EXHIBIT 99.3
US DATAWORKS, INC.
------------------
CONVERTIBLE DEBENTURES
----------------------
AND WARRANTS AGREEMENT
----------------------
THIS CONVERTIBLE DEBENTURES AND WARRANTS AGREEMENT (this "AGREEMENT"), dated
August 4, 2003, is entered into by and between US Dataworks, Inc., a Nevada
corporation (the "COMPANY"), and Bonanza Master Fund, Ltd. ("BONANZA"), Xxxxxxxx
Curhan Ford & Company, LLP ("MCF"), D. Xxxxxxxx Xxxxxxxx, an individual
("XXXXXXXX"), Xxxxxxx Xxxxxx, an individual ("CURHAN") and Xxx Xxxxxx, an
individual ("XXXXXX"). Bonanza, MCF, Xxxxxxxx, Curhan and Xxxxxx hereinafter
referred to collectively as "PURCHASERS"; or each a "PURCHASER". The Company and
Purchasers may be referred herein as the "PARTIES" or each, a "PARTY".
WHEREAS, pursuant to that certain securities purchase agreement, dated
June 30, 2003, entered into by and between the Company and Purchasers
("SECURITIES PURCHASE AGREEMENT"), Purchasers purchased and the Company issued
and sold, in the aggregate, five hundred thousand dollars ($500,000) of the
common stock of the Company (such common stock purchased pursuant to the
Securities Purchase Agreement, hereinafter, the "ORIGINAL COMMON STOCK"). As a
further condition of the Securities Purchase Agreement, the Company also issued
warrants ("ORIGINAL WARRANTS") to each Purchaser, entitling the holder to
exercise such warrants for the purchase of common stock (the shares of common
stock issued upon the exercise of the Original Warrants hereinafter, "ORIGINAL
WARRANTS SHARES"). The Company granted each Purchaser one thousand (1,000)
Original Warrants for every ten thousand dollars ($10,000) such Purchaser paid
of Subscription Amount (as such term is defined in the Securities Purchase
Agreement) to the Company.
WHEREAS, in addition to the Securities Purchase Agreement, the Parties
entered into that certain registration rights agreement, of even date thereof
(the "REGISTRATION RIGHTS AGREEMENT"), setting forth Purchasers' rights by which
Purchasers' Original Common Stock, as well as any Original Warrant Shares, shall
be included in a registration statement filed by the Company with the Securities
Exchange Commission (the "COMMISSION") within forty-five (45) days thereafter
and to be declared effective by the SEC within ninety (90) days thereafter.
WHEREAS, the Company desires, and Purchasers, and each of them
individually, agrees to surrender Purchasers' Original Common Stock in exchange
for certain convertible debentures ("DEBENTURES," each, a "DEBENTURE"). The
Original Common Stock shall be cancelled and no new shares of Common Stock are
to be issued in the place of such surrendered Original Common Stock. Each
Debenture will be subject to the terms and conditions set forth herein and in
the Debenture, substantially in the form attached hereto as EXHIBIT A.
WHEREAS, as an inducement to Purchasers to surrender their Original
Common Stock in exchange for the Debentures, the Company wishes to grant
Purchasers additional warrants (the "NEW WARRANTS") entitling Purchasers to
purchase common stock ("NEW WARRANTS SHARES") at the exercise price described
herein and in the New Warrants, substantially in the form attached hereto as
EXHIBIT B.
1
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
Article I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law
or other governmental action to close.
"CLOSING" means the closing of Purchasers' surrender of their
Original Common Stock in exchange for the Debentures and New Warrants
pursuant to Section 2.4.
"CLOSING DATE" means the date of the Closing.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, $0.0001
par value per share, and any securities into which such common stock
may hereafter be reclassified.
"COMPANY COUNSEL" means Pillsbury Winthrop LLP.
"CONVERSION DATE" means the Trading Day immediately following
the earlier of either (i) the approval by the Company's shareholders
and implementation of a reverse stock split, the result of which
causing enough authorized but not issued Common Stock to accommodate
the full conversion of Purchasers' Debentures and exercise of
Purchasers' Original Warrants and New Warrants; (ii) the approval and
implementation of an increase to the authorized Common Stock, such
increase in the authorized number of Common Stock substantial enough to
accommodate the full conversion of Purchasers' Debentures and full
exercise of its Original Warrants and New Warrants; or (iii) the period
ending ten trading days following the Maturity Date.
"CONVERSION NOTICE" means notice from Purchasers of their
intent to convert their Debentures and/or exercise their Original
Warrants and/or New Warrants on or following the Conversion Date.
2
"DEBENTURE SHARES" means the shares of Common Stock issuable
to each Purchaser upon conversion of the Debentures, pursuant to this
Agreement.
"DISCLOSURE SCHEDULES" means the Disclosure Schedules
concurrently delivered herewith.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000.
"MATERIAL ADVERSE EFFECT" means: (i) a material adverse effect
on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of operations,
assets, business or financial condition of the Company, or (iii) a
material adverse effect on the Company's ability to perform in any
material respect on a timely basis its obligations under any
Transaction Document.
"MATURITY DATE" shall have the meaning ascribed to such term
Section 2.1(a)(iii).
"NEW WARRANTS" shall have the meaning ascribed to such term in
Section 2.2.
"NEW WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of the New Warrants.
"ORIGINAL COMMON STOCK" means the Common Stock purchased by
the Purchasers pursuant to the Securities Purchase Agreement.
"ORIGINAL WARRANTS" mean the warrants issued to Purchasers
pursuant to the Securities Purchase Agreement.
"ORIGINAL WARRANTS SHARES" means the Common Stock the
Purchasers may purchase by exercising their Original Warrants.
"PER SHARE CONVERSION PRICE " equals nine cents ($0.09),
subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the
Common Stock that occur after the date of this Agreement.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement, as amended herein, and covering the resale by the Purchasers
of the Debenture Shares the Original Warrants Shares and the New
Warrant Shares.
3
"REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement, dated June 30, 2003, entered into by and
between the Parties and as amended herein.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SECURITIES" means the Debentures, the Debenture Shares, the
Original Warrants, the Original Warrant Shares, the New Warrants and
the New Warrant Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" means that certain securities
purchase agreement, dated June 30, 2003 entered into by and between the
Parties.
"SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amounts
set forth below such Purchaser's signature block on the signature page
of the Securities Purchase Agreement.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not listed
on a Trading Market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or
(iii) if the Common Stock is not quoted on the OTC Bulletin Board, a
day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of reporting
prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
"TRADING MARKET" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
"TRANSACTION DOCUMENTS" means this Agreement, the Registration
Rights Agreement (as amended), the Debentures, the Original Warrants,
the New Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock
is then listed or quoted as reported by Bloomberg Financial L.P. (based
on a trading day from 9:30 a.m. ET to 4:02 p.m. Eastern Time) using the
VAP function; (b) if the Common Stock is not then listed or quoted on
an Trading Market and if prices for the
4
Common Stock are then quoted on the OTC Bulletin Board, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on the OTC Bulletin Board; (c) if the Common
Stock is not then listed or quoted on the OTC Bulletin Board and if
prices for the Common Stock are then reported in the "Pink Sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share
of Common Stock as determined by a nationally recognized-independent
appraiser selected in good faith by Purchasers holding a majority of
the principal amount of Debentures then outstanding.
Article II.
CONVERTIBLE DEBENTURES, NEW WARRANTS AND AMENDMENTS TO THE
REGISTRATION RIGHTS AGREEMENT
2.1 CONVERTIBLE DEBENTURE.
(a) Upon the execution of this Agreement, the
Original Common Stock certificates received by each Purchaser pursuant to
Securities Purchase Agreement are hereby deemed surrendered and automatically
cancelled and each Purchaser shall receive from the Company a Debenture,
substantially in the form attached hereto as EXHIBIT A. Purchasers shall pay no
additional consideration for the Debentures. The form of the Debenture will
include:
(i) the Debenture shall bear ten percent
(10%) interest per ANNUM ("INTEREST") payable semi-annually;
(ii) Purchasers may convert all or any
portion of the outstanding principal balance (and all of any portion of accrued
but unpaid Interest) of the Debenture into Debenture Shares voluntarily at the
Per Share Conversion Price any time following the Conversion Date;
(iii) on August 4, 2004 (the "MATURITY
DATE"), or such date that is earlier pursuant to the Debentures, Purchasers may
demand all of the outstanding principal balance and any accrued and unpaid
Interest that is due and payable; and
(iv) the Company may not redeem the
Debenture except with the written consent of Purchasers.
(b) In the event that the Company does not have an
adequate number of authorized Common Stock to issue all of the Debenture Shares,
Original Warrant Shares and New Warrants Shares within thirty (30) days of any
Purchaser's Conversion Notice, then (i) first, the Company's Chief Executive
Officer, (ii) and if more Common Stock is required, then second, the President,
(iii) and if more Common Stock is required, then third and on a PRO RATA basis,
any other executive officers of the Company, shall surrender to the Company, for
immediate cancellation, that number of such executive officer's shares of Common
Stock necessary, when added to the available authorized but not issued shares of
Common Stock, to enable the Company to issue the Debenture Shares, Original
5
Warrant Shares and New Warrants Shares so converted and/or exercised by
Purchasers. Upon cancellation of such surrendered Common Stock, the Company
shall promptly issue the corresponding certificates to each Purchaser for the
Debenture Shares, Original Warrant Shares and New Warrants Shares as
converted/exercised by such Purchaser. It shall be the sole obligation of the
Company and its Chief Executive Officer, President and other executive officers
to enter into any separate contractual arrangements so as to remunerate the
Chief Executive Officer, President and other executive officers for the Common
Stock each surrenders pursuant to this Section 2.1(b) and the Company shall hold
the Purchasers harmless (as further set forth in Section 4.10 herein) against
any claims brought by the Chief Executive Officer, President and other executive
officers who surrender Common Stock, and their successors and assigns, arising
from or relating to this Section 2.1(b).
2.2 WARRANTS. The Company shall grant new warrants ("NEW
WARRANTS"), substantially in the form attached hereto as EXHIBIT B, to each
Purchaser entitling the holder to exercise such New Warrants for the purchase of
New Warrant Shares. The Company shall grant Purchasers one thousand (1,000) New
Warrants for every ten thousand dollars ($10,000) such Purchaser paid of
Subscription Amount (as such term is defined in the Securities Purchase
Agreement) to the Company. The exercise price for the New Warrants shall be the
Per Share Conversion Price. The Warrants shall have a term of three (3) years.
2.3 AMENDMENTS TO THE REGISTRATION RIGHTS AGREEMENT. The
Registration Rights Agreement is hereby amended as follows:
(a) DEFINITIONS.
(i) The following new definition is inserted
immediately before "EFFECTIVENESS DATE":
"CONVERSION DATE" means the Trading Day immediately following the
earlier of either (i) the approval by the Company's shareholders and
implementation of a reverse stock split, the result of which causing enough
authorized but not issued Common Stock to accommodate the full conversion of
Purchasers' Debentures and exercise of its Original Warrants and New Warrants;
(ii) the approval and implementation of an increase to the authorized Common
Stock, such increase in the authorized number of Common Stock substantial enough
to accommodate the full conversion of Purchasers' Debentures and full exercise
of Purchasers' Original Warrants and New Warrants; or (iii) the period ending
ten trading days following the Maturity Date.
(ii) "EFFECTIVENESS DATE" is amended by replacing
"Closing Date" with "Conversion Date".
(iii) "FILING DATE" is amended by replacing "Closing
Date" with "Conversion Date".
(iv) "REGISTRABLE SECURITIES" is amended by deleting
the phrase: "Shares, the Warrants Shares" and replacing it with: "Debenture
Shares, Original Warrant Shares and New Warrant Shares".
6
(b) The remainder of the Registration Rights
Agreement shall remain unchanged and shall continue to be binding and effective
upon the Parties.
2.4 CLOSING. At the Closing, all of the Original Common Stock
certificates shall be deemed surrendered and automatically cancelled. Purchasers
shall make their best efforts to deliver their actual Original Common Stock
certificates to the Company; however, the failure of any Purchaser to deliver
such Purchaser's Original Common Stock certificate will in no way effect the
automatic cancellation of such Original Common Stock pursuant to this Agreement.
Each Purchaser shall receive from the Company, and the Company shall issue to
each Purchaser, a Debenture equal to such Purchaser's Subscription Amount. In
addition and in consideration for the surrender of the Original Common Stock,
each Purchaser shall be issued New Warrants enabling them to purchase upon
exercise one thousand (1,000) New Warrants Shares for every ten thousand dollars
($10,000) such Purchaser paid of Subscription Amount to the Company. Upon
satisfaction of the conditions set forth in Section 2.5, the Closing shall occur
at the offices of the Company or such other location as the parties shall
mutually agree.
2.5 CLOSING CONDITIONS.
(a) At the Closing (unless otherwise specified below) the
Company shall deliver or cause to be delivered on behalf of each
Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a Debenture equal to such Purchaser's
Subscription Amount, issued in the name of such Purchaser; and
(iii) a New Warrant, issued in the name of such
Purchaser, pursuant to which such Purchaser shall have the
right to purchase upon exercise one thousand (1,000) New
Warrants Shares for every ten thousand dollars ($10,000) such
Purchaser paid of Subscription Amount to the Company.
(b) At the Closing, each Purchaser shall deliver or cause to
be delivered the following:
(i) this Agreement duly executed by such Purchaser;
and
(ii) such Purchaser's Original Common Stock
certificate(s), if available.
(c) All representations and warranties of the other party
contained herein shall remain true and correct as of the Closing Date.
(d) As of the Closing Date, there shall have been no Material
Adverse Effect with respect to the Company since the date hereof.
(e) From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior
7
to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have
been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities
nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
each Purchaser, makes it impracticable or inadvisable to purchase the
Shares at the such Closing.
Article III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, all of the representations and warranties made by the
Company in the Securities Purchase Agreement are and have remained true and
correct as though such representations and warranties have been made at the time
of Closing.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser hereby, for itself and for no other Purchasers, represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:
(a) ORGANIZATION: AUTHORITY. Each of Bonanza and MCF hereby
represent that it is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization
with full right, corporate or partnership power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Purchaser of the
transactions contemplated by this Agreement has been duly authorized by
all necessary corporate or similar action on the part of such
Purchaser. Each of Xxxxxxxx, Curhan and Xxxxxx hereby represent that
they are individuals, each with the power and authority to enter into
and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. Each
Transaction Document to which each Purchaser is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in
accordance with its terms.
(b) INVESTMENT INTENT. Such Purchaser understands that the
Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof, has no present intention
of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such
Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
8
securities laws). Such Purchaser is acquiring the Securities hereunder
in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities.
(c) PURCHASER STATUS. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such
Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in the
Security Purchase Agreement and this Section 3.2.
Article IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement,
to the Company, to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities
in the following form:
5
THESE SECURITIES HAVE NOT 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. THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501 (a) UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and, if
required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of
the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities
may reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder.
(c) Certificates evidencing the Debenture Shares, Original
Warrants Shares and New Warrants Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering
the resale of such security is effective under the Securities Act, or
(ii) following any sale of such Debenture Shares, Original Warrants
Shares or New Warrants Shares pursuant to Rule 144, or (iii) if such
Debenture Shares, Original Warrants Shares or New Warrants Shares are
eligible for sale under Rule 144(k), or (iv) if such legend is not
required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). The Company shall cause its counsel to issue a confirming
statement to the Company's transfer agent promptly after the Effective
Date if required by the Company's transfer agent to effect the removal
of the legend hereunder. If all or any portion of a Warrant is
exercised at a time when there is an effective registration statement
to cover the resale of the Warrant Shares, such Warrant Shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required
10
under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company's
transfer agent of a certificate representing Debenture Shares, Original
Warrants Shares or New Warrants Shares, as the case may be, issued with
a restrictive legend, deliver or cause to be delivered to such
Purchaser a certificate representing such Securities that is free from
all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this
Section.
(d) In addition to such Purchaser's other available remedies,
the Company shall pay to a Purchaser, in cash, as liquidated damages
and not as a penalty, for each $1,000 of Debenture Shares, Original
Warrants Shares or New Warrants Shares (based on the VWAP of the Common
Stock on the date such Securities are submitted to the Company's
transfer agent) subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after such third
Trading Day until such certificate is delivered. Nothing herein shall
limit such Purchaser's right to pursue actual damages for the Company's
failure to deliver certificates representing any Securities as required
by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.
(e) Each Purchaser, severally and not jointly, agrees that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the
Company's reliance that the Purchasers will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an
exemption therefrom. [SEE SECTION 5(B) OF THE RRA]
4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any such holder of Securities, the Company
shall deliver to such holder a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.3 INTEGRATION. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
11
4.4 [INTENTIONALLY OMITTED]
4.5 DISCLOSURE, PUBLICITY. The Company and each Purchaser
shall consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the.
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and (ii) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under subclause (i) or (ii).
4.6 SHAREHOLDERS RIGHTS PLAN. No claim will be made or
enforced by the Company or any other Person that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.
4.7 NON-PUBLIC INFORMATION. The Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
4.8 [INTENTIONALLY OMITTED]
4.9 REIMBURSEMENT. If any Purchaser becomes involved in any
capacity in any legal proceeding by or against any Person who is a stockholder
of the Company (except as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder), solely as a
result of such Purchaser's acquisition of the Securities under this Agreement,
the Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
12
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
4.10 INDEMNIFICATION OF PURCHASERS. The Company will indemnify
and hold the Purchasers and their directors, officers, shareholders, partners,
employees and agents (each, a "PURCHASER PARTY") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to: (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred.
4.11 RESERVATION OF COMMON STOCK. The Company shall use its
commercially reasonable best efforts to reserve and continue to reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue Debenture
Shares pursuant to this Agreement and Original Warrants Shares and New Warrants
Shares pursuant to the Original Warrants and New Warrants, respectively.
4.12 LISTING OF COMMON STOCK. The Company hereby agrees to use
commercially reasonable efforts to maintain the listing of the Common Stock on
the Trading Market, and as soon as reasonably practicable following the Closing
(but not later than the earlier of the Effective Date and the first anniversary
of the Closing Date) to list the applicable Debenture Shares, Original Warrants
Shares and New Warrants Shares on the Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Trading Market, it will include in such application the Debenture Shares,
Original Warrants Shares and New Warrant Shares, and will take such other action
as is necessary or desirable in the opinion of the Purchasers to cause the
Debenture Shares, Original Warrants Shares and New Warrants Shares to be listed
on such other Trading Market as promptly as possible. The Company will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on a Trading Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.
13
Article V.
MISCELLANEOUS
5.1 FEES AND EXPENSES. Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Securities.
5.2 ENTIRE AGREEMENt. The Transaction Documents, together with
the exhibits and schedules thereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
5.4 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified on the signature pages attached hereto prior to 6:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number on the signature pages attached hereto on a day that is
not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice . is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 AMENDMENTS: Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
5.6 CONSTRUCTION. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
5.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser. Any Purchaser may
assign any or all of its rights under this Agreement to any Person, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the "Purchasers".
14
5.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, except as otherwise set forth in Sections 4.9 and
4.10.
5.9 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, New York for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by delivering a copy thereof via overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto (including its affiliates, agents, officers, directors and
employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and delivery of the
Debentures Shares, Original Warrants Shares and New Warrant Shares.
5.11 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature 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.
15
5.12 SEVERABILITY. If any provision of this Agreement is held
to be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 REPLACEMENT OF SECURITIES. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.
5.14 REMEDIES. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under
the Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall, to the
extent permissible under applicable law, be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS.
The obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchasers, and no Purchasers shall
be responsible in any way for the performance of the obligations of any other
Purchasers under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchasers to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen
16
to communicate with the Company through FW. FW does not represent all of the
Purchasers in this transaction but only Bonanza Master Fund Ltd. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
(SIGNATURE PAGE FOLLOWS)
17
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
US DATAWORKS, INC.
ADDRESS FOR NOTICE:
-------------------
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
By: /S/ XXXX X. XXXXXXX Attn: CEO
-------------------------------- Tel: (000) 000-0000
Name: Xxxx X. Xxxxxxx Fax: (000) 000-0000
Title: CFO
With copy to (which shall not constitute notice):
Pillsbury Winthrop LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attn: X. Xxxxxx
Tel. (000) 000-0000
Fax: (000) 000-0000
[SIGNATURE PAGE CONTINUES]
18
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to he duly executed by their respective authorized
signatories as of the date first indicated above.
BONANZA MASTER FUND LTD.
ADDRESS FOR NOTICE:
-------------------
0000 Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
By: /S/ XXXXX XXXXX P: 214.615.7090
---------------------------------- F: 214.987.4342
Name: Xxxxx Xxxxx Attn: Xxxxx Xxxxx
Title: Managing Director
Subscription Amount: $250,000
New Warrant Shares: 25,000
WITH A COPY TO:
--------------
Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
[SIGNATURE PAGE CONTINUED]
19
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
XXXXXXXX CURHAN FORD & CO.
ADDRESS FOR NOTICE:
-------------------
000 Xxxxxxxxxx Xx., Xxx 0000
Xxx Xxxxxxxxx, XX 00000
By: /S/ XXXX XXXXXXXX Attn: D. Xxxxxxxx Xxxxxxxx
---------------------------------------- Tel: 000.000.0000
Name: Xxxx Xxxxxxxx Fax: 000.000.0000
Title: Chief Financial Officer
Subscription Amount: $140,000
New Warrant Shares: 14,000
WITH A COPY TO:
--------------
20
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
D. XXXXXXXX XXXXXXXX
ADDRESS FOR NOTICE:
-------------------
000 Xxxxxxxxxx Xx., Xxx 0000
Xxx Xxxxxxxxx, XX 00000
By: /S/ D. XXXXXXXX XXXXXXXX Attn: D. Xxxxxxxx Xxxxxxxx
---------------------------------------- Tel: 000.000.0000
Name: D. Xxxxxxxx Xxxxxxxx Fax: 000.000.0000
Title: Chairman & CEO
Subscription Amount: $50,000
New Warrant Shares: 5,000
WITH A COPY TO:
--------------
21
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
XXXXXXX X. XXXXXX
ADDRESS FOR NOTICE:
-------------------
000 Xxxxxxxxxx Xx., Xxx 0000
Xxx Xxxxxxxxx, XX 00000
By: /S/ XXXXXXX X. XXXXXX Attn: Xxxxxxx X. Xxxxxx
--------------------------------------- Tel: 000.000.0000
Name: Xxxxxxx X. Xxxxxx Fax: 000.000.0000
Title:
Subscription Amount: $50,000
New Warrant Shares: 5,000
WITH A COPY TO:
--------------
22
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
XXXXXXX XXXXXX
ADDRESS FOR NOTICE:
-------------------
000 Xxxxxxxxxx Xx., Xxx 0000
Xxx Xxxxxxxxx, XX 00000
By: /S/ XXXXXXX XXXXXX Attn: Xxxxxxx Xxxxxx
--------------------------------------- Tel: 000.000.0000
Name: Xxxxxxx Xxxxxx Fax: 000.000.0000
Title:
Subscription Amount: $10,000
New Warrant Shares: 1,000
WITH A COPY TO:
--------------
23
