<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT")
OR ANY APPLICABLE STATE SECURITIES LAWS. IT
MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, CONVERTED, OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
----------------
$250,000.00
King of Prussia, Pennsylvania
FOR VALUE RECEIVED, the undersigned, SEDONA
CORPORATION, a Pennsylvania
corporation ("Maker"), promises to pay to
William W. Rucks, IV ("Holder"), with
the address of 600 Jefferson Street, Post
Office Box 51967, Lafayette, Louisiana
70505, the principal sum of TWO HUNDRED
FIFTY THOUSAND and no/100 dollars
($250,000.00) ("Loan"), together with
interest thereon at the rate of eight
percent (8%) per annum from the date hereof
until the earlier of maturity or the
date the balance shall be paid in full
(this "Note"); provided that Holder shall
be entitled at any time during the term of
the Loan to convert the then
outstanding balance of the Loan into shares
of Common Stock at a price of $0.18
per share.
1. Definitions. The following definitions are applicable to the
words,
phrases or terms used in this Note.
(a) The term "Common Stock" shall mean the Maker's common
stock, par value $0.001 per share.
(b) The term "Holder"
shall mean and include all heirs,
successors and assigns of any owner or
holder of this Note.
(c) The term "Maker" shall mean and include all makers,
co-makers and other parties signing on the
face of this Note and their
successors and assigns, and the use of the
plural number shall include the
singular, and vice versa, and the use of
any gender shall include all genders.
(d) The term "Maturity" shall mean the date on which this Note
shall be due and payable in full, which
date shall be June 30, 2007.
(e) The term "Notice of Conversion" shall mean the Notice of
Conversion substantially in the form of
Exhibit A attached hereto.
(f) The term "Shares" shall mean all shares of Common Stock or
other securities issued or issuable
pursuant to the exercise of the Notice of
Conversion.
2. Payment Terms. This Loan shall be effective commencing on the
date
hereof and continuing until two (2) years
after the effective date. Unless the
Note is converted or prepaid, the Maker
shall be obligated to make one payment
of all outstanding principal due thereon at
Maturity. The Maker shall pay
Page 1 of 8
<PAGE>
interest annually in arrears, unless, prior
to such payment, Holder provides
Maker with a written Notice of Conversion
of Holder's election to convert all of
such payment into Shares. Unless otherwise
designated in writing, mailed or
delivered to Maker, the place for payment
of the indebtedness evidenced by this
Note shall be the Holder's principal
address as noted above. Payments received
on this Note shall be applied first to
accrued interest, and the balance to
principal.
3. Events of Default. The following shall constitute an Event
of
Default:
In the event Maker shall fail (i) to pay
any sums due hereunder when due, or
(ii) to observe or perform any term,
condition, covenant, representation or
warranty set forth herein, when due or
required, or within any period of time
permitted thereunder for cure of any such
default or non-performance.
4. Acceleration of Maturity. Upon the happening of any Event of
Default, the unpaid principal and interest
due Holder shall, at the option of
the Holder, become immediately due and
payable.
5. Limitation on Interest. In no contingency, whether by reason
of
acceleration of the Maturity of this Note
or otherwise, shall the interest
contracted for, charged or received by
Holder exceed the maximum amount
permissible under applicable law. If, from
any circumstance whatsoever, interest
would otherwise be payable to Holder in
excess of the maximum lawful amount, the
interest payable to Holder shall be reduced
to the maximum amount permitted
under applicable law; and, if from any
circumstance the Holder shall ever
receive anything of value deemed interest
by applicable law in excess of the
maximum lawful amount, an amount equal to
any excessive interest shall be
applied to the reduction of the principal
of this Note and not to the payment of
interest, or if such excessive interest
exceeds the unpaid balance of principal
of the Note such excess shall be refunded
to Maker. All interest paid or agreed
to be paid to Holder shall, to the extent
permitted by applicable law, be
amortized, prorated, allocated, and spread
throughout the full period until
payment in full of the principal of the
Note (including the period of any
renewal or extension thereof) so that
interest thereon for such full period
shall not exceed the maximum amount
permitted by applicable law.
6. Remedies; Nonwaiver. Failure of Holder to exercise any right
or
remedy available to Holder upon the
occurrence of an Event of Default hereunder
shall not constitute a waiver on the part
of Holder of the right to exercise any
such right or remedy for that Event of
Default or any subsequent Event of
Default. The exercise of any remedy by
Holder shall not constitute an election
of any such remedy to the exclusion of any
other remedies afforded Holder at law
or in equity, all such remedies being
nonexclusive and cumulative. If an Event
of Default occurs under this Note and this
Note is referred to an attorney at
law for collection, Maker agrees to pay all
costs incurred by Holder incident to
collection up to a limit of 10% of the
unpaid debt, including but not limited to
reasonable attorney fees, enforceable as a
contract of indemnity, plus all court
costs.
Page 2 of 8
<PAGE>
7. Waivers. The Maker, endorsers, sureties and guarantors hereof,
if
any, severally (i) waive presentment,
protest and demand, (ii) waive notice of
protest, demand, dishonor and nonpayment of
this Note, and (iii) expressly agree
that this Note may be renewed in whole or
in part, or any nonpayment hereunder
may be extended, or a new note of different
form may be substituted for this
Note or changes may be made in
consideration of the extension of the Maturity
date hereof, or any combination thereof,
from time to time, but, in any singular
event or any combination of such events,
neither Maker nor any endorser, surety
or guarantor will be released from
liability by reason of the occurrence of any
such event, nor shall Holder hereof be
deemed by the occurrence of any such
event to have waived or surrendered, either
in whole or in part, any right it
otherwise might have.
8. Option to Convert Note into Stock.
(a) The Maker represents that at any time during the term of
the Loan, Holder shall have the right and
option to convert (the "Conversion
Right") the unpaid principal balance of
this Note or any part thereof (the
"Outstanding Principal Balance"), into
Shares having all rights inherent in
common stock under the Maker's Articles of
Incorporation and Bylaws in effect as
of the date hereof. The number of Shares to
be paid on conversion shall be equal
to the amount of the then Outstanding
Principal Balance divided by $0.18. The
$0.18 conversion price for conversion of
the Outstanding Principal Balance shall
be protected by full-ratchet anti-dilution,
with exemption of stock options
issued to the Maker's employees and
directors only, as is further set forth in
the Loan Documents. Interest shall be paid
in cash; provided, however, that at
the sole election of the Holder, accrued
and unpaid interest may be converted
into Shares by dividing the amount to be
converted by $0.18.
(b) Maker shall timely file a registration statement to
register for resale under the Securities
Act of 1933, as amended (the
"Securities Act"), all Shares that ma
