EXHIBIT 10.12
THE SECURITIES DESCRIBED IN THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
CERTAIN STATES, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
8% CONVERTIBLE PROMISSORY NOTE
$200,000 JUNE __, 2003 (THE "EFFECTIVE DATE")
FOR VALUE RECEIVED, the undersigned, US DATAWORKS, INC. (the "MAKER"),
hereby promises to pay to the order of Xxxxx Xxxxxxx, the holder, or its assigns
(the "NOTEHOLDER"), in lawful money of the United States of America, and in
immediately payable funds, the principal sum of two hundred thousand dollars
($200,000). The principal hereof together with any unpaid accrued interest
thereon, shall be due and payable on June ___, 2004 (the "MATURITY Date").
Payment of all amounts due hereunder shall be made at the address of the
Noteholder provided herein. The Maker further promises to pay interest at the
rate of eight percent (8%) PER ANNUM on the outstanding principal balance
hereof. The accrued interest shall be payable in cash quarterly on September 30,
2003, December 30, 2003, March 30, 2004 and June 30, 2004 (the "QUARTERLY
INTEREST PAYMENTS").
This Note 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 Note 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.
1. REDEMPTION. The Maker may, at its option, at any time prior to the
Maturity Date, redeem this Note (the "Redemption"), in whole or in part, at face
value of the original principal amount, plus accrued and unpaid interest, if any
(the "Redemption Amount"), of the Note (or portion thereof) to be redeemed, upon
giving to the Noteholder a written notice five (5) business days prior to such
Redemption. Any partial Redemption of the outstanding principal amount shall in
no way release, discharge or affect the obligation of the Maker to continue to
make any other payments due on the Note until this Note is paid in full.
2. SUBORDINATION. For purposes of this Note 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 Maker 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)
-1-
any savings and loan association; (b) obligations of the Maker incurred pursuant
to agreements to factor the accounts receivable of the Maker; (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 Maker is responsible or liable, by
guarantees or otherwise; (d) obligations of the Maker 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 Maker 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 Note 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 Notes.
The Maker agrees, and the Noteholder of the Note issued hereunder by
its acceptance thereof likewise agrees, that the Note shall be issued subject to
the provisions of this Section 2, each person holding any Note, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions. This Note 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 Noteholder 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 Maker to the extent applicable to the Superior Bank
Indebtedness until the principal of, and premium, if any, and interest on the
Notes 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 Holders of the Notes 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 Noteholder, on the one hand, and the holders
of the Superior Bank Indebtedness, on the other hand.
3. TRANSFERABILITY. This Note shall be freely transferable by the
Noteholder provided such transfer is in compliance with applicable federal and
state securities laws.
4. CONVERSION. Anytime following the Effective Date the Maker, in its
sole discretion, shall be entitled to convert the Note into shares of Common
Stock, in whole or in part upon giving to the Noteholder a written notice five
(5) business days prior to such conversion. The Note, or portion hereof, shall
be convertible into such number of Common Stock (the "CONVERSION STOCK") as will
be determined by dividing the principal amount of the Note, and accrued
interest, if any, by the Conversion Price. The Conversion Price shall be seven
cents ($0.07) per share. The Maker agrees that such shares of Common Stock shall
-2-
be deemed to be issued to the Noteholder as the record holder of such shares as
of the close of business on the date of conversion (the "CONVERSION Date"). A
stock certificate for the shares of Common Stock shall be delivered to the
Noteholder within ten (10) days following the Conversion Date. No adjustments
shall be made to the number of shares issuable upon conversion of this Note
("NOTE SHARES") for any cash dividends paid or payable to holders of record of
Common Stock prior to the date as of which the Noteholder shall be deemed to be
the record holder of such Note Shares. The Company hereby agrees that the
Noteholder shall have "piggyback" registration rights entitling such Noteholder
to include any and all of the Note Shares in any future registration of any
shares of the Company. The Company shall give Noteholder at least ten (10) days'
prior written notice for any proposed registration of the Company's shares in
order for such Noteholder to determine whether any or all of the Note Shares
shall be included therein. The Company's obligations pursuant to this Section 4
shall terminate on the earlier to occur of: (a) the second anniversary of the
date of issuance of the Note Shares and (b) such time when all Note Shares held
by the Noteholder may be sold pursuant to Rule 144 under the Securities Act
during any three (3) month period.
5. DEFAULT. The occurrence of any one of the following events shall
constitute an Event of Default:
(a) The non-payment of (i) any principal at the Maturity Date, or (ii)
interest on the Quarterly Interest Payment dates; and such failure continues for
a period of ten (10) days;
(b) The material breach of this Agreement and such default continues
for ten (10) days after written notice of such default is received by Maker;
(c) The commencement by the Maker 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 Maker as insolvent or bankrupt by a decree of
a court of competent jurisdiction; or the petition or application by the Maker
for, acquiescence in, or consent by the Maker to, the appointment of any
receiver or trustee for the Maker or for all or a substantial part of the
property of the Maker; or the assignment by the Maker for the benefit of
creditors; or the written admission of the Maker of its inability to pay its
debts as they mature; or
(d) The commencement against the Maker of any proceeding relating to
the Maker 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 Maker 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 Maker or
for all or a substantial part of the property of the Maker, 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 Maker.
Upon the occurrence of any Event of Default, the Noteholder may, by
written notice to the Maker (i) declare all or any portion of the unpaid
principal amount due to Noteholder, together with all accrued interest thereon,
immediately due and payable.
-3-
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 Maker is:
US Dataworks, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Maker shall give written notice of any change of address to the Noteholder. The
address of the Noteholder is as set forth on the signature page to this Note,
and the Noteholder shall give written notice of any change of address to the
Maker.
7. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Maker consents
to the jurisdiction of any court of the State of Texas and of any federal court
located in the State of Texas. The Maker 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 Noteholder may elect, by
certified mail directed to the Maker 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 NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS 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 Noteholder and Maker
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of deferment or acceleration of the maturity of this Note 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 Note 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.
-4-
11. WAIVER. Maker hereby waives presentment, demand, protest and
notices of protest, demand, dishonor and nonpayment.
12. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified only upon the written consent of the parties hereto.
13. SUCCESSORS AND ASSIGNS. All the terms and provisions of this note
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
14. ASSIGNABILITY. Maker's obligations hereunder are nontransferable
and nonassignable without the prior written consent of Noteholder.
15. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties relating to the subject 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.
16. COUNTERPARTS. This Note may be executed in multiple counterparts,
each of which shall be deemed an original and all of which taken together shall
be but a single instrument.
17. LEGAL REPRESENTATION. Maker and Noteholder, respectively, agree and
represent that each party has been represented by such party's legal counsel
with regard to all aspects of this Note, 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 Note.
IN WITNESS WHEREOF, the Maker has signed and sealed this Note and
delivered it in the state of California as of June __, 2003.
US DATAWORKS, INC.
/S/ XXXXXXX XXXXXX
------------------
Xxxxxxx Xxxxx
Chief Financial Officer
NOTEHOLDER:
Xxxxx Xxxxxxx
Address: ____________________________
____________________________
____________________________
____________________________
-5-
