EXHIBIT 10.5
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.
WARRANT AGREEMENT
This Warrant Agreement (the "AGREEMENT") dated as of July 10, 2003
between US Dataworks, Inc. a Nevada corporation (the "COMPANY"), and Xxxxxxx X.
Xxxxx ("XXXXX").
WHEREAS, Xxxxx has lent the Company, through a series of demand
promissory notes, an aggregate amount of One Million Three Hundred Fifty Three
Thousand Dollars ($1,353,000) (the "ORIGINAL NOTES"). The Company desires, and
Xxxxx agrees, to exchange his Original Notes for a new, consolidated promissory
note (the "NEW NOTE") pursuant to a certain Note and Warrant Agreement, entered
into of even date herewith (the "NOTE AND WARRANT AGREEMENT") by and between the
Company and Xxxxx.
WHEREAS, pursuant to the Note and Warrant Agreement and as an
inducement to Xxxxx to exchange the Original Notes for the New Note, the Company
wishes to xxxxx Xxxxx warrants (the "WARRANTS") entitling him to purchase of One
Million Three Hundred Fifty Three Thousand Dollars ($1,353,000) of the common
stock of the Company ("COMMON STOCK," or individually, "SHARE" or plural,
"SHARES") at the exercise price described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. ISSUANCE OF WARRANT CERTIFICATE.
The Warrants certificate to be delivered pursuant to this Agreement
(the "WARRANT CERTIFICATE") shall be executed on behalf of the Company by its
Chief Executive Officer, President, or any Vice President under its corporate
seal reproduced thereon and attested by its corporate Secretary or one of its
assistant Secretaries. The Warrant Certificate may be exchanged, at Xxxxx'x
option, when surrendered to the Company for another Warrant Certificate or other
Warrant Certificates of like tenor and representing in the aggregate a like
number of Warrants. Unless otherwise set forth herein, all capitalized terms
used herein without definition shall have the meanings ascribed to such terms in
the Note and Warrant Agreement.
2. RIGHT TO EXERCISE WARRANTS.
Each Warrant may be exercised from the date of this Agreement until
11:59 P.M. (Pacific Standard Time) on July___, 2008 (the "EXPIRATION DATE")
pursuant to the provisions set forth in this Agreement. Each Warrant not
exercised on or before the Expiration Date shall expire. Subject to the
provisions of this Agreement, Xxxxx shall have the right to purchase from the
Company, and the Company shall issue and sell to Xxxxx, at an initial price per
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Share equal to the lesser of: (i) sixteen cents ($0.16) or (ii) the closing bid
price as reported by the American Stock Exchange on the trading day immediately
prior to the execution of the Note and Warrant Agreement, subject to adjustment
as provided herein (the "EXERCISE PRICE"), one fully paid and nonassessable
Share upon surrender to the Company of the Warrant Certificate evidencing such
Warrant, with the form of election to purchase duly completed and signed and
evidence of payment of the Exercise Price.
Upon surrender of such Warrant Certificate and payment of the Exercise
Price by either cash or cashless exercise ("NET ISSUE EXERCISE"), the Company
shall cause the corresponding number of Shares to be issued and delivered
promptly to Xxxxx or any other holder he may designate. In the event that upon
any exercise of Warrants evidenced hereby, the number of Warrants exercised
shall be less than the total number of Warrants evidenced hereby, there shall be
issued to the holder hereof or his assignee a new Warrant Certificate evidencing
the number of Warrants not exercised. The Warrants evidenced by a Warrant
Certificate shall be exercisable at the election of the holder thereof, subject
to the provisions of Sections 4 and 5 hereof.
(a) CASH EXERCISE. These Warrants may be exercised by the holder by (i)
the surrender of the Warrant Certificate to the Company, with the Notice of
Exercise annexed hereto duly completed and executed on behalf of the holder, 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 holder at the address of the holder
appearing on the books of the Company) and (ii) the delivery of payment to the
Company, for the account of the Company, by cash, wire transfer of immediately
available funds to a bank account specified by the Company, or by certified or
bank cashier's check, of the Exercise Price for the number of Shares specified
in the Notice of Exercise in lawful money of the United States of America. The
Company agrees that such 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 on
which the Warrant Certificate shall have been surrendered and payment made for
the Shares as aforesaid. A stock certificate or certificates for the Shares
specified in the Notice of Exercise shall be delivered to the holder as promptly
as practicable, and in any event within 10 days, thereafter. No adjustments
shall be made on Warrant Shares issuable on the exercise of this Warrant 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
Warrant Shares.
(b) NET ISSUE EXERCISE. In lieu of exercising these Warrants pursuant
to Section 2(a), the holder may elect to receive, without the payment by the
holder of any additional consideration, shares equal to the value of the
Warrants, or any portion thereof, by the surrender of the Warrant Certificate to
the Company, with the Notice of Exercise annexed hereto duly executed, at the
office of the Company. Thereupon, the Company shall issue to the holder such
number of fully paid and nonassessable shares of Common Stock as is computed
using the following formula:
X = Y (A-B)
-------
A
where
X = the number of shares to be issued to the holder pursuant to
this Section 2(b).
Y = the number of shares of Common Stock otherwise issuable
under the Warrant Certificate or, if only a portion of the
Warrants is being exercised, the portion of the Warrant
Certificate being surrendered (as adjusted to the date of such
calculation).
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A = the closing stock price of one share of Common Stock as
reported by the American Stock Exchange national market the
trading day immediately prior to the date the Company receives
the Notice of Election.
B = the Exercise Price in effect under these Warrants at the time
the Net Issue Election is made pursuant to this Section 2(b).
3. RESERVATION OF SHARES.
The Company will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Shares or
its authorized and issued Shares held in its treasury for the purpose of
enabling it to satisfy any obligation to issue Shares upon exercise of Warrants,
the full number of Shares deliverable upon the exercise of all outstanding
Warrants. The Company covenants that all Shares which may be issued upon
exercise of Warrants will be validly issued, fully paid and nonassessable
outstanding Shares of the Company.
4. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
Xxxxx represents and warrants to the Company that Xxxxx is acquiring
the Warrants for investment and with no present intention of distributing or
reselling any of the Warrants. The Shares and the certificate or certificates
evidencing any such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE 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.
Certificates for Warrants or Shares shall also bear such legends as may
be required from time to time by law.
5. RULE 144.
If the Company shall be subject to the reporting requirements of
Section 13 of the 1934 Act, the Company will use its best efforts to file timely
all reports required to be filed from time to time with the Commission
(including but not limited to the reports under Section 13 and 15(d) of the 1934
Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Company under
the Act). If there is a public market for any Shares of the Company at any time
that the Company is not subject to the reporting requirements of either of said
Section 13 or 15(d), the Company will, upon the request of any holder of any
Shares or Warrants, use its best efforts to make publicly available the
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information concerning the Company referred to in subparagraph (c)(2) of said
Rule 144. The Company will furnish to each holder of any Shares or Warrants,
promptly upon request, (i) a written statement of the Company's compliance with
the requirements of subparagraphs (c)(1) or (c)(2,) as the case may be, of said
Rule 144, and (ii) written information concerning the Company sufficient to
enable such holder to complete any Form 144 required to be flied with the
Commission pursuant to said Rule 144.
6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES AND CLASS OF
CAPITAL STOCK PURCHASABLE.
The Exercise Price and the number of Shares purchasable upon the
exercise of each Warrant are subject to adjustment from time to time as set
forth in this Section 6.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the Company: pays a
dividend or makes a distribution on its Common Stock, in each case, in Shares of
its Common Stock; subdivides its outstanding Shares of Common Stock into a
greater number of Shares; combines its outstanding Shares of Common Stock into a
smaller number of Shares; makes a distribution on its Common Stock in Shares of
its capital stock other than Common Stock; or issues by reclassification of its
Shares of Common Stock any Shares of its capital stock; then the number and
classes of Shares purchasable upon exercise of each Warrant in effect
immediately prior to such action shall be adjusted so that the holder of any
Warrant thereafter exercised may receive the number and classes of Shares of
capital stock of the Company which such holder would have owned immediately
following such action if such holder had exercised the Warrant immediately prior
to such action.
(b) CONSOLIDATION, MERGER OR SALE OF THE COMPANY. If the Company is a
party to a consolidation, merger or transfer of assets that reclassifies or
changes its outstanding Common Stock, the successor corporation (or corporation
controlling the successor corporation or the Company, as the case may be) shall
by operation of law assume the Company obligations under this Agreement. Upon
consummation of such transaction the Warrants shall automatically become
exercisable for the kind and amount of securities, cash or other assets that the
holder of a Warrant would have owned immediately after the consolidation, merger
or transfer if such holder had exercised the Warrant immediately before the
effective date of such transaction. As a condition to the consummation of such
transaction, the Company shall arrange for the person or entity obligated to
issue securities or deliver cash or other assets upon exercise of the Warrant
to, concurrently with the consummation of such transaction, assume the Company's
obligations hereunder by executing an instrument so providing and further
providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section.
7. NOTICES TO COMPANY AND XXXXX.
Any notice or demand authorized by this Agreement to be given or made
by any registered holder of any Warrant Certificate to or on the Company shall
be sufficiently given or made if sent by registered mail, postage prepaid,
addressed to the Company.
Any notice pursuant to this Agreement to be given by the Company to
Xxxxx shall be sufficiently given if sent by registered mail, postage prepaid,
addressed (until another address is filed in writing by Xxxxx with the Company)
to Xxxxx at the address provided on page 5 of this Agreement.
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8. SUPPLEMENTS AND AMENDMENTS.
The Company and Xxxxx may from time to time supplement or amend this
Agreement in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provisions
herein, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and Xxxxx may deem necessary or desirable.
9. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or Xxxxx shall bind and inure to the benefit of their
respective successors and assigns hereunder.
10. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Nevada and for all
proposes shall be governed by and construed in accordance with the laws of said
State.
11. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all proposes be deemed to be an original, and
such counterparts shall together constitute one and the same instrument.
12. SHAREHOLDER APPROVAL.
This Agreement shall not become effective and binding upon the parties
and no Warrants may be issued or exercised without first obtaining the approval
of the Company's voting shareholders to such issuance in accordance with the
rules of the American Stock Exchange or any other market rules with which the
Company shall be required to comply at the time of such issuance or exercise.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date and year first above written.
US Dataworks, Inc.
/S/ XXXXXXX X. XXXXX /S/ XXXXX XXXXXXXX
-------------------------------- -------------------------------------
Xxxxxxx X. Xxxxx Xxxxx Xxxxxxxx, President
Address: US Dataworks, Inc.
---------------------- 0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
--------------------------------
TELEPHONE: Telephone: (000) 000-0000
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FACSIMILE: Facsimile: (000) 000-0000
--------------------------------
EMAIL:
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US DATAWORKS, INC
NEW WARRANT CERTIFICATE
NO. _____
This Warrant Certificate certifies that Xxxxxxx X. Xxxxx, or his
registered assigns, is the registered holder of a total of
_________________________________________ (___________) warrants (the
"WARRANTS"), which shall expire on July___, 2008 (the "EXPIRATION DATE"), to
purchase Common Stock, par value $.0001 per share (the "COMMON STOCK") of US
Dataworks, Inc., a Nevada corporation (the "COMPANY"). Each Warrant entitles the
holder to purchase from the Company before 11:59 p.m. (Pacific Standard Time) on
the "EXPIRATION DATE" one fully paid and nonassessable share of Common Stock of
the Company at the initial exercise price for each Warrant, subject to
adjustment in certain events (the "EXERCISE PRICE"), provided that upon
surrender of this Warrant Certificate and either payment of the Exercise Price
at an office or agency of the Company, but only subject to the terms and
conditions set forth herein. As used herein, "SHARE" or "SHARES" refers to the
Common Stock of the Company and, where appropriate, to the other securities or
property issuable upon exercise of a Warrant as provided for in the Agreement
upon the happening of certain events. Unless otherwise set forth herein, all
capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Warrant Agreement.
The Exercise Price and the number of Shares and classes of capital
stock purchasable upon exercise of the Warrants are subject to adjustment upon
the occurrence of certain events set forth in the Agreement. In the event that
upon any exercise of Warrants evidenced hereby, the number of Warrants exercised
shall be less than the total number of Warrants evidenced hereby, there shall be
issued to the holder hereof or his or her assignee a new Warrant Certificate
evidencing the number of Warrants not exercised. No adjustment shall be made for
any cash dividends on any Shares issuable upon exercise of this Warrant.
No Warrant may be exercised after 11:59 P.M. (Pacific Standard Time) on
the corresponding Expiration Date. All Warrants evidenced hereby shall
thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to a Warrant Agreement, dated as of
July__, 2003 (the "WARRANT AGREEMENT") duly executed by the Company and Xxxxx.
The Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder of the Warrant Certificates).
The Company may deem and treat the person(s) registered in the
Company's register as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
holder(s) hereof, and for all purposes, and the Company shall not be affected by
any notice to the contrary.
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THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF 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.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
US Dataworks, Inc. Attested
___________________________ ___________________________________
Xxxxx Xxxxxxxx, President
___________________________________
Printed Name and Title
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NOTICE OF EXERCISE
To: US DATAWORKS, INC.
The undersigned hereby elects to purchase _________________________ shares of
Common Stock of US DATAWORKS, INC. ("Shares") pursuant to the terms of the
attached Warrant Certificate, and (check the appropriate box):
[ ] tenders herewith payment for the purchase of ______________________
shares of Common Stock; and/or
[ ] elects to exercise Net Issue Exercise, as provided in Section 2(b)
of the Warrant Agreement, for the purchase of ______________________
shares of Common Stock.
In exercising these Warrants, the undersigned hereby confirms and acknowledges
that the shares of Common Stock to be issued upon conversion thereof are being
acquired solely for the account of the undersigned and not as a nominee for any
other party, or for investment, and that the undersigned will not offer, sell or
otherwise dispose of any such shares of Common Stock except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any applicable state securities laws.
Please issue a certificate or certificates representing said shares of Common
Stock in the name of the undersigned or in such other name(s) as is specified
below:
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Please issue a new Warrant Certificate for the unexercised portion of the
attached Warrant Certificate in the name of the undersigned or in such other
name(s) as is specified below:
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HOLDER:
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Signature of Holder Date
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Printed Name of Holder Amount of Payment
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