THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, CONVERTED, 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
----------------
$250,000.00 King of Prussia, Pennsylvania
FOR VALUE RECEIVED, the undersigned, SEDONA CORPORATION, a Pennsylvania
corporation ("Maker"), promises to pay to Xxxxxxx X. Xxxxx, XX ("Holder"), with
the address of 000 Xxxxxxxxx Xxxxxx, Xxxx Xxxxxx Xxx 00000, Xxxxxxxxx, Xxxxxxxxx
00000, the principal sum of TWO HUNDRED FIFTY THOUSAND and no/100 dollars
($250,000.00) ("Loan"), together with interest thereon at the rate of eight
percent (8%) per annum from the date hereof until the earlier of maturity or the
date the balance shall be paid in full (this "Note"); provided that Holder shall
be entitled at any time during the term of the Loan to convert the then
outstanding balance of the Loan into shares of Common Stock at a price of $0.18
per share.
1. Definitions. The following definitions are applicable to the words,
phrases or terms used in this Note.
(a) The term "Common Stock" shall mean the Maker's common
stock, par value $0.001 per share.
(b) The term "Holder" shall mean and include all heirs,
successors and assigns of any owner or holder of this Note.
(c) 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, and the use of any gender shall include all genders.
(d) The term "Maturity" shall mean the date on which this Note
shall be due and payable in full, which date shall be June 30, 2007.
(e) The term "Notice of Conversion" shall mean the Notice of
Conversion substantially in the form of Exhibit A attached hereto.
(f) The term "Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to the exercise of the Notice of
Conversion.
2. Payment Terms. This Loan shall be effective commencing on the date
hereof and continuing until two (2) years after the effective date. Unless the
Note is converted or prepaid, the Maker shall be obligated to make one payment
of all outstanding principal due thereon at Maturity. The Maker shall pay
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interest annually in arrears, unless, prior to such payment, Holder provides
Maker with a written Notice of Conversion of Xxxxxx's election to convert all of
such payment into Shares. 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. Events of Default. The following shall constitute an Event of
Default:
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.
4. 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.
5. 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
to be paid to Holder shall, to the extent permitted by applicable law, be
amortized, prorated, 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.
6. 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 up to a limit of 10% of the unpaid debt, including but not limited to
reasonable attorney fees, enforceable as a contract of indemnity, plus all court
costs.
Page 2 of 8
7. 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.
8. Option to Convert Note into Stock.
(a) The Maker represents that at any time during the term of
the Loan, Holder shall have the right and option to convert (the "Conversion
Right") the unpaid principal balance of this Note or any part thereof (the
"Outstanding Principal Balance"), into 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 number of Shares to be paid on conversion shall be equal
to the amount of the then Outstanding Principal Balance divided by $0.18. The
$0.18 conversion price for conversion of the Outstanding Principal Balance shall
be protected by full-ratchet anti-dilution, with exemption of stock options
issued to the Maker's employees and directors only, as is further set forth in
the Loan Documents. Interest shall be paid in cash; provided, however, that at
the sole election of the Holder, accrued and unpaid interest may be converted
into Shares by dividing the amount to be converted by $0.18.
(b) Maker shall timely file a registration statement to
register for resale under the Securities Act of 1933, as amended (the
"Securities Act"), all Shares that may be issued under this Note, and shall
continue to maintain such Shares as so registered so long as Maker remains
obligated to Holder under the terms of this Note.
(c) Maker's right to convert the Outstanding Principal Balance
and accrued and unpaid interest shall terminate upon payment thereof in cash by
Maker.
9. Mechanics of Conversion. Before the Holder shall be entitled to
convert the Outstanding Principal Balance of or the accrued and unpaid interest
on this Note into Shares, the Holder shall surrender this Note, duly endorsed,
at the office of the Maker, and shall give written Notice of Conversion to the
Maker at its principal corporate office of the Holder's 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 Maker shall, promptly
thereafter, issue and deliver 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. In the
event that Holder elects to convert only a portion of the Outstanding Principal
Balance or accrued and unpaid interest into Shares, Holder shall deliver to
Maker a written acknowledgement of partial payment.
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10. Prepayment. If at any time, in the event that the Maker's cash
position increases to a significant level, in the Maker's sole judgment, due to
increased business activity, a legal settlement, or additional equity
investment, the Maker, on thirty (30) days' written notice to Xxxxxx, may, in
its sold discretion, elect to prepay the Outstanding Principal Balance, plus
accrued and unpaid interest, in cash, at any time, without penalty, in the event
the Maker does not elect to send Maker a Notice of Conversion to convert all or
a designated part of the Outstanding Principal Balance during the thirty (30)
day notice period.
11. 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.
12. 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.
13. 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.
14. Captions. The captions of the sections of this Note are for the
purpose of convenience only and are not intended to be a part of this Note and
shall not be deemed to modify, explain, enlarge or restrict any of the
provisions hereof.
15. Remedies Not Exclusive. The remedies provided in this Note and the
Security Agreement or otherwise available to Holder for enforcing the payment of
the principal sum together with interest and the performance of the covenants,
conditions and agreements herein and therein contained are cumulative and
concurrent and may be pursued singly or successively or together at the sole
discretion of Holder, and may be exercised from time to time as often as
occasion therefore shall occur until Holder has been paid all sums due in full.
16. Severability. The terms and provisions of this Note are severable.
In the event of the unenforceability or invalidity of any one or more of the
terms, covenants, conditions or provisions of this Note under federal, state or
other applicable law, such unenforceability or invalidity shall not render any
other term, covenant, condition or provision hereunder unenforceable or invalid.
In the event any waiver by Maker hereunder is prohibited by law, such waiver
shall be and be deemed to be deleted herefrom.
17. Integration. This Note, together with the Term Sheet executed in
connection with the Loan or such formal documentation as contemplated by the
Term Sheet ("Loan Documents") express the entire agreement between the Maker and
Holder concerning the subject matter hereof and no modification of this Note
shall be effective unless expressed in a mutually signed writing. None of
Xxxxxx's rights, powers, privileges or immunities under this Note can be waived
unless (and then only to the extent that) such waiver is expressed in a writing
signed by Xxxxxx.
Page 4 of 8
18. Successors and Assigns. This Note shall be binding upon the Maker,
its successors and assigns, and shall inure to the benefit of Xxxxxx, his heirs
and assigns. The Holder may assign all or any part of this Note to related
entities controlled by the Holder or to independent third parties, provided that
such assignment is made in compliance with the Securities Act and applicable
state securities laws.
19. Time of Essence. Subject to the provisions hereof, time is of the
essence of each and every provision of this Note.
20. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the making of any payment, the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday,
then such payment may be made, such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
21. Loss, Theft, Destruction or Mutilation of Note. Maker covenants
that upon receipt by the Maker of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Note, and in case of loss, theft
or destruction, of indemnity reasonably satisfactory to it (which shall not
include the posting of any bond), and upon surrender and cancellation of such
Note if mutilated, the Maker will make and deliver a new Note in the same form
and dated as of the date hereof, in lieu of such Note.
22. WAIVER OF JURY TRIAL.
MAKER AND HOLDER ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS NOTE OR WITH RESPECT TO THE TRANSACTION CONTEMPLATED HEREBY
WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES
AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY. ACCORDINGLY,
MAKER AND HOLDER IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT EITHER PARTY MAY NOW OR HEREAFTER HAVE TO A TRIAL BY JURY WITH RESPECT
TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR IN CONNECTION WITH
THIS NOTE OR ANY OF THE LOAN DOCUMENTS.
23. JURISDICTION AND VENUE.
MAKER XXXXXX AGREES THAT ALL ACTIONS FOR PROCEEDINGS INITIATED BY MAKER
AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE LOAN DOCUMENTS SHALL BE LITIGATED
IN THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA, OR THE UNITED STATES DISTRICT
COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, OR IN ANY OTHER COURT IN WHICH
HOLDER SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION.
MAKER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED BY HOLDER IN ANY OF SUCH COURTS AND HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS
ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
Page 5 of 8
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
MAKER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO THIS NOTE.
MAKER WAIVES ANY CLAIM THAT PHILADELPHIA COUNTY, PENNSYLVANIA OR THE EASTERN
DISTRICT OF PENNSYLVANIA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON
LACK OF VENUE. SHOULD MAKER, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO
ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS
PRESCRIBED BY LAW AFTER THE MAILING THEREOF, MAKER SHALL BE DEEMED IN DEFAULT
AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY HOLDER AGAINST MAKER AS DEMANDED
OR PRAYED.
IN WITNESS WHEREOF and intending to be legally bound hereby, Maker has
duly executed this Note as of this the 1st day of July, 2005.
Maker's Address: MAKER:
---------------- ------
0000 Xxxx Xxxxx Xxxxxx, 0xx xxxxx XXXXXX XXXXXXXXXXX
Xxxx xx Xxxxxxx, XX 00000
-------------------------------
By: Xxxxx X. Xxxxxx
President and Chief
Executive Officer
Page 6 of 8
EXHIBIT A
NOTICE OF CONVERSION
TO: SEDONA CORPORATION
(1) The undersigned hereby elects to purchase _________ shares of
Common Stock (the "Common Stock"), of SEDONA CORPORATION pursuant to the terms
of the attached Convertible Note dated July 1, 2005, between Sedona Corporation,
as Maker, and Xxxxxxx X. Xxxxx, as Holder (the "Note") and tenders herewith [THE
ORIGINAL NOTE] [AN ACKNOWLEDGEMENT OF PARTIAL PAYMENT OF THE OUTSTANDING
PRINCIPAL BALANCE OF AND/OR ACCRUED AND UNPAID INTEREST ON THE NOTE] together
with all applicable transfer taxes.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
______________________________________________
(Name)
______________________________________________
(Address)
Dated:_____________________________________
Name of Entity
(if applicable):___________________________
Signed:____________________________________
Name:______________________________________
Title
(if applicable):___________________________
Address:___________________________________
___________________________________________
___________________________________________
Tax Identification Number:_________________
Page 7 of 8
SEDONA CORPORATION
NOTE ASSIGNMENT FORM
(To assign the foregoing Note, execute
this form and supply required information.)
FOR VALUE RECEIVED, the foregoing Note and all rights evidenced thereby
are hereby assigned to ________________________________________ whose address is
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Dated:_______________________________
Name of Entity
(if applicable):_____________________
Signed:______________________________
Name:________________________________
Title
(if applicable): ____________________
Address:_____________________________
_____________________________________
_____________________________________
SIGNATURE GUARANTEED:
---------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Note, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Note.
Page 8 of 8
