<PAGE>
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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:
/ / Preliminary Proxy Statement
/ / Confidential, Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
SENTO CORPORATION
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(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:
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<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 23, 1999
SENTO CORPORATION
You are cordially invited to attend the Annual Meeting of Shareholders of
Sento Corporation (the "Company"), which will be held on Thursday, September 23,
1999 at 10 a.m., at the Company's corporate offices located at 808 East Utah
Valley Drive, American Fork, Utah 84003 (the "Annual Meeting"), for the
following purposes, which are more fully described in the Proxy Statement
accompanying this Notice:
(i) To elect three directors of the Company, each to serve until the
2000 Annual Meeting of Shareholders or until their respective
successors have been duly elected and qualified;
(ii) To consider and vote upon a proposal to adopt the Sento
Corporation 1999 Omnibus Stock Incentive Plan;
(iii) 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 August 10, 1999
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
- -----------------------------------------------
Stanley J. Cutler
Secretary
August 17, 1999
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 CORPORATION
808 EAST UTAH VALLEY DRIVE
AMERICAN FORK, UTAH 84003
---------------
PROXY STATEMENT
-----------------
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 23, 1999
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of Sento
Corporation, a Utah corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company 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 Thursday, September 23, 1999 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 August 17, 1999.
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 of Directors has fixed the close of business on August 10, 1999
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 7,767,312 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, 7,767,312 votes are
entitled to be cast on each matter submitted to a vote at the Annual Meeting.
PROXIES
Shares of 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
three director nominees; (ii) FOR the proposal to adopt the Sento Corporation
1999 Omnibus Stock Incentive Plan (the "Stock Incentive Plan"); and (iii) in
the discretion of the proxy holders as to any other matters which may properly
come before the Annual Meeting.
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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 of
Incorporation and Bylaws of the Company, 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 three nominees receiving the highest
number of votes will be elected. For approval of the proposal to adopt the
Sento Corporation 1999 Omnibus Stock Incentive Plan, the votes cast in favor of
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, three directors of the Company constituting the
entire Board of Directors are to be elected to serve until the next annual
meeting of shareholders and until their successors shall be duly elected and
qualified. 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 of Directors. The three
nominees receiving the highest number of votes at the Annual Meeting will be
elected. Certain information with respect to each nominee for director is set
forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ----------------------------- --- ----------------------------------------------- --------------
<S> <C> <C> <C>
Kieth E. Sorenson............ 50 Chairman of the Board 1997
Arthur F. Coombs, III........ 38 President, Chief Executive Officer and Director 1999
Gary B. Filler............... 58 Acting Chief Financial Officer and Director 1998
</TABLE>
KIETH E. SORENSON has served as Chairman of the Board of the Company since
December 1, 1997. Mr. Sorenson served as President and Chief Executive Officer
of the Company from December 1, 1997 to April 22, 1999. Prior to joining the
Company, Mr. Sorenson was the founder of Truevision, Inc. (formerly RasterOps),
a publicly traded multi-media, graphics and video company. From 1993 to 1997,
he was a managing partner of Sorenson, Thomas & Co. and President, CEO and
Chairman of Truevision, Inc., of which he currently serves as director. From
1979 to 1987, he was employed by Ramtek, Inc., a Silicon Valley pioneer in
computer graphics as Vice President of Engineering and Product Marketing. He is
also currently the owner of Avtronix, a private aviation electronics
manufacturing company, and a director of Sumeria, a developer of CD-ROM titles.
ARTHUR F. COOMBS, III has served as President, Chief Executive Officer and
a director of the Company since April 22, 1999. From March 1998 until his
appointment to his current position, Mr. Coombs served as Executive Vice
President of Sento Technical Services Corporation, a wholly-owned subsidiary of
the Company. Prior to joining the Company he served as Managing Director and
Vice President over European Business Development for Sykes Enterprises, Inc., a
worldwide provider of technical support services, for four years. He is an
author of outsourcing and IT technical support methodologies and is a recognized
speaker at IT and call center conferences. Mr. Coombs has worked for high-tech
firms such as Hewlett-Packard, VLSI Research, and
2
<PAGE>
Truevision, Inc. Mr. Coombs has extensive experience in supervising the
delivery of technical support service in 14 languages to more than 25
countries.
GARY B. FILLER has served as a director of the Company since August 1998
and as Acting Chief Financial Officer of the Company since March 1999. Prior to
joining the Company, he was Senior Vice President and Chief Financial Officer of
Diamond Multimedia Systems, Inc., a manufacturer of graphics boards and modems,
from January 1995 to September 1996. From June 1994 to January 1995, Mr. Filler
was a business consultant and private investor. From February 1994 until June
1994, he served as Executive Vice President and Chief Financial Officer of ASK
Group, Inc., a computer systems company. Mr. Filler was Chairman of the Board
of Seagate Technology, Inc., a manufacturer and distributor of data storage,
retrieval and management products ("Seagate"), from September 1991 until October
1992, and was Vice Chairman of the Board of Seagate from October 1990 until
September 1991. Mr. Filler currently serves as Co-Chairman of the Board of
Seagate and as a director of Seagate Software, Inc., a subsidiary of Seagate.
COMMITTEES AND MEETINGS
The Board of Directors formed a standing Audit Committee, the members of
which were Craig I. Thomas, a former director of the Company who resigned in
April 1999, and Gary B. Filler. The Audit Committee held no meetings during the
fiscal year ended March 31, 1999. 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 of Directors also formed a standing Compensation Committee, the
members of which were Gary B. Filler and Walter W. Bregman, a former director of
the Company who resigned in July 1999. The Compensation Committee held no
meetings during the fiscal year ended March 31, 1999. The Compensation
Committee currently serves as the committee that administers the Incentive Plan
and the Company's 1996 Employee Stock Purchase Plan. In the absence of an
acting Compensation Committee, the Board of Directors is currently administering
the Incentive Plan and the Company's 1996 Employee Stock Purchase Plan.
During the fiscal year ended March 31, 1999, the Board of Directors held
six meetings. No director attended fewer than 75% 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 of Directors.
DIRECTOR COMPENSATION
Non-employee directors of the Company receive compensation of $1,500 for
attendance at each Board meeting. All directors are reimbursed for expenses
incurred in connection with attendance at Board and committee meetings.
EXECUTIVE OFFICERS
In addition to Messrs. Coombs and Filler, whose biographies are set forth
above, certain biographical information is furnished below with respect to the
following executive officers of the Company and its subsidiaries:
KEITH D. BARR, 45, has served as the Company's Chief Information Officer
since April 1998. He is responsible for the ongoing development of the
Company's information technology strategy and managing its new technical
services center. Prior to joining the Company, Mr. Barr worked for more than
four years as the Director of International IT for Sykes Enterprises, Inc.,
leading the technical development from one call center of 35 employees to
multiple call centers with 5,000 employees worldwide. Prior to joining Sykes
Enterprises, Inc., Mr. Barr spent 20 years working for the U.S. Department of
Defense and was the Chief of Information Systems at the military's largest base
located in Shreveport, LA.
STANLEY J. CUTLER, 57, has served as the Company's Controller since
November 1999 and as the Corporate Secretary since July 1999. Previously he was
interim Vice President of Finance for Portola Packaging, a manufacturer of
closures for plastic containers with revenues of $200 million, from December
1997 to November 1998. Mr. Cutler served as Controller for Diamond Multimedia
Systems, Inc., a multimedia and computer graphics
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<PAGE>
and modem company, from January 1995 to November 1997. From July 1994 until
December 1994, Mr. Cutler served as the acting Director of Finance for Media
Vision Technology, Inc., a manufacturer of multimedia products. From February
1994 until July 1994, Mr. Cutler served as Director of Finance for ASK Group,
Inc., a computer systems company, and has many years of experience as
controller and vice president of finance for high-tech companies in Silicon
Valley. Mr. Cutler is a certified public accountant and began his career in
accounting at Peat Marwick Mitchell & Co. in San Francisco, California.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officers, as well as all other executive officers of the Company
whose aggregate compensation for the fiscal year ended March 31, 1999 exceeded
$100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ------------------- -------
SECURI-
OTHER TIES ALL
ANNUAL RESTRICTED UNDER- OTHER
COMPENSA- STOCK LYING LTIP COMPENSA-
NAME AND SALARY BONUS TION AWARD(S) OPTIONS PAYOUTS TION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- --------------------------- ------ --------- -------- ---------- ---------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kieth E. Sorenson 1999 120,000 -- -- -- -- --
Chief Executive Officer 1998 34,462 100,000 -- -- -- -- --
and Chairman of the 1997
Board (1)
Arthur F. Coombs, III 1999 99,154 100,000 -- -- -- -- --
Executive Vice 1998 -- -- -- -- --
President(1) 1997
Robert K. Bench 1999 104,165 51,868 -- -- -- -- --
Executive Vice President 1998 106,534 -- -- -- -- --
and Chief Financial 1997
Officer
Fred J. Allen 1999 110,319 -- -- -- -- --
Executive Vice President 1998 -- -- -- -- --
1997
John M. Wendel 1999 69,231 60,000 -- -- -- -- --
Executive Vice President 1998 -- -- -- -- --
1997
</TABLE>
- --------------------------
(1) Mr. Sorenson served as the Chief Executive Officer of the Company
throughout the fiscal year ended March 31, 1999. Upon Mr. Sorenson's
resignation on April 22, 1999, Mr. Coombs was appointed to serve as the
Company's Chief Executive Officer. Mr. Coombs served as Executive Vice
President throughout the fiscal year ended March 31, 1999.
4
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of options to acquire
shares of Common Stock made to the Named Executive Officers during the fiscal
year ended March 31, 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
OPTION TERM
PERCENT OF TOTAL
OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ---------------------------- ---------- ---------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert K. Bench (1) 200,000 20% $3.75 Jul, 2006 $358,092 $ 857,692
John M. Wendel (2) 300,000 30% $3.75 Jul, 2006 $537,137 $1,286,537
Gary B. Filler 100,000 10% $1.50 Mar, 2009 $ 94,334 $ 239,061
Gary B. Filler 30,000 3% $3.50 Aug, 2005 $ 29,010 $ 64,104
</TABLE>
- -------------------
(1) The above options granted to Mr. Bench expired on June 27, 1999 (90 days
after Mr. Bench's resignation as Chief Financial Officer).
(2) Of the above options granted to Mr. Wendel, options to acquire 215,000
shares of Common Stock were canceled on April 22, 1999 (the date of Mr.
Wendel's resignation as Executive Vice President), and the remaining
options to acquire 85,000 shares of Common Stock expired on July 21, 1999
(90 days after Mr. Wendel's resignation).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth the aggregate value of unexercised options
to acquire shares of Common Stock held by the Named Executive Officers on March
31, 1999 and the value realized upon the exercise of options during the fiscal
year ended March 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY END 1999 (2) AT FY END 1999($)(3)
--------------------- ------------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
- -------------------------------------- --------------- -------------- --------------------- ------------------------
<S> <C> <C> <C> <C>
Robert K. Bench (4) -- -- 91,829/150,000 $13,804/--
Kieth E. Sorenson (5) -- -- 368,188/536,812 --/--
John M. Wendel (6) -- -- 75,000/225,000 --/--
Gary B. Filler -- -- 107,500/22,500 6,300/--
Fred J. Allen -- -- 44,860/35,619 8,781/2,927
</TABLE>
- -------------------
(1) Calculated based on the difference between the exercise price and the value
of the shares as of the date acquired.
(2) Includes shares of Common Stock subject to options exercisable within 60
days of March 31, 1999.
(3) Calculated based on the difference between the exercise price and the price
of a share of Common Stock on March 31, 1999. The price of the Common
Stock on March 31, 1999 was $1.563 per share (as reported on the NASDAQ
SmallCap Stock Market).
(4) In June 1999, Mr. Bench exercised options to acquire 41,829 shares of
Common Stock. Mr. Bench's remaining options to acquire 250,000 shares of
Common Stock expired on June 27, 1999 (90 days after Mr. Bench's
resignation).
(5) Mr. Sorenson resigned as Chief Executive Officer on April 22, 1999, at
which time options to acquire 900,000 shares of Common Stock were canceled.
(6) Mr. Wendel resigned as Vice President on April 22, 1999, at which time
options to acquire 215,000 shares of Common Stock were canceled, and the
remaining options to acquire 85,000 shares of Common Stock expired on July
21, 1999 (90 days after Mr. Wendel's resignation).
5
<PAGE>
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Kieth E. Sorenson resigned as Chief Executive Officer on April 22, 1999, a
position he held since December 1, 1997. Upon his resignation, options
previously granted to Mr. Sorenson to purchase 900,000 shares of Common Stock
were canceled. Mr. Sorenson was granted options to purchase 100,000 shares of
Common Stock in April of 1999 as incentive to remain in his capacity as Chairman
of the Board. Mr. Sorenson has entered into a one-year consulting agreement
with the Company, whereby he is paid $10,000 per month. The consulting
agreement expires in April 2000.
Upon Mr. Sorenson's resignation, Arthur F. Coombs, III accepted the
position of Chief Executive Officer of the Company. Mr. Coombs is an "at will"
employee and receives monthly compensation of $10,000. In the event of a
change in control which results in certain specified consequences to Mr. Coombs,
the Company will be required to pay to Mr. Coombs a severance payment equal to
one year's salary.
On March 30, 1999, the Company contracted with Gary B. Filler to act as
Executive Vice President and Chief Financial Officer of the Company. Mr. Filler
is paid $8,500 per month under the contract, which is cancelable by either party
at any time. In addition, the Company granted to Mr. Filler an option to
acquire 100,000 shares of Common Stock at an exercise price of $1.50 per share.
See "Option Grants in Last Fiscal Year."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to the employment agreements and change of control arrangements
noted above, the Company sold land and a building to Gary B. Godfrey, who was a
director of the Company at the time of sale. The property was sold for $192,722
in cash and 58,000 shares of Common Stock. The net gain recognized by the
Company on the sale was $124,578.
6
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
PRINCIPAL HOLDERS
The following table sets forth information as of July 26, 1999 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 each of the Named Executive Officers 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
7,767,312 shares of Common Stock as of July 26, 1999.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AS OF JULY 26, 1999
-------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF PERCENTAGE
SHARES OF CLASS*
- ------------------------------------------------------------------ -------------- ---------------
<S> <C> <C>
Common Stock:
Gary B. Godfrey.............................................. 791,027(1) 10%
149 North 835 East
Lindon, Utah 84042
Clemons F. Walker............................................ 487,000(2) 6%
748 Rising Star Drive
Henderson, Nevada 89014
Robert K. Bench.............................................. 423,558(3) 5%
626 East 1820 North
Orem, Utah 84057
Brian W. Braithwaite......................................... 397,167 5%
808 East Utah Valley Drive
American Fork, Utah 84003
Gary B. Filler............................................... 149,000(4) 2%
Kieth E. Sorenson............................................ 101,500(5) 1%
Arthur F. Coombs, III........................................ 70,417(6) **
All officers and directors as a group (5 persons)............ 399,584(7) 5%
</TABLE>
- -------------------
* Beneficial ownership as a percentage of the class for each person holding
options, warrants or other rights exercisable within 60 days of July 26,
1999 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.
** Represents less than 1% of the outstanding shares of Common Stock.
(1) Shares held by Gary B. Godfrey and Karie Godfrey, Trustees of the Gary B.
Godfrey Family Revocable Trust dated July 1, 1993.
(2) Includes 280,900 shares of Common Stock held in the name of the Walker
Family Trust, presently exercisable warrants to purchase 50,000 shares of
Common Stock held by Mr. Walker and presently exercisable warrants to
purchase 50,000 shares of Common Stock held in the name of the Walker
Family Trust.
(3) Includes 12,500 shares held by Tara Bench and 10,000 shares held by Taylor
Bench, each of whom is a child of Mr. Bench. Mr. Bench disclaims any
beneficial ownership of such shares.
(4) Includes 32,000 shares of Common Stock and 10,000 shares of Common Stock
subject to presently exercisable warrants held by G.T. Investments, of
which Mr. Filler is the sole shareholder, and presently exercisable options
to purchase 107,500 shares of Common Stock.
(5) Includes presently exercisable options to purchase 101,500 shares of Common
Stock.
(6) Includes presently exercisable options to purchase 70,417 shares of Common
Stock.
(7) Includes presently exercisable options to purchase 323,583 shares of Common
Stock and presently exercisable warrants to purchase 20,000 shares of
Common Stock.
7
<PAGE>
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, 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 no forms other than
the following were delinquent or were not filed during the most recent fiscal
year or prior years (to the extent not previously disclosed):
Mr. Kieth E. Sorenson failed to file a Form 3 due on June 10, 1997. Mr.
Sorenson filed the delinquent Form 3 with the SEC on July 20, 1999. Mr. Gary B.
Filler failed to file a Form 5 due on May 15, 1999. Mr. Filler filed the
delinquent Form 5 with the SEC on July 7, 1999. Mr. Walter W. Bergman failed to
file a Form 5 due on May 15, 1999. Mr. Bergman filed the delinquent Form 5 with
the SEC on July 8, 1999.
ADOPTION OF THE SENTO CORPORATION 1999 OMNIBUS STOCK INCENTIVE PLAN
The Board of Directors has adopted and recommends that shareholders of the
Company vote to approve the Sento Corporation 1999 Omnibus Stock Incentive Plan
(the "Incentive Plan"). The Incentive Plan will, if approved, be substituted in
part for the Sento Corporation Stock Incentive Plan, as amended (the
"Predecessor Plan"), and, therefore, shares of Common Stock previously
authorized for the granting of stock options under the Predecessor Plan but not
granted prior to July 15, 1999 will no longer be available under the Predecessor
Plan but will, instead, be available under the Incentive Plan. Any stock
options previously granted under the Predecessor Plan will remain outstanding
pursuant to the terms of the Predecessor Plan. If the Incentive Plan is not
approved, the Predecessor Plan will remain in effect in its present form. The
terms of the Incentive Plan are summarized below. The following description of
the Incentive Plan does not purport to be complete and is qualified in its
entirety by reference to the full text thereof. Capitalized terms used herein
will, unless otherwise defined, have the meanings assigned to them in the text
of the Incentive Plan.
GENERAL
The Incentive Plan is intended to promote the interests of the Company and
its shareholders by providing directors, officers, employees and others who are
expected to contribute to the success of the Company with appropriate incentives
and rewards to encourage them to enter into and continue in the employ of the
Company and to acquire a proprietary interest in the long-term success of the
Company, thereby aligning their interests more closely to the interests of the
Company's shareholders.
The Incentive Plan is intended to comply with the requirements of Rule
16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended. In addition, the Plan is intended to provide performance-based
compensation so as to be eligible for compliance with Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"), which
denies a deduction by an employer for certain compensation in excess of $1
million per year paid by a publicly-traded corporation to the following
individuals who are employed at the end of the employer's taxable year ("Covered
Employees"): the chief executive officer and the four most highly compensated
executive officers (other than the chief executive officer), for whom
compensation disclosure is required under the proxy rules. Certain
compensation, including compensation based on the attainment of performance
goals, is excluded from this deduction limit if certain requirements are met.
Among the requirements for compensation to qualify for this exception is that
the material terms pursuant to which the compensation is to be paid be disclosed
to and approved by the shareholders in a separate vote prior to the payment.
Accordingly, if the Incentive Plan is approved by shareholders and the other
conditions of Section 162(m) relating to performance-based compensation are
satisfied, compensation paid to Covered Employees pursuant to the Incentive Plan
will not be subject to the deduction limit of Section 162(m).
SUMMARY OF TERMS
The Incentive Plan authorizes an aggregate of 3,500,000 shares of Common
Stock that may be subject to awards, subject to adjustment as described below;
however, upon approval of the Incentive Plan, no future options may be granted
under the Predecessor Plan and 261,448 shares of Common Stock previously
available for stock options under the Predecessor Plan, but not covered by
outstanding stock options, will no longer be available under the
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Predecessor Plan but will, instead, be available under the Incentive Plan.
Accordingly, only an additional 1,000,000 shares of Common Stock would be
available for awards under the Incentive Plan in excess of the number of
shares currently available under the Predecessor Plan. Such shares may be
authorized and unissued shares, treasury shares or shares acquired by the
Company for purposes of the Incentive Plan. Generally, shares subject to an
award that remain unissued upon expiration or cancellation of the award will
be available for other awards under the Incentive Plan. In the event that
the Compensation Committee of the Board of Directors (the "Committee")
determines that any dividend or other distribution, stock split,
recapitalization, reorganization, merger or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Incentive Plan, then the Committee will make such
equitable changes or adjustments as it deems necessary to the aggregate
number of shares available under the Incentive Plan, the number of shares
subject to each outstanding award and the exercise price of each outstanding
option or stock appreciation right.
Awards under the Incentive Plan may be made in the form of (i) Incentive
Stock Options, (ii) Non-Qualified Stock Options, (iii) Stock Appreciation
Rights, (iv) Restricted Stock, (v) Phantom Stock and (vi) Stock Bonuses. Awards
may be granted to such directors, officers, employees and others expected to
contribute to the long-term success of the Company and its subsidiaries as the
Committee shall, in its discretion, select.
The Incentive Plan will be administered by the Committee which shall
consist of two or more persons each of whom is an "outside director" within the
meaning of Section 162(m) and a non-employee director within the meaning of Rule
16b-3. The Committee is authorized, among other things, to construe, interpret
and implement the provisions of the Incentive Plan, to select the persons to
whom awards will be granted, to determine the terms and conditions of such
awards and to make all other determinations deemed necessary or advisable for
the administration of the Incentive Plan.
AWARDS UNDER THE PLAN
STOCK OPTIONS. The Committee will determine each option's expiration date;
provided, however, that no incentive stock option may be exercised more than ten
years after the date of grant. The purchase price per share payable upon the
exercise of an option (the "option exercise price") will be established by the
Committee, but may be no less than the Fair Market Value of a share of Common
Stock on the date of grant. The option exercise price is payable (i) in cash,
by certified check, bank cashier's check or wire transfer, (ii) by delivering
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the full amount of the Purchase Price, (iii) by
delivering shares of Common Stock owned by the Participant with appropriate
stock powers, (iv) by electing to have the Company retain shares of Common Stock
which would otherwise be issued on the exercise of the Option, (v) any
combination of the foregoing forms or (vi) by such other payment method as the
Committee may prescribe.
STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted in
connection with all or any part of, or independently of, any option granted
under the Incentive Plan. A stock appreciation right granted independently of
any option will be subject to the same vesting rules as described above for
options. A stock appreciation right granted in tandem with any stock option
will be exercisable only when and to the extent the option to which it relates
is exercisable. The grantee of a stock appreciation right has the right to
surrender the stock appreciation right and receive from the Company, in cash, an
amount equal to the excess of the Fair Market Value of a share of Common Stock
over the exercise price of the stock appreciation right for each share of Common
Stock in respect of which such stock appreciation right is being exercised.
RESTRICTED STOCK. The Committee may grant restricted shares of Common
Stock to such persons, in such amounts, and subject to such terms and conditions
(including the attainment of performance goals) as the Committee shall determine
in its discretion. Awards of Restricted Stock granted to Executive Officers of
the Company will be contingent on the attainment by the Company or a subsidiary
of the Company, if applicable, of one or more pre-established performance goals
(the "Performance Goals") established by the Committee. The Performance Goals
may be based on the attainment by the Company (and/or its subsidiaries, if
applicable) of any one or more of the following criteria: (i) a specified
percentage return on total stockholder equity of the Company; (ii) a specified
percentage increase in earnings per share from continuing operations of Common
Stock; (iii) a specified percentage increase in net income of the Company; and
(iv) a specified percentage increase in profit before taxation of the Company.
PHANTOM STOCK. The Committee may grant shares of Phantom Stock to such
persons, in such amounts, and
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subject to such terms and conditions (including the attainment of performance
goals) as the Committee shall determine in its discretion. If the
requirements specified by the Committee are met, the grantee of such an award
will receive a cash payment equal to the Fair Market Value of the shares
covered thereby plus the dividends that would have been paid on such shares
had they actually been outstanding following the grant date. Awards of
Phantom Stock granted to Executive Officers of the Company will be contingent
on the attainment by the Company or a subsidiary of the Company, if
applicable, of any one or more of the Performance Goals noted above.
STOCK BONUS. The Committee may grant bonuses comprised of shares of Common
Stock free of restrictions to such persons, in such amounts, as the Committee
shall determine in its discretion
The Board may suspend, discontinue, revise, terminate or amend the
Incentive Plan at any time; provided, however, that shareholder approval will be
obtained if and to the extent that the Board deems it appropriate to satisfy
Section 162(m).
PLAN BENEFITS
The Company cannot now determine the exact number of Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Phantom Stock and Stock Bonuses to be granted in the future to the Named
Executive Officers, to all current executive officers as a group, or to all
employees (including executive officers). See "Executive Compensation--Option
Grants in Last Fiscal Year" for the number of options granted under the
Predecessor Plan to the Named Executive Officers during the year ended March 31,
1999. During the year ended March 31, 1999, options to purchase 230,000 shares
of Common Stock were granted to all current executive officers of the Company as
a group. In addition, during the period between April 1, 1999 and July 30,
1999, options to purchase 750,000 shares of Common Stock were granted to all
current executive officers of the Company as a group.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
Federal income tax consequences relating to awards under the Incentive Plan.
This discussion is based on currently existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
Regulations promulgated thereunder and current administrative rulings and court
decisions, all of which are subject to change. Any such change, which may or
may not be retroactive, could alter the tax consequences to shareholders
described herein. Shareholders should be aware that this discussion does not
deal with all United States Federal income tax considerations that may be
relevant to an individual shareholder granted awards pursuant to the Incentive
Plan. ACCORDINGLY, SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE SPECIFIC TAX CONSEQUENCES RELATING TO AWARDS UNDER THE INCENTIVE PLAN.
NON-QUALIFIED STOCK OPTIONS. Generally, an optionee will not recognize any
taxable income upon the grant of a Non-Qualified Stock Option. The Company will
not be entitled to a tax deduction with respect to the grant of a Non-Qualified
Stock Option. Upon exercise of a Non-Qualified Stock Option, the excess of the
Fair Market Value of the Common Stock on the exercise date over the option
exercise price will be taxable as compensation income to the optionee and will
be subject to applicable withholding taxes. The Company will generally be
entitled to a tax deduction at such time in the amount of such compensation
income. The optionee's tax basis for the Common Stock received pursuant to the
exercise of a Non-Qualified Stock Option will equal the sum of the compensation
income recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Common Stock is more than
one year.
INCENTIVE STOCK OPTIONS. An optionee will not recognize any taxable income
at the time of grant or timely exercise of an Incentive Stock Option and the
Company will not be entitled to a tax deduction with respect to such grant or
exercise. Exercise of an Incentive Stock Option may, however, give rise to
taxable compensation income subject to applicable withholding taxes, and a tax
deduction to the Company, if the optionee subsequently engages in a
"disqualifying disposition," as described below.
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A sale or exchange by an optionee of shares acquired upon the exercise of
an Incentive Stock Option more than one year after the transfer of the shares to
such optionee and more than two years after the date of grant of the Incentive
Stock Option will result in any difference between the net sale proceeds and the
exercise price being treated a long-term capital gain (or loss) to the optionee.
If such sale or exchange takes place within two years after the date of grant of
the Incentive Stock Option or within one year from the date of transfer of the
Incentive Stock Option shares to the optionee, such sale or exchange will
generally constitute a "disqualifying disposition" of such shares that will have
the following results: any excess of (i) the lesser of (a) the Fair Market
Value of the shares at the time of exercise of the Incentive Stock Option and
(b) the amount realized on such disqualifying disposition of the shares over
(ii) the option exercise price of such shares, will be ordinary income to the
optionee, subject to applicable reporting requirements, and the Company will be
entitled to a tax deduction in the amount of such income. Any further gain
generally will qualify as capital gain and will not result in any deduction by
the Company.
RESTRICTED STOCK. A grantee will not recognize any income upon the receipt
of Restricted Stock unless the holder elects under Section 83(b) of the Code,
within thirty days of such receipt, to recognize ordinary income in an amount
equal to the Fair Market Value of the Restricted Stock at the time of receipt.
If the election is made, the holder will not be allowed a deduction for amounts
subsequently required to be returned to the Company. If the election is not
made, the holder will generally recognize ordinary income, on the date that the
restrictions to which the Restricted Stock are subject are removed, in an amount
equal to the Fair Market Value of such shares on such date, less any amount paid
for the shares. At that time the holder will recognize ordinary income, subject
to applicable reporting and withholding requirements, and the Company generally
will be entitled to a deduction in the same amount.
Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e., a Section
83(b) election was previously made or the restrictions were previously removed),
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares. Such gain or loss will be long-term capital gain
or loss if the holding period for such shares is more than one year.
OTHER AWARDS. The grant of a Stock Appreciation Right or Phantom Stock
award will not result in income for the grantee or in a tax deduction for the
Company. Upon the settlement of such a right or award, the grantee will
recognize ordinary income equal to the aggregate value of the payment received,
subject to applicable reporting and withholding requirements, and the Company
generally will be entitled to a tax deduction in the same amount. A Stock Bonus
generally will result in compensation income for the grantee and a tax deduction
for the Company, equal to the Fair Market Value of the shares of Common Stock
granted.
Inasmuch as awards under the Incentive Plan will be granted at the sole
discretion of the Committee and that performance goal criteria may vary from
year to year and from Participant to Participant, benefits under the Incentive
Plan are not determinable. Compensation paid and other benefits granted for the
fiscal year ended March 31, 1999 are set forth above in the section entitled
"Executive Compensation" commencing on page 5.
SELECTION OF AUDITOR
KPMG LLP ("KPMG") served as the independent certified public accountants of
the Company for the fiscal year ended March 31, 1999. The Board of Directors
has not yet selected a certified public accounting firm to serve as the
Company's independent certified public accountants for the fiscal year ending
March 31, 2000 and intends to solicit bids from several independent accounting
firms including KPMG. The Board of Directors has extended to KPMG an invitation
to attend the Annual Meeting. If representatives of KPMG are present at the
Annual Meeting, they will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors 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
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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 2000, 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, 808
East Utah Valley Drive, American Fork, Utah 84003, no later than May 26, 2000.
ADDITIONAL INFORMATION
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON FROM WHOM A PROXY IS
SOLICITED BY THE BOARD OF DIRECTORS, 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, 1999, 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 STANLEY J. CUTLER, CORPORATE SECRETARY AND CONTROLLER OF
THE COMPANY, AT 808 EAST UTAH VALLEY DRIVE, AMERICAN FORK, UTAH 84003.
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PROXY
SENTO CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary B. Filler and Stanley J. Cutler, and
each of them, as proxies, with full power of substitution, and hereby authorizes
them to represent and vote, as designated below, all shares of Common Stock of
Sento Corporation, a Utah corporation (the "Company"), held of record by the
undersigned on August 10, 1999 at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at 808 East Utah Valley Drive, American Fork, Utah
84003, on September 23, 1999, at 10:00 a.m., local time, or at any adjournment
or postponement thereof, upon the matters set forth below, all in accordance
with and as more fully described in the accompanying Notice of Annual Meeting
and Proxy Statement, receipt of which is hereby acknowledged.
1. ELECTION OF DIRECTORS, each to serve until the next annual meeting of
shareholders of the Company and until their respective successors shall
have been duly elected and shall qualify.
/ / FOR all nominees listed below (except as marked to the contrary).
/ / WITHOUT AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
KIETH E. SORENSON ARTHUR F. COOMBS, III GARY B. FILLER
2. PROPOSAL TO ADOPT the Sento Corporation 1999 Omnibus Stock Incentive Plan
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
(continued)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ABOVE AND FOR THE
PROPOSAL TO ADOPT THE SENTO CORPORATION 1999 OMNIBUS STOCK INCENTIVE PLAN.
Please complete, sign and date this proxy where indicated and return it
promptly in the accompanying prepaid envelope.
DATED: , 1999
--------------------------------- ------------------------------
Signature
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Signature if held jointly
(Please sign above exactly as the shares are issued. When shares are held
by joint tenants, both should sign. When signing as attorney, 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.)
