AMENDMENT TO CONVERTIBLE DEBENTURE
EXHIBIT
4.1
AMENDMENT TO CONVERTIBLE DEBENTURE
THIS AMENDMENT to Convertible Debenture (this “Amendment”) dated effective March 9,
2006, is between US Dataworks, Inc., a Nevada corporation (the “Company”) and Crescent
International, Ltd. (the “Holder”).
RECITALS
(a) The Company originally executed and delivered to Holder a Convertible Debenture dated June
17, 2005 (the “Debenture”), in the principal sum of $770,000 due June 17, 2007, or such earlier
date as the Debenture is required or permitted to be repaid as provided thereunder.
(b) The Company and Holder now agree to make certain changes to the Debenture, all in
accordance with and subject to the terms and provisions of this Amendment.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and Holder hereby agree
as follows:
1. Amendments to the Debenture.
(a) Section 6(a) of the Debenture is hereby amended and restated in its entirety, to be read and read as follows:
a) Monthly Redemption.
(i) On or before twenty-five (25) calendar days’ prior to each Monthly
Redemption Date, the Company shall have delivered to the Holder’s account with The
Depository Trust Company 89,744 shares of the Company’s Common Stock, such shares
representing (x) the Monthly Redemption Amount divided by (y) the then Conversion
Price (the “Pre-Redemption Conversion Shares”); provided, that the
Company may not pay the Monthly Redemption Amount in Conversion Shares unless the
Equity Conditions have been satisfied or otherwise waived in writing by the Holder.
Notwithstanding anything to the contrary in this Section 6(a), as to any Monthly
Redemption (as defined below) and upon 30 calendar days’ prior written irrevocable
notice by the Company, in lieu of payment in Conversion Shares the Monthly
Redemption Amount may be paid in cash by the Company.
(ii) Beginning on April 17, 2006 and on each Monthly Redemption Date
thereafter, the Company shall redeem the Monthly Redemption Amount plus the sum of
all liquidated damages and any other amounts then owing to the Holder in respect of
this Debenture (the “Monthly Redemption”) in Conversion
Shares based on a conversion price equal to the lesser of (i) the then
Conversion Price and (ii) 90% of the average of the 10 VWAPs immediately prior to
the applicable Monthly Redemption Date (the price calculated during the 10 Trading
Day period immediately prior to the Monthly Redemption Date, the “Monthly
Conversion Price”), provided that such price must be at least $0.23
(subject to adjustment for any stock dividend, stock split, stock combination or
other similar event affecting the Common Stock during such 10 Trading Day period) or
else such Monthly Redemption must be paid in cash.
(iii) Subject to Section 6(a)(ii), beginning on April 17, 2006 and on each
Monthly Redemption Date thereafter, the Holder shall deliver to the Company (via
electronic mail or facsimile), the Monthly Conversion Price (together with the
Bloomberg Financial L.P. report providing the VWAPs, collectively the “VWAP
Information”). Beginning on April 17, 2006 and on each subsequent Monthly
Redemption Date, to the extent the Monthly Conversion Price as calculated by the
Holder and verified by the Company on the Monthly Redemption Date immediately prior
to then current Monthly Redemption Date was less than the then Conversion Price, the
Company, within three (3) Trading Days following receipt of the VWAP Information
from Holder, shall have delivered to the Holder’s account with The Depository Trust
Company a number of Conversion Shares equal to the difference between the
Pre-Redemption Conversion Shares and the quotient of (x) the applicable Monthly
Redemption Amount plus the sum of all liquidated damages and any other amounts then
owing to the Holder divided by (y) the Monthly Conversion Price as calculated on the
Monthly Redemption Date immediately prior to the then current Monthly Redemption
Date (the “VWAP Conversion Shares”).
Notwithstanding anything to the contrary in this Section 6(a)(iii), the
Holder’s delay in delivering the VWAP Information shall not prevent the Company from
calculating the Monthly Conversion Price and redeeming the VWAP Conversion Shares,
if any. In the event of a delay in delivery of the VWAP Information as provided in
this Section 6(a)(iii), the Company shall (i) calculate the Monthly Conversion Price
without the VWAP Information, (ii) provide Crescent with its calculation, and (iii)
redeem the VWAP Conversion Shares, if any, due to Crescent as determined by the
Company’s calculation. Crescent shall have 24 hours after the receipt of such
calculation to dispute the calculation. In the event of such a dispute, Crescent
will promptly provide the VWAP Information to the Company, and the Company and
Crescent will work in good faith to resolve the discrepancy.
(iv) The Holder may convert, pursuant to Section 4(a), any principal amount of
the Debenture subject to a Monthly Redemption at any time prior to the date that the
Monthly Redemption Amount and all amounts owing thereon are due and paid in full.
Unless otherwise indicated by the Holder in the applicable Notice of Conversion, any
principal amount of Debenture converted during the period between Monthly Redemption
Dates (the “Monthly Redemption Period”) shall be
first applied to the cash portion of the principal amount subject to the
Monthly Redemption and then to the Monthly Redemption Share Amount. Any principal
amount of this Debenture converted during the applicable Monthly Redemption Period
in excess of the Monthly Redemption Amount shall be applied against the last
principal amount of this Debenture scheduled to be redeemed hereunder, in reverse
time order from the Maturity Date; provided, however, if any such
conversion is applied to such Monthly Redemption Amount, the Pre-Redemption
Conversion Shares, if any were issued in connection with such Monthly Redemption or
were not already applied to such conversions, shall be first applied against such
conversion. The Company covenants and agrees that it will honor all Notice of
Conversions tendered up until such amounts are paid in full. The Company’s
determination to pay a Monthly Redemption in cash or shares of Common Stock shall be
applied ratably to all Holders based on their initial purchases of Debentures
pursuant to the Purchase Agreement. At any time the Company delivers a notice to the
Holder of its election to pay the Monthly Redemption Amount in cash in lieu of
Common Stock, the Company shall file a prospectus supplement pursuant to Rule 424
disclosing such election.
(b) The first sentence of Section 6(b) of the Debenture is also hereby amended and
restated in its entirety, to be read and read as follows:
b) Redemption Procedure. The payment of cash and/or issuance of Common
Stock (other than the Pre-Redemption Conversion Shares and the first payment on or
before March 17, 2006 as provided in Section 6(a)(i) above), as the case may be,
pursuant to a Monthly Redemption shall be made on the Monthly Redemption Date.
2. Miscellaneous. Except as hereby expressly modified, all terms of the Debenture
shall remain in full force and effect. This Amendment (a) shall bind and benefit the Company and
Holder and their respective heirs, beneficiaries, administrators, executors, successors and
assigns; (b) may be modified or amended only by a writing signed by each party; (c) may be executed
in several counterparts, and by the parties hereto in separate counterparts, and each counterpart,
when executed and delivered, shall constitute an original agreement enforceable against all who
signed it without production of or accounting for any other counterpart, and all separate
counterparts shall constitute the same agreement and (d) embodies the entire agreement and
understanding between the parties with respect to modifications of instruments provided for herein
and supersedes all prior conflicting or inconsistent agreements, consents and understandings
relating to such subject matter. The parties acknowledge and agree that there are no oral
agreements between the Company and Holder which have not been incorporated in this Amendment. If
any provision of this Amendment should be determined by any court of competent jurisdiction to be
illegal, invalid or unenforceable under present or future laws, the legality, validity and
enforceability of the remaining provisions of this Amendment shall not be affected thereby. The
headings in this Amendment shall be accorded no significance in interpreting it.
EXECUTED effective as of the date first set forth above.
| US DATAWORKS, INC. |
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| By: | /s/ Xxxx X. XxXxxxxxxx | |||
| Name: | Xxxx X. XxXxxxxxxx | |||
| Title: | Chief Accounting Officer | |||
| CRESCENT INTERNATIONAL, LTD. |
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| By: | /s/ Maxi Brezzi |
/s/ Xxxxxx Xxxxx-Xxxxxxxx | ||
| Name: | Maxi Brezzi |
Xxxxxx Xxxxx-Xxxxxxxx | ||
| Title: | Authorized Signatory |
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