<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended December 31, 1999, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-15864
SEDONA CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 95-4091769
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
649 North Lewis Road, Limerick, PA 19468
(Address of principal executive offices, including zip code)
610-495-3003
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant computed by reference to the closing price as reported on the Nasdaq
SmallCap Market as of March 17, 2000 was $187,906,000.
The number of shares of the Registrant's Common Stock issued and outstanding as
of March 17, 2000 was 26,718,398 shares.
Documents Incorporated by Reference: None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference to the
information under the caption "Directors and Executive Officers of the
Registrant" in the Company's Annual Report on 10-K for the year ended December
31, 1999.
Beneficial Ownership Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commissions
("Commission"), and The Nasdaq Stock Market, Inc. Directors, executive officers
and beneficial owners of more than 10% of the outstanding shares of Common Stock
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms that they file. Based solely on review of the copies of such
forms or written representations that no reports on Form 5 were required, the
Company believes that for the year period ended December 31, 1999, all of its
directors, executive officers and greater than 10% beneficial owners complied
with Section 16(a) filing requirements applicable to them.
ITEM 11. EXECUTIVE COMPENSATION
Compensation.
The following table sets forth certain summary information concerning
compensation for services in all capacities awarded to, earned by or paid to,
the Company's Chief Executive Officer and the other most highly compensated
officers of the Company, whose aggregate cash and cash equivalent compensation
exceeded $100,000 (the "Named Officers"), with respect to the last three fiscal
years.
<TABLE>
<CAPTION>
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Long Term
Annual Compensation Compensation
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Stock Option/
Warrant Awards All Other
Name and Principal Position Year Salary Bonus (shares) Compensation (1)
- ---------------------------- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Laurence L. Osterwise 1999 $ - $- 400,000 $ -
Chairman of the Board 1998 $ 38,078 $- 300,000 $ -
(2) 1997 $ 121,154 $- 250,000 $ -
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Marco A. Emrich
Chief Executive Officer 1999 $ 63,173 $- 725,000 $ -
and President (3)
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Robert J. Griffin 1999 $ 160,426 $- 100,000 $ -
Vice President 1998 $ 198,330 $- 50,000 $ -
1997 $ 37,500 $- 50,000 $ -
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</TABLE>
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(1) In fiscal year 1999, no executive officer received prerequisites or other
personal benefits, securities or property as a portion of the executive
officer's salary and bonus.
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Certain Employment Agreements.
On September 15, 1999, the Company entered into an Employment Agreement with
Marco A. Emrich, its Chief Executive Officer and President (the "CEO
Agreement"). The CEO Agreement has a term of two years and three months.
Compensation during this period will be $225,000 as base annual salary plus
additional compensation as directed by the Board of Directors. Mr. Emrich can
also earn up to $100,000 in the form of cash bonus for years 2000 and 2001,
subject to quarterly measurements. In addition Mr. Emrich was granted 200,000
options and 175,000 warrants with a strike price of $2.50, which will vest over
4 years at 25% per year. He also was granted 350,000 warrants with a strike
price of $2.50 with a four year "cliff vest" provision, and certain acceleration
provisions based on stock price performance. In the event of "Change of Control"
within 12 months there will be a 33% acceleration of unvested Options/warrants;
and 50% acceleration after the first 12 months. If such termination had occurred
on December 31, 1999, the Company would have been obligated to pay Mr. Emrich
$225,000.
The termination remuneration described above is not payable in the event of
termination for cause.
Option/Warrant Grants.
The following table sets forth certain information concerning options/warrants
granted to the Named Officers, and additional information concerning such grants
of stock options/warrants during fiscal year 1999. No stock appreciation rights
have been granted by the Company.
<TABLE>
<CAPTION>
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Percentage of Total Potential Realizable Value
Options/ at Assumed Annual Rates
Warrants Granted to of Stock Price
Option/ Employees in Fiscal Exercise Price Expiration Appreciation for
Name Warrant Grants Year 1999 (Per Share) Date Option/Warrant Term (1)
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5% ($) 10% ($)
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<S> <C> <C> <C> <C> <C> <C> <C>
Laurence L. Osterwise 400,000 25.0% $2.19 12/31/08 $1,399,210 $2,546,128
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Marco A. Emrich 725,000 37.1% $2.25 8/31/09 $2,350,653 $4,592,648
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William K. Williams 50,000 2.6% $1.35 4/21/09 $ 203,422 $ 350,512
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Robert J. Griffin 100,000 5.1% $1.35 4/21/09 $ 406,845 $ 701,024
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</TABLE>
Option Exercises and Fiscal Year-End Values.
The following table sets forth certain information as of December 31, 1999,
regarding the number and year end value of unexercised stock options held by
each of the Named Officers. No stock appreciation rights have been granted by
the Company.
<TABLE>
<CAPTION>
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Value of Unexercised
Number of Unexercised In-the-Money
Options/Warrants at Options/Warrants at
December 31, 1999 December 31, 1999 (1)
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Shares Acquired Value Realized
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Laurence L. Osterwise -0- $-0- 1,038,888 300,000 $794,777 $375,000
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Marco A. Emrich -0- $-0- -0- 725,000 -0- $862,750
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William K. Williams -0- $-0- 16,667 83,333 $ 21,334 $147,166
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Robert J. Griffin -0- $-0- 65,000 135,000 $ 84,563 $240,437
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</TABLE>
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(1) Based on the closing price of the Common Stock as reported on the Nasdaq
SmallCap Market on December 31, 1999 ($3.44), net of the option/warrant
exercise price.
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Compensation Committee Interlocks and Insider Participation.
The current members of the Company's Compensation Committee are Messrs. R. Barry
Borden, David S. Hirsch, and Laurence L. Osterwise. No executive officer of the
Company has served as a director or member of the Compensation Committee (or
other committee serving an equivalent function) of any other entity, whose
executive officers served as a director of or member of the Compensation
Committee of the Company.
Compensation of Directors.
On the first business day of January 1998 and on the first business day of
January in each succeeding year, each non-employee director of the Company will
receive a grant of an option to purchase shares of Common Stock at the
then-current Fair Market Value as determined in accordance with the 1992 Plan,
as follows: an option to purchase 15,000 shares of Common Stock for service to
the Board during the preceding year, plus an option to purchase 2,500 shares of
Common Stock for serving as the Chairman of the Board or Chairman of a Committee
of the Board during the preceding year. However, if a director shall become
eligible for an option grant after the first regularly scheduled meeting of the
Board during any calendar year, the Compensation Committee shall determine the
size of such option grant by multiplying 15,000 shares (and/or 2,500 shares) by
a fraction which is determined by dividing the number of regularly scheduled
Board meetings remaining in the calendar year by six. The non-employee directors
were issued the following option grants in January 2000 for service to the Board
in 1999: Mr. Borden, 20,000 shares; Messrs. Hirsch, Mulshine, and Pellicci,
17,500 shares; Messrs. Sargent, Shapiro, and Womble, 15,000 shares.
In addition, under the terms of the 1992 Plan, any new director who has been
elected to the Board was granted an option to purchase 25,000 shares of Common
Stock at the then-current Fair Market Value as determined in accordance with the
1992 Plan. The shares underlying these options will vest at the rate of 5,000
shares per year for five years, commencing on the first anniversary date of his
election to the Board and on each subsequent anniversary thereafter. In the
future, upon ratification of the 2000 Plan at this Meeting, the Compensation
Committee of the Board of Directors will determine the number of options that
Directors will receive for service to the Board and upon being elected to serve
as a Director.
Further, commencing in 1998, on or before January 31 in each year, each
non-employee director will receive an annual retainer of $5,000 as cash
compensation for his services as a director for the preceding year. Also, each
non-employee director will receive $500 for attendance at each Board and
committee meeting, with multiple meetings held on the same day to count as one.
These amounts shall be subject to annual review and possible adjustment at the
discretion of the Board.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership of the
Company's voting securities as of the Record Date, assuming conversion of Series
A Preferred Stock into one share of Common Stock, and including options and
warrants by (i) each person known by the Company to be the beneficial owner of
more than five percent of any class of its voting securities, (ii) each director
and executive officer, and (iii) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
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Beneficial Owner (1) Amount & Nature of Beneficial Percentage of Outstanding
Ownership (2) Common Stock
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<S> <C> <C>
Laurence L. Osterwise 1,171,943 4.37%
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Marco A. Emrich -0- *
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Michael A. Mulshine 803,130 (3) 2.99%
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David S. Hirsch 336,967 (4) 1.26%
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James C. Sargent 127,067 *
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R. Barry Borden 71,780 *
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Jack A. Pellicci 44,760 *
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Robert M. Shapiro 47,500 *
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James T. Womble 5,000 *
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Robert J. Griffin 89,333 *
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William K. Williams 33,333 *
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All Directors and Executive Officers
as a group (12 persons) 2,731,412 10.18%
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</TABLE>
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* Represents one percent or less.
(1) The address of all persons listed is c/o SEDONA Corporation, 649 North
Lewis Road, Limerick, PA 19468.
(2) Unless otherwise indicated, each person possesses sole voting and
investment power with respect to the shares identified as beneficially
owned in the table.
(3) Includes warrants to purchase 682,666 shares issued to Osprey Partners, a
company owned by Mr. Mulshine.
(4) Includes 10,940 shares of Common Stock held by Mr. Hirsch's wife, as to
all of such shares Mr. Hirsch disclaims beneficial ownership. Includes
51,100 shares of Common Stock held by Mr. Hirsch's children, as to all of
such shares Mr. Hirsch disclaims beneficial ownership.
The foregoing table also includes shares which the following directors and
executive officers have the right to acquire within sixty days upon the exercise
of options and warrants: Mr. Osterwise, 1,088,878 warrants; Mr. Mulshine, 76,095
options, 663,916 warrants; Mr. Hirsch, 112,845 options, 60,000 warrants; Mr.
Sargent, 79,845 options; Mr. Borden, 71,780 options; Mr. Pellicci, 44,760
options; Mr. Shapiro, 27,500 options; Mr. Womble, 5,000 options; Mr. Griffin,
89,932 options; and Mr. Williams, 33,333 options.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1999, the Board of Directors ratified a Consulting Agreement with
Osprey Partners, a company that is owned by Michael A. Mulshine. Under that
agreement, Osprey was to provide services to the Company with regard to
shareholder and investor relations activities and for management consulting
services. Under the agreement Osprey was issued warrants to purchase up to
72,000 shares of Common Stock, with such warrants to vest at the rate of 6,000
shares on the first of each month for the twelve months starting January 1,
1999, and such warrants to be exercisable for up to ten years at an exercise
price of $2.50 per warrant. It is management's belief that the levels of
compensation for services provided were favorable to the Company and were
reasonably below market rates for such services.
SIGNATURE
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 1 to be signed on
its behalf by the undersigned, thereunto duly authorized, on April 27, 2000.
SEDONA CORPORATION
By: /s/ Marco A. Emrich
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Marco A. Emrich
Chief Executive Officer and President
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