Document:

Prepared and filed by St Ives Financial

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR OTHER JURISDICTION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 

COMMON STOCK PURCHASE WARRANT

To Purchase (insert number of Shares) Shares of Common Stock of

Neutron Enterprises, Inc.

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) CERTIFIES that, for value received, [proper name] (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after _____, 2006 (the “Initial Exercise Date”) and on or prior to the close of business on October ______, 2008 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Neutron Enterprises, Inc., a corporation incorporated in the
State of Nevada (the “Company”), up to [insert number] shares (the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrant shall be $2.50, subject to adjustment hereunder. All references to dollars and “$” refer to the lawful currency of the United States. 

The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein.

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1. Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

3. Exercise of Warrant. 

(a) Exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or by means of a cashless exercise pursuant to Section 3(c), the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for shares purchased hereunder shall be delivered to the Holder within ten (10) Trading Days
after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. 

(b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the un-purchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. 

(c)
  Subject to Section 3(a) above, this Warrant may be exercised by means of a cashless
  exercise by the surrender of this Warrant and the Notice of Exercise Form annexed
  hereto duly executed in accordance with the following formula:

 

  	
         
 	

X= Y x
 	

(A-B)
 	

 
 
	

 
 	

 
 	

 	

 
 
	

 
 	

 
 	

A
 	

 
 

 

  	
         

      	
        Where
          X =

      	
         

      	
        the
          number of shares of Common Stock to be issued to the Holder

      
	 	 	 	 
	
         

      	
        Y
          =

      	
         

      	
        the
          number of shares of Common Stock purchasable under the Warrant or, if
          only a portion of the Warrant is being exercised, the portion of the
          Warrant being exercised (at the date of such calculation)

      
	 	 	 	 
	
         

      	
        A
          =

      	
         

      	
        the
          Fair Market Value of one share of the Company’s Common Stock (at
          the date of such calculation)

      
	 	 	 	 
	
         

      	
        B
          =

      	
         

      	
        Exercise
          Price (as adjusted to the date of such calculation).

      

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For the purpose of this Section 3(d), “Fair Market Value” shall be an amount equal to the average of the “Current Market Value” for the ten (10) days preceding the Company’s receipt of the duly executed Notice of Exercise Form annexed hereto. For the purpose of this Section 3(d), “Current Market Value” for any day shall be determined as follows:

(i) if the Common Stock is traded in the over-the-counter market and not on any national securities exchange and not on the NASDAQ National Market System or NASDAQ Small Cap Market (together, the “NASDAQ Reporting System”), the average of the mean between the last bid and asked prices per share, as reported by the National Quotation Bureau, Inc., or an equivalent generally accepted reporting service, or if not so reported, the average of the closing bid and asked prices for one share of Common Stock as furnished to the Company by any member of the National Association of Securities Dealers, Inc., selected by the Company for that purpose; or

(ii) if the Common Stock is listed or traded on a national securities exchange or the NASDAQ Reporting System, the per share closing price on the principal national securities exchange on which the Common Stock is so listed or traded, on the NASDAQ Reporting System, as the case may be, on the last business day prior to the date of the exercise of this Warrant. The closing price referred to in this clause (ii) shall be the last reported sales price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on the national securities exchange on which the Common Stock is then listed or in the NASDAQ Reporting System; or

(iii) if no such closing price or closing bid and asked prices are available, as determined in any reasonable manner as may be prescribed by the Board of Directors of the Company.

4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto
duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

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6. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms hereof.

7. Transfer, Division and Combination. 

(a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. 

(b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

(e)
  Neitherthis Warrant nor the Warrant shares have been registered under the Securities
  Act or under applicable state securities or blue sky laws and may not be offered
  for sale, sold or otherwise transferred in any transaction that would constitute
  a sale under the Securities Act unless: (i) the Holder or transferee of this
  Warrant, as the case may be, furnishes to the Company a written opinion of counsel
  (which opinion shall be in form, substance and scope customary for opinions
  of counsel in comparable transactions) to the effect that such transfer may
  be made without registration under the Securities Act and under applicable state
  securities or blue sky laws, (ii) the holder or transferee execute and deliver
  to the Company an investment letter in form and substance acceptable to the
  Company and (iii) the transferee be an “accredited investor” as defined
  in Rule 501(a) promulgated under the Securities Act. Certificates evidencing
  Warrant shares shall have endorsed thereon a legend substantially similar to
  the legend appearing on this Warrant.

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8. No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for 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 action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

11. Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall
be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.

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12. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the
arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 

13. Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

14. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

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15. Notice
of Corporate Action. If at any time:

(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at least 10 days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 10 days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend,
distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d).

16. Authorized
Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and un-issued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefore upon such exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

7

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

17. Miscellaneous.

(a) Jurisdiction. This Warrant shall constitute a contract under the laws of Nevada, without regard to its conflict of law principles or rules.

(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant will have restrictions upon resale imposed by state and federal securities laws.

(c) Non-waiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies; notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

(d) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement; provided upon any permitted assignment of this Warrant, the assignee shall promptly provide the Company with its contact information.

(e) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

(f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

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(g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

(h) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

(i) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(j) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated:  ______, 2006

 

	

 
 	

 
 	

 
 	

NEUTRON ENTERPRISES, INC.
 
	

 
 	

 
 	

  
 	

 
 	
        By: 
 	
          
 
	
         
 	
         
 	
         
 	
         
 	
         
 	
        

 
	
         
 	
         
 	
         
 	
         
 	
         
 	
        Name:

Title:
 

 

10

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

 

	

 
 	
        Dated: 
 	
         
 	
        ,
 	

 
 
	

 
 	
         
 	
        

 	
         
 	

 
	

 
 	
        Holder’s Signature:
 	

 
 	
         
 
	

 
 	
         
 	

 	
         
 
	

 
 	
        Holder’s Address:
 	

 
 	
         
 
	

 
 	
         
 	

 	
         
 
	

 
 	
         
 	

 
 	
         
 
	

 
 	
         
 	

 	
         
 
	
        Signature Guaranteed: 
 	

 
 	

 
 
	
         
 	

 	

 
 
										

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

NOTICE OF EXERCISE

To: Neutron Enterprises, Inc.

(1)
    The undersigned hereby elects to purchase ________ Warrant Shares of Neutron
    Enterprises, Inc. pursuant to the terms of the attached Warrant (only if
    exercised in full), and tenders herewith payment of the exercise price in
    full, together with all applicable transfer taxes, if any.

(2) Payment shall (i) take the form of in lawful money of the United States; or (ii) be made by cashless exercise by delivery of shares issuable upon exercise of Warrant as determined in accordance with the terms of the Warrant:

 

	

 
 	

Fair Market Value Of One Share:
 	

 
 	

$
 	

 
 	
         
 
	
         
 	
         
 	
         
 	
         
 	
        

 	
         
 
	
         
 	
        Exercise Price Of One Share:
 	
         
 	
        $
 	
         
 	
         
 
	
         
 	
         
 	
         
 	
         
 	
        

 	
         
 
	
         
 	
        Difference In Fair Market Value and Exercise Price Divided By Fair Market Value:
 	
         
 	
        $
 	
         
 	
         
 
	
         
 	
         
 	
         
 	
         
 	
        

 	
         
 
	
         
 	
        Multiplied by number of shares being exercised equals the Number Of Shares Issuable:
 	
         
 	
         
 	
         
 	
         
 
	
         
 	
         
 	
         
 	
         
 	
        

 	
         
 

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 	

 
 	

 
 	

 
 

The Warrant Shares shall be delivered to the following:

	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 	

 
 	

 
 	

 
 

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

	

 
 	

 
 	

[PURCHASER]
 
	

  
 	

 
 	
        

          By: 

      	
          
 
	
         
 	
         
 	
         
 	
        

 
	
         
 	
         
 	
         
 	
        Name:
 
	
         
 	
         
 	
         
 	
        Title:
 
	
         
 	
         
 	
        

          Dated:<PAGE>

                                  EXHIBIT 10.77

                                 PROMISSORY NOTE

BORROWER:   SEDONA CORPORATION
            1003 WEST NINTH AVENUE
            2ND FLOOR
            KING OF PRUSSIA, PENNSYLVANIA 19406

LENDER:     OAK HARBOR INVESTMENT PROPERTIES, L.L.C.
            11822 JUSTICE AVENUE, SUITE B-6
            BATON ROUGE, LOUISIANA 70816
<PAGE>

                                 PROMISSORY NOTE

PRINCIPAL AMOUNT: $1,040, 402.22
INTEREST RATE: 8%
DATE OF NOTE: AUGUST 17, 2006

          PROMISE TO PAY. Sedona Corporation, a Pennsylvania corporation with
its principal place of business at 1003 West Ninth Avenue, 2nd Floor, King of
Prussia, Pennsylvania 19406 ("Borrower") promises to pay to the order of Oak
Harbor Investment Properties, L.L.C. ("Lender"), in lawful money of the United
States of America the principal sum of One Million Forty Thousand Four Hundred
Two and 22/100 Dollars (U.S. $1,040,402.22), together with simple interest at
the rate of 8% per annum assessed on the unpaid principal balance of this Note
as outstanding from time to time, commencing on August 17, 2006 and continuing
until this Note is paid in full.

          PAYMENT. Borrower will make payments of principal in the amount of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) on each of May 1, 2007
and May 1, 2008 together with all accrued interest on the unpaid principal as of
such payment date. The entire unpaid balance of principal and all accrued but
unpaid interest will be due and payable on May 1, 2009. Unless otherwise agreed
or required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges. The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over a
year of 360 days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other place as Lender may
designate in writing.

          PREPAYMENT. Borrower may prepay this Note in full at any time by
paying the then unpaid principal balance of this Note, plus accrued simple
interest and any unpaid late charges through date of prepayment. If Borrower
prepays this Note in full, or if Lender accelerates payment, Borrower
understands that, unless otherwise required by law, any prepaid fees or charges
will not be subject to rebate and will be earned by Lender at the time this Note
is signed. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower's obligation to continue to make payments under the
payment schedule. Rather, early payments will reduce the principal balance due.
Borrower agrees not to send Lender payments marked "paid in full", "without
recourse", or similar language. If Borrower sends such a payment, Lender may
accept it without losing any of Lender's rights under this Note, and Borrower
will remain obligated to pay any further amount owed to Lender. All written
communications concerning disputed amounts, including any check or other payment
instrument that indicates that the payment constitutes "payment in full" of the
amount owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: Oak Harbor
Investment Properties, L.L.C., 11822 Justice Avenue, Suite B-6, Baton Rouge,
Louisiana 70816.

                                       2
<PAGE>

          LATE CHARGE. If Borrower fails to pay any payment under this Note in
full within 10 days of when due, Borrower agrees to pay Lender a late payment
fee in an amount equal to 5.000% of the unpaid amount of interest and principal
then due and owing under this Note. Late charges will not be assessed following
declaration of default and acceleration of the maturity of this Note.

          INTEREST AFTER DEFAULT. Upon default, including failure to pay upon
final maturity, the total sum due under this Note will bear interest from the
date of acceleration or maturity at the interest rate on this Note plus 3%, but
not to exceed 18%. The interest rate will not exceed the maximum rate permitted
by applicable law.

          SECURITY. The obligations of the Borrower pursuant to this Note are
secured by a first priority lien and security interest in the collateral of the
Borrower as specifically set forth in an Amended and Restated Security Agreement
of even date herewith (the "Security Agreement").

          DEFAULT. Each of the following shall constitute an event of default
("Event of Default") under this Note:

(1)  PAYMENT DEFAULT. Borrower fails to make any payment when due under this
     Note.

(2)  DEFAULT UNDER SECURITY AGREEMENTS. Should Borrower violate, or fail to
     comply fully with any of the terms and conditions of, or default under any
     security right, instrument, document, or agreement directly or indirectly
     securing repayment of this Note, including but not limited to the Security
     Agreement.

(3)  OTHER DEFAULTS. Should Borrower default in performance of its obligations
     under any other loan, promissory note, extension of credit, security right,
     instrument, document, or agreement, or obligation owed by the Borrower to
     or in favor of Lender or David R. Vey ("Vey") including, but not limited to
     the following: (i) that certain Promissory Note dated October 23, 2006,
     herewith from the Borrower to Vey in the principal amount of $1,213,952.81;
     (ii) that certain Secured Convertible Note dated October 23, 2006, herewith
     from the Borrower to Vey in the principal sum of $2,691,263.36; or (iii)
     that certain Revolving Promissory Note of dated September 27, 2006 herewith
     from the Borrower to Vey in the principal sum of $500,000.

(4)  READJUSTMENT OF OBLIGATIONS. Should proceedings for readjustment of
     indebtedness, reorganization, bankruptcy, composition or extension under
     any insolvency law be brought by or against Borrower.

(5)  ASSIGNMENT FOR BENEFIT OF CREDITORS. Should Borrower file proceedings for a
     respite or make a general assignment for the benefit of creditors.

(6)  RECEIVERSHIP. Should a receiver of all or any part of Borrower's property,
     be applied for or appointed.

                                       3
<PAGE>

(7)  DISSOLUTION PROCEEDINGS. Should proceedings for the dissolution or
     appointment of a liquidator of Borrower be commenced.

(8)  FALSE STATEMENTS. Should any warranty, representation or statement made or
     furnished to Lender by Borrower or on Borrower's behalf related documents
     be false or misleading in any material respect, either now or at the time
     made or furnished or becomes false or misleading at any time thereafter.

(9)  MATERIAL ADVERSE CHANGE. Should any material adverse change occur in the
     financial condition of Borrower or should any material discrepancy exist
     between the financial statements submitted by Borrower and the actual
     financial condition of Borrower.

          LENDER'S RIGHTS UPON DEFAULT. Should any one or more default events
occur or exist under this Note as provided above, Lender shall have the right,
at Lender's sole option, to declare formally this Note to be in default and to
accelerate the maturity and insist upon immediate payment in full of the unpaid
principal balance then outstanding under this Note, plus accrued interest,
together with reasonable attorneys' fees, costs, expenses and other fees and
charges as provided herein. Lender shall have the further right, again at
Lender's sole option, to declare formal default and to accelerate the maturity
and to insist upon immediate payment in full of each and every other loan,
extension of credit, debt, liability and/or obligation of every nature and kind
that Borrower may then owe to Lender or Vey, whether direct or indirect or by
way of assignment, and whether absolute or contingent, liquidated or
unliquidated, voluntary or involuntary, determined or undetermined, secured or
unsecured, whether Borrower is obligated alone or with others on a "solidary" or
"joint and several" basis, as a principal obligor or otherwise, all without
further notice or demand, unless Lender shall otherwise elect.

          ATTORNEYS' FEES; EXPENSES. If Lender refers this Note to an attorney
for collection, or files suit against Borrower to collect this Note, or if
Borrower files for bankruptcy or other relief from creditors, Borrower agrees to
pay Lender's reasonable attorneys' fees.

          GOVERNING LAW. This Note will be governed by, construed and enforced
in accordance with federal law and the laws of the State of Louisiana without
giving effect to any principles of choice of laws or conflicts of law that may
require another law, other than the internal laws of the State of Louisiana, to
apply. This Note has been accepted by Lender in the State of Louisiana.

          FINANCIAL STATEMENTS. Borrower agrees to provide Lender with such
financial statements and other related information at such frequencies and in
such detail as Lender may reasonably request.

          WAIVERS. Borrower hereby waives demand, presentment for payment,
protest, notice of protest and notice of nonpayment, and all pleas of division
and discussion. Borrower agrees that discharge or release of any party who is or
may be liable to Lender for the indebtedness represented hereby, or the release
of any collateral directly or indirectly securing repayment hereof, shall not
have the effect of releasing any other party or parties, who shall

                                       4
<PAGE>

remain liable to Lender, or of releasing any other collateral that is not
expressly released by Lender. Borrower additionally agrees that Lender's
acceptance of payment other than in accordance with the terms of this Note, or
Lender's subsequent agreement to extend or modify such repayment terms, or
Lender's failure or delay in exercising any rights or remedies granted to
Lender, shall likewise not have the effect of releasing Borrower or any other
party or parties from their respective obligations to Lender, or of releasing
any collateral that directly or indirectly secures repayment hereof. In
addition, any failure or delay on the part of Lender to exercise any of the
rights and remedies granted to Lender shall not have the effect of waiving any
of Lender's rights and remedies. Any partial exercise of any rights and/or
remedies granted to Lender shall furthermore not be construed as a waiver of any
other rights and remedies; it being Borrower's intent and agreement that
Lender's rights and remedies shall be cumulative in nature. Borrower further
agrees that, should any default event occur or exist under this Note, any waiver
or forbearance on the part of Lender to pursue the rights and remedies available
to Lender, shall be binding upon Lender only to the extent that Lender's
specifically agrees to any such waiver or forbearance in writing. A waiver or
forbearance on the part of Lender as to one default event shall not be construed
as a waiver or forbearance as to any other default. Borrower and each guarantor
of this Note further agree that any late charges provided for under this Note
will not be charges for deferral of time for payment and will not and are not
intended to compensate Lender's for a grace or cure period, and no such
deferral, grace or cure period has or will be granted to Borrower in return for
the imposition of any late charge. Borrower recognizes that Borrower's failure
to make timely payment of amounts due under this Note will result in damages to
Lender, including but not limited to Lender's loss of the use of amounts due,
and Borrower agrees that any late charges imposed by Lender hereunder will
represent reasonable compensation to Lender for such damages. Failure to pay in
full any installment or payment timely when due under this Note, whether or not
a late charge is assessed, will remain and shall constitute an Event of Default
hereunder.

          SUCCESSORS AND ASSIGNS LIABLE. Borrower's obligations and agreements
under this Note shall be binding upon Borrower's respective successors, heirs,
legatees, devisees, administrators, executors and assigns. The rights and
remedies granted to Lender under this Note shall inure to the benefit of
Lender's successors and assigns, as well as to any subsequent holder or holders
of this Note.

          CAPTION HEADINGS. Caption headings in this Note are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Note.

          SEVERABILITY. If any provision of this Note is held to be invalid,
illegal or unenforceable by any court, that provision shall be deleted from this
Note and the balance of this Note shall be interpreted as if the deleted
provision never existed.

          SUCCESSOR INTERESTS. The terms of this Note shall be binding upon
Borrower, and upon Borrower's successors, heirs, legatees, devisees,
administrators, executors and assigns, and shall inure to the benefit of Lender
and its successors and assigns.

                                       5
<PAGE>

          APPLICABLE LENDING LAW. Borrower, by signing this Note, acknowledges
and agrees that the proceeds of this Note will be used for business and
commercial purposes.

          PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE.

BORROWER:

SEDONA CORPORATION

BY:                             ITS
    --------------------------,     ------------------

STATE OF _____________________________________________   )
                                                         ) SS
COUNTY OF ____________________________________________   )

          I, the undersigned authority, a Notary Public in and for said county
in said state, hereby certify that _____________________________________, the
__________________ of SEDONA CORPORATION, whose name is signed to the foregoing
instrument, and who is known to me, acknowledged before me on this day that,
being informed of the contents of said Agreement, he or she executed the same
voluntarily on the day the same bears date.

          GIVEN UNDER MY HAND AND OFFICIAL SEAL THIS _________________________
DAY OF ___________________________________, 2006.

______________________________________________________
NOTARY PUBLIC

MY COMMISSION EXPIRES ______________________________

                                       6

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