EXHIBIT 10.76
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 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
$500,000.00 King of Prussia, Pennsylvania
FOR VALUE RECEIVED, the undersigned, SEDONA CORPORATION, a Pennsylvania
corporation ("Maker"), promises to pay to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, ("Holder"), with
the address of ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, the principal sum of
FIVE HUNDRED THOUSAND and no/100 dollars ($5000,000.00) ("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 (the or 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 September 30,
2007.
(e) The term "Notice of Exercise" shall mean the
Notice of Exercise 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 Exercise.
2. Payment Terms. This Loan shall be effective Commencing on
the effective date and continuing until two (2) years after the effective date,
The Maker shall be obligated to make one payment of all outstanding principal
and interest due thereon at Maturity. 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:
(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.
(b) Defaults. In the event Maker fails to pay any
invoice or other sum which may be due and payable to Holder, when due or
required, according to the terms thereunder, unless prior written waiver has
been granted to Maker by ▇▇▇▇▇▇.
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.
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, together with all accrued and unpaid interest (the "Outstanding
Balance"), 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 of Shares to
be paid on conversion shall be equal to the amount of the then Outstanding
Principal Balance divided by $0.18. Interest shall be paid in cash, however; at
the sole election of the Holder, accrued interest may be converted into shares
at the same share price as the principal.
(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.
9. Mechanics of Conversion. 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 of
Exercise 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"). 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 Balance into Shares, Holder shall
deliver to Maker a written acknowledgement of partial payment.
10. Prepayment. The Maker may prepay any part of or the entire
balance of this Note without penalty. The Holder of this Note may demand
prepayment or redemption in full if either of the following conditions are met:
(a) Company receives funds from any source (i.e.,
including all internal sources such as collections of accounts receivable as
well as any external sources of funds such as sales of securities, totaling in
excess of $3,500,000 from the date of this transaction.
(b) Company reaches current cash on hand in excess of
$1,000,000 for a period exceeding 30 days.
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 other documents executed
as of the date hereof in connection with the Loan ("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 ▇▇▇▇▇▇'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 ▇▇▇▇▇▇.
18. Successors and Assigns. This Note shall be binding upon
the Maker, its successors and assigns, and shall inure to the benefit of ▇▇▇▇▇▇,
his heirs and assigns.
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 ▇▇▇▇▇▇ 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 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,
▇▇▇▇▇ has duly executed this Note as of this the 30th day of September, 2005.
Maker's Address: Maker:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, 2nd floor SEDONA CORPORATION ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SEDONA CORPORATION By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Executive Officer
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Financial Officer
EXHIBIT A
NOTICE OF EXERCISE
To: SEDONA CORPORATION
(1) The undersigned hereby elects topurchase____________________shares
of Common Stock (the "Common Stock"), of SEDONA CORPORATION pursuant to the
terms of the attached Convertible Note dated September 30, 2005 between Sedona
Corporation, as Maker, and ▇▇▇▇▇▇▇ ▇▇▇▇▇, as Holder (the "Note") and tenders
herewith [THE ORIGINAL NOTE] [AN ACKNOWLEDGEMENT OF PARTIAL PAYMENT OF THE NOTE]
together with all applicable transfer taxes.
(2) 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
----------------
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 an fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Note.
LOAN AGREEMENT
Between
SEDONA Corporation
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
THIS LOAN AGREEMENT dated as of July 1, 2005 (the "Agreement"), between
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, a Louisiana resident ("Investor"), and Sedona Corporation,
a corporation organized and existing under the laws of the Commonwealth of
Pennsylvania (the "Company").
WHEREAS, the Company is desirous of obtaining working capital for its
operations by issuing convertible notes (the "Convertible Notes") up to a
principal amount of One Million Dollars ($1,000,000.00) that can be converted by
Investor to shares of the Company's Common Stock; and
WHEREAS, the Investor agrees to lend up to $1,000,000 to the Company
(the "Loans") upon the terms and conditions set forth herein; and
WHEREAS, as an added inducement to Investor to make the loans to the
Company, the Company agrees to provide to Investor warrants to acquire shares of
the Company's common stock issued upon the conversion of the outstanding
principal or interest on the Convertible Notes (the "Warrants"); and
WHEREAS, the Company and the Investor have entered into a Term Sheet
Agreement which the Company and the Investor executed on June 29 and July 1,
2005, respectively), ("Term Sheet"), setting forth the terms and conditions of
the Loans; and
WHEREAS, the Term Sheet requires that the expression of the terms and
conditions contained therein be fully documented in a manner acceptable to
Company and Investor;
NOW, THEREFORE, based upon the expression of terms and conditions of
the Term Sheet and the intention of the parties as more fully set forth herein,
the Company and Investor, and each of them, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "Common Stock" shall mean the Company's common stock, $.001 par
value per share.
Section 1.2. "Converted Shares" shall mean that number of shares of Common Stock
purchased in reduction of the principal and/or interest due on the Convertible
Notes which the Investor elects to convert to Common Stock.
Page 1 of 16
Section 1.3. "Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.4. "Registration Rights Agreement" shall mean the agreement entered
into between the Company and the Investor as of the date hereof in the form
annexed hereto as Exhibit B, regarding the filing of a registration statement
under the Securities Act for the resale of the Convertible Shares and the
Warrant Shares.
Section 1.5. "SEC Documents" shall mean the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2004 and each report, proxy statement or
registration statement filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 or the Securities Act
since the filing of such Annual Report through the date hereof.
Section 1.6. "Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.7. "Warrants" shall mean the Warrants substantially in the form of
Exhibit C to be issued to the Investors hereunder.
Section 1.8. "Warrant Shares" shall mean all shares of Common Stock issuable
pursuant to exercise of the Warrants.
ARTICLE II
THE LOANS
Section 2.1. Funding of Loans.
The Investor will fund the Loans in three (3) Tranches (the "Tranches")
unless the Company notifies him not to fund the second Tranche and/or third
Tranche as set forth below. The first Tranche is payable to Company on the date
hereof in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00). The
second Tranche is payable to Company on or before July 30, 2005, in the amount
of Two Hundred Fifty Thousand Dollars ($250,000.00), subject to the Company's
satisfying the condition set forth in Section 2.3 hereof. The third Tranche is
payable to Company on or before September 29, 2005, in the amount of Five
Hundred Thousand Dollars ($500,000.00), subject to the Company's satisfying the
condition set forth in Section 2.3 hereof. Notwithstanding any other provision
in this Agreement, the Investor shall not fund the second and/or third Tranche
in the event that, within two (2) business days prior to the date on which he is
otherwise obligated to fund such Tranche(s) (as such dates may be extended as
set forth in Section 2.4), the Company notifies the Investor in writing that the
Investor not fund such Tranche(s).
Page 2 of 16
Section 2.2. Convertible Note(s).
Payment of each Tranche shall be evidenced by a Convertible Note in
substantial form as that set forth in Exhibit A hereto. Each Convertible Note
shall reflect the date and amount of financing received by the Company pursuant
to each Tranche of the Convertible Note. Each Convertible Note shall bear
interest at 8% per annum, shall have a maturity date of twenty-four (24) months
from the date of issue unless otherwise converted pursuant to Section 4.1, and
shall have such other terms as are set forth in Exhibit A.
Section 2.3. Conditions of Second and Third Tranche(s).
The Company must provide verification to the Investor, prior to the
funding of the second Tranche, of a signed License Agreement with a business
unit of Fiserv Solutions Inc. with greater than 250 customers, under which the
Company's CRM technology shall be sold and distributed as an integral component
of any sales or upgrades of the business unit core system solution.
Section 2.4. Failure to Meet Condition.
The Company shall be permitted a grace period, to and including August
30, 2005, to provide the verification required pursuant to Section 2.3 herein.
In the event that the Company provides the Investor with such verification after
July 29 2005, and on or before August 30, 2005, then the Investor shall fund the
second Tranche within two (2) business days following receipt thereof, and the
Investor shall fund the third Tranche (subject to the Company's right to cancel
the second and/or third Tranche as set forth in Section 2.1) on or before
September 29, 2005. Should the Company fail to provide the verification required
pursuant to Section 2.3 on or before August 30, 2005, then the Investor, may, at
his option, be released from any further obligation to fund the second or third
Tranche by his notifying the Company, in writing, by no later than September 2,
2005, that he will not fund the second or third Tranche. If the Investor does
not so notify the Company on or before September 2, 2005, then he will be deemed
to have waived the condition to funding in Section 2.3, and he will be required
to fund the second Tranche by September 5, 2005, and the third Tranche by
September 29, 2005 (subject to the Company's right to cancel the second and/or
third Tranche as set forth in Section 2.1).
ARTICLE III
USE OF LOAN FUNDS BY COMPANY
Section 3.1. Payment of Obligations.
The Company shall use the proceeds from each funded Tranche of the
Convertible Note to pay existing obligations of the Company in the following
order of priority:
1. Internal Revenue Service for any payroll, withholding and other
employee taxes;
2. any state revenue department for which payroll, withholding or
other employee taxes are due
3. any state revenue department for any sales or use taxes owed by
the Company
4. proper parties to satisfy and ERISA, pension , or benefit
obligations;
Page 3 of 16
5. proper parties and employees to satisfy any wage, current
severance obligations, WARN Act or other employee related expense,
6. proper parties to satisfy any outstanding environmental claims,
demands, enforcement actions or judgments;
7. federal and state authorities for taxes based on income and for
franchise taxes and
8. payment to accounts payables and expenses incurred in business
operations.
ARTICLE IV.
CONVERSION RIGHTS
Section 4.1. Conversion of Principal/Interest.
Investor may elect in writing to convert all or a designated part of
the principal or interest amount of the Convertible Notes to Converted Shares of
the Company at any time. The conversion price for principal and interest shall
be $0.18 per Converted Share.
Section 4.2. Anti-Dilution.
The $0.18 conversion price for shares issued upon conversion of
principal on a Convertible Note shall be protected by full-ratchet,
anti-dilution as set forth in Section 4.5 hereof; provided that such
anti-dilution shall not apply with respect to the Company's granting of stock
options to its employees or directors or the exercise of stock options (whether
granted prior to or after the date hereof) by current, future, or past Company
employees or directors.
Section 4.3. Warrants.
As additional consideration for the Investor to make the Loans,
Investor shall be granted one (1) Warrant for each two (2) Converted Shares
issued pursuant to Section 4.1. Each Warrant shall, until its expiration at the
end of four (4) years from the date of issuance, entitle the Investor to
purchase one (1) share of Common Stock at the per share price of $0.30.
Section 4.4. Extension of Previously Issued Warrants.
As additional consideration for the Investor to make the Loans, the
Company agrees that the expiration date of each of the 525,266 warrants that the
Company has previously issued to the Investor in connection with the Investor's
previous financings to the Company shall be extended for a period of twelve (12)
months.
Section 4.5. Adjustment of Conversion Price Due to Issuance of Additional Shares
(Full Ratchet, Anti-Dilution Adjustment). The Conversion Price shall be subject
to adjustment as follows:
Page 4 of 16
4.5.1 Special Definitions
(a) "Options" shall mean rights, options or warrants
to subscribe for, purchase or
otherwise acquire either Common Stock or Convertible Securities.
(b) "Convertible Securities" shall mean any
indebtedness, shares or other securities
convertible into or exchangeable for Common Stock.
(c) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued
(or, pursuant to Section 4.5.4, deemed to be issued) by the Company after the
date hereof (the "Loan Date"), other than shares of Common Stock issued or
issuable (or, pursuant to Section 4.5.4, deemed to be issued) at any time:
(i) upon conversion of Convertible
Securities or upon exercise of Options outstanding on or
issued as of the Loan Date;
(ii) upon the grant or exercise of Options
to the extent such Options are or have been granted to persons
who, as the date of grant, were Company employees or members
of its Board of Directors; or
(iii) upon the grant of securities or
convertible securities issued to lending or leasing
institutions.
4.5.2 No Adjustment of Conversion Price. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional Shares
of Common Stock (a) unless the consideration per share (determined pursuant to
Section 4.5.5) for an Additional Share of Common Stock issued or deemed to be
issued by the Company is less than the applicable Conversion Price in effect on
the date of, and immediately prior to, such issue, or (b) if prior to such
issuance, the holder of the Convertible Note(s) gives a written waiver of such
adjustment.
4.5.3 Adjustment of Conversion Price Upon Issuance of
Additional Shares.
In the event the Company shall issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.5.4) for a consideration per share less than the
applicable Conversion Price in effect on the date of such issuance, then and
thereafter upon each such issuance or sale, the applicable Conversion Price
shall be reduced, concurrently with such issue, to a new such Conversion Price
(calculated to the nearest cent) that will enable Investor to own, immediately
after such issuance or sale, the proportionate number of shares of all
outstanding shares of the capital stock of the Company calculated on a
fully-diluted basis, that Investor would have owned immediately after such
issuance if such shares had been issued or sold for a consideration per share
equal to applicable Conversion Price immediately prior to such issuance.
Page 5 of 16
4.5.4 Deemed Issue of Additional Shares of Common Stock -
Options and Convertible Securities. Except as otherwise provided in this Section
4.5, in the event the Company at any time after the Loan Date shall issue any
Options (other than pursuant to Section 4.5.1(c)) or Convertible Securities or
shall fix a record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible Securities, then
the maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent adjustment
of such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion or
exercise of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue or, in case such a record
date shall have been fixed, as of the close of business on such record date;
provided, however, that for purposes of this Section 4.5.4, Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 4.5.5) of such Additional Shares of
Common Stock would be less than the applicable Conversion Price in effect on the
date of, and immediately prior to, such issue or such record date, as the case
may be (except as provided below in this Section 4.5.4); and provided, further,
that in any such case in which Additional Shares of Common Stock are deemed to
be issued:
(a) no further adjustment in the applicable
Conversion Price shall be made upon the subsequent issue of shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities or upon the subsequent issue of such Convertible
Securities or Options;
(b) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or any increase in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase becoming
effective, be recomputed to reflect such increase insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(c) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the applicable Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon shall be readjusted to
the Conversion Price that would have been in effect if no adjustment had been
made with respect to such Options or Convertible Securities;
(d) in the event of any changes in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange of
such Options or Convertible Securities, including a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect shall be
readjusted to the Conversion Price that would have been in effect if the
adjustment which was made upon the issuance of such Options or Convertible
Securities had been made upon the basis of such change;
Page 6 of 16
(e) in the event (A) the Company amends the terms of
any Options or Convertible Securities outstanding as of the Loan Date in a
manner that either increases the number of securities to be issued upon the
exercise or conversion of such Options or Convertible Securities or decreases
the exercise or conversion price of such Options or Convertible Securities or
(B) the Company amends in any manner the terms of any Options (other than those
described in Section 4.5.1(c)(iii)) or Convertible Securities issued after the
Loan Date, then, in the case of both Clause A and Clause B above, such Options
or Convertible Securities, as so amended, shall be deemed to have been issued
upon such amendment date and the provisions of this Section 4.5.4 shall apply.
4.5.5 Determination of Consideration. For purposes of this
Section 4.5, the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property. Such consideration shall:
(i) insofar as it consists of cash, be
computed at the aggregate amount of cash proceeds received by
the Company excluding amounts paid or payable for accrued
interest or accrued dividends;
(ii) insofar as it consists of property
other than cash, be computed at the fair value thereof at the
time of such issue, as determined in good faith by the Board
of Directors of the Company; and
(iii) in the event Additional Shares of
Common Stock are issued together with other shares or
securities or other assets of the Company for consideration
which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above,
which is allocated to the Additional Shares of Common Stock as
determined in good faith by the Board of Directors.
(b) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 4.5.4, relating to Options and Convertible
Securities, shall be determined by dividing
(i) the total amount, if any, received or
receivable by the Company as consideration for the issue of
such Options or Convertible Securities, plus, subject to
Section 4.5.4(b), the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such consideration) payable to the
Company upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or
exchange of such Convertible Securities by
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities.
Page 7 of 16
4.5.6 Waiver of Adjustment. Notwithstanding the provisions of
this Section 4.5, the applicable Conversion Price shall not be adjusted upon the
issuance of any shares of Common Stock or Convertible Securities as provided in
this Section 4.5 in the event the Investor agrees to waive such adjustment.
4.5.7 Stock to be Reserved. The Company will at all times
reserve and keep available out of its authorized Common Stock or its treasury
shares, solely for the purpose of issue upon the conversion of the Convertible
Note(s) as herein provided, such number of shares of Common Stock as shall then
be issuable upon the conversion of the Convertible Note(s).
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
Section 5.1 Representations and Warranties.
The Investor represents and warrants to the Company that:
a. Status. He is an individual over the age of 21 and is a resident of
the State of Louisiana.
b. Intent. He is entering into this Agreement for his own account and
not with a view to or for sale in connection with any distribution of the
Convertible Notes, the Converted Shares, the Warrant, or the Warrant Shares. The
Investor has no present arrangement (whether or not legally binding) at any time
to sell the Convertible Notes, Converted Shares, Warrants, or Warrant Shares to
or through any Person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold such securities for
any minimum or other specific term (other than as specified in Section 5.2
herein) and reserves the right to dispose of the Convertible Notes, Warrants,
Converted Shares and Warrant Shares at any time in accordance with federal and
state securities laws applicable to such disposition and with Section 5.2.
c. Securities Act Status of Investor. He is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D of the Securities Act), and
he has such experience in business and financial matters that it has the
capacity to protect its own interests in connection with this transaction and is
capable of evaluating the merits and risks of an investment in the Convertible
Notes, Converted Shares and Warrant Shares. The Investor acknowledges that an
investment in the Convertible Notes, Converted Shares and Warrant Shares is
speculative and involves a high degree of risk. The Investor is an accredited
investor (as defined in Rule 501 of Regulation D) because he meets one or more
of the following (please check all that apply):
(a) his individual net worth, or joint net worth with his
spouse, at the time of this purchase exceeds $1,000,000 or
Page 8 of 16
(b) he had an individual income in excess of $200,000 in each
of the two most recent years or joint income with his spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year.
d. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
e. Disclosure; Access to Information. He has received all documents,
records, books and other publicly available information pertaining to Investor's
investment in the Company that has been requested by the Investor. The Investor
has reviewed copies of all SEC Documents deemed relevant by the Investor.
f. Manner of Sale. At no time was the Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 5.2 Covenants
The Investor covenants to the Company that:
a. Restrictions on Transfer. He will not sell, assign, hypothecate,
pledge, convey, or otherwise transfer a Convertible Note, Converted Share,
Warrant, or Warrant Share without registering such transaction under the
Securities Act and applicable state securities laws or pursuant to exemptions
from registration thereunder. Investor acknowledges that such instruments will
bear a legend evidencing such restriction upon transfer.
b. Refrain from Selling Shares. As an inducement for the Company to
issue the Convertible Notes and Warrants, the Investor agrees that, until such
time as he has fulfilled all of his funding obligations hereunder or Investor is
released from such obligations pursuant to Section 2.4 herein, he will not sell
or otherwise transfer any shares of the Company's Common Stock that he currently
owns or may hereafter acquire.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights.
The Company shall cause the Registration Rights Agreement to remain in
full force and effect, and the Company shall comply in all material respects
with the terms thereof.
Section 6.2. Reservation of Common Stock.
The Company shall reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to issue the Converted Shares and Warrant Shares pursuant to the
Convertible Note and exercise of the Warrants. The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered pursuant to any
exercise of the Warrants and the number of shares so reserved shall be increased
or decreased to reflect potential increases or decreases in the Common Stock
that the Company may thereafter be obligated to issue by reason of adjustments
to the Warrants.
Page 9 of 16
ARTICLE VII
MISCELLANEOUS
Section 7.1 Governing Law; Consent to Jurisdiction.
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania without regard to the choice of law
or conflicts of law provisions thereof. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the non-exclusive
jurisdiction of the courts of the Commonwealth of Pennsylvania and of the United
States of America, located in the Commonwealth of Pennsylvania, for any action,
proceeding or investigation in any court or before any governmental authority
("Litigation") arising out of or relating to this Agreement and the transactions
contemplated hereby, and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in this Agreement shall be effective service of process for any Litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any Litigation arising out of this Agreement or the transaction contemplated
hereby in the courts of the Commonwealth of Pennsylvania or the United States of
America, located in the Commonwealth of Pennsylvania, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Litigation brought in any such court has been brought
in an inconvenient forum.
Section 7.2 Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) hand delivered, (ii) deposited in the
mail, registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
Page 10 of 16
If to the Company: Sedona Corporation
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to (shall not ▇▇▇▇▇▇ & ▇▇▇▇, P.C.
constitute notice): ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. 20036
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 202-446-5011
if to the Investor: As set forth on the signature pages hereto.
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 7.2 by giving written notice of
such changed address or facsimile number to the other party hereto as provided
in this Section 7.2.
Section 7.3 Counterparts/Facsimile/Amendments.
This Agreement may be executed in multiple counterparts, each of which
may be executed by less than all of the parties and shall be deemed to be an
original instrument which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one and
the same instrument. Except as otherwise stated herein, in lieu of the original
documents, a facsimile transmission or copy of the original documents shall be
as effective and enforceable as the original. This Agreement may be amended only
by a writing executed by all parties.
Section 7.4. Entire Agreement.
This Agreement, the forms of agreements attached as Exhibits A through
C hereto, which are the Convertible Notes, Warrants, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements (including but not limited to the Term Sheet)
negotiations and understandings between the parties, both oral and written
relating to the subject matter hereof. The terms and conditions of all Exhibits
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
Section 7.5. Severability.
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Page 11 of 16
Section. 7.6. Headings.
The headings used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement.
Section 7.7 Fees and Expenses.
Each of the Company and the Investor agrees to pay its own expenses
incident to the performance of its obligations hereunder.
Section 7.8 No Brokerage.
Each of the parties hereto represents that it has had no dealings in
connection with this transaction with any finder or broker who will demand
payment of any fee or commission from the other party. The Company on the one
hand, and the Investor, on the other hand, agree to indemnify the other against
and hold the other harmless from any and all liabilities to any Person claiming
brokerage commissions or finder's fees on account of services purported to have
been rendered on behalf of the indemnifying party in connection with this
Agreement or the transactions contemplated hereby.
[signatures on next page]
Page 12 of 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
SEDONA CORPORATION
By:
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and
Chief Executive Officer
By:
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Secretary and
Chief Financial Officer.
INVESTOR
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Address
--------------------------------
Page 13 of 16
Exhibit A
Form of Convertible Notes
Page 14 of 16
Exhibit B
Registration Rights Agreement
Page 15 of 16
Exhibit C
Warrant
Page 16 of 16
Exhibit B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 1, 2005,
between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, a Louisiana resident (the "Investor"), and Sedona
Corporation, a Pennsylvania corporation (the "Company").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Investor has agreed to lend the Company up to $1,000,000
pursuant to a Loan Agreement dated the date hereof (the "Loan Agreement"), and
evidence such loans through the issuance of convertible notes ("Convertible
Notes"); and
WHEREAS, the Company desires to grant to the Investor the
registration rights set forth herein with respect to the shares of the Company's
common stock, par value $0.001 per share, that he may acquire upon the
conversion of the Convertible Notes or the exercise of the Warrant (such shares
hereinafter referred to as the "Stock" or "Securities" of the Company); and,
WHEREAS, terms not defined herein shall have the meanings
ascribed to them in the Loan Agreement.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Securities" means the Securities until (i) the Registration
Statement (as defined in Section 3(a) hereof) under the Securities Act of 1933,
as amended (the "Securities Act") has been declared effective by the Securities
and Exchange Commission (the "Commission"), and all Securities have been
disposed of pursuant to the Registration Statement, (ii) all Securities have
been sold under circumstances under which all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) all Securities have been otherwise transferred to
holders who may trade such Securities without restriction under the Securities
Act, and the Company has delivered a new certificate or other evidence of
ownership for such Securities not bearing a restrictive legend or (iv) such time
as, in the opinion of counsel to the Company, all Securities may be sold without
any time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act. In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be deemed to be made
in the definition of "Registrable Securities" as is appropriate in order to
prevent any dilution or enlargement of the rights granted pursuant to this
Agreement.
Section 2. Restrictions on Transfer. The Investor acknowledges
and understands that prior to the registration of the Securities as provided
herein, the Securities are "restricted securities" as defined in Rule 144
promulgated under the Securities Act. Each Investor understands that no
disposition or transfer of the Securities may be made by such Investor in the
absence of (i) an opinion of counsel, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.
With a view to making available to the Investor the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Investor to sell securities of the
Company to the public without registration, the Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of
Rule 144; and
(b) file with the SEC in a timely manner all reports
and other documents required to be filed with the SEC pursuant to Section 13 or
15(d) under the Exchange Act by companies subject to either of such sections,
irrespective of whether the Company is then subject to such reporting
requirements.
Section 3. Registration Rights With Respect to the Securities.
(a) The Company agrees that it will prepare and file
with the SEC, as soon as practical, a registration statement (on Form S-3, or
other appropriate registration statement form) under the Securities Act (the
"Registration Statement"), at the sole expense of the Company (except as
provided in Section 3(c) hereof), in respect of the Investor, so as to permit a
public offering and resale of the Securities under the Act by the Investor as
selling stockholder and not as an underwriter.
(b) The Company will maintain the Registration
Statement filed under this Section 3 effective under the Securities Act until
the earlier of (i) the date that none of the Securities covered by such
Registration Statement are or may become issued and outstanding, (ii) the date
that all of the Securities have been sold pursuant to such Registration
Statement, (iii) the date the Company receives an opinion of counsel that the
Securities may be sold under the provisions of Rule 144 without limitation as to
volume, (iv) all Securities have been otherwise transferred to persons who may
trade such shares without restriction under the Securities Act, and the Company
has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend, (v) all Securities may be sold
without any time, volume or manner limitations pursuant to Rule 144(k) or any
similar provision then in effect under the Securities Act in the opinion of
counsel to the Company, or (vi) two (2) years from the Effective Date (the
"Effectiveness Period").
2
(c) All fees, disbursements and out-of-pocket
expenses and costs incurred by the Company in connection with the preparation
and filing of the Registration Statement under subparagraph 3(a), and in
complying with applicable securities and Blue Sky laws (including, without
limitation, all attorney's fees of the Company), shall be borne by the Company.
The Investor shall bear his own costs of underwriting and/or brokerage
discounts, fees and commissions, if any, applicable to the Securities being
registered and the fees and expenses of his counsel. The Investor and his
counsel shall have a reasonable period, not to exceed five (5) business days, to
review the proposed Registration Statement or any amendment thereto, including a
copy of the Company's proposed response to any staff comments, prior to filing
with the SEC, and the Company shall provide each Investor with copies of any
comment letters received from the SEC with respect thereto within two (2)
business days of receipt thereof and shall communicate any oral advice from the
SEC as to whether or not the Registration Statement will be reviewed, and if so,
how extensively. The Company shall qualify any of the Securities for sale in
such states as any Investor reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the Company
shall not be required to qualify in any state which will require an escrow or
other restriction relating to the Company and/or the sellers, or which will
require the Company to qualify to do business in such state or require the
Company to file therein any general consent to service of process. The Company
at its expense will supply the Investor with copies of the applicable
Registration Statement and the prospectus included therein and other related
documents in such quantities as may be reasonably requested by the Investor.
(d) The Company shall not be required by this Section
3 to include the Investor's Securities in any Registration Statement which is to
be filed if, in the opinion of the Company, the proposed offering or other
transfer as to which such registration is requested is exempt from applicable
federal and state securities laws and would result in all purchasers or
transferees obtaining securities which are not "restricted securities", as
defined in Rule 144 under the Securities Act.
(e) No provision contained herein shall preclude the
Company from selling securities pursuant to any Registration Statement in which
it is required to include Securities pursuant to this Section 3.
(f) If at any time or from time to time after the
effective date of any Registration Statement, the Company notifies the Investor
in writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Investor shall not offer or sell any Securities or engage in
any other transaction involving or relating to Securities, from the time of the
giving of notice with respect to a Potential Material Event until the Investor
receive written notice from the Company that such Potential Material Event
either has been disclosed to the public or no longer constitutes a Potential
Material Event; provided, however, that the Company may not so suspend such
right to offer or sell any Securities for more than ninety (90) days in the
aggregate during any twelve month period during the period the Registration
Statement is required to be in effect. If a Potential Material Event shall occur
prior to the date a Registration Statement is required to be filed, then the
Company's obligation to file such Registration Statement shall be delayed for
not more than ninety (90) days.
3
(g) "Potential Material Event" means any of the
following: (i) the possession by the Company of material information not ripe
for disclosure in a registration statement, if determined in good faith by the
Chief Executive Officer or the Board of Directors of the Company; or (ii) any
material engagement or activity by the Company which would, in the good faith
determination of the Chief Executive Officer or the Board of Directors of the
Company, be adversely affected by disclosure in a registration statement at such
time, which determination shall be accompanied by a good faith determination by
the Chief Executive Officer or the Board of Directors of the Company that the
applicable Registration Statement would be materially misleading absent the
inclusion of such information.
(h) In connection with any offering under this
Section 3 involving an underwriting, the Company shall not be required to
include any Registrable Securities in such underwriting unless the Investor
accepts the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it. If, in the opinion of the managing underwriter, the
registration of all, or part of, the Registrable Securities that the Investor
has requested to be included would materially and adversely affect such public
offering, then the Company shall be required to include in the underwriting only
that number of Registrable Securities, if any, that the managing underwriter in
good faith believes may be sold without causing such adverse effect. If the
number of Registrable Securities to be included in the underwriting in
accordance with the foregoing is less than the total number of shares that the
Investor has requested to be included, the Investor shall participate in the
underwriting pro rata based upon his total ownership of Registrable Securities.
Section 4. Cooperation with Company. The Investor will
cooperate with the Company in all respects in connection with this Agreement,
including timely supplying all information reasonably requested by the Company
(which shall include all information regarding each Investor and proposed manner
of sale of the Registrable Securities required to be disclosed in any
Registration Statement) and executing and returning all documents reasonably
requested in connection with the registration and sale of the Registrable
Securities and entering into and performing his obligations under any
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering. Nothing in this Agreement shall obligate the Investor to
consent to be named as an underwriter in any Registration Statement. The
obligation of the Company to register the Registrable Securities shall be
absolute and unconditional as to those Securities which the SEC will permit to
be registered without naming the Investor as an underwriter.
Section 5. Registration Procedures. If and whenever the
Company is required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Securities Act, the
Company shall (except as otherwise provided in this Agreement), as expeditiously
as possible, subject to the Investor's assistance and cooperation as reasonably
required with respect to each Registration Statement:
4
(a) (i) prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such registration
statement whenever the Investor shall desire to sell or otherwise dispose of the
same (including prospectus supplements with respect to the sales of securities
from time to time in connection with a registration statement pursuant to Rule
415 promulgated under the Securities Act) and (ii) take all lawful action such
that each of (A) the Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading and (B) the prospectus forming part of the Registration
Statement, and any amendment or supplement thereto, does not at any time during
the Registration Period include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(b) (i) prior to the filing with the SEC of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any prospectus (including any supplements thereto), provide draft
copies thereof to the Investor as required by Section 3(c) and reflect in such
documents all such comments as the Investor (and his/her respective counsel)
reasonably may propose respecting the Selling Shareholder and Plan of
Distribution sections (or equivalents) and (ii) furnish to the Investor such
numbers of copies of a prospectus including a preliminary prospectus or any
amendment or supplement to any prospectus, as applicable, in conformity with the
requirements of the Securities Act, and such other documents, as the Investor
may reasonably request in order to facilitate the public sale or other
disposition of the securities owned by the Investor;
(c) register and qualify the Registrable Securities
covered by the Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as the Investor shall reasonably request (subject to
the limitations set forth in Section 3(c) above), and do any and all other acts
and things which may be necessary or advisable to enable the Investor to
consummate the public sale or other disposition in such jurisdiction of the
securities owned by the Investor;
(d) list such Registrable Securities on the principal
market in which the Company's securities of the same class are then trading, if
the listing of such Registrable Securities is then permitted and required under
the rules of such principal market;
5
(e) notify the Investor at any time when a prospectus
relating thereto covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event of which it
has knowledge as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and the Company shall prepare and file a curative amendment under
Section 5(a) as quickly as commercially possible;
(f) as promptly as practicable after becoming aware
of such event, notify the Investor who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of the effectiveness
of the Registration Statement at the earliest possible time and take all lawful
action to effect the withdrawal, recession or removal of such stop order or
other suspension;
(g) cooperate with the Investor to facilitate the
timely preparation and delivery of certificates for the Registrable Securities
to be offered pursuant to the Registration Statement and enable such
certificates for the Registrable Securities to be in such denominations or
amounts, as the case may be, as the Investor reasonably may request and
registered in such names as the Investor may request; and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investor) an appropriate instruction
and, to the extent necessary, an opinion of such counsel;
(h) take all such other lawful actions reasonably
necessary to expedite and facilitate the disposition by the Investor of his/her
Registrable Securities in accordance with the intended methods therefor provided
in the prospectus which are customary for issuers to perform under the
circumstances;
(i) in the event of an underwritten offering,
promptly include or incorporate in a prospectus supplement or post-effective
amendment to the Registration Statement such information as the managers
reasonably agree should be included therein and to which the Company does not
reasonably object and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment; and
(j) maintain a transfer agent and registrar for its
Common Stock.
6
Section 6. Indemnification.
(a) To the maximum extent permitted by law, the
Company agrees to indemnify and hold harmless the Investor, each underwriter of
such Investor's Registrable Shares and each person, if any, who controls the
Investor or an underwriter within the meaning of the Securities Act (each a
"Distributing Investor") against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees and expenses), to which the Distributing Investor may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, or any related final prospectus or
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company will not be liable in any such case to the extent, and
only to the extent, that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, preliminary prospectus,
final prospectus or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by the
Distributing Investor, its counsel, affiliates or any underwriter, specifically
for use in the preparation thereof.
(b) To the maximum extent permitted by law, the
Investor, agrees that he will indemnify and hold harmless the Company, each
officer and director of the Company, each underwriter and each person, if any,
who controls the Company or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities (which shall,
for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys' fees
and expenses) to which the Company, any such underwriter or any such officer,
director or controlling person of the Company or any such underwriter may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, or any related final prospectus or
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such Registration Statement, final
prospectus or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by such Investor,
its counsel or affiliates, specifically for use in the preparation thereof.
Notwithstanding anything to the contrary contained herein, each Investor shall
not be liable under this Section 6(b) for any amount that exceeds the gross
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to the Registration Statement. This indemnity agreement will be in
addition to any liability which the Investor may otherwise have and is not a
limitation on any other indemnity obligation of the Investor to the Company.
7
(c) Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action against such
indemnified party, such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under this Section 6, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party except to the extent
the failure of the indemnified party to provide such written notification
actually prejudices the ability of the indemnifying party to defend such action.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified parties as a group
shall have the right to employ one separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party unless (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by its counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the indemnified party or any other
indemnified party (in which case the indemnifying party shall not have the right
to assume the defense of such action on behalf of such indemnified party, it
being understood, however, that the indemnifying party shall, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable only for the reasonable fees and expenses of one
separate firm of attorneys for the indemnified party, which firm shall be
designated in writing by the indemnified party). No settlement of any action
against an indemnified party shall be made without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld so long
as such settlement includes a full release of claims against the indemnified
party, and no indemnified party shall consent to entry of any judgment or settle
any claim or litigation without the prior written consent of the indemnifying
party.
Section 7. Contribution. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
indemnified party makes a claim for indemnification pursuant to Section 6 hereof
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
Section 6 hereof provide for indemnification in such case, or (ii) contribution
8
under the Securities Act may be required on the part of any indemnified party,
then the Company and the applicable Distributing Investor shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees and expenses), in either such case (after contribution from
others) on the basis of relative fault as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the applicable
Distributing Investor on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Investor agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no
event shall the Investor be required to undertake liability to any person under
this Section 7 for any amounts in excess of the dollar amount of the gross
proceeds received by such Investor from the sale of such Investor's Registrable
Securities pursuant to any Registration Statement under which such Registrable
Securities are registered under the Securities Act.
Section 8. Notices. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be delivered
as provided in the Loan Agreement.
Section 9. Amendments and Waivers. Except as
otherwise provided herein, the provisions of this Agreement may be amended and
the Company may take action herein prohibited, or omit to perform any act herein
required to be performed by it, if, but only if, the Company has obtained the
written consent of holders of at least a majority of the Registrable Securities
then in existence.
Section 10. Assignment. This Agreement is binding
upon and inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. The rights granted the Investor under this
Agreement may be assigned as permitted by the Loan Agreement.
9
Section 11. Additional Covenants of the Company. The
Company agrees that at such time as it otherwise meets the requirements for the
use of Securities Act Registration Statement on Form S-3 for the purpose of
registering the Registrable Securities, it shall file all reports and
information required to be filed by it with the SEC in a timely manner and take
all such other action so as to maintain such eligibility for the use of such
form.
Section 12. No Registration of Warrants. The
registration rights contained herein apply only to the Company's Common Stock,
and the Company shall never be obligated to register the Warrants.
Section 13. Counterparts/Facsimile. This Agreement
may be executed in two or more counterparts, each of which shall constitute an
original, but all of which, when together shall constitute but one and the same
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties. In lieu of the
original, a facsimile transmission or copy of the original shall be as effective
and enforceable as the original.
Section 14. Remedies; Severability. The remedies
provided in this Agreement are cumulative and not exclusive of any remedies
provided by law. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction.
Section 15. Headings. The headings in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 16. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania without regard to the choice of law or conflicts of law provisions
thereof. Each of the parties hereto hereby irrevocably and unconditionally
consents to submit to the non-exclusive jurisdiction of the courts of the
Commonwealth of Pennsylvania and of the United States of America, located in the
Commonwealth of Pennsylvania, for any action, proceeding or investigation in any
court or before any governmental authority ("Litigation") arising out of or
relating to this Agreement and the transactions contemplated hereby, and further
agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in the Loan Agreement shall
be effective service of process for any Litigation brought against it in any
such court. Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any Litigation arising out of
this Agreement or the transaction contemplated hereby in the courts of the
Commonwealth of Pennsylvania or the United States of America, located in the
Commonwealth of Pennsylvania, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such
Litigation brought in any such court has been brought in an inconvenient forum.
10
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed, on the day and year first
above written.
SEDONA CORPORATION
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and
Chief Executive Officer
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President and
Chief Financial Officer
THE INVESTOR
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
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[Address]