EXHIBIT 99.5
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY MAY BE
CONVERTED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
10% CONVERTIBLE DEBENTURE
$______________ AUGUST 4, 2003 (THE "EFFECTIVE DATE")
FOR VALUE RECEIVED, the undersigned, US DATAWORKS, INC. (the
"COMPANY"), hereby promises to pay to the order of _______________________, the
holder, or its assigns (the "HOLDER"), in lawful money of the United States of
America, and in immediately payable funds, the principal sum of
__________________ ($________). The principal hereof together with any unpaid
accrued interest thereon, shall be due and payable on August 4, 2004 (the
"MATURITY DATE"). Payment of all amounts due hereunder shall be made at the
address of the Holder provided herein. The Company further promises to pay
interest at the rate of ten percent (10%) PER ANNUM on the outstanding principal
balance hereof. The accrued interest shall be payable in cash semi-annually on
the dates six and twelve months following the Effective Date (the "SEMI-ANNUAL
INTEREST PAYMENTS"). The Semi-Annual Interest Payment due twelve months
following the Effective Date shall be paid on the Maturity Date. All overdue
accrued and unpaid interest to be paid hereunder shall entail a late fee at the
rate of 18% per annum (or such lower maximum amount of interest permitted to be
charged under applicable law) (the "LATE FEE") which will accrue daily, from the
date such interest is due hereunder through and including the date of payment.
This Debenture has not and will not be registered under the Securities
Act of 1933, as amended (the "ACT") or applicable state securities laws, in
reliance on the exemption from registration afforded by Regulation D promulgated
under the Act. This Debenture may not be offered, sold, transferred or otherwise
disposed of, unless such securities are registered under the Act, or an
exemption from the registration requirements of the Act is available.
Any capitalized terms not defined herein shall have the meaning
ascribed to such term as provided in that certain Securities Purchase Agreement,
of even date herewith, entered into by and between Company and Holder (the
"SECURITIES PURCHASE AGREEMENT").
1. REDEMPTION. The Company may redeem this Debenture prior to the
Maturity Date only if the Holder agrees, in writing, to the terms and condition
of such redemption. Any partial redemption of the outstanding principal amount
shall in no way release, discharge or affect the remaining obligations of the
Company under this Debenture until this Debenture is paid in full.
2. TRANSFERABILITY. This Debenture shall be freely transferable by the
Holder provided such transfer is in compliance with applicable federal and state
securities laws.
3. CONVERSION.
(a) The Holder may, in its sole discretion, convert all or any
portion of this Debenture into the common stock of the Company, $00001 par value
per share, and any securities into which such common stock may hereafter be
reclassified ("COMMON STOCK"), by delivering written notice ("CONVERSION
NOTICE") to the Company at any time following the Conversion Date. For purposes
of this Section 4, the "CONVERSION DATE" shall mean 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 the
Debentures and exercise of the Original Warrants and New Warrants held by each
of the parties to the Securities Purchase Agreement; (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 the Debentures and full exercise of the Original Warrants and New
Warrants held by each of the parties to the Securities Purchase Agreement; or
(iii) the period ending ten trading days following the Maturity Date.
(b) The Debenture, or portion hereof, shall be convertible
into such number of Common Stock (the "DEBENTURE SHARES") as will be determined
by dividing the principal amount of the Debenture, and all or any portion of the
accrued interest (at Holder's sole discretion), if any, by the Per Share
Conversion Price of nine cents ($0.09) per share, as adjusted hereunder. The
Company agrees that such Xxxxxxxxx Shares shall be deemed to be issued to the
Holder as the record holder of such shares as of the close of business on the
date of the Company's receipt of the Conversion Notice (the "CONVERSION NOTICE
DATE"). A stock certificate for the shares of Common Stock shall be delivered to
the Holder within three (3) business days following the Conversion Notice Date
("SHARE DELIVERY DATE") along with a bank check in the amount of accrued and
unpaid interest on such portion so converted. No adjustments shall be made to
the number of shares issuable upon conversion of this Debenture for any cash
dividends paid or payable to holders of record of Common Stock prior to the date
as of which the Holder shall be deemed to be the record holder of such Debenture
Shares. Notwithstanding anything herein to the contrary, if the Company, at any
time while the Debentures are outstanding: (A) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company pursuant to this Debenture, including interest
thereon), (B) subdivide outstanding shares of Common Stock into a larger number
of shares, (C) combine (including by way of reverse stock split) outstanding
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shares of Common Stock into a smaller number of shares, or (D) issue by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Per Share Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(c) In lieu of declaring an Event of Default pursuant to
Section 4, if the Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 3(b) by the Shares Delivery
Date, at the election of the Holder, one of the following shall occur:
(i) the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of principal amount
being converted, $50 per Trading Day (increasing to $100 per Trading Day after 3
Trading Days after such damages begin to accrue) for each Trading Day after the
Share Delivery Date until such certificates are delivered; or
(ii) if after the Share Delivery Date the Holder is required
by its brokerage firm to purchase (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of the
Debenture Shares which the Holder anticipated receiving upon such conversion (a
"BUY-IN"), then the Company shall (A) pay in cash to the Holder the amount by
which (x) the Holder's total purchase price (including brokerage commissions, if
any) for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue multiplied by (2) the actual sale price
of the Common Stock at the time of the sale (including brokerage commissions, if
any) giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue the Debenture in principal amount equal to the principal
amount of the attempted conversion or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company timely complied with
its delivery requirements this Section. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In.
Nothing herein shall limit a Xxxxxx's 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. The exercise of any such rights
shall not prohibit the Holders from seeking to enforce damages under applicable
law.
(d) If, at any time while this Debenture is outstanding, (i)
the Company effects any merger or consolidation of the Company with or into
another Person, (ii) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (iii) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a "FUNDAMENTAL TRANSACTION"),
then upon any subsequent conversion of this Debenture, the Holder shall have the
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right to receive, at the Holder's option, (i) an amount in cash at the closing
of the Fundamental Transaction equal to the Default Amount (as defined in
Section 4) at such time (notwithstanding that no Event of Default (as defined in
Section 4) has occurred) or (ii) for each Underlying Share that would have been
issuable upon such conversion absent such Fundamental Transaction, the same kind
and amount of securities, cash or property as it would have been entitled to
receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one share of
Common Stock (the "ALTERNATE CONSIDERATION"). For purposes of any such
conversion, the determination of the Per Share Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the Per
Share Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new debenture consistent with the foregoing
provisions and evidencing the Holder's right to convert such Debenture into
Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
and insuring that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
4. DEFAULT. The occurrence of any one of the following events (whatever
the reason and whether it shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of any court, or
any order, rule or regulation of any administrative or governmental body) shall
constitute an Event of Default:
(a) The non-payment of any principal, Semi-Annual Interest
Payments (including late fees) or amounts due pursuant to Section 3(c) when such
payment becomes due and payable and the Company's continued failure to make such
payment for a period often (10) days thereafter;
(b) The material breach of this Agreement and such default
continues for ten (10) days after written notice of such default is received by
Company;
(c) The commencement by the Company of any voluntary
proceeding under any bankruptcy, reorganization, insolvency, receivership,
dissolution, or liquidation law or statute or any jurisdiction, whether now or
hereafter in effect; or the adjudication of the Company as insolvent or bankrupt
by a decree of a court of competent jurisdiction; or the petition or application
by the Company for, acquiescence in, or consent by the Company to, the
appointment of any receiver or trustee for the Company or for all or a
substantial part of the property of the Company; or the assignment by the
Company for the benefit of creditors; or the written admission of the Company of
its inability to pay its debts as they mature;
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(d) The Common Stock shall not be eligible for quotation on or
quoted for trading on the American Stock Exchange, the New York Stock Exchange,
the Nasdaq National Market or the Nasdaq SmallCap Market;
(e) The Company shall fail for any reason to deliver
certificates to the Holder prior to the fifth business day after the date a
Conversion Notice is delivered to the Company by the Holder or the Company shall
provide notice to the Holder, including by way of public announcement, at any
time, of its intention not to comply with requests for conversions of any
Debentures in accordance with the terms hereof or thereof;
(f) On the Maturity Date, an insufficient number of shares of
Common Stock is available to accommodate the full conversion of the Debentures
and exercise of the Original Warrants and New Warrants; or
(g) The commencement against the Company of any proceeding
relating to the Company under any bankruptcy, reorganization, insolvency,
receivership, dissolution or liquidation law or statute or any jurisdiction,
whether now or hereafter in effect, provided, however, that the commencement of
such a proceeding shall not constitute an Event of Default unless the Company
consents to the same or admits in writing the material allegations of same, or
said proceeding shall remain undismissed for 20 days; or the issuance of any
order, judgment or decree for the appointment of a receiver or trustee for the
Company or for all or a substantial part of the property of the Company, which
order, judgment or decree remains undismissed for 20 days; or a warrant of
attachment, execution, or similar process shall be issued against any
substantial part of the property of the Company.
Upon the occurrence of any Event of Default, the Holder may, by written
notice to the Company declare all or any portion of the unpaid principal amount
due to Holder, together with all accrued interest thereon, immediately due and
payable. The aggregate amount payable upon an Event of Default shall be equal to
the sum of (i) the greater of (A) the outstanding principal balance of the
portion of this Debenture declared due and payable by the Holder and (B) the
number of Debenture Shares into which the outstanding principal balance of the
portion of this Debenture declared due and payable by the Holder is convertible
multiplied by the average of the 10 VWAPs immediately prior to the date such
payment is demanded by the Holder and (ii) all accrued and unpaid interest
hereon and any other fees or amounts due under this Debenture (the "DEFAULT
AMOUNT"). Interest shall accrue on the amount due hereunder from the 10th day
after such payment is due through the date of payment in full hereunder. A
declaration of an Event of Default may be rescinded ad annulled by the Holder at
any time prior to payment hereunder and the Holder shall have all rights as a
Holder until such time, if any, as the full payment under this Section shall
have been received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
5. DEBENTURE SHARES.
(a) The Company covenants that, commencing on the Conversion
Date, it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock solely for the purpose of issuance upon
conversion of the Debentures, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall be
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issuable upon the conversion of the outstanding principal amount of the
Debentures. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Registration Statement has been declared
effective under the Securities Act, registered for public sale in accordance
with such Registration Statement.
(b) The issuance of certificates for Debenture Shares on
conversion of the Debentures shall be made without charge to the Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such Debentures so converted and the Company shall
not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
6. COMPANY'S OBLIGATIONS. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, interest and other
amounts (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct debt obligation
of the Company. This Debenture ranks PARI PASSU with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Company shall not and shall cause it subsidiaries not to,
without the consent of the Holders, (a) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holders or (b) enter into any agreement with respect to any of the foregoing.
7. LOST DEBENTURE. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
8. NOTICES. Notices to be given hereunder shall be in writing and shall
be deemed to have been sufficiently given if delivered personally or sent by
overnight courier or messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notice shall be deemed to have been
received on the date of personal delivery, telex, facsimile transmission,
telegram or similar means of communication, or if sent by overnight courier or
messenger, shall be deemed to have been received on the next delivery day after
deposit with the courier or messenger, or if sent by certified or registered
mail, return receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. The address of the Company is:
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US Dataworks, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Company shall give written notice of any change of address to the
Holder. The address of the Holder is as set forth on the signature page to this
Debenture, and the Holder shall give written notice of any change of address to
the Company.
9. GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture 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 any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "NEW
YORK COURTS"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mall or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture 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 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 Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
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.
10. CONFORMITY WITH LAW. All agreements between the Holder and Company
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of deferment or acceleration of the maturity of this Debenture
or otherwise, shall the rate of interest hereunder exceed the maximum rate
permissible under applicable law. If, from any circumstances whatsoever, the
rate of interest resulting from the payment and/or accrual of any amount of
interest hereunder, at any time that payment of interest is due and/or at any
time that interest is accrued, shall exceed the limits prescribed by such
applicable law, then payment and/or accrual of such interest shall be reduced to
that resulting from the maximum rate of interest permissible under such
applicable law. This provision shall never be superseded or waived.
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11. SEVERABILITY. Every provision hereof is intended to be several. If
any provision of this Debenture is determined by a court of competent
jurisdiction to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall not effect the other provisions hereof,
which shall remain binding and enforceable.
12. WAIVER; AMENDMENT. The Company hereby waives presentment, demand,
protest and notices of protest, demand, dishonor and nonpayment. Any provision
of this Debenture may be amended, waived or modified only upon the written
consent of the parties hereto.
13. SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Debenture shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
14. ASSIGNABILITY. The Company's obligations hereunder are
nontransferable and nonassignable without the prior written consent of Xxxxxx.
15. ENTIRE AGREEMENT. This Debenture and the Securities Purchase
Agreement (as well as any other Transaction Documents attached thereto or
described therein) represent the entire agreement between the parties relating
to the subject matter hereof. This Agreement alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
There are no other courses of dealing, understandings, agreements,
representations or warranties, written or oral, except as set forth herein.
16. FACSIMILE EXECUTION. Any signature delivered by facsimile
transmission shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect
as if such facsimile signature page were an original thereof.
17. LEGAL REPRESENTATION. Company and Holder, respectively, agree and
represent that each party has been represented by such party's legal counsel
with regard to all aspects of this Debenture, or if such party is acting without
legal counsel, that such party has had adequate opportunity and has been
encouraged to seek the advice of such party's legal counsel prior to the
execution of this Debenture.
** * * * * *** * * * * * *
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IN WITNESS WHEREOF, the undersigneds have caused this Debenture to be
duly executed by their respective authorized signatories as of the date first
indicated above.
__________________________________ US DATA WORKS, INC.
__________________________________ ______________________________
Its authorized representative Its authorized representative
__________________________________ ______________________________
Title Title
ADDRESS FOR NOTICE:
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