EXHIBIT 10.72
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE CONVERTED, SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
$125,000.00 King of Prussia, Pennsylvania
FOR VALUE RECEIVED, the undersigned, SEDONA CORPORATION, a Pennsylvania
Corporation ("Maker"), promises to pay to Xxxxx X. Xxx ("Holder"), with the
address of 00000 Xxxxxxx Xxxxxx Xxxxx X-0 Xxxxx Xxxxx, Xxxxxxxxx 00000, the
principal sum of One Hundred Twenty-Five Thousand Dollars ($125,000.00),
together with interest thereon at the rate of eight percent (8%) per annum of
the principal sum of the convertible note until the earlier of Maturity or the
date upon which the unpaid balance shall be paid in full (the or this "Note").
1. Definitions. The following definitions are applicable to the words,
phrases or terms used in this Note.
(a) The term "Average Closing Price" shall mean the
average of the closing sales price of a share of the
Maker's common stock as reported by the Principal
Market.
(b) The term "Common Stock" shall mean the Maker's common
stock, par value $0.001 per share.
(c) The term "Holder" shall mean and include all
successors and assigns of any owner or holder of this
Note.
(d) The term "Maker" shall mean and include all makers,
co-makers and other parties signing on the face of
this Note and their successors and assigns, and the
use of the plural number shall include the singular,
and vice versa.
(e) The term "Maturity" shall mean the date on which this
Note shall be due and payable in full, which date
shall be May 23, 2006, unless theretofore converted.
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(f) The term "Principal Market" shall mean the American
Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market, the Nasdaq Small Cap Market
or the OTC Bulletin Board, whichever is at the time
the principal trading exchange or market for the
Common Stock, based upon share volume.
2. Terms of Payment. The Note shall be paid in full, as to principal
and any unpaid interest, on or before Maturity. Such Maturity may be extended by
mutual consent of the Holder and the Maker. Holder shall have the right to
convert the principal balance of the Note and accrued interest into Common Stock
at any time. Unless otherwise designated in writing, mailed or delivered to
Maker, the place for payment of the indebtedness evidenced by this Note shall be
the Holder's principal address as noted above. Payments received on this Note
shall be applied first to accrued interest, and the balance to principal.
3. Interest. Interest shall be paid semi-annually in arrears. Interest
may be paid in cash or, at the election of the Maker, in shares of common stock
valued at the market price based on the average closing price for the five (5)
trading days prior to the date that each semi-annual interest payment becomes
due.
4. Security. This note shall be secured by the existing Security
Agreement dated March 2003, by the Maker in favor of the Holder.
5. Events of Default. The following shall constitute an Event of
Default:
(a) In the event Maker shall fail (i) to pay any sums due
hereunder when due, or (ii) to observe or perform any term, condition, covenant,
representation or warranty set forth herein, when due or required, or within any
period of time permitted thereunder for cure of any such default or
non-performance.
6. Acceleration of Maturity. Upon the happening of any Event of
Default, the unpaid principal and interest due Holder shall, at the option of
the Holder, become immediately due and payable.
7. Limitation on Interest. In no contingency, whether by reason of
acceleration of the Maturity of this Note or otherwise, shall the interest
contracted for, charged or received by Holder exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Holder in excess of the maximum lawful amount, the
interest payable to Holder shall be reduced to the maximum amount permitted
under applicable law; and, if from any circumstance the Holder shall ever
receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal of this Note and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
of the Note such excess shall be refunded to Maker. All interest paid or agreed
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to be paid to Holder shall, to the extent permitted by applicable law, be
amortized, pro-rated, allocated, and spread throughout the full period until
payment in full of the principal of the Note (including the period of any
renewal or extension thereof) so that interest thereon for such full period
shall not exceed the maximum amount permitted by applicable law.
8. Remedies; Nonwaiver. Failure of Holder to exercise any right or
remedy available to Holder upon the occurrence of an Event of Default hereunder
shall not constitute a waiver on the part of Holder of the right to exercise any
such right or remedy for that Event of Default or any subsequent Event of
Default. The exercise of any remedy by Holder shall not constitute an election
of any such remedy to the exclusion of any other remedies afforded Holder at law
or in equity, all such remedies being nonexclusive and cumulative. If an Event
of Default occurs under this Note and this Note is referred to an attorney at
law for collection, Maker agrees to pay all costs incurred by Holder incident to
collection, including but not limited to reasonable attorney fees (such fees not
to exceed ten percent (10%) of the then outstanding principal balance of the
Note), enforceable as a contract of indemnity, plus all court costs and other
expenses incurred at or prior to trial and in connection with any and all
appeals.
9. Waivers. The Maker, endorsers, sureties and guarantors hereof, if
any, severally (i) waive presentment, protest and demand, (ii) waive notice of
protest, demand, dishonor and nonpayment of this Note, and (iii) expressly agree
that this Note may be renewed in whole or in part, or any nonpayment hereunder
may be extended, or a new note of different form may be substituted for this
Note or changes may be made in consideration of the extension of the Maturity
date hereof, or any combination thereof, from time to time, but, in any singular
event or any combination of such events, neither Maker nor any endorser, surety
or guarantor will be released from liability by reason of the occurrence of any
such event, nor shall Holder hereof be deemed by the occurrence of any such
event to have waived or surrendered, either in whole or in part, any right it
otherwise might have.
10. Option to Convert Note Into Stock.
(a) Holder shall have the sole right and option to convert
(the "Conversion Right") the unpaid principal balance of this Note, together
with all accrued and unpaid interest, into shares of Maker's voting common stock
(the "Shares") having all rights inherent in common stock under the Maker's
Articles of Incorporation and Bylaws in effect as of the date hereof (the
"Option"). The number Shares to be paid on conversion of the full principal
balance shall be 568,181. The number of Shares to be paid on conversion of the
accrued and unpaid interest shall be determined by dividing the amount of the
accrued and unpaid interest by the average closing price for the five (5)
trading days prior to the conversion date.
(b) Maker shall file a registration statement to register for
resale under the Securities Act of 1933, as amended (the "Securities Act") in a
timely manner for all Shares that may be issued under this Note.
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11. Conversion.
(a) The Holder may elect in writing to convert all or
designated part of the principal amount of the Notes at any time before the Note
is paid in full. Before the Holder shall be entitled to convert this Note into
Shares, the Holder shall surrender this Note, duly endorsed, at the office of
the Maker, and shall give written notice to the Maker at its principal corporate
office of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for the Shares are to be issued
(the "Notice of Conversion").
(b) The Maker shall have one (1) business day from its receipt
of the Notice of Conversion to elect to prepay the Note by notifying Holder in
writing of such election and, within five (5) business days thereafter,
delivering to Holder the payment set forth in Paragraph 12 below. In the event
that Maker prepays the Note, Xxxxxx's right to convert the Note shall terminate,
and his Notice of Conversion shall not be effective.
(c) In the event that the Maker does not prepay as set forth
in subparagraph (b), it shall promptly issue and deliver to the Holder, or to
such persons at the address specified by the Holder, a certificate or
certificates for the Shares to which the Holder is entitled. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of surrender of this Note, and the persons entitled to receive the
Shares issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Shares as of such date. No fractional shares
shall be issued upon conversion of this Note, and the number of Shares to be
issued shall be rounded down to the nearest whole share. If the conversion is
not canceled by prepayment, the outstanding portion of the principal balance
designated by the Holder will be converted into Shares at $0.22 per share, and
accrued and unpaid interest will be converted into Shares at the market price
based on the average closing price for the five (5) trading days prior to the
conversion date.
12. Prepayment. The Maker may prepay any part of or the entire
principal balance of the Note plus interest in cash at any time without penalty,
subject to the right of the Holder to convert the Note into Shares as set forth
below. Prior to prepaying, the Maker shall provide Holder with written notice of
prepayment (the "Prepayment Notice"). The Holder shall have five (5) business
days thereafter in which to elect to convert all of the Note by complying with
subparagraph 11(a), above, in which event the Note shall be converted as set
forth in subparagraph 11(c), above, and subparagraph 11(b) shall not apply. If
Xxxxxx does not elect to convert after receipt of the Prepayment Notice, he
shall lose his right to convert as well his right to accrue additional interest
on the Note following the date of the Prepayment Notice, in which event his sole
right under the Note will be to deliver the Note to Maker for prepayment.
13. Redemption. In the event the Maker receives an investment (in the
form of debt, equity, a convertible instrument, or any combination thereof) of
$1.0 million or more from a party other than the Holder, during the life of this
Note, the Holder may elect in writing to redeem the outstanding Note for cash.
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The redemption price shall be the unpaid principal balance and the accrued and
unpaid interest. Maker shall pay such redemption price promptly upon receipt of
the notice of redemption together with this Note.
14. Controlling Law. This Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania (other than its
conflict of laws principles) and the provisions of applicable federal law.
15. Shareholder Status. Nothing contained in this Note shall be
construed as conferring upon the Holder the right to vote or to receive
dividends or to consent or to receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the Maker or of any
other matter, or any rights whatsoever as a shareholder of the Maker prior to
conversion hereof.
16. Notices. Any notice required or permitted under this Note shall be
in writing and shall be deemed to have been given on the date of delivery, if
personally delivered or delivered by courier, overnight express or other method
of verified delivery, to the party to whom notice is to be given, and addressed
to the addressee at the address of the addressee set forth herein, or the most
recent address, specified by written notice, given to the sender pursuant to
this paragraph.
EFFECTIVE as of the 23rd day of May, 2005.
Maker's Address: MAKER:
0000 X. 0xx Xxxxxx, 0xx Xxxxx XXXXXX XXXXXXXXXXX
Xxxx xx Xxxxxxx, XX 00000
By:
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Xxxxx X. Xxxxxx
Chief Executive Officer
By:
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Xxxxx X. Xxxxx
Chief Financial Officer
Date: 12-06-05
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