EXHIBIT 10.3
CONVERTIBLE DEBENTURES
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AND WARRANTS AGREEMENT
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THIS CONVERTIBLE DEBENTURE AND WARRANTS AGREEMENT (this "AGREEMENT"),
dated June 30, 2003, is entered into by and between US DATAWORKS, INC., a Nevada
corporation (the "COMPANY"), and Societe Financiere Privee, S.A., a corporation
of Switzerland ("SFP")
WHEREAS, the Company desires to sell, and SFP agrees to purchase, one
or more debentures (each, a "DEBENTURE"). The 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 SFP to purchase the Debenture, the Company
wishes to grant SFP warrants (the "WARRANTS") entitling it to purchase common
stock of the Company ("COMMON STOCK") at the exercise price described herein and
in the Warrants, substantially in the form attached hereto as EXHIBIT B.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
as set forth herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement, capitalized terms not
otherwise defined in this Agreement shall have the following meanings:
"MATURITY DATE" means June 30, 2004.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"LIEN" means, with respect to any asset, any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind in respect of such
asset.
"MATERIAL ADVERSE EFFECT" means any change, violation, inaccuracy,
circumstance or effect that is materially adverse to the business, properties,
assets (including intangible assets), liabilities, capitalization or financial
condition of the Company and its Subsidiaries, taken as a whole; provided,
however, that the following shall not be taken into account in determining
whether there has been a Material Adverse Effect: (i) any occurrences relating
to the economy of the United States in general and (ii) changes in trading
prices for the Company's securities or for securities in general.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar successor federal statute and the rules and regulations thereunder, all
as the same shall be in effect from time to time.
"SEC DOCUMENTS" means the Company's periodic reports filed with the
Securities and Exchange Commission (the "SEC").
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"SUBSIDIARY" means a Person, whether incorporated or unincorporated, of
which (i) more than fifty percent (50%) of the securities or other ownership
interests, or (ii) securities or other interests having by their terms ordinary
voting power to elect more than fifty percent (50%) of the board of directors or
others performing similar functions with respect to such corporation or other
organization, is directly owned or controlled by such Person or by any one or
more of its Subsidiaries.
2. CONVERTIBLE DEBENTURE AND WARRANTS.
2.1 CONVERTIBLE DEBENTURE.
(a) SFP shall purchase from the Company a debenture
("DEBENTURE"), substantially in the form attached hereto as EXHIBIT A. SFP shall
purchase the initial Debenture by paying the Company a purchase price (the
"PURCHASE PRICE") in cash of five hundred thousand dollars ($500,000) from the
proceeds of the sale of the Common Stock issued upon its conversion of 100,000
shares of its US Dataworks Series A Preferred Stock ("SERIES A STOCK") on May
20, 2003.
(b) All subsequent purchases of Debentures shall be initiated
by the Company, in its sole discretion, by giving written notice to SFP,
requesting SFP to purchase a Debenture pursuant to this Agreement (a "DEBENTURE
PURCHASE REQUEST"). SFP shall use its commercially reasonable best efforts to
secure the net proceeds required to satisfy the Company's Debenture Purchase
Request, PROVIDED HOWEVER, that (with the exception of the initial Debenture
purchase described in subsection (a), above) no more than sixty percent (60%) of
the net proceeds from SFP's sale of Series A Stock.
(c) The form of the Debenture will include:
(1) the Purchase Price shall be a twelve percent
(12%) discount to the face value of the Debenture (I.E., a Purchase Price of $88
purchases a Debenture with a face value of $100);
(2) the Debenture shall bear five percent (5%)
interest PER ANNUM ("INTEREST") payable semi-annually;
(3) SFP 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 Common Stock voluntarily at any time;
(4) on June 30, 2004 (the "MATURITY DATE"), SFP may
demand all of the outstanding principal balance and any accrued and unpaid
Interest be due and payable;
(5) the conversion price ("CONVERSION PRICE") shall
be the closing bid price for the Company's Common Stock as listed on the
American Stock Exchange (or any other national securities exchange upon which
the Company's common stock is primarily listed) on the trading day immediately
before the date of conversion; and
(6) the Company may redeem the Debenture at any time
without penalty.
(d) The Company shall not issue Common Stock upon conversion of the
Debenture if such issuance, when added to the number of shares of Common Stock
issued by the Company upon exercise of the Warrants (if any), would equal or
exceed twenty percent (20%) of the total number of Common Stock issued and
outstanding on the date of such conversion without first obtaining the approval
of is 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 conversion.
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2.2 WARRANTS. The Company shall grant warrants ("WARRANTS"),
substantially in the form attached hereto as Exhibit B, to SFP entitling the
holder to exercise such Warrants for the purchase of Common Stock. The Company
shall grant SFP one thousand (1,000) Warrants for every ten thousand dollars
($10,000) of Purchase Price paid to the Company. The exercise price ("EXERCISE
PRICE") for the Warrants shall be one hundred twenty-five percent (125%) of the
average closing bid price for the 10 trading days immediately prior to each
Closing, subject to the anti-dilution provisions set forth in the Debenture.
2.3 CLOSING. The consummation of the initial Debenture purchase (the
"CLOSING") shall take place at the offices of the Company, 0000 Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxx, XX 00000, on June 30, 2003, or at such other time and place
as the Company and SFP mutually agree in writing. All subsequent Debenture
purchases (each, a "CLOSING"; collectively, the "CLOSINGS") shall take place at
such the time and place as the Company and SFP mutually agree in writing. The
date on which each Closing takes place is referred to as a "CLOSING DATE." At
the Closing of each Debenture purchase, the Company shall deliver to SFP a duly
executed Debenture and a duly executed Warrants, with each to be registered in
the name of SFP or in the name of a nominee designated by SFP. All Purchase
Price proceeds shall be sent to the Company via wire transfer per the following
wire transfer instructions:
SOUTHWEST BANK OF TEXAS, N.A.
XXXXXXX, XXXXX 00000
ABA # 000000000
FOR CREDIT TO:
US DATAWORKS, INC.
ACCOUNT # 0003260410
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby represents and warrants to, and agrees with, SFP, except as
otherwise disclosed in the SEC Documents, the following representations and
warranties in their entirety:
3.1 ORGANIZATION AND QUALIFICATION. The Company is duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of Nevada. The Company has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as currently
conducted. The Company is qualified as a foreign corporation and is in good
standing in all states where the conduct of its business or its ownership or
leasing of property requires such qualification, except where the failure to be
so qualified would not have a Material Adverse Effect on the Company.
3.2 AUTHORIZATION. All corporate action on the part of the Company
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and thereunder, and the
authorization, issuance and delivery of the Debenture and Warrants has been
taken or will be taken on or prior to the Closing. This Agreement constitutes a
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the enforcement of creditors' rights generally, (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (c) to the extent the indemnification
provisions contained in this Agreement may be limited by applicable federal or
state securities laws.
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3.3 VALID ISSUANCE. The Debenture, the Warrants and the shares of
Common Stock issuable upon conversion of the Debenture and exercise of the
Warrants (collectively, the "SECURITIES") have been duly authorized and, when
issued, sold and delivered to SFP after payment therefore in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable, and,
assuming the accuracy of the representations and warranties of SFP set forth
Article 4 of this Agreement, will be issued in compliance with all applicable
federal and state securities laws and will be free of all Liens or other
encumbrances other than as set forth in the legends contained in Section 5.1 of
this Agreement.
3.4 NO MATERIAL ADVERSE CHANGE. Except as set forth in the Company's
SEC Documents (a) there has been no material adverse change in the business,
properties, results of operations or financial condition of the Company, whether
or not arising in the ordinary course of business, and (b) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock.
3.5 ACCESS TO INFORMATION. Prior to the Closing, the Company will
provide to SFP and its professional representatives such information as such
Persons from time to time may reasonably request with respect to the Company and
prior to the Closing shall permit SFP and its professional representatives
reasonable access, during regular business hours and upon reasonable notice, to
the properties, books and records of the Company as SFP from time to time may
reasonably request.
3.6 PRIVATE OFFERING
3.7 . Neither the Company nor any authorized Person acting on its
behalf has, in connection with the offer, sale, exchange or issuance of the
Securities, engaged in (i) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Securities Act), (ii) any action involving a public offering within the meaning
of section 4(2) of the Securities Act, or (iii) any action that would require
the registration under the Securities Act of the offering, sale, exchange or
issuance of the Securities pursuant to this Agreement or that would violate
applicable state securities or "blue sky" laws. The Company has not made and
will not prior to the Closing Date make, directly or indirectly, any offer or
sale of the Securities, or of securities of the same or similar class as the
Securities if, as a result, the offer and sale contemplated hereby would fail to
be entitled to exemption from the registration requirements of the Securities
Act. As used herein, the terms "offer" and "sale" have the meanings specified in
section 2(3) of the Securities Act.
4. SFP HEREBY REPRESENTS AND WARRANTS TO THE COMPANY THAT:
4.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be purchased
by SFP will be acquired for investment for SFP's own account, and not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and SFP has no present intention of selling, granting any participation
in, or otherwise distributing the same. SFP is not a party to any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or
otherwise dispose of any of the Securities purchased by it.
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4.2 RELIANCE UPON SFP'S REPRESENTATIONS. SFP understands that the
issuance and sale of the Securities will not be registered under the Securities
Act on the ground that such issuance and sale will be exempt from registration
under the Securities Act pursuant to Rule 506 of Regulation D and/or section
4(2) thereof, and that the Company's reliance on such exemption is based on each
SFP's representations set forth herein. SFP realizes that the basis for the
exemption may not be present if, notwithstanding such representations, SFP has
in mind merely acquiring the securities for a fixed or determinable period in
the future, or for a market rise, or for sale if the market does not rise. SFP
has no such present intention.
4.3 RECEIPT OF INFORMATION. SFP has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
issuance and sale of the Securities and the business, properties, prospects and
financial condition of the Company and to obtain additional information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to it or to which it had access. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 3 of this Agreement or the right of SFP to rely thereon.
4.4 INVESTMENT EXPERIENCE. SFP is experienced in evaluating and
investing in securities of companies and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment in the Securities.
4.5 ACCREDITED INVESTOR. SFP is an "accredited investor" as such term
is defined in Rule 501 of Regulation D promulgated under the Securities Act.
4.6 RESTRICTED SECURITIES. SFP understands that the Securities may not
be sold, transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Securities or an available
exemption from registration under the Securities Act, the Securities must be
held indefinitely. In particular, SFP is aware that the Securities may not be
sold pursuant to Rule 144 promulgated under the Securities Act unless all of the
conditions of that Rule are met. Among the conditions for use of Rule 144 is the
availability of current information to the public about the Company.
5. RESTRICTED TRANSFERABILITY AND PIGGYBACK REGISTRATION RIGHTS.
5.1 LEGENDS. Each certificate or other document evidencing the
Securities or Common Stock issuable upon conversion of the Debenture or exercise
of the Warrant shall be endorsed with the legends set forth below, and the
Investor covenants that, except to the extent such restrictions are waived by
the Company, the Investor shall not transfer the shares represented by any such
certificate without complying with the restrictions on transfer described in the
legends endorsed on such certificate:
(a) The following legend under the Act:
"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."
(b) Such other legends as may be required under state
securities laws.
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5.2 PIGGYBACK REGISTRATION RIGHTS. Should the Company propose to
register any of its Common Stock under the Securities Act for any reason other
than a registration of securities with respect to its employee benefit plans,
the Company shall, at such time, promptly give SFP ten (10) days' advance
written notice of such registration ("REGISTRATION NOTICE"). Only in the
instance where SFP has given the Company written notice, within five (5) days of
its receipt of the Registration Notice, directing the Company NOT to register
all of its Common Stock issued from conversion of the Debentures and exercise of
the Warrants, the Company shall otherwise cause to be registered under the
Securities Act all of SFP's outstanding Common Stock issued from conversion of
the Debentures and exercise of the Warrants, subject to any adjustment or
cutbacks made by the Company's underwriter in its sole discretion. SFP agrees to
promptly return to the Company any shareholder questionnaire or other
documentation the Company may require SFP to submit as required under federal
and state securities laws. The Company's obligations pursuant to this Section
5.2 shall terminate on the earlier to occur of: (a) the second anniversary of
the date of issuance of the Common Stock upon conversion of the Debenture and
(b) such time when all Common Stock held by SFP may be sold pursuant to Rule 144
under the Securities Act during any three (3) month period.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION OF SFP. The Company agrees to indemnify and hold
harmless SFP (and each person, if any, who controls SFP within the meaning of
section 15 of the Securities Act) from and against any losses, claims, damages
or liabilities to which SFP (or such person, if any, who controls SFP within the
meaning of section 15 of the Securities Act) may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) a material breach of any term of this Agreement, the Debentures
and the Warrants, or (ii) the material breach of any representation, warranty or
covenant of this Agreement, the Debentures and the Warrants. The Company will
reimburse SFP (and each person, if any, who controls SFP within the meaning of
section 15 of the Securities Act) for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that the Company shall not be
liable in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon the breach by any Investor to comply with its
representations, warranties, covenants and agreements contained in this
Agreement.
6.2 INDEMNIFICATION OF THE COMPANY. The Investor agrees to indemnify
and hold the Company harmless from and against any losses, claims, damages or
liabilities to which the Company may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon a material
breach of any representation, warranty or covenant of this Agreement, the
Debentures and the Warrants. The Investor will reimburse the Company for any
reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided,
however, that the Investor shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon the
breach by the Company to comply with its representations, warranties, covenants
and agreements contained in this Agreement.
7. MISCELLANEOUS.
7.1 REASONABLE EFFORTS; OTHER ACTIONS. Subject to the terms and
conditions herein provided and applicable law, the Company and SFP shall use all
commercially reasonable efforts promptly to take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
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7.2 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to June 30, 2003. The headings and
subheadings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. Any
reference in this Agreement to a statutory provision or rule or regulation
promulgated thereunder shall be deemed to include any similar successor
statutory provision or rule or regulation promulgated thereunder.
7.3 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither the Company nor SFP shall assign this Agreement or
any rights hereunder or delegate any duties hereunder without the prior written
consent of the other except as otherwise provided herein.
7.4 NOTICES. Unless otherwise provided, any notice, request, demand or
other communication required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given upon Personal delivery to the
party to be notified, or when sent by Facsimile (with receipt confirmed and
promptly confirmed by Personal delivery, U.S. first class mail, or courier), or
overnight courier service, or upon deposit with the United States Post Office,
by registered or certified mail, postage prepaid and addressed as follows (or at
such other address as a party may designate by notice to the other):
If to the US Dataworks, Inc. If to SFP: Societe Financiere Privee
Company: 0000 Xxxxxxxxx Xxxx 0, Xxx Xxxxxxx
Xxxxx 000 XX-0000 Xxxxxx
Xxxxxxx, Xxxxx 00000 ATTN : Xxxxxxxx Xxxxxxx
ATTN: Xxxxxxx Xxxxx Fax : (00) 00.000.00.00
Fax: (000) 000-0000 Tel. : (00) 00.000.00.00
Tel.: (000) 000-0000 email : xxxxxxx@xxxxxxxx.xxx
With a copy to: Pillsbury Winthrop LLP With a Bridgewater Capital Corporation
0000 Xxxxxxx Xxxxxx copy to: 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000 Xxxxxxx
Xxxx Xxxx, XX 00000 Xxxxx, XX 00000
ATTN: Xxxx X. Xxxxxx, Esq. ATTN: Urban Smedeby, Xxxx Xxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
Tel.: (000) 000-0000 Tel.: (000) 000-0000
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7.5 SURVIVAL. All representations and warranties contained or provided
for herein shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the party benefiting from any such
representation or warranty, and shall survive the Closing to the extent of
applicable statutes of limitations.
7.6 AMENDMENTS AND WAIVERS. This Agreement may be amended or modified
only by a written instrument signed by the Company and SFP hereunder. The
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the party against whom such waiver is sought to be enforced.
No waiver by either party of any default with respect to any provision,
condition or requirement hereof shall be deemed to be a continuing waiver in the
future thereof 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 accruing to it
thereafter.
7.7 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable, invalid or void by a court of competent jurisdiction, such
provision shall be excluded from this Agreement and the balance of this
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
7.8 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein contain the entire understanding of the parties with respect to the
matters covered herein and supersedes all prior agreements and understandings,
written or oral, between the parties relating to the subject matter hereof. If
any provision in this Agreement directly conflicts with any provision in the
Debenture, Security Agreement or Warrants, the provision in this Agreement will
control, unless the context clearly indicates the parties intended the other
provision to control.
7.9 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Nevada (irrespective of its choice of law
principles); provided, however, that neither this Agreement nor any provision
hereof shall be construed for or against any party on the basis that such party
drafted this Agreement or any provision hereof.
7.10 COUNTERPARTS. This Agreement may be executed by facsimile copies
and in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument
7.11 FINDER'S FEE. A finder's fee equal to four percent (4%) of the
Purchase Price of each Debenture purchased by SFP shall be paid by the Company
to Bridgewater Capital Corporation, a California corporation ("BRIDGEWATER"), in
common stock valued at the closing price of the trading day immediately before
the corresponding Closing Date. The common stock issued to finder's fee shall be
paid in not less than three (3) business days from the Company's receipt of the
Purchase Price proceeds from SFP.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY SFP
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US DATAWORKS, INC. SOCIETE FINANCIERE PRIVEE, S.A.
By:________________________ By:_______________________
Name:_____________________ Name:_____________________
Title:______________________ Title:_____________________
Societe Financiere Privee
0, Xxx Xxxxxxx
XX-0000 Xxxxxx
Fax : (00) 00.000.00.00
Tel. : (00) 00.000.00.00
email : xxxxxxx@xxxxxxxx.xxx
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EXHIBIT A
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FORM OF DEBENTURE
EXHIBIT B
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FORM OF WARRANT
