EXHIBIT 4.1
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY MAY BE CONVERTED HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE 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. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
1% CONVERTIBLE DEBENTURE
$575,000 OCTOBER 2, 2003 (THE "EFFECTIVE DATE")
FOR VALUE RECEIVED, the undersigned, US DATAWORKS, INC. (the "COMPANY"), hereby
promises to pay to the order of XXXX XXXXXXXX IRA, the holder, or its assigns
(the "HOLDER"), in lawful money of the United States of America, and in
immediately payable funds, the principal sum of Five Hundred Seventy-five
Thousand Dollars ($ 575,000). The principal hereof together with any unpaid
accrued interest thereon, shall be due and payable on demand on October 2, 2004
(the "DEMAND DATE"). Payment of all amounts due hereunder shall be made at the
address of the Holder provided herein. The Company further promises to pay
interest at the rate of one percent (1%) PER ANNUM ("INTEREST") on the
outstanding principal balance hereof. The accrued Interest shall be payable on
the Demand Date.
This Debenture has not and will not be registered under the Securities
Act of 1933, as amended (the "Act") or applicable state securities laws, in
reliance on the exemption from registration afforded by Regulation D promulgated
under the Act. This Debenture may not be offered, sold, transferred or otherwise
disposed of, unless such securities are registered under the Act, or an
exemption from the registration requirements of the Act is available.
Any capitalized terms not defined herein shall have the meaning
ascribed to such term as provided in that certain Convertible Debenture and
Warrants Purchase Agreement, of even date herewith, entered into by and between
Company and Holder (the "PURCHASE AGREEMENT").
1. REDEMPTION. The Company may redeem this Debenture prior to the
Demand Date only if the Holder agrees, in writing, to the terms and condition of
such redemption. Any partial redemption of the outstanding principal amount
shall in no way release, discharge or affect the remaining obligations of the
Company under this Debenture until this Debenture is paid in full.
2. SUBORDINATION. For purposes of this Debenture and specifically this
Section 2 hereof, the term "SUPERIOR BANK INDEBTEDNESS" shall be defined as
follows:
The principal of, and accrued and unpaid interest on (a) indebtedness
of the Company incurred in the ordinary course of business for money borrowed or
in respect of letters of credit issued for its own account, to (i) any bank or
trust company organized under the laws of the United States or any state or (ii)
any savings and loan association; (b) obligations of the Company incurred
pursuant to agreements to factor the accounts receivable of the Company; (c)
purchase money obligations entered into in the ordinary course of business,
evidenced by notes, lease-purchase agreements, purchase contracts or agreements,
or similar instruments for the payment of which the Company is responsible or
liable, by guarantees or otherwise; (d) obligations of the Company incurred in
the ordinary course of business under any agreement to lease, or lease of, any
real or personal property which are required to be capitalized in accordance
with generally accepted accounting principles, or any other agreement to lease,
or lease of, any real or personal property for the benefit of the Company which,
by the terms thereof, are expressly designated as Superior Bank Indebtedness;
and (e) any modification, renewal, extension or refunding of any such
indebtedness, guarantee or obligation; in every case, whether such indebtedness,
guarantee or obligation, or such modification, renewal, extension or refunding
thereof, was outstanding on the date of execution of this Debenture or
thereafter created, incurred or assumed; unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such indebtedness, guarantee or obligation, or such modification, renewal,
extension or refunding thereof, is not superior in right of payment to the
Debenture.
The Company agrees, and the Holder of the Debenture issued hereunder by
its acceptance thereof likewise agrees, that the Debenture shall be issued
subject to the provisions of this Section 2, each person holding any Debenture,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions. This Xxxxxxxxx issued hereunder shall, to
the extent and in the manner hereinafter set forth, be subordinated and subject
in right of payment or satisfaction to the prior payment of Superior Bank
Indebtedness.
Subject to the payment of Superior Bank Indebtedness as provided above
and subject to applicable law, the rights of the Holder shall be appropriately
subrogated to the rights of the holders of Superior Bank Indebtedness to receive
payments or distributions of cash, property or securities of the Company to the
extent applicable to the Superior Bank Indebtedness until the principal of, and
premium, if any, and Interest on the Debenture shall be paid in full; and, for
the purposes of such subrogation, no payments or distributions to the holders of
the Superior Bank Indebtedness of any cash, property or securities to which the
Holder of the Debenture would be entitled except for the provisions of this
Section 2. It is understood that the provisions of this Section 2 are and are
intended solely for the purpose of defining the relative rights of the Holder,
on the one hand, and the holders of the Superior Bank Indebtedness, on the other
hand.
3. TRANSFERABILITY. This Debenture shall be freely transferable by the
Holder provided such transfer is in compliance with applicable federal and state
securities laws.
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US Dataworks, Inc.
Convertible Debenture
October 2, 2003
4. CONVERSION.
(a) The Company shall convert all of this Debenture and any accrued and
unpaid Interest into the common stock of the Company, $0.0001 par value per
share, and any securities into which such common stock may hereafter be
reclassified ("COMMON STOCK") on the Conversion Date. The Company shall deliver
to Holder notice of such conversion ("CONVERSION NOTICE") at any time prior to
or on the Conversion Date. This Debenture shall not be otherwise convertible
prior to the Conversion Date. For purposes of this Section 4, the "CONVERSION
DATE" shall mean March 31, 2004.
(b) The Debenture shall be convertible into such number of Common Stock
(the "DEBENTURE SHARES") as will be determined by dividing the principal amount
of the Debenture, and all accrued Interest, if any, by the Per Share Conversion
Price. The Per Share Conversion Price equals Two Dollars ($2.00), subject to the
adjustment for any reverse or forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that may occur
after the date of this Agreement. In the event that the average closing price
for the Common Stock for the Price Reset Period is less than Two Dollars
($2.00), the Per Share Price shall be adjusted to equal the average closing
price for the Price Reset Period, discounted by twenty-five percent (25%);
PROVIDED, HOWEVER, that under no circumstance will the Per Share Price be less
than Sixty Cents ($0.60). Should the Per Share Price be adjusted as a result of
the condition described in the preceding sentence, the Company shall issue to
Purchaser, within three (3) Trading Days, the additional shares of Common Stock
necessary to give Purchaser that amount equal to the Subscription Amount divided
by the (adjusted) Per Share Price less the number of shares previously issued
hereunder.
(c) The Company agrees that such Xxxxxxxxx Shares shall be deemed to be
issued to the Holder as the record holder of such shares as of the close of
business on the date of the Company's issuance of the Conversion Notice (the
"CONVERSION NOTICE DATE"). A stock certificate for the shares of Common Stock
shall be delivered to the Holder within ten (10) days following the Conversion
Notice Date. No adjustments shall be made to the number of shares issuable upon
conversion of this Debenture for any cash dividends paid or payable to holders
of record of Common Stock prior to the date as of which the Holder shall be
deemed to be the record holder of such Debenture Shares.
(d) The Company hereby agrees that the Holder shall have certain
registration rights as set forth in that certain registration rights agreement
entered into by and between the Company and the Holder of even date herewith
(the "REGISTRATION AGREEMENT").
5. DEFAULT. The occurrence of any one of the following events shall
constitute an Event of Default:
(a) The non-payment of any principal or Interest when such payment
becomes due and payable and the Company's continued failure to make such payment
for a period of ten (10) days thereafter;
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US Dataworks, Inc.
Convertible Debenture
October 2, 2003
(b) The material breach of this Agreement and such default continues
for ten (10) days after written notice of such default is received by Company;
(c) The commencement by the Company of any voluntary proceeding under
any bankruptcy, reorganization, insolvency, receivership, dissolution, or
liquidation law or statute or any jurisdiction, whether now or hereafter in
effect; or the adjudication of the Company as insolvent or bankrupt by a decree
of a court of competent jurisdiction; or the petition or application by the
Company for, acquiescence in, or consent by the Company to, the appointment of
any receiver or trustee for the Company or for all or a substantial part of the
property of the Company; or the assignment by the Company for the benefit of
creditors; or the written admission of the Company of its inability to pay its
debts as they mature; or
(d) The commencement against the Company of any proceeding relating to
the Company under any bankruptcy, reorganization, insolvency, receivership,
dissolution or liquidation law or statute or any jurisdiction, whether now or
hereafter in effect, provided, however, that the commencement of such a
proceeding shall not constitute an Event of Default unless the Company consents
to the same or admits in writing the material allegations of same, or said
proceeding shall remain undismissed for 20 days; or the issuance of any order,
judgment or decree for the appointment of a receiver or trustee for the Company
or for all or a substantial part of the property of the Company, which order,
judgment or decree remains undismissed for 20 days; or a warrant of attachment,
execution, or similar process shall be issued against any substantial part of
the property of the Company.
Upon the occurrence of any Event of Default, the Holder may, by written
notice to the Company (i) declare all or any portion of the unpaid principal
amount due to Holder, together with all accrued interest thereon, immediately
due and payable.
6. NOTICES. Notices to be given hereunder shall be in writing and shall
be deemed to have been sufficiently given if delivered personally or sent by
overnight courier or messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notice shall be deemed to have been
received on the date of personal delivery, telex, facsimile transmission,
telegram or similar means of communication, or if sent by overnight courier or
messenger, shall be deemed to have been received on the next delivery day after
deposit with the courier or messenger, or if sent by certified or registered
mail, return receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. The address of the Company is:
US Dataworks, Inc.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Company shall give written notice of any change of address to the Holder. The
address of the Holder is as set forth on the signature page to this Debenture,
and the Holder shall give written notice of any change of address to the
Company.
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US Dataworks, Inc.
Convertible Debenture
October 2, 2003
7. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Company consents
to the jurisdiction of any court of the State of Texas and of any federal court
located in the State of Texas. The Company waives personal service of any
summons, complaint or other process in connection with any such action or
proceeding and agrees that service thereof may be made, as the Holder may elect,
by certified mail directed to the Company at the location provided for in
Section 8 hereof, or, in the alternative, in any other form or manner permitted
by law.
8. GOVERNING LAW. THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA APPLICABLE TO
CONTRACT MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT GIVING EFFECT TO THE
RULES AND CONFLICTS OF LAW.
9. CONFORMITY WITH LAW. All agreements between the Holder and Company
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of deferment or acceleration of the maturity of this Debenture
or otherwise, shall the rate of interest hereunder exceed the maximum rate
permissible under applicable law. If, from any circumstances whatsoever, the
rate of interest resulting from the payment and/or accrual of any amount of
interest hereunder, at any time that payment of interest is due and/or at any
time that interest is accrued, shall exceed the limits prescribed by such
applicable law, then payment and/or accrual of such interest shall be reduced to
that resulting from the maximum rate of interest permissible under such
applicable law. This provision shall never be superseded or waived.
10. SEVERABILITY. Every provision hereof is intended to be several. If
any provision of this Debenture is determined by a court of competent
jurisdiction to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall not effect the other provisions hereof,
which shall remain binding and enforceable.
11. WAIVER; AMENDMENT. The Company hereby waives presentment, demand,
protest and notices of protest, demand, dishonor and nonpayment. Any provision
of this Debenture may be amended, waived or modified only upon the written
consent of the parties hereto.
12. SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Debenture shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
13. ASSIGNABILITY. The Company's obligations hereunder are
nontransferable and nonassignable without the prior written consent of Xxxxxx.
14. ENTIRE AGREEMENT. This Debenture and the Purchase Agreement (as
well as any other Transaction Documents attached thereto or described therein)
represent the entire agreement between the parties relating to the subject
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US Dataworks, Inc.
Convertible Debenture
October 2, 2003
matter hereof. This Agreement alone fully and completely expresses the agreement
of the parties relating to the subject matter hereof. There are no other courses
of dealing, understandings, agreements, representations or warranties, written
or oral, except as set forth herein.
15. FACSIMILE EXECUTION. Any signature delivered by facsimile
transmission shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect
as if such facsimile signature page were an original thereof.
16. LEGAL REPRESENTATION. Company and Holder, respectively, agree and
represent that each party has been represented by such party's legal counsel
with regard to all aspects of this Debenture, or if such party is acting without
legal counsel, that such party has had adequate opportunity and has been
encouraged to seek the advice of such party's legal counsel prior to the
execution of this Debenture.
IN WITNESS WHEREOF, the undersigneds have caused this Debenture to be
duly executed by their respective authorized signatories as of the date first
indicated above.
HOLDER US DATAWORKS, INC.
Xxxx Xxxxxxxx XXX /S/ Xxxx X. Xxxxxxx
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Its Authorized Representative Xxxx X. Xxxxxxx
Its Authorized Representative
/S/ Xxxx Xxxxxxxx CFO
----------------------------- -----------------------------
Title Title
Address for Notice:
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US Dataworks, Inc.
Convertible Debenture
October 2, 2003
