SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-4
Issuer Tender Offer Statement
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
SEDONA CORPORATION
(Name of Issuer)
SEDONA CORPORATION
(Name of Person(s) Filing Statement)
SERIES E CONVERTIBLE PREFERRED STOCK
WARRANTS TO ACQUIRE SHARES OF COMMON STOCK AT $2.25 PER SHARE
WARRANTS TO ACQUIRE SHARES OF COMMON STOCK AT $4.00 PER SHARE
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
LAURENCE L. OSTERWISE
649 NORTH LEWIS ROAD, SUITE 220
LIMERICK, PENNSYLVANIA 19468
(610) 495-6701
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of the
Person(s) Filing Statement)
With a copy to:
ROBERT B. MURPHY,ESQ.
SCHNADER HARRISON SEGAL & LEWIS LLP
1300 I STREET, N.W., SUITE 1100 EAST LOBBY
WASHINGTON, D.C. 20005
202-216-4211
AUGUST 18, 1999
(Date Tender Offer First Published, Sent or Given to
Security Holders)
CALCULATION OF FILING FEE:
Transaction Valuation*: Amount of Filing Fee:
$2,210,964 $443.00
* Based upon the purchase of Securities Packages containing
1,847.18 shares of Series E Convertible Preferred Stock (the
"Series E Stock") (the maximum number of shares of Series E
Stock offered) to be purchased at the repurchase formula of
110% of the principal amount of each share of Series E Stock
contained in each Securities Package, along with accrued divi
dends).
<PAGE>
ITEM 1. SECURITY AND ISSUER
(a) Name: Sedona Corporation
Address of Principal Executive Office: 649 North Lewis
Road, Suite 220, Limerick, Pennsylvania 19468 (610) 495-6701
(b) Title of Securities Amount Outstanding on
Being Sought August 18, 1999
-------------------------------- ---------------------
Series E Convertible Preferred Stock 1,847.18
Warrants to Acquire Common Stock ($2.25) 1,132,846.00
Warrants to Acquire Common Stock ($4.00) 1,019,561.00
Information with respect to the exact amount of securities
being sought and the consideration being offered therefor is
incorporated by reference from "Number of Securities Packages
Which May Be Tendered" on Page 4 in the Offer to Purchase
dated August 18, 1999 (the "Offer to Purchase"), filed as
Exhibit (a)(i) hereto. The officers, directors and affiliates
of the Issuer have advised the Issuer that they do not own any
of the securities and therefore will not tender any securities
pursuant to the Offer.
(c) Information with respect to the principal market for and
price range of the securities is incorporated by reference
from "Determination of Repurchase Price" on Page 7 in the Of
fer to Purchase.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) Information with respect to source and amount of funds
to be used for the purchase of securities is incorporated by
reference from "Source and Amount of Funds" on Pages 8-9 in
the Offer to Purchase.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS
OF THE ISSUER OR AFFILIATE
Information with respect to the purpose of the tender offer
and planned disposition of the securities, and possible re
sults of the tender offer is incorporated by reference to
"Purpose of the Offer; Acceptance of Securities Packages and
Payment"; and "Participation By the Company's Management" on
Pages 3, 6 and 8, respectively, in the Offer to Purchase.
Other than as indicated, there are no current plans or
proposals that relate to or would result in:
(a) The acquisition by any person, other than the
Issuer, of additional securities of the Issuer, or the
disposition of any such securities by any such person;
(b) Any extraordinary corporate transaction involving
the Issuer or any of its subsidiaries;
(c) Any sale or transfer of a material amount of assets
of the Issuer or any of its subsidiaries;
(d) Any change in the present board of directors or
management of the Issuer;
(e) Any material change in the present dividend rate or
policy, or indebtedness or capitalization of the Issuer;
(f) Any other material change in the Issuer's corporate
structure or business;
(g) Any changes in the Issuer's charter, bylaws or
instruments corresponding thereto or other actions which may
impede the acquisition of control of the Issuer by any person;
(h) The delisting of any class of equity security of
the Issuer from any national securities exchange, or the
cessation of quotations of any such class of securities in any
inter-dealer quotation system;
(i) Any class of equity security of the Issuer becoming
eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended;
or
(j) The suspension of the Issuer's obligation to file
reports pursuant to Section 15(d) of the Securities Exchange
Act of 1934, as amended.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
Neither the Issuer nor any of its subsidiaries, nor to the
knowledge of the Issuer, any of its officers or directors or
any associate of any of the foregoing has engaged in any
transactions involving the securities during the 40 business
days prior to the date hereof.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES
Other than as set forth in "Source and Amount of Funds" on
Pages 8-9 of the Offer to Purchase, neither the Issuer nor, to
the knowledge of the Issuer, any of its officers, directors or
affiliates is a party to any contract, arrangement,
understanding or relationship relating directly or indirectly
to the Offer and the securities of the Issuer.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
No person has been retained or compensated by the Issuer or
on behalf of the Issuer to make solicitations or
recommendations in connection with the Offer.
ITEM 7. FINANCIAL INFORMATION
(a)(1)-(4) Not applicable.
(b)(1)-(3) Not applicable.
ITEM 8. ADDITIONAL INFORMATION
(a) Neither the Issuer nor, to the Issuer's knowledge, any
of its officers or directors is a party to any material
contract, arrangement, understanding or relationship between
them and the Issuer which are material to a decision by a
shareholder whether to tender or hold securities in the Offer.
(b) There are no applicable regulatory requirements which
must be complied with or approvals which must be obtained in
connection with the Offer.
(c) Not applicable.
(d) There are no material pending legal proceedings relating
to the Offer.
(e) Not applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith or incorporated by
reference herein to documents previously electronically filed.
(a)(i) Offer to Purchase dated August 18, 1999;
(ii) Letter of Transmittal.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
SEDONA CORPORATION
By: /S/ WILLIAM K. WILLIAMS
-------------------------
William K. Williams
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------------------------------------
99(a)(i) Offer to Purchase dated August 18, 1999
99(a)(ii) Letter of Transmittal.
OFFER TO PURCHASE FOR CASH
BY
SEDONA CORPORATION
ALL OF THE ISSUED AND OUTSTANDING SHARES OF SERIES E
CONVERTIBLE PREFERRED STOCK AND ONE-THIRD OF THE RELATED
$2.25 WARRANTS TO ACQUIRE COMMON STOCK
AND ONE-THIRD OF THE RELATED
$4.00 WARRANTS TO ACQUIRE COMMON STOCK
_________________________
THE OFFER TO PURCHASE AND YOUR WITHDRAWAL RIGHTS EXPIRE AT
5:00 P.M., EASTERN STANDARD TIME ON WEDNESDAY, SEPTEMBER 15,
1999, UNLESS THE OFFER TO PURCHASE IS EXTENDED
_________________________
AUGUST 18, 1999
SUMMARY OF THE OFFER TO PURCHASE
Sedona Corporation, a Pennsylvania corporation (the
"Company"), is offering to purchase from the holders
("Holders") of the Company's Series E Convertible Preferred
Stock, $1,000 par value per share (the "Series E Stock"), a
package consisting of all of the issued and outstanding shares
of Series E Stock, along with (i) one-third of the associated
warrants to acquire shares of Company common stock, $.001 par
value per share (the "Common Stock") at an exercise price of
$2.25 per share (the "2.25 Warrants"), and (ii) one-third of
the associated warrants to acquire shares of Common Stock at
an exercise price of $4.00 per share (the "4.00 Warrants" and,
together with the 2.25 Warrants, the "Warrants"). Holders who
desire to tender their shares of Series E Stock pursuant to
this Offer to Purchase must tender all of their Series E Stock
and also must tender one-third of their 2.25 Warrants and
one-third of their 4.00 Warrants. The package consisting of
all of a Holder's Series E Stock plus one-third of the
Holder's 2.25 Warrants and one-third of the Holder's 4.00
Warrants is hereinafter referred to as the "Securities
Package."
The purchase price offered with respect to each
Securities Package (the "Repurchase Price"), shall be
determined by reference to the number of shares of Series E
Stock contained in each Securities Package and shall be equal
to 110% of the principal amount of each share of Series E
Stock contained in the Securities Package, along with all
dividends which have accrued through the date of closing of
the Offer to Purchase on the shares of Series E Stock in the
Securities Package. The Repurchase Price shall be paid to all
tendering Holders in cash, upon the terms and subject to the
conditions set forth in this Offer to Purchase and the related
Letter of Transmittal (which together constitute the "Offer to
Purchase").
The Offer to Purchase is not conditioned upon any minimum
number of Securities Packages being tendered. The Offer to
Purchase expires at 5:00 P.M., Wednesday, September 15, 1999
unless extended or terminated (the "Expiration Date").
All Securities Packages properly tendered and not
withdrawn prior to the expiration of the Offer to Purchase
will be purchased at the Repurchase Price, upon the terms and
subject to the conditions of the Offer to Purchase. As of the
date of the Offer to Purchase, there were 1,847.18 shares of
Series E Stock issued and outstanding, 1,132,846 2.25 Warrants
outstanding and 1,019,561 4.00 Warrants outstanding. Through
its offer to purchase the Securities Packages, the Company is
offering to purchase 100% of the Series E Stock which is
issued and outstanding and one-third of the outstanding 2.25
Warrants and 4.00 Warrants. There is currently no public
trading market for the Securities Packages or the components
thereof. The Repurchase Price has been determined by the
Company based upon the value of the Securities Packages as
negotiated and agreed to by the Company and representatives of
the holders of the Securities Packages.
Any Holder desiring to tender his or her Securities
Packages should complete and sign the Letter of Transmittal in
accordance with the instructions contained therein and mail or
otherwise deliver the Letter of Transmittal, stock and warrant
certificates representing the Securities Packages to be
tendered, and any other documents required by the Letter of
Transmittal to Sedona Corporation, 649 North Lewis Road, 2nd
Floor, Limerick, Pennsylvania 19468, Attention: William K.
Williams, Chief Financial Officer. Any questions regarding
the Offer to Purchase or requests for assistance or additional
copies of the Letter of Transmittal may be directed to William
K. Williams at the same address.
_________________________
THIS OFFER TO PURCHASE IS NOT BEING MADE TO, NOR WILL
THE COMPANY ACCEPT TENDERS FROM, HOLDERS IN ANY JURISDICTION
IN WHICH THE OFFER TO PURCHASE WOULD NOT COMPLY WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. WHILE THE
COMPANY IS UNAWARE OF ANY JURISDICTION IN WHICH THE MAKING OF
THE OFFER TO PURCHASE OR THE TENDER OF SECURITIES PACKAGES BY
HOLDERS WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION, THE COMPANY RESERVES THE RIGHT TO EXCLUDE
HOLDERS IN ANY JURISDICTION IN WHICH IT IS ASSERTED THAT THE
OFFER TO PURCHASE CANNOT BE LAWFULLY MADE.
NO ADDITIONAL SOLICITING MATERIAL IS BEING EMPLOYED BY
THE COMPANY IN CONNECTION WITH THE OFFER TO PURCHASE. ANY
DISTRIBUTION OR REPRODUCTION OF THIS OFFER TO PURCHASE, IN
WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF ITS CONTENTS,
EXCEPT TO YOUR ADVISORS, IS PROHIBITED.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION
ON BEHALF OF THE COMPANY OR THE BOARD OF DIRECTORS AS TO
WHETHER HOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
PURSUANT TO THIS OFFER TO PURCHASE. NO PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFER TO PURCHASE OTHER
THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL.
IF GIVEN OR MADE, SUCH RECOMMENDATION, INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE BOARD OF DIRECTORS.
<PAGE>
TERMS AND CONDITIONS OF THE OFFER TO PURCHASE
The Offer
The Company is offering to purchase each Securities
Package at the price of 110% of the principal amount of each
share of Series E Stock contained in each Securities Package,
along with all dividends which have accrued to date on the
shares of Series E Stock in each Securities Package. The
Securities Packages that the Company is offering to repurchase
hereby represent 100% of the issued and outstanding Series E
Stock and one-third of the outstanding 2.25 Warrants and 4.00
Warrants.
Purpose of the Offer
The Company is making the Offer to Purchase at this time
because:
The Offer to Purchase will reduce or eliminate
dividend arrearages (which currently aggregate
approximately $179,066) on the Series E Stock.
The Offer to Purchase allows the Holders to gain
liquidity on their investment in the Company at a
premium to the current value of the Series E Stock.
The Offer to Purchase will allow Holders to realize a
return on their initial investment in the Company on a portion
of their holdings. Though the Common Stock (which underlies
the Series E Stock and into which the Warrants are
convertible), is traded on the Nasdaq SmallCap market, there
is no active trading market for the Series E Stock and/or the
Warrants (and the Company does not expect one to develop in
the foreseeable future). As a result, the Offer to Purchase
provides Holders with an opportunity to sell part of their
equity holdings that might not otherwise be available.
Though the Offer to Purchase has been approved by the
Company's Board of Directors, neither the Company nor its
Board of Directors is making any recommendation as to whether
any current Holder should tender any Securities Packages
pursuant to the Offer to Purchase. Each Holder must make his
or her own decision whether to tender Securities Packages.
Number of Securities Packages Which May Be Tendered
Upon the terms and subject to the conditions of the Offer to
Purchase, the Company will accept for payment and will
purchase all of the Securities Packages which are properly
tendered (and are not withdrawn) prior to the Expiration Date.
Though Holders are under no obligation to tender
Securities Packages pursuant to this Offer to Purchase, in the
event that a Holder desires to tender a Securities Package,
such Holder must tender all of such Holder's Series E Stock
and one-third of such Holder's 2.25 Warrants and 4.00
Warrants.
Although it has no current plans to do so, in the future
the Company may purchase additional shares of its equity
(whether Common Stock, other series and classes of its
preferred stock and/or warrants) in private transactions,
through tender offers, on the open market (with respect to the
Common Stock), or otherwise. Such purchases would be subject
to applicable laws and regulations and may be on the same
terms or on terms which are more or less favorable to
shareholders than the terms of this Offer to Purchase.
Expiration Date; Extension of Tender Period
The Offer to Purchase expires on the Expiration Date
which is at 5:00 P.M., Wednesday, September 15, 1999.
The Company reserves the right, in its sole discretion,
and at any time and/or from time to time, to extend the period
of time during which the Offer to Purchase is open by making a
public announcement thereof. During any such extension, all
Securities Packages previously tendered will remain subject to
the Offer to Purchase, except to the extent that such
Securities Packages may be withdrawn as set forth below in
"Withdrawal Rights." There is no assurance whatsoever that
the Company will exercise its right to extend the Offer to
Purchase.
Amendment
The Company reserves the right, in its sole discretion,
to amend or modify any term or terms of the Offer to Purchase,
including the number of Securities Packages subject to the
Offer to Purchase and the Repurchase Price. In the event of
any amendment or modification to the Offer to Purchase, the
Company will give Holders such notice and extend the
Expiration Date as required by applicable law.
Procedure for Tendering Securities Packages
For Securities Packages to be properly tendered pursuant
to the Offer to Purchase, tendering Holders must cause the
following to be delivered to the Company before the Expiration
Date:
Certificates for the shares of Series E Stock being
tendered.
Warrant certificates for the Warrants being
tendered.
A properly completed and duly-executed Letter of
Transmittal.
Other documents required by the Letter of
Transmittal.
Such documents should be delivered to:
Sedona Corporation
649 North Lewis Road, 2nd Floor
Limerick, Pennsylvania 19468
Attn: William K. Williams
Facsimile: 610-495-3092
The method of delivery of all documents, including stock
and warrant certificates, the Letter of Transmittal and any
other required documents is at the election and risk of the
tendering Holder. If delivery is by mail, registered mail
with return receipt requested and proper insurance is
recommended.
Based on a review of its records, the Company believes
that most of its current Holders hold only one certificate
representing all of the shares of Series E Stock owned by each
Holder and one warrant certificate for each of the 2.25
Warrants and the 4.00 Warrants. A Holder delivering a
certificate representing more warrants than such Holder
desires to tender should deliver such certificate along with a
specific indication of the number of warrants being tendered.
The Letter of Transmittal provides for the required indication
of the number of warrants to which the tender applies. After
completion of the Offer to Purchase, the Company will deliver
a new warrant certificate to each tendering Holder
representing the balance of the Warrants held by such Holder.
Determination of Validity; Waiver of Defects
All questions as to the number of Securities Packages to
be accepted and the validity, form, eligibility and acceptance
for payment of any tender of Securities Packages pursuant to
the Offer to Purchase will be determined by the Company, in
its sole discretion, and such determination will be final and
binding on all parties. The Company reserves the absolute
right to reject any or all tenders determined by it not to be
in proper form or the acceptance for payment of which may, in
the opinion of the Company's counsel, be unlawful. The
Company also reserves the absolute right to waive any of the
conditions of the Offer to Purchase and any defect or
irregularity in the tender of any particular Securities
Packages. No tender of Securities Packages pursuant to the
Offer to Purchase will be deemed properly made until all
defects or irregularities have been cured or waived. The
Company is not obligated to give notice of any defects or
irregularities in tenders and will not incur any liability for
failure to give such notice.
Withdrawal Rights
Securities Packages tendered pursuant to the Offer to
Purchase may be withdrawn at any time prior to the Expiration
Date; thereafter such tenders are irrevocable.
For a withdrawal to be effective, the Company must
receive a written, telegraphic or facsimile transmission
notice of withdrawal at the address or facsimile number set
forth above in "Procedure for Tendering Securities Packages."
Any notice of withdrawal must specify the name of the person
having tendered the Securities Package and now seeking to
withdraw. If certificates have been delivered to the Company,
then prior to the release of such certificates, the tendering
Holder seeking to withdraw must also submit the serial numbers
shown on the particular certificate(s) evidencing such shares
of Series E Stock and the Warrants.
All questions as to the form and validity of notices of
withdrawal will be determined by the Company, in its sole
discretion, which determination will be final and binding on
all parties. The Company is not obligated to give notice of
any defects or irregularities in any notice of withdrawal and
will not incur any liability for failure to give such notice.
A withdrawal of a tender may not be rescinded, and a
Securities Package withdrawn shall thereafter be deemed not to
be validly tendered for purposes of the Offer to Purchase.
Withdrawn Securities Packages may be re-tendered, however,
prior to the Expiration Date by following the procedures set
forth above in "Procedure for Tendering Securities Packages."
Acceptance of Securities Packages and Payment Upon the
terms and subject to the conditions of the Offer to Purchase,
as soon as practicable after the Expiration Date, the Company
will purchase and pay the aggregate Repurchase Price for all
of the Securities Packages that are properly tendered and not
withdrawn.
Payment for Securities Packages purchased pursuant to the
Offer to Purchase will be made by check from the Company to
each tendering Holder. Such payment will be made by the
Company only to the registered holder of the Securities
Packages that are tendered. The Company will pay any stock
transfer taxes with respect to the transfer and sale of
Securities Packages by Holders to the Company pursuant to the
Offer to Purchase. Each tendering Holder will be responsible
for all other taxes with respect to the sale of such Holder's
Securities Packages to the Company. See "Federal Income Tax
Considerations for Tendering Holders."
The Series E Stock component of the Securities Packages
acquired by the Company pursuant to the Offer to Purchase will
be deemed to be issued but not outstanding shares and will be
available for the Company to re-issue without further action
of the Holders. Shares of Series E Stock could be issued for
purposes such as the acquisition of other businesses or
assets, the raising of additional capital to fund the
Company's business, the distribution of stock dividends, and
the implementation of employee benefit plans. The Warrants
component of the Securities Packages acquired by the Company
pursuant to the Offer to Purchase will be canceled.
Determination of Repurchase Price
The Repurchase Price was determined by the Company after
negotiations with representatives of holders of the Series E
Stock and the Warrants. The Repurchase Price represents a
repayment of the principal amount of the Series E Stock, along
with all dividends which have accrued to date, plus a premium
of 10% of the principal amount which is designed to compensate
the Holders for the Warrant component of the Securities
Package as well as to provide incentive to the Holders to
tender the Securities Packages.
It should be noted that there is not necessarily a strict
correlation between the number of shares of Series E Stock and
the number of Warrants held by each Holder and, as a result,
each Securities Package may contain a slightly different ratio
of shares of Series E Stock to Warrants. Since the Repurchase
Price is calculated by reference to the number of shares of
Series E Stock in each Securities Package, it is possible that
there may be variances such that Holders of a Securities
Package containing an equal number of shares of Series E Stock
will receive the same aggregate Repurchase Price even though
the Warrant component of the particular Securities Packages
may differ.
Conditions to Completion of the Offer to Purchase
Notwithstanding any other provision of the Offer to
Purchase, the Company will not be required to accept for
payment, or pay for, any Securities Packages, and may
terminate or amend the Offer to Purchase or may postpone the
acceptance for payment of, or the payment for the Securities
Packages tendered, subject to Rule 13e-4(f) of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), if
at any time after the date of this Offer to Purchase and prior
to the time of acceptance for payment of, or payment for, the
Securities Packages tendered, any of the following conditions
exist:
a preliminary injunction or permanent injunction or
other order of any court which prevents the
acceptance of or payment for Securities Packages
tendered pursuant to the Offer to Purchase has been
issued and remains in effect; or
there is instituted, pending, or threatened any
action or proceeding by any governmental authority
or agency, or by any other person challenging the
Offer to Purchase, the acceptance of or payment for
Securities Packages tendered, or could
otherwise have a material adverse effect on the
Company, its financial condition, business or
assets; or
there is any action taken or threatened, or approval
or consent withheld, or statute, rule or regulation
proposed, enacted, amended or deemed to be
applicable to the Offer to Purchase or the Company
by any governmental authority or agency
which in the Company's sole judgment (i) make the
acceptance of or payment for Securities Packages
tendered illegal, or otherwise restrict or prohibit
consummation of the offer, or (ii) have a material
adverse effect on the Company, its financial
condition, business or assets.
All of the foregoing conditions are for the Company's
benefit, and any determination by the Company concerning the
events described above, or determination to assert or waive
such conditions shall be made by the Company and such
determination will be final and binding on all parties.
Participation By The Company's Management
As of the close of business on the date of this Offer to
Purchase, the executive officers and directors of the Company,
as a group, do not own any shares of Series E Stock or any
Warrants. Accordingly, none of the Company's executive
officers and directors will participate in the Offer to
Purchase.
While it is not anticipated that any of the Company's
executive officers and directors will participate in the Offer
to Purchase, Laurence Osterwise, the Company's President and
Chief Executive Officer, may invest $200,000 in the Company
pursuant to the Private Placement (as defined and described in
"Source and Amount of Funds" below). Mr. Osterwise's
investment is contingent on the Private Placement first
raising a minimum of $1,500,000 (exclusive of Mr. Osterwise's
potential investment), although Mr. Osterwise may waive such
contingency in his sole discretion. In addition, other
Company directors may invest in the Private Placement.
Source and Amount of Funds
The total amount of funds required by the Company to
consummate the Offer to Purchase is estimated to be
approximately $2,210,964, assuming that the maximum number of
Securities Packages eligible to be tendered are so tendered.
The Company intends to fund the purchase of the Securities
Packages and related expenses from two sources: (i) with
proceeds from a private placement of Common Stock (the
"Private Placement") and (ii) with proceeds from the exercise
of an outstanding warrant to purchase Common Stock (the
"Warrant Exercise").
Private Placement. The Private Placement is in the
process of being completed and is expected to be completed on
or about August 20, 1999. The Private Placement consists of
the sale of up to 23 units at a price of $100,000 per unit,
with each unit consisting of 50,000 shares of Common Stock and
a warrant to purchase 44,444 shares of Common Stock at an
exercise price of $2.25 per share. The Private Placement is
being undertaken in contemplation of the Offer to Purchase and
the proceeds of the Private Placement, in the aggregate amount
of up to $2,300,000 will be held by the Company in a
segregated account to be used in connection with the
repurchase of the Securities Packages. As of the date of the
Offer to Purchase, the Private Placement has resulted in the
sale of 7 units consisting of 350,000 shares of Common Stock
and warrants to purchase 311,108 shares of Common Stock at an
exercise price of $2.25 per share. To date, the Company has
realized proceeds from the Private Placement in the aggregate
amount of $700,000, including the contingent investment of Mr.
Osterwise.
In December 1998, the Company entered into an consulting
agreement with Mr. George Griffin whereby he receives $5,000
per month, plus reimbursement for reasonable and actual
expenses, and was granted a warrant to purchase up to 150,000
shares of Common Stock at $2.50 per share which warrant vests
over time. Mr. Griffin provided consulting services to the
Company in connection with the Private Placement for which he
was not separately compensated. The agreement with Mr.
Griffin is cancelable by the Company upon 30 days written
notice.
Warrant Exercise. In the event that the Private
Placement does not yield an amount of money sufficient to fund
the full Repurchase Price, the Company will fund the remainder
of the Repurchase Price with proceeds of the Warrant Exercise.
The Warrant Exercise was recently completed as follows:
Company warrant WC0249 (the "Outstanding Warrant") provided
the holder with the opportunity to acquire 2,100,000 shares of
Common Stock at any exercise price of $4.00 per share. In
discussions with the holder of the Outstanding Warrant, the
holder indicated a willingness to immediately exercise a
portion of the Outstanding Warrant provided that the Company
would agree to lower the exercise price from $4.00 to $1.75
per share. After considering the Company's need for working
capital as well as the potential that additional funds (beyond
funds raised in the Private Placement) may be needed to
repurchase the Securities Packages, the Company's Board of
Directors approved the adjustment to the exercise price on the
Outstanding Warrant, the holder of the Outstanding Warrant
exercised the Outstanding Warrant to acquire 1,142,858 shares
of Common Stock and the Company realized $2,000,000 in
proceeds from the Warrant Exercise. It is anticipated that a
majority of the proceeds from the Warrant Exercise will be
used for the Company's working capital needs.
Federal Backup Withholding
Absent an exemption under applicable law concerning
"backup withholding" of federal income tax, the Company will
be required to withhold 31% of the gross proceeds otherwise
payable to a Holder pursuant to the Offer to Purchase unless
the Holder has provided his or her tax identification number,
certifies that such number is correct, and certifies that such
person is not subject to backup federal income tax
withholding.
Each tendering Holder should complete and sign the
signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal so as to provide the information and
certifications necessary to avoid backup withholding.
Federal Income Tax Considerations for Tendering Holders
The following summary is a general discussion of certain
of the U.S. Federal income tax consequences relating to the
sale of Securities Packages pursuant to this Offer.
This summary does not purport to cover all aspects of
Federal income taxation that may be relevant to Holders. In
addition, certain Holders (including insurance companies,
tax-exempt organizations, financial institutions, foreign
persons, broker dealers, or stockholders who have acquired
their Units as compensation) may be subject to special rules
not discussed below. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), regulations,
rulings and decisions now in effect, all of which are subject
to change (any such changes may be retroactive so as to apply
to transactions before the date changes are made). Also,
unless otherwise stated, the discussion assumes that each of
the constituent elements of the Securities Packages are
capital assets within the meaning of Section 1221 of the Code
in the hands of the Holder at all relevant times.
No rulings as to any of the matters discussed in this
summary have been requested or received from the Internal
Revenue Service (the "Service"). The consequences of any
particular Holder may differ depending on that Holder's
circumstances and tax position. Furthermore, this summary
does not discuss any aspects of state, local, foreign or other
tax laws.
Each Holder is urged to consult and rely on such Holder's
own tax advisor with respect to such Holder tendering
Securities Packages pursuant to the Offer to Purchase.
In General. A Holder's sale of the constituent elements
of the Securities Packages (the shares of Series E Stock, and
the Warrants) for cash pursuant to the Offer to Purchase will
be a taxable transaction for Federal income tax purposes. A
Holder who sells a Securities Package pursuant to the Offer
to Purchase will be required to allocate the Repurchase Price
between these constituent elements in proportion to their fair
market values on the purchase date to determine the amount
realized from the sale of each constituent element of the
Securities Package. The amount realized on a sale of the
Series E Stock will include any amount representing accrued
but unpaid dividends.
Sale of the Series E Stock. The tax consequences of the
sale of the Series E Stock will be determined in part under
the stock redemption rules of Section 302 of the Code. The
amount and characterization of income recognized by a Holder
in connection with a sale of Series E Stock pursuant to the
Offer to Purchase will depend on whether the sale is treated
as an "exchange" or as a "dividend" for Federal income tax
purposes.
Under Section 302 of the Code, a sale of Series E Stock
to the Company pursuant to the Offer to Purchase will, as a
general rule, be treated as an "exchange" of the Series E
Stock (rather than as a distribution by the Company with
respect to the Series E Stock held by the tendering Holder)
for Federal income tax purposes if the receipt of cash upon
the sale: (i) is "substantially disproportionate" with respect
to the Holder; (ii) is in "complete redemption" of the
Holder's interest in the Company; or (iii) is "not essentially
equivalent to a dividend" with respect to the Holder. These
tests (the "Section 302 tests") are explained more fully
below. Notwithstanding the foregoing, if the Company were
determined to be a "collapsible corporation," a Holder's gain
would be taxable as ordinary income, rather than capital gain.
Because of its operating history, the nature of its assets and
other factors, the Company believes that it is not a
"collapsible corporation."
If any of the Section 302 tests are satisfied so that the
sale of the Series E Stock is treated as an "exchange" rather
than a dividend distribution for Federal income tax purposes,
a tendering Holder will recognize capital gain or loss equal
to the difference between the amount of cash received by the
Holder in respect of the Series E Stock (including the
principal amount of the Series E Stock, any accrued but
undeclared and unpaid dividends on that stock and an allocable
share of any premium) pursuant to the Offer to Purchase and
the Holder's tax basis in the shares of Series E Stock sold
pursuant to the Offer to Purchase. Therefore, if any of the
Section 302 tests would be satisfied, a tendering Holder may
wish to take into account the various tax bases and holding
periods of such Holder's Series E Stock, if such
characteristics are not uniform, in determining which share(s)
to tender so as to minimize the amount of the Holder's taxable
gain or to maximize the portion of the gain or loss which
would be capital gain or loss.
In determining whether any of the Section 302 tests are
satisfied, it is important to understand that a Holder must
take into account not only stock actually owned by the Holder,
but also stock that is considered as being owned by the Holder
("constructive ownership") pursuant to Section 318 of the
Code. Under Section 318, a Holder is deemed to own stock
actually owned, and in some cases stock constructively owned,
by certain related individuals and entities in which the
Holder has an interest, or, in the case of Holders that are
entities, by certain individuals or entities that have an
interest in the Holder, as well as any stock the Holder has a
right to acquire by exercise of an option or by the conversion
or exchange of a security.
One of the following Section 302 tests generally must be
satisfied in order for the sale of Series E Stock pursuant to
the Offer to Purchase to be treated as an "exchange" for
Federal income tax purposes, rather than as a dividend
distribution:
i. Substantially Disproportionate Test.
The receipt of cash by a Holder will be "substantially
disproportionate" with respect to the Holder if: (1) the
Holder owns less than 50% of the total combined voting power
of all classes of stock immediately following the exchange of
Series E Stock; and (2) the percentage of the outstanding
voting stock of the Company, actually and constructively owned
by the Holder immediately following the exchange of Series E
Stock pursuant to the Offer to Purchase (treating Series E
Stock acquired by the company pursuant to the Offer to
Purchase as not outstanding), is less than 80% of the
percentage of the outstanding voting stock of the Company
actually and constructively owned by the Holder immediately
before the exchange (treating Series E Stock acquired by the
Company pursuant to the Offer to Purchase as outstanding). No
distribution will be treated as substantially disproportionate
unless the Holder's actual and constructive ownership of the
common stock (whether voting or nonvoting) of the Company,
owned by the Holder immediately following the exchange of the
Series E Stock also meets the 80% requirement discussed above.
ii. Complete Redemption Test. The receipt
of cash by a Holder will be in "complete redemption" of the
Holder's interest if either (i) all of the stock of the
Company that is actually and constructively owned by the
Holder is sold pursuant to the Offer to Purchase or (ii) all
of the stock of the Company actually owned by the Holder is
sold pursuant to the Offer to Purchase, the Holder is
eligible to waive, and effectively waives, the attribution of
stock of the Company constructively owned by the Holder in
accordance with the procedures described in Section 302(c)(2)
of the Code, the Holder does not have any other interest
(including an interest as an officer or employee) in the
Company (other than as a creditor), and does not acquire such
interest within 10 years from the date of distribution, other
than stock acquired by bequest or inheritance. The
waiver of constructive ownership as described above is
permitted only in the case of constructive ownership of stock
held by family members.
iii. Not Essentially Equivalent to a Dividend
Test. If the receipt of cash by a Holder fails to constitute
an "exchange" under the "substantially disproportionate" test
or the "complete redemption" test, the receipt of cash may
constitute an "exchange" under the "not essentially equivalent
to a dividend" test. The receipt of cash by a Holder will be
"not essentially equivalent to a dividend" if the Holder's
exchange of Series E Stock pursuant to the Offer to Purchase
results in a "meaningful reduction" of the Holder's
proportionate interest in the Company. Whether the receipt of
cash by a Holder will result in a meaningful reduction of the
Holder's proportionate interest will depend on the
Holder's particular facts and circumstances. The IRS has
indicated in published rulings that any reduction in the
percentage interest of a shareholder whose relative stock
interest in a publically held corporation is nominal (an
interest of less than 1% may satisfy this requirement) and who
exercises no control over corporate affairs should constitute
a "meaningful reduction." It may be possible for a tendering
Holder to satisfy one of the above three tests by
contemporaneously in accordance with a plan, selling or
otherwise disposing of all or some of the stock in the Company
that is actually owned (or by causing another person to sell
or otherwise dispose of all or some of the Stock in the
Company that is constructively owned) by such Holder pursuant
to the Offer to Purchase. Correspondingly, a tendering Holder
may not be able to satisfy one of the above three tests
because of contemporaneous acquisitions of stock by such
Holder or by some person or entity whose stock would be
treated as constructively owned by such Holder.
The Section 302 tests are highly complex and as to
certain issues there is an absence of authority. Therefore,
in applying these tests, and the various rules relating to
them, Holders should consult with and rely upon their own tax
advisors.
If one of the Section 302 tests applies so that the
purchase by the Company of the Series E Stock is treated as an
"exchange" taxable as a capital gain (or loss), any such gain
will be taxed at capital gains tax rates. Generally, in the
case of non-corporate Holders, if the shares of Series E Stock
sold to the Company were "held" for more than 12 months, any
capital gain will be taxed at a maximum Federal income tax
rate of 20%. If the shares of Series E Stock sold to the
Company have not been "held" for more than one year, the gain
will be taxed at ordinary income tax rates (see discussion
below). Capital gains of corporations are taxable at a
maximum federal income tax rate of 35%.
If none of the Section 302 tests is satisfied and if the
Company has sufficient "earnings and profits" (as that term is
used in Section 316(a) of the Code), a tendering Holder may be
treated as having received a dividend includable in gross
income in an amount equal to the entire amount of cash
received by the Holder in respect of the Series E Stock
(including the principal amount of the Series E Stock, any
accrued but undeclared and unpaid dividends on that stock and
an allocable share of any premium) pursuant to the Offer to
Purchase. This amount would not be reduced by the Holder's
tax basis in the Series E Stock exchanged pursuant to the
Offer to Purchase, and (except as described below for
corporate Holders eligible for the dividends- received
deduction) the Holder's tax basis in those shares of Series E
Stock would be added to the Holder's tax basis in his or her
remaining Series E Stock. Dividend income is generally
taxable to non-corporate taxpayers at a maximum Federal income
tax rate of 39.6% (although income at certain levels may be
subject to a higher effective rate owing to the phase-out of
personal exemptions and certain itemized deductions) and to
corporations at a maximum Federal income tax rate of 35%
(although income at certain levels may be subject to a higher
effective rate owing to phase-out of the 15% and 25%
brackets). As discussed below, a corporate Holder that is
treated as receiving a dividend may be allowed a
dividends-received deduction. Any cash received for Series E
Stock pursuant to the Offer to Purchase as a dividend
distribution but which is in excess of the Company's "earnings
and profits" will be treated, first, as a non-taxable return
of capital to the extent of the Holder's basis for such
Holder's Series E Stock, and, thereafter, as a capital gain to
the extent it exceeds such tax basis.
Upon receipt of a dividend from the Company, a corporate
Holder who owns less than 20% of the stock of the Company
(based on both vote and value) generally is eligible for a
dividends-received deduction equal to 70% of the amount of the
distribution, subject to certain applicable limitations.
In addition, any amount received by a corporate Holder
that is treated as a dividend may constitute an "extraordinary
dividend" subject to the provisions of Section 1059 of the
Code. Generally, that section requires a corporate
shareholder to reduce the tax basis of its shares in a
corporation by the portion of the dividend eligible for the
dividends-received deduction and, if such portion (the
"non-taxed portion") exceeds the shareholder's adjusted tax
basis for the Series E Stock, to treat any such excess as gain
from the sale of Series E Stock. In addition, if the
distribution in redemption is treated as a dividend because of
the application of the rules providing for constructive
ownership of stock subject to an option, gain will be
recognized to the extent the non-taxed portion of any such
"dividend" exceeds the adjusted income tax basis in the
redeemed Series E Stock. The term "extraordinary dividend"
includes any dividend if the amount thereof exceeds the
greater of 5% of the adjusted tax basis of the Holder's shares
or 5% of the fair market value of the shares. For the purpose
of determining the amount of dividends received, dividends
received that have ex-dividend dates within the same period of
85 consecutive days of a dividend are aggregated. Further, if
a taxpayer receives an aggregate amount of dividends in excess
of 20% of the adjusted basis of the taxpayer's stock, such
dividends having ex-dividend dates within the same period of
365 consecutive days, then such dividends also constitute
"extraordinary dividends" and the taxpayer must reduce its
basis under Section 1059 of the Code. Section 1059 applies
only to stock that has not been held for more than two years
before the dividend announcement date unless, among other
things, the redemption is not pro rata to all shareholders or
the rules relating to dividend treatment in a redemption
resulting from the constructive ownership of stock subject to
an option apply. Additionally, if a corporate shareholder is
required under Section 1059 to reduce its stock basis, then
the non-taxed portion of all dividend distributions within an
85 day or 365 day period referred to above, including regular
dividend distributions by the Company, reduce the corporate
shareholder's basis in the Series E Stock
Sale of Warrants. The sale of the Warrants generally
will be taxable transactions for Federal income tax purposes.
Any such gain recognized by the Holders on a sale of Warrants
will ordinarily be taxed at capital gains tax rates.
Generally, in the case of non-corporate Holders, gains
resulting from the sale of any of the Warrants to the Company
which were "held" for more than 12 months, will be taxed at a
maximum Federal income tax rate of 20%. Gains resulting from
the sale of any of the 4.00 Warrants or 2.25 Warrants which
were sold to the Company which were not "held" for more than
one year, will be taxed at ordinary income tax rates. Gains
resulting from the sale of any of the 4.00 Warrants or 2.25
Warrants by a corporate Holder to the Company, will be taxed
at a maximum rate of 35%. The tax treatment of Warrants may
be subject to special rules under Section 1234 of the Code and
the regulations promulgated thereunder (e.g., treatment of
gain that taxed as a dividend and limitations on the
deductibility of losses). As indicated above, each Holder is
urged to consult and rely on such Holder's own tax advisor
with respect to such Holder tendering Warrants pursuant to the
Offer to Purchase.
Miscellaneous
Pursuant to Rule 13e-4 under the Exchange Act, the
Company has filed with the Securities and Exchange Commission
(the "Commission") an Issuer Tender Offer Statement on
Schedule 13E-4 which contains additional information with
respect to the Offer to Purchase. Such Schedule 13E-4,
including the exhibits and any amendments thereto, may be
examined, and copies may be obtained at the Commission's
public reference rooms at the Commission's principal office at
Judiciary Plaza, 450 Fifth Street, N.W., and at the
Commission's regional offices at Seven World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. The
Schedule 13E-4 is also available to the public from the
Commission's website at "http://www.sec.gov". In addition,
such schedule may be inspected and copied at the offices of
The Nasdaq Stock Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
LETTER OF TRANSMITTAL
TO TENDER SECURITIES PACKAGES CONSISTING OF SHARES OF SERIES E
CONVERTIBLE PREFERRED STOCK
AND WARRANTS TO ACQUIRE SHARES OF COMMON STOCK
OF
SEDONA CORPORATION
Tendered Pursuant to the Offer to Purchase
dated August 18, 1999
_________________________
THE OFFER TO PURCHASE AND YOUR WITHDRAWAL RIGHTS EXPIRE AT
5:00 P.M., EASTERN STANDARD TIME ON WEDNESDAY, SEPTEMBER 15,
1999 ("EXPIRATION DATE") UNLESS THE OFFER TO PURCHASE IS
EXTENDED
_________________________
This Letter of Transmittal and Certificates for shares of
Series E Convertible Preferred Stock and Warrants
should be sent or delivered as follows:
Sedona Corporation
649 North Lewis Road, 2nd Floor
Limerick, Pennsylvania 19468
Attn: William K. Williams
DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES
FOR SHARES OF SERIES E CONVERTIBLE PREFERRED STOCK AND
WARRANTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
_________________________
SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BEFORE COMPLETING THIS LETTER OF TRANSMITTAL.
DESCRIPTION OF SECURITIES PACKAGE TENDERED
NAMES AND ADDRESSES OF
REGISTERED HOLDER(S)
COMPONENTS OF SECURITIES
PACKAGE TENDERED
Certificate Serial Number(s)
Total Number of Shares/Warrants
Represented by Certificates
Total Number of Shares/Warrants
Tendered
1. Series E Stock
2. 2.25 Warrants
3. 4.00 Warrants
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Sedona Corporation, a
Pennsylvania corporation (the "Company"), the above-described
package (the "Securities Packages"), with each Securities
Package consisting of all of the undersigned's shares of the
Company's Series E Convertible Preferred Stock, par value
$1,000 per share (the "Series E Stock"), along with (i)
one-third of the undersigned's related $2.25 Warrants to
acquire shares of Company common stock ("2.25 Warrants") and
(ii) one- third of the undersigned's related $4.00 Warrants to
acquire shares of Company common stock ("4.00 Warrants"). The
aggregate repurchase price for the Securities Package is equal
to 110% of the principal amount of each share of Series E
Stock contained in the Securities Package, along with all
dividends which have accrued through the date of the closing
of the Offer to Purchase on the shares of Series E Stock in
the Securities Package (the "Repurchase Price"). The
Repurchase Price shall be paid to the undersigned in cash,
upon the terms and subject to the conditions set forth in the
Offer to Purchase dated August 18, 1999, the receipt of which
is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer to Purchase").
Upon the terms and subject to the conditions of the Offer
to Purchase (including, if the Offer to Purchase is extended
or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and
transfers to or upon the order of the Company all right, title
and interest in and to the Securities Package (and the
components thereof) that is being tendered hereby. The
undersigned hereby irrevocably constitutes and appoints
William K. Williams and Michael Mulshine, or either of them,
the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Securities Package (and the
components thereof), with full power of substitution (such
power of attorney being deemed to be an irrevocable power
coupled with an interest), to deliver such Securities Package
(and the components thereof), or transfer ownership of such
Securities Packages (or the components thereof) to or upon the
order of the Company, all in accordance with the terms of the
Offer to Purchase.
The undersigned hereby represents, warrants and agrees
that the undersigned has full power and authority to tender,
sell, transfer, and assign the Securities Package tendered
hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions,
charges and encumbrances, and that such Securities Package
(and the components thereof) will not be subject to any
adverse claim when the same are accepted by the Company. The
undersigned will, upon request, execute and deliver any
additional documents deemed by the Company to be necessary to
complete the sale, assignment and transfer of the Securities
Package tendered hereby.
The undersigned also represents, warrants and covenants
that the undersigned has read and agrees to all of the terms
of the Offer to Purchase. The undersigned recognizes that,
under circumstances set forth in the Offer to Purchase, the
Company may terminate or amend the Offer to Purchase or may
not be required to accept for payment the Securities Package
tendered herewith.
All authority herein conferred or agreed to be conferred
shall survive the death or incapacity of the undersigned and
any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and
assigns of the undersigned. Any tender pursuant to this
Letter of Transmittal may only be revoked in accordance with
the procedures set forth in the Offer to Purchase.
The undersigned understands that the tender of the
Securities Package (and the components thereof) pursuant to
any of the procedures described in the Offer to Purchase and
in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and
subject to the conditions set forth herein and in the Offer to
Purchase.
The undersigned understands that if the undersigned
delivers a warrant certificate representing more warrant
shares than the undersigned desires to (or is permitted to)
tender, and if the tender is accepted, the Company will
deliver a new warrant certificate(s) to the undersigned
representing the balance of the warrant shares held by the
undersigned.
HOLDER(S) SIGN HERE ______________________________
Signature of Owner ______________________________
Signature of Co-Owner (if applicable)
Name(s): ______________________________
(please print)
______________________________
(please print)
Date: ______________________________
Capacity: ______________________________
(please include full title)
Address: ______________________________
______________________________
Telephone: (____)________________________
Tax Identification or Social Security Number:
_________________
(This Letter of Transmittal must be signed by the registered
holder(s) exactly as name(s) appear(s) on the certificates.
If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity,
please set forth full title. See Instruction 3 of this Letter
of Transmittal.)
<PAGE>
INSTRUCTIONS Forming Part of the Terms and Conditions of
the Offer to Purchase
1. Delivery of Letter of Transmittal and Shares. This
Letter of Transmittal is to be used to tender Securities
Packages pursuant to the Offer to Purchase. All share and
warrant certificates, as well as a properly completed and duly
executed Letter of Transmittal, and any other documents
required by this Letter of Transmittal, must be received by
the Company at the address set forth above on or prior to the
Expiration Date.
THE METHOD OF DELIVERY OF SHARES AND WARRANTS AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
TENDERING HOLDER. IF SHARES AND WARRANTS ARE SENT BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY TO THE COMPANY.
No alternative, conditional or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter
of Transmittal waive any right to receive any notice of the
acceptance of their Securities Packages.
2. Inadequate Space. If the space provided herein is
inadequate, list and attach hereto on a separate schedule, the
share and warrant certificate serial numbers and the number of
shares and warrants being tendered.
3. Signatures on Letter of Transmittal; Stock Powers
and Endorsements. The signature on the Letter of Transmittal
must correspond with the name as written on the face of the
shares and warrants without alteration, enlargement or any
change whatsoever. If any of the shares and warrants tendered
are owned of record by two or more joint owners, all such
owners must sign this Letter of Transmittal.
If any of the shares and warrants tendered are registered
in different names, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are
different registrations of shares and warrants. If this
Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary capacity or
representative capacity, such persons should so indicate when
signing, and unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must
be submitted.
4. Transfer Taxes. The Company will pay any transfer
taxes with respect to the transfer and sale of any of the
shares and warrants to it or its order pursuant to the Offer
to Purchase. If for any reason other than the transfer of
shares and warrants to the Company or its order pursuant to
the Offer to Purchase a transfer tax is imposed, the amount
of the transfer tax (whether imposed on the registered holder
or any other person) will be payable by the tendering
shareholder. Any such transfer tax payable by the tendering
shareholder will be deducted from the aggregate purchase price
unless satisfactory evidence of payment of such tax or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 4, IT WILL NOT BE
NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO SHARES
LISTED IN THIS LETTER OF TRANSMITTAL.
5. Irregularities and Waiver of Conditions. All
questions as to the validity, form, eligibility (including
time of receipt) and acceptance for exchange of any tender of
Securities Packages will be determined by the Company, in its
sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject
any or all tender of Securities Packages determined by it not
to be in proper form, or the acceptance or exchange of which
may, in the opinion of the Company's counsel, be unlawful.
The Company also reserves the absolute right to waive any
defect or irregularity in any tender with respect to any
particular Securities Packages or any particular holder, and
the Company's interpretations of the terms and conditions of
the Offer to Purchase (including these instructions) shall be
final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within
such time as the Company shall determine. Neither the Company
nor any other person will be under any duty or obligation to
give notice of any defects or irregularities in tenders, nor
shall any of them incur any liability for failure to give such
notice. Any Securities Packages received by the Company that
are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned
to the appropriate tendering holders as soon as practicable.
6. Requests for Assistance or Additional Copies.
Requests for information or additional copies of the Offer to
Purchase or this Letter of Transmittal should be directed to
William K. Williams and the Company, 649 North Lewis Road, 2nd
Floor, Limerick, Pennsylvania 19468, telephone (610) 495-6701.
7. Taxpayer Information and Substitute W-9. All
shareholders must complete the "Substitute Form W-9" set forth
below by providing the Shareholder's name, address, city, and
either (i) state and zip code, or (ii) country of residence.
United States federal income tax law requires that a
United States holder who surrenders share to provide the
Company (as payor) with his or her correct taxpayer
identification number ("TIN"), which, if the surrendering
holder is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the
surrendering holder may be subject to a penalty imposed by the
Internal Revenue Service and payments that are made by the
Company to the tendering holder may be subject to a 31% backup
withholding. If withholding results in an overpayment of
taxes, a refund may be obtained. Exempt persons (including,
among others, all corporations) are not subject to these
backup withholding and reporting requirements.
To prevent the 31% backup withholding tax, each
surrendering United States holder must provide his or her
correct TIN by completing Part 2 of the "Substitute Form W-9"
set forth above, certifying that the TIN provided is correct
(or that the surrendering holder is awaiting a TIN) and that
(a) the surrendering holder has not been notified by the
Internal Revenue Service that he or she is subject to backup
withholding as a result of failure to report all interest or
dividends, or (b) the Internal Revenue Service has notified
the surrendering holder that he or she is no longer subject to
backup withholding or certify in accordance with the enclosed
Guidelines that such surrendering holder is exempt from backup
withholding.
8. Mutilated, Lost, Stolen or Destroyed Shares. Any
exchanging Shareholder whose shares have been mutilated, lost,
stolen or destroyed should contact William K. Williams at the
Company for instructions.
<PAGE>
SUBSTITUTE FORM W-9
PAYOR'S REQUEST FOR TAX IDENTIFICATION NUMBER (TIN) PAYOR'S
NAME: Sedona Corporation PAYEE'S NAME AND ADDRESS:
______________________________
______________________________
______________________________
PART 1 PLEASE PROVIDE YOUR TIN IN THE SPACE AT RIGHT AND
CERTIFY BY SIGNING BELOW ___________________________
(Social Security Number)
or
___________________________
(Employer Identification Number)
PART 2
AWAITING TIN (check if awaiting TIN) _____
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT
(1) the number shown on this form is my correct taxpayer
identification number (or a TIN has not been issued to me but
I have mailed or delivered an application to receive a TIN or
intend to do so in the near future), (2) I am not subject to
backup withholding either because I have not been notified by
the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all
interest or dividends or the IRS has notified me that I am no
longer subject to backup withholding, and (3) all other
information provided on this form is true, correct and
complete.
_________________________
_________________________
Signature Date
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and either
(a) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal
Revenue Service Center or Social Security Administration
Office or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a
taxpayer identification number within sixty (60) days, 31% of
all reportable payments made to me thereafter will be withheld
until I provide a number.
________________________ _________________________
Signature Date
