Intermountain Health Care, and various other organizations.
Mr. Smith graduated from the University of Utah with a degree in engineering and
has completed eight years of graduate work.
Kenneth M. Woolley: Director
Mr. Woolley has been a founder and director of several companies. Mr.
Woolley served on the Board of Directors of Megahertz Holding Corporation, the
leading manufacturer of fax/modems for laptop and notebook computers until
February 1995. Prior to the merger of Megahertz and VyStar Group, Inc. in June
1993 Mr. Woolley had served as President of the parent company. Since 1979, Mr.
Woolley has been a principal in Extra Space Management, Inc. and Extra Space
Storage, privately held companies engaged in the ownership and management of
mini-storage facilities. Since 1989, Mr. Woolley has been a partner in D.K.S.
Associates, and since 1990 a director and executive officer of Realty
Management, Inc., privately held companies engaged in the ownership and
management of apartments, primarily in Las Vegas, Nevada. Mr. Woolley is a
director of Cirque Corporation. Mr. Woolley also serves as an associate
professor of business management at Brigham Young University. Mr. Woolley holds
a B.A. in Physics from Brigham Young University, an M.B.A. and Ph.D. in Business
Administration from the Stanford University Graduate School of Business.
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Terry R. Haas: Nominee for Director
Mr. Haas has been nominated to serve on the Board of Directors of the
Company as of the date of the Annual Meeting. Since August 1990, Mr. Haas has
served as President and Chief Executive Officer of Innovus Corporation, a
publicly held multimedia software company. Prior to joining Innovus, Mr. Haas
was Vice President Channel Sales & Marketing of Novell, Inc. from 1994 until
1996, where among other accomplishments he led the integration of the Novell and
WordPerfect channel sales and marketing personnel and programs. From 1993 until
joining Novell, he was Principal, Channel Marketing Consultant for
Paratechnology, Inc., working with major high technology and software companies
developing strategies and plans for marketing and distributing new products.
From 1987 until 1993, Mr. Haas held various positions at Novell, including
Director of North American Distributor Sales. Mr. Haas earned a M.B.A. in
Finance from DePaul University, and a B.S. in Biology/Chemistry from Western
Michigan University.
EXECUTIVE OFFICERS. The following individuals are the executive officers
of the Company and its wholly owned subsidiaries:
James A. Kizer: Senior Vice President and Chief Operating Officer of WorldNow
Online Network, Inc.
Prior to joining the Company in 1997, Mr. Kizer was Executive Vice
President and Chief Operating Officer of Federal Broadcasting. From January 1993
until April 1994, he was Vice President/General Manager of WSTM-TV in Syracuse,
New York. Prior to working at WSTM he was Vice President/General Manager of
WLUC-TV in Marquette, Michigan beginning January 1988. Mr. Kizer received his
Bachelor of Arts degree from the University of Florida in 1982.
Michael D. Bard: Chief Financial Officer
Mr. Bard joined the Company in September 1996. Mr. Bard was the
Controller for ARD, Inc., a professional services corporation located in
Burlington, Vermont from 1991 to 1996. Prior to joining ARD, Inc., Mr. Bard was
Senior Vice President, Controller for CACI, Inc. International, an information
technology company located in Fairfax, Virginia from 1976 to 1991. Mr. Bard is a
certified public accountant and holds a bachelors degree in accounting.
Chad L. Evans: Chief Executive Officer of DataMark Systems, Inc.
Mr. Evans is Chief Executive Officer and Chairman of the Board of
DataMark Systems, Inc., and was instrumental in the start-up, operation and
growth of the Company. Mr. Evans has extensive experience in direct response
advertising strategies and methodologies on a local, regional and national
basis. Mr. Evans has also served as an officer and director of several other
successful firms. He served as Chief Executive Officer of Mountainwest
Technology, Inc. and its subsidiary Mountainwest Junior College. He currently
serves as a Director for Utah Industries for the Blind.
Arthur E. Benjamin: President of DataMark Systems, Inc.
Prior to joining the Company in January 1995, Mr. Benjamin was President
of Watterson College since 1994, in addition to serving as CEO of MCS
Technologies, Inc., a company engaged in vocational training since 1993, and
Senior Vice President/Marketing of Rhodes Group, a company engaged in vocational
training since 1989, President, Marketing By Design (a national marketing
agency) since 1981, and Travel By Design (a national travel agency) since 1992.
Mr. Benjamin has 25 years in marketing and sales and 12 years in proprietary
school marketing and operations. He has held executive positions with Group W,
CBS, Admarketing (a national media buying service), Connecticut Public
Broadcasting, Computer Processing Institute (a group of four proprietary
schools), and Advantage Media and Marketing (a consumer ad agency). He has
overseen numerous public relations campaigns and designed and published a
regional magazine. He is a graduate of Clark University, the Burklyn Business
School and the Career College Association leadership conference.
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MEETINGS. The Board of Directors held 8 meetings in fiscal 1997. The
Board of Directors has appointed a Compensation Committee consisting of Mr.
Egide, Mr. Woolley and Mr. Stone. The Compensation Committee, which is
responsible for reviewing and recommending the approval to the Board of
Directors of compensation of the officers of the Company, met one time during
fiscal 1997. The Audit Committee, comprised of Mr. Egide, Mr. Woolley and Mr.
Stone, is responsible for periodically reviewing the financial condition and the
results of audits of the Company with its independent public accountants. The
Audit Committee met one time in fiscal 1997.
Mr. Stone received $1,000 per month as a director's fee during fiscal
1997. Non-employee directors are reimbursed their out-of-pocket expenses for
attending Board and Committee meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding Common Stock of the
Company beneficially owned as of September 30, 1997 by: (i) each person known by
the Company to beneficially own 5% or more of the outstanding Common Stock, (ii)
by each director and director nominee, (iii) by each executive officer named in
the Summary Compensation Table, and (iv) by all officers and directors as a
group. As of September 30, 1997, there were 8,560,932 shares of Common Stock
outstanding and no Preferred Stock outstanding.
<TABLE>
<CAPTION>
Amount of Percentage
Names and Addresses of Common of Voting
Principal Stockholders Shares* Securities
- ------------------------------------ --------------- ------------
<S> <C> <C>
Quantum Industrial Partners LDC 675,000 7.9%
Kaye Flamboyan 9
Willemstad, Curacao
Netherlands Antilles
Officers and Directors
Chad L. Evans 2,342,356(1) 27.3%
488 E. 6400 S., Suite 100
Salt Lake City, Utah 84107
James D. Egide 1,480,003(2) 17.2%
448 E. 6400 S., Suite 400
Salt Lake City, Utah 84107
C. Scott Stone 30,000(3) 0.4%
Kenneth M. Woolley 417,581(4) 4.8%
Stanton D. Jones 350,000(5) 4.0%
J. Henry Smith 240,000 2.8%
Mitchell L. Edwards 0(6) 0.0%
Terry R. Haas 0 0.0%
All Directors and Executive Officers 4,922,440 54.7%
(10 persons)
</TABLE>
* Assumes exercise of all exercisable options held by listed security holders
which can be acquired within 60 days from June 30, 1997.
(1) Includes shares held by a trust controlled by Mr. Evans. Also includes
25,000 shares that Mr. Evans may acquire
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on exercise of options.
(2) Includes 25,000 shares which Mr. Egide may acquire on exercise of options.
(3) Includes 30,000 shares which Mr. Stone may acquire on exercise of options.
(4) Includes 225,000 shares which Mr. Woolley may acquire on exercise of
options.
(5) Includes 112,500 shares which Mr. Jones may acquire on exercise of
options. Does not include an additional 62,500 shares which may be
acquired on exercise of options which are not currently exercisable.
(6) Does not include 200,000 shares which may be acquired on exercise of
options which are not currently exercisable.
The stockholders listed have sole voting and investment power, except as
otherwise noted.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the last three years to the Company's Chief
Executive Officer as of June 30, 1997 and to each of the Company's other
executive officers whose annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ -------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL YEAR ENDED SALARY BONUS COMPENSATION OPTIONS/SARS
POSITION JUNE 30 ($) ($) ($) (#)
- --------------------- ---------- -------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Stanton D. Jones 1997 $160,000 $25,000 (1) --
President, WorldNow 1996 $ 9,667 $35,000 -- 362,500
Online Network
J. Henry Smith 1997 $ 48,750 $ 5,000 $ 400,000(2) --
Chief Technical
Officer for
WorldNow Online
Network
Chad L. Evans 1997 $120,000 -- (3) --
Chairman of 1996 $120,000 -- -- 25,000
DataMark Systems 1995 $120,000 -- -- --
Arthur E. Benjamin 1997 $144,000 -- -- --
President of 1996 $144,000 -- -- 100,000
DataMark Systems 1995 $ 72,000 -- -- --
</TABLE>
(1) Mr. Jones receives a monthly car allowance. The annual cost to the Company
is $6,000.
(2) Mr. Smith received $400,000 as part of his employment contract which he
received in connection with the acquisition of Sisna, Inc.
(3) Mr. Evans receives the use of a Company provided car. The cost to the
Company in fiscal 1997 was approximately $6,000.
Compensation of the executive officers may be increased from time to time as
recommended by the compensation committee and approved by the Board of
Directors.
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
No stock options were granted during fiscal 1997 to named executive
officers.
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AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES IN FISCAL 1997
The following table summarizes for each of the named executive officers
of the Company the number of stock options, if any, exercised during fiscal
1997, the aggregate dollar value realized upon exercise, the total number of
unexercised options held at June 30, 1997 and the aggregate dollar value of
in-the-money unexercised options, if any, held at June 30, 1997. Value realized
upon exercise is the difference between the fair market value of the underlying
stock on the exercise date and the exercise price of the option. The value of
unexercised, in-the-money options at June 30, 1997 is the difference between its
exercise price and the fair market value of the underlying stock on June 30,
1997, which was $3.00 per share based on the closing bid price of the Common
Stock on June 30, 1997. The underlying options have not been and, may never be
exercised; and actual gains, if any, on exercise will depend on the value of the
Common Stock on the actual date of exercise. There can be no assurance that
these values will be realized.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money Options at
Acquired Value Options at 6/30/97 6/30/97
on Realized --------------------------- -------------------------
Name Exercise(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ---------- ---------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stanton D. Jones 0 $ 0 112,500 62,500 $ 0 $ 0
Chad L. Evans 0 $ 0 25,000 0 $ 0 $ 0
Arthur E. Benjamin 50,000 $250,000 0 50,000 $ 0 $125,000
</TABLE>
STOCK OPTION PLAN
The Company has adopted the DataMark Systems Omnibus Stock Option Plan
(the "Option Plan") to assist the Company in securing and retaining key
employees and directors. The Option Plan provides that options to purchase a
maximum of 780,532 shares of Common Stock may be granted to (i) directors and
consultants, and (ii) officers (whether or not a director) or key employees of
the Company ("Eligible Employees"). The Option Plan will terminate in 2014
unless sooner terminated by the Board of Directors. The Board of Directors has
adopted, subject to stockholder approval, the Amended and Restated Stock
Incentive Plan.
The Option Plan is administered by a committee (the "Option Committee")
currently consisting of the Board of Directors. The total number of options
granted in any year to Eligible Employees, the number and selection of Eligible
Employees to receive options, the number of options granted to each and the
other terms and provisions of such options are wholly within the discretion of
the Option Committee, subject to the limitations set forth in the Option Plan.
The option exercise price for options granted under the Incentive Plan may not
be less than 100% of the fair market value of the underlying common stock on the
date the option is granted. Options granted under the Option Plan expire upon
the earlier of an expiration date fixed by the Option Committee or five years
from the date of grant.
Under the Option Plan, the Company may issue both qualified and
non-qualified stock options. As of June 30, 1997, options to purchase 779,388
shares of Common Stock were outstanding under the Option Plan.
COMPENSATION OF DIRECTORS
The Company's non-employee Directors are not currently compensated for
attendance at Board of Director meetings. Non-employee directors may be granted,
on an ad hoc basis, stock options upon being appointed to the Board. The Company
may adopt a formal director compensation plan in the future. All of the
Directors are reimbursed for their expenses for each Board and committee meeting
attended.
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COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the National Association of Securities Dealers. Officers, directors and
greater than ten-percent stockholders are required by Securities and Exchange
Commission 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 on representations that no other reports were required, the
Company has determined that during the last fiscal year all applicable 16(a)
filing requirements were met except as follows: Stanton Jones and Henry Smith
were late in filing their Form 5's which were due within 45 days of the fiscal
year end.
CERTAIN TRANSACTIONS
During the year ended June 30, 1994, the Company made cash loans to two
officers totaling $46,000, which were settled during the year ended June 30,
1995, except for $1,000 which was settled during the year ended June 30, 1997.
Prior to July 1, 1994, the Company had borrowed money from certain
officers. Additional borrowings of $50,000 and $129,500 were made during the
years ended June 30, 1996 and 1995, respectively. Principal payments on these
notes were $1,666, $199,500, and $2,152 during the years ended June 30, 1997,
1996 and 1995, respectively. The amounts due on these loans at June 30, 1997 and
1996 were $0 and $1,666, respectively.
During the year ended June 30, 1996, the Company borrowed $500,000 from
a bank to fund computer equipment purchases. Certain officers and stockholders
guaranteed the loan. In exchange for the guarantee, such persons received a
one-year option to purchase 25,000 shares of common stock at $5.00 per share.
During the year ended June 30, 1997, the Company negotiated services and
equipment purchase agreements with CasinoWorld Holdings, Ltd. and Cybergames,
Int., companies in which Mr. Egide, the Company's Chairman of the Board and a
major stockholder, has an ownership interest. Under the tentative agreements,
the Company will provide software development services, configured hardware and
other computer equipment. As of June 30, 1997, the Company had acquired $244,292
of computer equipment to be resold in connection with these arrangements.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation policies are administered by the
Compensation Committee. The Compensation Committee reviews and determines the
compensation of the Company's officers and evaluates management performance,
management succession and related matters.
The compensation policy of the Company is to provide competitive levels
of compensation that are influenced by performance, that reward individual
achievements, and that enable the Company to attract and retain qualified
executives. Compensation consists primarily of annual salary and long-term
incentive compensation in the form of stock options. Bonuses are awarded only in
circumstances when, in the Compensation Committee's subjective judgment, a
particular executive had exceptional performance during the prior year.
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The Compensation Committee believes that the Company's performance in
fiscal 1997 and Mr. Evans' contribution to such performance justifies the salary
paid and benefits received. The Compensation Committee also believes that the
performance of Mr. Jones in fiscal 1997 justifies the bonus he received, and
that the compensation paid to Mr. Smith in connection with his entering into an
employment agreement with the Company was fair given the contribution Mr. Smith
has made and is expected to make to the performance of the Company. No stock
options were granted to the named executive officers in fiscal 1997.
The Compensation Committee:
James D. Egide
Kenneth M. Woolley
Scott Stone
PERFORMANCE GRAPH
The following chart shows how $100 invested as of June 30, 1995,
in shares of the Company's Common Stock would have grown during the two-year
period ended June 30, 1997, as a result of changes in the Company's stock price,
compared with $100 invested in the Standard & Poor's 500 Stock Index and in the
Standard & Poor's Technology 500 Index.
The Company's Common Stock began to be quoted on the OTC Bulletin Board
in January 1995, prior to that time there was no public market for the
securities of the Company's predecessor and the Company is not aware of any
quotations for its securities during that period.
COMPARISON OF TWO YEAR CUMULATIVE TOTAL RETURN
(AS OF JUNE 30 OF EACH YEAR)
DATAMARK HOLDING, INC., S&P 500 INDEX, AND S&P TECHNOLOGY 500
[GRAPH]
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<TABLE>
<CAPTION>
June 30
Index Returns
Base ----------------------
Company/Index Name 1995 1996 1997
- ------------------ ------- -------- -------
<S> <C> <C> <C>
DataMarkHolding, Inc. $100.00 $3600.00 $685.71
S& P 500 Index 100.00 119.16 181.16
S&P Technology - 500 100.00 126.00 169.72
</TABLE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to the Articles of Incorporation of the Company, the Board of
Directors is to be comprised of not fewer than three and no more than nine
individuals. The number of directors has been set at six by the Board of
Directors pursuant to the Company's Bylaws. The term of the directors is to be
for a period of one year or until their successors are duly elected and
qualified. Accordingly, the directors elected at this meeting will serve until
the next annual meeting to be held in 1998, or until their successors are
elected and qualified. The persons named in the enclosed form of Proxy will vote
the shares represented by such Proxy FOR the election of the nominees for
director named below. The nominees are:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE CURRENT POSITION
--------------- --- ----------------
<S> <C> <C>
James D. Egide 63 Director, Chairman
Stanton D. Jones 39 Director, President of
WorldNow Online Network
Mitchell L. Edwards 38 Director, Executive Vice
President / Finance and
Legal
J. Henry Smith 34 Director, Chief Technical
Officer of WorldNow Online
Network
Kenneth M. Woolley 51 Director
Terry R. Haas 48 Nominee for Director
</TABLE>
Biographical information regarding the nominees is set forth above under
the caption "Directors and Executive Officers."
Pursuant to the Company's Articles of Incorporation, as amended, every
holder of Common Stock voting for the election of directors is entitled to one
vote for each share of Common Stock. A stockholder may vote each share once for
one nominee to each of the director positions being filled, and there is no
cumulative voting.
Proxies solicited hereby (other than Proxies in which the vote is
withheld as to one or more nominees) will be voted for the candidates standing
for election as directors nominated by the Board. If any nominee is unable to
serve, the shares represented by all valid Proxies will be voted for election of
such substitute as the Board may recommend. At this time, the Board knows of no
reason why any nominee might be unavailable to serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
DIRECTOR NOMINEES.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO STOCK OPTION PLAN
GENERAL
On October 20, 1997, the Board unanimously adopted the Amended and
Restated DataMark Holding, Inc. 1997 Incentive Plan (the "Incentive Plan"),
formerly known as the Omnibus Stock Option Plan, subject to stockholder
approval. The Board believes that it is imperative that the Company adopt a more
flexible, long-term incentive plan, which is both competitive with, and
responsive to, rapidly changing standards of compensation, and that will further
the Company's compensation philosophy and objectives. The compensation
philosophy and objectives of the Company include providing competitive levels of
compensation to attract and retain valuable personnel, compensating executives
based on the Company's progress toward achievement of strategic goals, and
strengthening the incentive for executive officers to increase stockholder
value. In order to enhance the effectiveness of the Company's compensation
practices, the Compensation Committee recommended the Incentive Plan to the
Board of Directors as a plan that would provide the Company with the ability to
devise stock-based, cash-based or performance-based incentive awards which are
competitive with cutting-edge compensation programs, and would serve to further
the Company's compensation objectives.
The principal provisions of the Incentive Plan are summarized below.
This summary, however, does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Incentive Plan. Capitalized terms
used without definition in this summary have the meanings specified under the
Incentive Plan.
PURPOSE
The purpose of the Incentive Plan is to strengthen the Company by
providing an incentive to its employees, officers, consultants and directors and
thereby encouraging them to devote their abilities and industry to the success
of the Company's business enterprise. The Incentive Plan seeks to achieve this
purpose by extending to employees, officers, consultants and directors of the
Company long-term incentive for high levels of performance through the grant of
Incentive Stock Options and Nonqualified Stock Options (collectively the
"Options"), and Stock Appreciation Rights, Dividend Equivalent Rights,
Performance Awards and Restricted Stock. A grant of a Stock Appreciation Right,
Restricted Stock, a Performance Award, a Dividend Equivalent Right or any or all
of them is referred to herein as an "Award."
ADMINISTRATION
The Incentive Plan is to be administered by a committee consisting of at
least two directors of the Company (the "Committee"), and it may be administered
by the entire Board. If the Committee consists of less than the entire Board,
each member will be a "non-employee director" within the meaning of Rule 16b-3
promulgated under the Exchange Act. To the extent necessary for any Award to
qualify as performance-based compensation under Section 162(m) of the Code, each
member of the Committee must be an "outside director" within the meaning of
Section 162(m) of the Code and regulations promulgated thereunder.
Each Award under the Incentive Plan will be evidenced by an agreement
that sets forth the terms of the grant (the "Agreement"). Under the Incentive
Plan, the Committee has the authority to, among other things: (i) determine the
Eligible Individuals (as defined below) to whom Employee Options will be granted
and the number of such options, prescribe the terms and conditions of each
Employee Option, and amend or modify any Option Agreement consistent with the
Incentive Plan; (ii) select the Eligible Individuals to whom Awards will be
granted, the terms and conditions of each Award, and amend or modify any Award
Agreement consistent with the Incentive Plan; (iii) to construe and interpret
the Incentive Plan and the Options and Awards granted under the Incentive Plan,
and to establish, amend and revoke rules for the administration of the Incentive
Plan; (iv) to determine leaves of absence which may be granted to an Optionee or
Grantee on an individual basis without constituting a termination of service
under the Incentive Plan; (v) to exercise discretion with respect to its powers
under the Incentive Plan; and (vi) to generally act as the Committee
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deems advisable to promote the Company's best interests with respect to the
Incentive Plan. The Committee may take action by a majority of a quorum at a
meeting of the Committee, or in writing signed by a majority of all members of
the Committee.
Members of the Committee will not be liable for actions, failures to act
or determinations made in good faith with respect to the Incentive Plan, except
for liability arising from willful misfeasance, gross negligence or reckless
disregard of duties. The Company has agreed under the Incentive Plan to
indemnify Committee members for expenses and, to the extent permitted by law,
liability incurred in connection with claims arising in connection with the
Incentive Plan.
ELIGIBILITY
Any director (other than an Eligible Director), officer or employee of
the Company or a Subsidiary, or any consultant or advisor who is receiving cash
compensation from the Company or a Subsidiary who is designated by the Committee
as an "Eligible Individual" shall be eligible to be granted an Option or Award
under the Incentive Plan.
SHARES AVAILABLE FOR ISSUANCE
Under the Incentive Plan, 2,500,000 shares of the Common Stock (the
"Shares") will be available for the grant of Options and Awards to Eligible
Individuals (inclusive of all grants made under the Plan prior to its amendment
and restatement), subject to the following limitations: (i) not more than
one-third of the allotted Shares may be the subject of Restricted Stock Awards;
(ii) no Eligible Individual may be granted Options and Awards in respect of more
than 250,000 Shares per calendar year; (iii) no Eligible Individual may receive,
during the term of the Incentive Plan, Performance Units denominated in dollars
in excess of 100% of the Eligible Individual's base salary; and (iv) the Fair
Market Value of the Shares with respect to which Incentive Stock Options granted
under the Incentive Plan become exercisable for the first time by an Optionee
during any calendar year may not exceed $100,000. Upon a Change in
Capitalization, however, the Committee may adjust the maximum number and class
of Shares with respect to which Options or Awards may be granted, the number and
class of Shares which are subject to outstanding Options or Awards and the
purchase price thereof, the number and class of Shares in respect of which
Director Options are to be granted, and the Performance Objectives.
STOCK OPTIONS
The terms and conditions of a grant of Options to an Eligible Individual
(an "Employee Option") will be determined by the Committee in accordance with
the provisions of the Incentive Plan and set forth in a stock option agreement
(the "Option Agreement"). The per Share purchase price of an Employee Option
will be determined by the Committee and may not be less than 80% of the fair
market value (as defined in the Incentive Plan) of the Common Stock on the date
the purchase price is determined by the Committee. In the case of Incentive
Stock Options, the purchase price must not be less than 100% of the Fair Market
Value of a Share on the date the purchase price is determined (110% in the case
of an Incentive Stock Option granted to a ten percent stockholder). Each
Employee Option will be exercisable at such times and in such installments as
determined by the Committee and the Committee may accelerate the exercisability
of any Employee Option at any time. The term of an Employee Option may not
exceed ten years (five years in the case of any Incentive Stock Options granted
to a ten percent stockholder).
Incentive Stock Options are not transferable except by will or the laws
of descent and distribution, and may be exercised during the Optionee's lifetime
only by the Optionee. Other Options may be transferred to the extent provided by
the Committee in the Option Agreement.
The purchase price for Shares may be paid in (i) cash; (ii) by
authorizing the Company to retain from the total number of Shares as to which
the Option is exercised that number of Shares having a value equal to the
aggregate exercise price of the Shares as to which the Option is being
exercised; (iii) delivering a properly executed exercise notice together with
such other documentation as the Committee and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan
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proceeds required to pay the exercise price and any applicable income or
employment taxes; (iv) the transfer of Shares to the Company upon such terms and
conditions as determined by the Committee; (v) any combination of the foregoing
methods of payment; or (vii) any other method approved by the Committee. The
number of Shares that may be purchased upon exercise of an Option shall be
rounded to the nearest number of whole Shares.
If the fair market value of the Shares exceeds the exercise price of an
Option, an Optionee may request that the Committee authorize payment to the
Optionee of the difference between the fair market value of part or all of the
Shares subject to the Option and the exercise price of the Option. The Committee
in its sole discretion may grant or deny such a request. To the extent granted,
the Committee will direct the Company to make the payment to the Optionee in
cash or Shares or any combination thereof. An Option will be deemed to be
exercised and canceled to the extent that the Committee grants the request. An
Optionee will not be deemed the owner of Shares subject to an Option until the
Option has been exercised, the Shares issued to the Optionee, and the Optionee's
name entered as a stockholder of record on the Company's books. At that time,
the Optionee shall have full voting, dividend and other ownership rights with
respect to such Shares, subject to any terms and conditions that may be set
forth in the applicable Agreement.
Unless otherwise provided in an employment agreement between an Optionee
and the Company, or the applicable Option Agreement, a Termination of Employment
(as defined in the Incentive Plan) shall have the following effects under the
circumstances indicated. If an Optionee has a Termination of Employment for any
reason other than for cause or voluntarily by the Optionee prior to serving five
years as an employee of the Company (a "Voluntary Termination"), Options which
were exercisable as of the date of the Termination of Employment will remain
exercisable until the earlier of (i) ninety days after the date of the
Termination of Employment or (ii) the expiration of the stated term of the
Option. Upon a Termination of Employment by the Company for Cause or a Voluntary
Termination, unless determined otherwise by the Committee, any unexercised
Options held by such Optionee will terminate and expire concurrently with the
Termination of Employment. Upon a Termination of Employment caused by an
Optionee's Disability, any unexercised Options held by such Optionee which were
exercisable on the date of the Termination of Employment will expire one year
after the date of the Termination of Employment or, if earlier, the expiration
date of the Option. Upon Termination of Employment caused by death of an
Optionee, Options which were exercisable as of the date of death will remain
exercisable by the Optionee's beneficiary until the earlier of (i) one year
after the Optionee's death or (ii) the expiration of the stated term of the
Option. The Committee, in its sole discretion, may also include provisions
providing for forfeiture of gains on shares acquired under the Incentive Plan
and certain other remedies if the Optionee engages in any activity in
competition with the Company, or inimical, contrary or harmful to the interests
of the Company.
In the event of a Change in Control, outstanding Options will become
immediately and fully exercisable. In addition, to the extent set forth in a
particular Option Agreement, an Optionee may surrender for cancellation within
60 days after such Change in Control any Employee Option not yet exercised and
the Optionee will be entitled to receive cash in an amount equal to the excess,
if any, of (x) (A) in the case of a Nonqualified Stock Option, the greater of
(1) the Fair Market Value on the date preceding the surrender of the Shares
subject to the Employee Option surrendered or (2) the Adjusted Fair Market Value
of the Shares subject to the Employee Option surrendered or (B) in the case of
an Incentive Stock Option, the Fair Market Value on the date preceding the
surrender of the Shares subject to the Employee Option surrendered, over (y) the
purchase price for such Shares under the Employee Option surrendered. If an
Optionee's employment or service as a Director with the Company is terminated by
the Company following a Change in Control, Options held by the Optionee that
were exercisable on the date of termination shall remain exercisable until the
earlier of the first anniversary of the termination or the expiration date of
the Option.
DIRECTOR OPTIONS
The Incentive Plan also provides for the discretionary grant of Options
to each of its non-employee directors ("Director Options") upon as follows: (i)
each non-employee director who becomes a director after October 20, 1997 may be
granted upon election or appointment a Director Option for such number of Shares
as may be determined from time to time by the Board; and (ii) annually on the
first business day after the annual meeting of the stockholders of the Company,
all non-employee directors who are members of the
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Board at that time may be granted a Director Option for such number of Shares as
shall be determined by the Board from time to time; provided, however, that a
director shall not be entitled to receive an annual grant during the year in
which such director is first appointed or elected. Director Options will be
granted at a purchase price not less than the Fair Market Value of the Shares
subject to such Director Options on the date of grant. Director Options shall
become exercisable at such times as may be designated by the Board and shall
terminate upon termination of service as a director to the extent determined by
the Board of Directors.
STOCK APPRECIATION RIGHTS ("SARs")
The Incentive Plan permits the granting of SARs either in connection
with the grant of an Employee Option (a "Tandem SAR") or as a freestanding right
(a "Freestanding SAR"). A SAR permits a Grantee to receive upon exercise of the
SAR, cash and/or Shares, at the discretion of the Committee, in an amount equal
to (i) the excess, if any, of the fair market value of a Share on the date
preceding the SAR's exercise over the fair market value of a Share on the date
the SAR was granted (or the purchase price in the case of a SAR granted in
connection with an Option), multiplied by (ii) the number of Shares as to which
the SAR is being exercised. When a SAR is granted, however, the Committee may
establish a limit on the maximum amount a Grantee may receive on exercise.
A Tandem SAR will be exercisable only at such times and to the extent
the related Employee Option is exercisable and may be transferred only to the
extent the related Employee Option may be transferred. Upon exercise of a Tandem
SAR, the Employee Option will be cancelled to the extent of the number of Shares
as to which the SAR is exercised. Upon the exercise of an Employee Option
granted in connection with a Tandem SAR, the SAR will be cancelled to the extent
of the number of Shares as to which the Employee Option is exercised.
Freestanding SARs will have such conditions as to exercisability, vesting and
limitation as the Committee determines, but shall in no event have a term longer
than 10 years. Payment of the SAR to the Grantee may be made in Shares, cash or
a combination thereof.
In the event of a change in control of the Company, all SARs become
immediately and fully exercisable. In addition, to the extent set forth in a
particular SAR Agreement, an Grantee may receive cash or Shares with a value
equal to the excess, if any, of (A) the greater of (1) the Fair Market Value, on
the date preceding the exercise, of the Shares subject to the SAR exercise and
(2) the Adjusted Fair Market Value of the Shares on such date of such Shares
over (B) the Fair Market Value, on the date the SAR was granted, of the Shares
subject to the SAR exercised. If a Grantee's employment with the Company is
terminated by the Company following a Change in Control, SARs held by the
Grantee that were exercisable on the date of termination shall remain
exercisable until the earlier of the first anniversary of the termination or the
expiration date of the SAR.
DIVIDEND EQUIVALENT RIGHTS ("DERs")
DERs entitle the holder to receive all or some portion of the cash
dividends that are or would be payable with respect to Shares. DERs may be
granted in tandem with an Option or Award, and may be payable currently or
deferred until the lapsing of the restrictions on the DERs or until the vesting,
exercise, payment, settlement or other lapse of restrictions on the related
Option or Award. DERs may be settled in cash or Shares or a combination thereof,
in a single installment or multiple installments.
RESTRICTED STOCK
The Committee will determine the terms of each restricted stock Award at
the time of grant, including the price, if any, to be paid by the Grantee for
the restricted stock, the restrictions placed on the Shares, and the time or
times when the restrictions will lapse. In addition, at the time of grant, the
Committee, in their discretion, may decide: (i) whether any dividends declared
or paid on Shares by the Company will be paid to Grantee or will be held for the
account of the Grantee until the restrictions imposed on the Restricted Stock
lapse, (ii) whether any deferred dividends will be reinvested in additional
Shares or held in cash, (iii) whether interest will be accrued on any deferred
dividends held in cash and (iv) whether any stock dividends paid will be subject
to the restrictions applicable to the Restricted Stock Award. Payment of
deferred
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dividends in respect of Restricted Stock will be made upon the lapsing of the
applicable restrictions. Dividends deferred in respect of Restricted Stock shall
be forfeited upon forfeiture of such Restricted Stock.
Shares of Restricted Stock shall be issued in the name of the Grantee
after the Award is granted, provided that the Grantee has executed an Agreement
evidencing the Award, the appropriate blank stock powers and, in the discretion
of the Committee, an escrow agreement and any other documents which the
Committee may require as a condition to the issuance of such Shares. Unless the
Committee provides otherwise in the Agreement, the Grantee shall have all of the
rights of a stockholder with respect to restricted Shares, including the right
to vote and to receive dividends. Shares of Restricted Stock may not be
transferred in any manner, nor delivered to the Grantee, until all restrictions
upon the Shares have lapsed. Unless otherwise provided at the time of grant, the
restrictions on the Restricted Stock will lapse upon a Change in Control. Upon
the lapse of the restrictions on Shares of Restricted Stock, the Committee shall
cause a stock certificate representing such Shares to be delivered to the
Grantee, free of all restrictions under the Incentive Plan. The Committee may
modify outstanding Awards of Restricted Stock or accept the surrender of
outstanding Shares of Restricted Stock (to the extent the restrictions on such
Shares have not yet lapsed) and grant new Awards in substitution for them.
PERFORMANCE UNITS AND PERFORMANCE SHARES
Performance Units and performance shares will be awarded as the
Committee may determine, and the vesting of performance units and performance
shares will be based upon the Company's attainment of specified performance
objectives to be expressed by the Committee in terms of: earnings per Share,
Share price, pre-tax profits, net earnings, return on equity or assets,
revenues, EBITDA, market share or market penetration, or any combination of the
foregoing (the "Performance Objectives"). The agreements evidencing the Award of
Performance Shares or Performance Units will set forth the terms and conditions
thereof including those applicable in the event of the Grantee's Termination of
Employment.
Performance Units may be denominated in dollars or in Shares, and
payments in respect of Performance Units will be made in cash, Shares, Shares of
Restricted Stock or any combination of the foregoing, as determined by the
Committee. Payments in respect of vested Performance Units will be made after
the last day of the Performance Cycle to which the Award relates, unless the
Award Agreement provides for deferred payment. Performance Units vest when and
to the extent the Performance Objectives are satisfied for the Performance
Cycle.
The Committee shall provide, at the time an Award of Performance Shares
is made, the time at which the actual Shares represented by such Award shall be
issued to Grantee; provided, however, that no Performance Shares shall be issued
until the Grantee has executed an Agreement evidencing the Award, the
appropriate blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may require. At the
discretion of the Committee, Shares issued in connection with an Award of
Performance Shares shall be deposited together with the stock powers with an
escrow agent designated by the Committee. The Committee may determine whether
the Grantee shall have, upon delivery of the Shares to the escrow agent, all of
the rights of a stockholder with respect to such Shares, including the right to
vote and to receive dividends. Until any restrictions upon the Performance
Shares shall have lapsed, such Performance Shares may not be transferred in any
manner, nor may they be delivered to the Grantee. Restrictions upon Performance
Shares awarded hereunder shall lapse and such Performance Shares shall become
vested at such time and on such terms, conditions and satisfaction of
Performance Objectives as the Committee may, in its discretion, determine at the
time an Award is granted.
At the time the Award of Performance Shares is granted, the Committee
may determine that the payment to the Grantee of dividends declared or paid on
actual Shares represented by such Award which have been issued by the Company to
the Grantee shall be (i) deferred until the lapsing of the restrictions imposed
upon such Performance Shares and (ii) held by the Company for the account of the
Grantee until such time. The Committee may determine whether deferred dividends
are to be reinvested in Shares or held in cash and, if held in cash, whether to
pay interest on the account and the rate of such interest. Payment of such
deferred dividends shall be made upon the lapsing of restrictions on the
Performance Shares, and any dividends
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deferred in respect of any Performance Shares shall be forfeited upon the
forfeiture of such Performance Shares.
Upon the lapse of the restrictions on Performance Shares, the Committee
shall cause a stock certificate to be delivered to the Grantee, free of all
restrictions under the Incentive Plan. The Committee may modify or accept the
surrender of outstanding Performance Awards and grant new Performance Awards in
substitution for them, but no such modification may adversely alter the Award
without the Grantee's consent.
In the event of a Change in Control, unless otherwise determined by the
Committee, all Performance Units will vest and all restrictions on performance
shares will lapse.
AMENDMENTS AND TERMINATION
The Board of Directors may at any time and from time to time amend or
terminate the Incentive Plan; provided, however, that, to the extent necessary
under applicable law, no such change will be effective without the requisite
approval of the Company's stockholders. In addition, no such change may
adversely alter or impair any Awards or Options previously granted under the
Incentive Plan, except with the consent of the Grantee or Optionee, nor deprive
any Optionee or Grantee of Shares he or she may have acquired through the
Incentive Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is generally a summary of the principal United
States federal income tax consequences under current federal income tax laws
relating to grants or awards to employees under the Incentive Plan. This summary
is not intended to be exhaustive and, among other things, does not describe
state, local or foreign income and other tax consequences.
Stock Options. An Optionee will not recognize any taxable income upon
the grant of a Nonqualified Stock Option and the Company will not be entitled to
a tax deduction with respect to such grant. Generally, upon exercise of a
Nonqualified Stock Option, the excess of the Fair Market Value of Shares subject
to the Option on the date of exercise over the per Share purchase price will be
taxable as ordinary income to the Optionee. If the Company complies with
applicable withholding requirements, the Company will be entitled to a tax
deduction in the same amount and at the same time as the Optionee recognizes
ordinary income, subject to any deduction limitation under Section 162(m) of the
Code (which is discussed below). The subsequent disposition of shares acquired
upon the exercise of a Nonqualified Stock Option will ordinarily result in
capital gain or loss.
Subject to the discussion below, an Optionee will not recognize taxable
income at the time of grant or exercise of an Incentive Stock Option and the
Company will not be entitled to a tax deduction with respect to such grant or
exercise. However, the exercise of an Incentive Stock Option may result in an
alternative minimum tax liability for the Optionee.
Generally, if an Optionee has held Shares acquired upon the exercise of
an Incentive Stock Option for at least one year after the date of exercise and
for at least two years after the date of grant of the Incentive Stock Option,
upon disposition of the Shares by the Optionee, the difference, if any, between
the sales price of the Shares and the per Share purchase price will be treated
as long-term capital gain or loss to the Optionee. Generally, upon a sale or
other disposition of Shares acquired upon the exercise of an Incentive Stock
Option within one year after the date of exercise or within two years after the
date of grant of the Incentive Stock Option (a "disqualifying disposition"), any
excess of the Fair Market Value of the Shares at the time of exercise of the
Option over the exercise price of such Option will constitute ordinary income to
the Optionee. Any excess of the amount realized by the holder on the
disqualifying disposition over the Fair Market Value of the Shares on the date
of exercise will generally be capital gain. Subject to any deduction limitation
under Section 162(m) of the Code, the Company will be entitled to a deduction
equal to amount of such ordinary income recognized by the holder.
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If an Option is exercised through the use of Shares previously owned by
the holder, such exercise generally will not be considered a taxable disposition
of the previously owned Shares and thus no gain or loss will be recognized with
respect to such Shares upon such exercise. However, if the Option is an
Incentive Stock Option and the previously owned Shares were acquired on the
exercise of an Incentive Stock Option and the holding period requirement for
those Shares is not satisfied at the time they are used to exercise the Option,
such use will constitute a disqualifying disposition of the previously owned
Shares resulting in the recognition of ordinary income in the amount described
above.
Special rules may apply in the case of an Optionee who is subject to
Section 16 of the 1934 Act.
Stock Appreciation Rights. The amount of any cash (or the Fair Market
Value of any Shares) received upon the exercise of a SAR right under the
Incentive Plan will be includible in the Grantee's ordinary income and, subject
to satisfying applicable withholding requirements and any Company deduction
limitation under Section 162(m) of the Code, the Company will be entitled to a
deduction.
Restricted Stock. A Grantee generally will not recognize taxable income
upon the grant of Restricted Stock, and the recognition of any income will be
postponed until such Shares are no longer subject to the restrictions or the
risk of forfeiture. When either the restrictions or the risk of forfeiture
lapses, the Grantee will recognize ordinary income equal to the Fair Market
Value of the Shares of Restricted Stock at the time that such restrictions lapse
and, subject to satisfying applicable withholding requirements and deduction
limitation under Section 162(m) of the Code, the Company will be entitled to a
deduction. A Grantee may elect to be taxed at the time of the grant of
Restricted Stock and, if this election is made, the Grantee will recognize
ordinary income equal to the excess of the Fair Market Value of the Shares of
Restricted Stock at the time of grant determined without regard to any of the
restrictions thereon over the amount paid, if any, by the Grantee for such
Shares.
Performance Shares and Performance Units. Generally, a Grantee will not
recognize any taxable income and the Company will not be entitled to a deduction
upon the award of Performance Shares or Performance Units. At the time the
Grantee receives the distribution in respect of the Performance Shares or the
Performance Units, the Fair Market Value of Shares or the amount of any cash
received in payment for such Awards generally is taxable to the Grantee as
ordinary income and, subject to the Company deduction limitation under Section
162(m) of the Code, the Company will be entitled to a deduction.
Dividend Equivalents. A Grantee realizes ordinary income upon the
receipt of Dividend Equivalents in an amount equal to any cash received.
Section 162(m). Section 162(m) of the Code generally disallows a federal
income tax deduction to any publicly held corporation for compensation paid in
excess of $1 million in any taxable year to the chief executive officer or any
of the four other most highly compensated executive officers who are employed by
the corporation on the last day of the taxable year, but does allow a deduction
for "performance-based compensation," the material terms of which are disclosed
to and approved by stockholders. The Company has structured and intends to
implement the Incentive Plan (except with respect to Options with an exercise
price less than the Fair Market Value of the underlying Shares on the date of
grant) so that compensation resulting therefrom would be qualified
"performance-based compensation." To allow the Company to qualify such
compensation, the Company is seeking stockholder approval of the Incentive Plan
and the material terms of the Performance Objectives applicable to Performance
Units under the Incentive Plan.
The Incentive Plan is designed to conform with Section 162(m) of the
Code. With respect to Options awarded under the Incentive Plan with an exercise
price less than the Fair Market Value of the underlying Shares on the date of
grant, there can be no assurance that the compensation attributable to such
Options will not be subject to the deduction limitations of Section 162(m) of
the Code.
Section 280G of the Code. Under certain circumstances, the accelerated
vesting or exercise of Options or SARs, or the accelerated lapse of restrictions
with respect to other Awards, in connection with a Change of Control of the
Company might be deemed an "excess parachute payment" for purposes of the
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golden parachute tax provisions of Section 280G of the Code. To the extent it is
so considered, the Grantee may be subject to a 20% excise tax and the Company
may be denied a tax deduction.
INTERPRETATION
Following the required registration of any equity security of the
Company pursuant to Section 12 of the Exchange Act, the Incentive Plan shall be
interpreted as follows. The Incentive Plan is intended to comply with Rule 16b -
3 promulgated under the Exchange Act and the Committee will interpret and
administer the Incentive Plan and Agreements in a manner consistent therewith.
Any provisions inconsistent with such Rule will be inoperative and will not
affect the validity of the Incentive Plan. Unless otherwise stated in the
relevant Agreement, each Option, SAR and Performance Award is intended to be
"performance - based compensation" within the meaning of Section 162(m)(4)(C) of
the Code. The Committee may not exercise discretion otherwise authorized under
the Incentive Plan if the ability to exercise such discretion or the exercise of
such discretion itself would cause the Options or Awards to fail to qualify as
performance - based compensation.
EFFECT ON EXISTING OPTIONS
All options outstanding under the Plan prior to its amendment and
restatement will become options outstanding under the Incentive Plan. The
amendment and restatement of the Plan shall not, unless required by law, impair
the rights of an Optionee with respect to any Option granted prior to the
effective date of the amendment and restatement of the Incentive Plan without
the consent of such Optionee, and, to the extent of any such impairment, the
terms of the Plan, prior to its amendment and restatement, shall continue to
apply to such Option. The terms of the Incentive Plan shall not apply to any
Option granted prior to the Effective Date to the extent such amendment and
restatement would cause an Incentive Stock Option Agreement not to qualify under
section 422 of the Code or would result in the Company having to recognize an
expense for financial reporting purposes as a result of such change or
amendment, unless otherwise agreed to by the company and the Optionee. Such
Options shall continue to be governed by the terms of the Plan prior to its
amendment and restatement.
NEW PLAN BENEFITS
As described above, the selection of the Eligible Individuals who will
receive Awards under the Incentive Plan, upon approval of the Incentive Plan by
stockholders, and the size and type of awards is generally to be determined by
the Committee in its discretion. The following grants of options have been made
by the Board of Directors of the Company, subject to stockholder approval of the
Incentive Plan:
<TABLE>
<CAPTION>
Name Number of Options
---- -----------------
<S> <C>
Mitchell L. Edwards 65,000
Michael D. Bard 50,000
</TABLE>
Other than the grants of options set forth above, no Awards have been
made or granted under the Incentive Plan, nor are any such Awards now
determinable. Thus, it is not possible to predict the benefits or amounts that
will be received by or allocated to particular individuals or groups of
employees in 1997. The table below sets forth certain information about the
outstanding Options granted under the Plan prior to its amendment and
restatement.
18
<PAGE> 20
<TABLE>
<CAPTION>
Number of Options
Name Exercisable Unexercisable Total
---- ----------- ------------- -----
<S> <C> <C> <C>
Named Executive Officers:
Stanton Jones 112,500 62,500 175,000
Arthur Benjamin 0 50,000 50,000
Nominees for Director:
James D. Egide 0 0 0
Stanton D. Jones 112,500 62,500 175,000
Mitchell L. Edwards 0 135,000 135,000
J. Henry Smith 0 0 0
Kenneth M. Woolley 0 0 0
Terry R. Haas 0 0 0
Executive Officers as a group 180,000 550,000 730,000
Non-Officer Directors as a group 0 0 0
Non-Officer Employees as a group 89,376 0 89,376
</TABLE>
VOTE REQUIRED
Approval and adoption of the Incentive Plan requires approval by a
majority of the votes cast on the proposal at the Annual Meeting, provided that
the total votes cast on the proposal represent over 50% of all shares of Common
Stock entitled to vote on the Proposal.
FOR THE REASONS STATED HEREIN, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE INCENTIVE PLAN.
19
<PAGE> 21
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected Arthur
Andersen LLP as the independent public accountants to audit the consolidated
financial statements of the Company for the fiscal year ending June 30, 1998. A
member of such firm is expected to be present at the Annual Meeting, will have
an opportunity to make a statement if so desired, and will be available to
respond to appropriate questions.
If the stockholders of the Company do not ratify the selection of Arthur
Andersen LLP, or if such firm should decline to act or otherwise become
incapable of acting, or if its employment is discontinued, the Board of
Directors or the Audit Committee will appoint other independent public
accountants.
Ratification of the selection of Arthur Andersen LLP as the Company's
independent public accountants will require the affirmative vote of a majority
of the Common Stock present and properly voting at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS.
20
<PAGE> 22
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 1998 Annual Meeting of
Stockholders must be received at the Company's executive offices at 448 E. 6400
S., Suite 400, Salt Lake City, UT, 84107, addressed to the attention of the
Secretary, by June 5, 1998 in order to be considered for inclusion in the Proxy
Statement and form of proxy relating to such meeting.
ANNUAL REPORT
The Annual Report of the Company for the year ended June 30, 1997 is
being mailed to the stockholders of the Company along with this Proxy Statement.
The Annual Report contains the Company's Annual Report for the year ended June
30, 1997, including the financial statements and management's discussion and
analysis of such financial statements and the report thereon of Arthur Andersen
LLP.
OTHER BUSINESS
The Board of Directors knows of no other business which will be
presented for consideration at the Annual Meeting other than as stated in the
accompanying Notice of Annual Meeting of Stockholders. If, however, other
matters are properly brought before the Annual Meeting, it is the intention of
the persons named in the accompanying form of Proxy to vote the shares
represented thereby on such matters in accordance with their best judgment and
in their discretion, and authority to do so is included in the Proxy.
21
<PAGE> 23
DATAMARK HOLDING, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 21, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mitchell L. Edwards and Michael D. Bard, or
either of them, each with full power of substitution, as proxies, attorneys and
agents of the undersigned, to attend the Annual Meeting of Stockholders of
DataMark Holding, Inc., at the offices of the Company, 448 E. 6400 S., Suite
400, Salt Lake City, UT 84107, on Friday, November 21, 1997 at 10:00 am Mountain
Time, and any adjournment or postponement thereof, and to vote the number of
shares the undersigned would be entitled to vote if personally present on the
following:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
for all nominees listed below
</TABLE>
Jarna D. Egide Kenneth W. Woolley Stanton D. Jones J. Henry Smith Mitchell
L. Edwards Terry R. Haas
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
place an "X" through that individual's name above.
2. Adoption of the Company's Amended and Restated Stock Incentive Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the year ending June 30, 1999:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, upon any and all such other matters as may properly
come before the meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE ABOVE PROPOSALS.
<PAGE> 24
THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, WILL BE
VOTED FOR THE SIX NOMINEES FOR ELECTION AND FOR PROPOSALS 2 AND 3.
Date: , 1997
-------------------------
Signature
-------------------------
Signature, if held
jointly
Please sign exactly as
name appears. When shares
are held by joint
tenants, both should
sign. When signing as
attorney, as executor,
administrator, trustee or
guardian, please give
full title as such. If a
corporation, please sign
in full corporate name by
President or other
authorized officer. If a
partnership, please sign
in partnership name by
authorized person.
STOCKHOLDERS ARE URGED TO MARK DATE, SIGN AND RETURN THIS PROXY IN THE ENVELOPE
PROVIDED
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
