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EXHIBIT A
5% CONVERTIBLE DEBENTURE
No. 001 US $3,000,000
SEDONA CORPORATION
5% CONVERTIBLE DEBENTURE DUE MARCH 22, 2001
THIS DEBENTURE is issued by Sedona Corporation, a corporation organized
and existing under the laws of the Commonwealth of Pennsylvania (the "Company")
and is designated as its 5% Convertible Debenture Due March 22, 2001.
FOR VALUE RECEIVED, the Company promises to pay to AMRO International,
S.A. or permitted assigns (the "Holder"), the principal sum of three million and
00/100 (US $3,000,000) Dollars on March 22, 2001 (the "Maturity Date") and to
pay interest quarterly in arrears on the principal sum outstanding at the rate
of 5% per annum accruing from the date of initial issuance; except, that, at the
election of the Holder, such payment of principal and interest may be extended
for subsequent thirty (30) calendar day periods (each an "Extension Period") to
be paid on the last day of each such period (the "Extension Date"). The Company
shall request the consent of the Holder for each Extension Period at least five
(5) Trading Days prior to the applicable Extension Date. Accrual of interest
shall commence on the first business day to occur after the date of initial
issuance and continue until payment in full of the principal sum has been made
or duly provided for. The first interest payment shall be due and payable on the
Maturity Date and thereafter quarterly interest payments shall be due and
payable on December 1, March 1, June 1 and September 1 of each year, commencing
with, if applicable, June 1, 2001. If the Maturity Date or any interest payment
date is not a business day in the State of New York, then such payment shall be
made on the next succeeding business day. The Company will pay the principal of,
and any accrued and unpaid interest due upon this Debenture on or before the
Maturity Date (or, if applicable, the Extension Date) and any accrued but unpaid
interest due upon this Debenture thereafter by check or wire transfer to the
person who is the registered Holder and addressed to such holder at the last
address appearing on the Debenture Register. The Company shall give the Holder
five (5) Trading Days notice prior to any prepayment. If the Company fails to
prepay pursuant to such notice within five (5) Trading Days of notice to the
Holder that the Company intends to prepay the outstanding principal of, and any
accrued and unpaid interest due upon this Debenture, the Company shall forfeit
any further prepayment rights. The forwarding of such check or money order shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Debenture to the
extent of the sum represented by such check or wire transfer plus any amounts so
deducted.
This Debenture is subject to the following additional provisions:
1. The Company shall be entitled to withhold from all payments
of interest on this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and Holder shall execute and deliver all
required documentation in connection therewith.
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2. Prior to due presentment for transfer of this Debenture,
the Company and any agent of the Company may treat the person in whose name this
Debenture is duly registered on the Company's Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Debenture be overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary. This Debenture has
been executed and delivered pursuant to the Convertible Debenture and Warrants
Purchase Agreement dated as of November 22, 2000 between the Company and the
original Holder (the "Purchase Agreement"), and is subject to the terms and
conditions of the Purchase Agreement, which are, by this reference, incorporated
herein and made a part hereof. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth for such terms in the Purchase
Agreement.
3. On any Trading Day on or prior to the Maturity Date (A)
that the Market Price (as defined below) on such date exceeds $2.00, or (B) on
or after the Company has given notice to the Company that it intends to prepay
all or part of the outstanding principal amount of this Debenture and the
accrued but unpaid interest and prior to the time the Company repays such
amounts (in such case, the Holder's right to convert is limited to the amount
the Company intends to prepay), the Holder of this Debenture may convert the
Purchase Price or any portion thereof, plus any accrued and unpaid interest,
into shares of Common Stock ("Conversion Shares"), at a conversion price for
each Conversion Share ("Conversion Price") equal to $1.0443 (85% of the Market
Price on the Trading Day immediately prior to the Closing Date)(subject to
adjustment for stock splits and the like). At any time commencing after the
Maturity Date, the Holder of this Debenture may convert the Purchase Price or
any portion thereof, plus, any accrued and unpaid interest, into Conversion
Shares at a Conversion Price equal to the lesser of (A) $1.4129 (115% of the
Market Price on the Trading Day immediately prior to the Closing Date)(subject
to adjustment for stock splits and the like)(the "Set Price"), and (B) 85% of
the Market Price on the Conversion Date (as defined below). The Market Price
shall mean the volume weighted average price of the Common Stock on the
Principal Market (and, at each Investor's option, if not listed on the Principal
Market, on the OTC Bulletin Board or the pink sheets or any other trading
market) during the five (5) Trading Days immediately prior to the Closing Date
or Conversion Date, as the case may be. If, upon any conversion of this
Debenture, the Company's issuance of Conversion Shares would cause it to violate
any listing requirement of the Principal Market, then in lieu of such stock
issuance, the Company shall pay the Holder cash in an amount equal to the
closing bid price of the Common Stock on the Conversion Date multiplied by the
number of shares which would otherwise have been issuable upon such conversion
within five (5) calendar days. The Company shall be liable for the liquidated
damages set forth in Section 8 herein for any failure to make such payments to
the Holder. Additionally, after the Maturity Date, except for sales of its
securities (i) pursuant to the exercise of options granted or to be granted
under an employee benefit plan which plan has been approved by the Company's
stockholders, (ii) pursuant to any compensatory plan for a full-time employee or
key consultant, or (iii) in connection with a strategic partnership or other
business transaction, the principal purpose of which is not simply to raise
money, if during the period beginning on the date hereof and ending when the
Holder no longer holds any of the principal amount of this Debenture or any
accrued but unpaid interest of this Debenture (the "MFN Period"), the Company
sells any shares of its Common Stock at a per share selling price ("Per Share
Selling Price") lower than the Set Price per share, then the Set Price shall be
adjusted downward to equal such lower Per Share Selling Price. The Company shall
give to each Investor written notice of any such sale within 24 hours of the
closing of any such sale.
(a) For the purpose of this Section 3, the term "Per Share
Selling Price" shall mean the amount actually paid by third parties for each
share of Common Stock. A sale of shares of Common Stock shall include the sale
or issuance of rights, options, warrants or convertible securities ("derivative
securities") under which the Company is or may become obligated to issue shares
of Common Stock, and in such circumstances the sale of Common Stock shall be
deemed to have occurred at the time of the issuance of the derivative securities
and the Per Share Selling Price of the Common Stock covered thereby shall also
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include the exercise or conversion price thereof (in addition to the
consideration per underlying share of Common Stock received by the Company upon
such sale or issuance of the derivative security). In case of any such security
issued within the MFN Period in a "Variable Rate Transaction" or an "MFN
Transaction" (each as defined below), the Per Share Selling Price shall be
deemed to be the lowest conversion or exercise price at which such securities
are converted or exercised in the case of a Variable Rate Transaction, or the
lowest adjustment price in the case of an MFN Transaction. If shares are issued
for a consideration other than cash, the per share selling price shall be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company.
(b) For the purpose of Section 3(a), the term "Variable Rate
Transaction" shall mean a transaction in which the Company issues or sells (a)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (x) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
Common Stock at any time after the initial issuance of such debt or equity
securities, or (y) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (but excluding standard stock split anti-dilution provisions),
or (b) any securities of the Company pursuant to an "equity line" structure
which provides for the sale, from time to time, of securities of the Company
which are registered for resale pursuant to the Securities Act.
(c) For the purposes of Section 4(a), the term "MFN
Transaction" shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
(the "New Offering") which grants to an investor (the "New Investor") the right
to receive additional shares based upon future transactions of the Company on
terms more favorable than those granted to the New Investor in the New Offering.
(d) In case of any stock split or reverse stock split, stock
dividend, reclassification of the common stock, recapitalization, merger or
consolidation, or like capital adjustment affecting the Common Stock, the
provisions of this Section 3 shall be applied in a fair, equitable and
reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof.
4. The rate of interest on this Debenture shall be five
percent (5%), per annum, on the outstanding principal until paid or converted.
The Holder shall have the right to cause the Company to issue Common Stock in
exchange for interest otherwise payable in cash pursuant to this Debenture. The
exact number of shares of Common Stock into which such interest payment is
convertible shall be determined as set forth in Section 3 herein.
5. [INTENTIONALLY OMMITTED]
6. [INTENTIONALLY OMMITTED]
7. On or prior to the Maturity Date, the Company will pay the
principal of and accrued but unpaid interest due upon this Debenture, less any
amounts required by law to be deducted, to the registered holder of this
Debenture and addressed to such holder at the last address appearing on the
debenture register, and the registered Holder will surrender this Debenture to
the Company.
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8. (a) Conversion shall be effectuated by surrendering this
Debenture to the Company (if such Conversion will convert all outstanding
principal) together with the form of conversion notice attached hereto as
Exhibit A (the "Notice of Conversion"), executed by the registered Holder
evidencing such Holder's intention to convert this Debenture or a specified, and
accompanied, if required by the Company, by proper assignment hereof in blank.
Interest accrued or accruing from the date of issuance to the Conversion Date
shall be paid as set forth above. No fraction of a share or scrip representing a
fraction of a share will be issued on conversion, but the number of Conversion
Shares issuable shall be rounded to the nearest whole share. The "Conversion
Date" shall be deemed to be the date on which the Holder faxes the Notice of
Conversion duly executed to the Company. Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (484) 679-2201
Attn.: William K. Williams. Certificates representing Conversion Shares will be
delivered to the Holder within three (3) Trading Days from the Conversion Date.
Delivery of Conversion Shares shall be made to the address specified by the
Holder in the Notice of Conversion.
(b) The Company understands that a delay in the issuance
the Conversion Shares beyond three (3) Trading Days could result in economic
loss to the Holder. As compensation to the Holder for such loss, the Company
agrees to pay late payments to the Holder for late issuance of Conversion Shares
upon conversion in accordance with the following schedule (where "No. Trading
Days Late" is defined as the number of Trading Days beyond three (3) Trading
Days from the Conversion Date.
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No. Trading Days Late Late Payment for Each
$10,000 of Principal Amount
Being Converted
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1 $100
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2 $200
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3 $300
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4 $400
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5 $500
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6 $600
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7 $700
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8 $800
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9 $900
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10 $1,000
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More than 10 $1,000 +$200 for each Trading Day
Late beyond 10 Trading Days
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The Company shall pay any payments incurred under this
Paragraph 8(b) in immediately available funds upon demand. Nothing herein shall
limit Holder's right to pursue injunctive relief and/or actual damages for the
Company's failure to issue and deliver Conversion Shares to the Holder,
including, without limitation, the Holder's actual losses occasioned by any
"buy-in" of Common Stock necessitated by such late delivery. Furthermore, in
addition to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of such
Conversion Shares within three (3) Trading Days from the date the Conversion
Date, the Holder will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company, whereupon the Company and the
Holder shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion, and in such event no late payments shall
be due in connection with such withdrawn conversion.
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(c) If at any time (a) the Company challenges, disputes or
denies the right of the Holder to effect the conversion of this Debenture into
Conversion Shares or otherwise dishonors or rejects any Notice of Conversion
properly delivered in accordance with this Paragraph 6 or (b) any Company
stockholder who is not and has never been an Affiliate (as defined in Rule 405
under the Securities Act of 1933, as amended) of the Holder obtains a judgment
or any injunctive relief from any court or public or governmental authority
which denies, enjoins, limits, modifies, delays or disputes the right of the
Holder hereof to effect the conversion of this Debenture into Conversion Shares,
then the Holder shall have the right, by written notice, to require the Company
to promptly redeem this Debenture for cash at a redemption price equal to one
hundred twenty percent (120%) of the outstanding principal amount hereof and all
accrued and unpaid interest hereon. Under any of the circumstances set forth
above, the Company shall indemnify and hold harmless the holder and be
responsible for the payment of all costs and expenses of the Holder, including
its reasonable legal fees and expenses, as and when incurred in disputing any
such action or pursuing its rights hereunder (in addition to any other rights of
the Holder). In the event a Holder shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not refuse conversion based
on any claim that the Holder or any one associated or affiliated with the Holder
has been engaged in any violation of law, agreement or for any other reason,
unless, an injunction from a court, on notice, restraining and or enjoining
conversion of all or part of this Debenture shall have been sought and obtained
and the Company posts a surety bond for the benefit of the Holder in the amount
of 120% of the principal amount of this Debenture outstanding, which is subject
to the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent it obtains judgment. In the absence of an
injunction precluding the same, the Company shall issue Conversion Shares upon a
properly noticed conversion.
9. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate, and
in the coin or currency or shares of Common Stock herein prescribed. This
Debenture is a direct obligation of the Company.
10. No recourse shall be had for the payment of the principal
of, or the interest on, this Debenture, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, shareholder, employee,
officer or director, as such, past, present or future, of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
11. In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on an as valued basis) in one or a series of related
transactions, the Holder shall have the right to (A) deem such an occurrence an
Event of Default and exercise its rights of prepayment pursuant to Paragraph 14
herein, (B) convert its aggregate principal amount of this Debenture then
outstanding into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the shares of Common Stock into which such aggregate principal
amount of this Debenture could have been converted immediately prior to such
merger, consolidation or sales would have been entitled, or (C) in the case of a
merger or consolidation, (x) require the surviving entity to issue convertible
debentures with such aggregate stated value or in such face amount, as the case
may be, equal to the aggregate principal amount of this Debenture then held by
the Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which newly issued debentures shall have terms identical (including
with respect to conversion) to the terms of this Debenture and shall be entitled
to all of the rights and privileges of the Holder set forth herein and the
agreements pursuant to which this Debenture was issued (including, without
limitation, as such rights relate to the acquisition, transferability,
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registration and listing of such shares of stock other securities issuable upon
conversion thereof), and (y) simultaneously with the issuance of such
convertible debentures, shall have the right to convert such instrument only
into shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such merger or
consolidation. In the case of clause (C), the conversion price applicable for
the newly convertible debentures shall be based upon the amount of securities,
cash and property that each share of Common Stock would receive in such
transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Paragraph upon any conversion or redemption following such event. This
Paragraph shall similarly apply to successive such events.
12. [INTENTIONALLY OMMITTED]
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
14. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture and same shall continue for a
period of three (3) Trading Days; or
b. Any of the material representations or warranties made by
the Company herein, in the Purchase Agreement, or in any
agreement, certificate or financial statements furnished
by the Company in connection with the execution and
delivery of this Debenture or the Purchase Agreement shall
be false or misleading in any material respect at the time
made; or
c. The Company fails to issue Conversion Shares to the Holder
or to cause its Transfer Agent to issue Conversion Shares
upon proper exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this
Debenture, or fails to transfer or to cause its Transfer
Agent to transfer any certificate for Conversion Shares as
and when required by this Debenture, and such transfer is
otherwise lawful, and any such failure shall continue
uncured for five (5) Trading Days; or
d. The Company shall fail to perform or observe, in any
material respect, any other covenant, term, provision,
condition, agreement or obligation of the Company under
the Purchase Agreement, or this Debenture and such failure
shall continue uncured for a period of thirty (30) days
after written notice from the Holder of such failure; or
e. The Company shall (1) admit in writing its inability to
pay its debts generally as they mature; (2) make an
assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or
receiver for its or for a substantial part of its property
or business; or
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f. A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or
business without its consent and shall not be discharged
within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
Company and shall not be dismissed within sixty (60) days
thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
($100,000) Dollars in the aggregate shall be entered or
filed against the Company or any of its properties or
other assets and shall remain unpaid, unvacated, unbonded
or unstayed for a period of sixty (60) days or in any
event later than five (5) days prior to the date of any
proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall
be instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty
(60) days after such institution or the Company shall by
any action or answer approve of, consent to, or acquiesce
in any such proceedings or admit the material allegations
of, or default in answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock suspended or
delisted from trading on a Principal Market for more than
five (5) Trading Days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding, and
the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
15. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
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16. In no event shall the Holder be permitted to convert this
Debenture for Conversion Shares to the extent that (x) the number of shares of
Common Stock beneficially owned by such Holder (other than Conversion Shares)
plus (y) the number of shares Conversion Shares, would be equal to or exceed
9.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon conversion of this Debenture held by such Holder
after application of this Paragraph 16. As used herein, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder. To the extent
that the limitation contained in this Paragraph 16 applies, the determination of
whether this Debenture is convertible (in relation to other securities
beneficially owned or controlled by the Holder) and of which a portion of this
Debenture is convertible shall be in the sole discretion of such Holder, and the
submission of a Notice of Conversion shall be deemed to be such Holder's
determination of whether this Debenture is convertible (in relation to other
securities owned by such holder) and of which portion of this Debenture is
convertible, in each case subject to such aggregate percentage limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to restrict the right of
a Holder to convert this Debenture into Conversion Shares at such time as such
conversion will not violate the provisions of this Paragraph 16. The provisions
of this Paragraph 16 may be waived by the Holder upon, at the election of the
Holder, not less than 75 days' prior notice to the Company, and the provisions
of this Paragraph 16 shall continue to apply until such 75th day (or such later
date as may be specified in such notice of waiver). No conversion of this
Debenture in violation of this Paragraph 16 but otherwise in accordance with
this Debenture shall affect the status of the Conversion Shares as validly
issued, fully-paid and nonassessable.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: November 22, 2000
SEDONA CORPORATION
By:
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Marco Emrich, President & CEO
Attest:
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. ___ into Shares of Common
Stock of Sedona Corporation (the "Company") according to the conditions hereof,
as of the date written below.
Date of Conversion* ____________________________________________________________
Conversion Price * ____________________________________________________
Accrued Interest________________________________________________________________
Signature_______________________________________________________________________
[Name]
Address:________________________________________________________________________
________________________________________________________________________
*If such conversion represents the remaining principal balance of the Debenture,
the original Debenture must accompany this notice within three (3) Trading Days.
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