LOAN
AND SECURITY AGREEMENT

     

    THIS LOAN AND SECURITY
AGREEMENT (this “Agreement”) dated as of
February 9, 2010 (the “Effective Date”) between SILICON VALLEY BANK, a
California corporation (“Bank”), and US DATAWORKS,
INC., a Nevada corporation (“Borrower”), provides the terms
on which Bank shall lend to Borrower and Borrower shall repay
Bank.  The parties agree as follows:

     

    1            ACCOUNTING AND OTHER
TERMS

     

    Accounting
terms not defined in this Agreement shall be construed following
GAAP.  Except as otherwise provided herein, calculations and
determinations must be made following GAAP.  Capitalized terms not
otherwise defined in this Agreement shall have the meanings set forth in
Section 13.  All other terms contained in this Agreement, unless
otherwise indicated, shall have the meaning provided by the Code to the extent
such terms are defined therein.

     

    2            LOAN AND TERMS OF
PAYMENT

     

    2.1         Promise to
Pay.  Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

     

    2.1.1      Revolving
Advances.

     

    (a)           Availability.  Subject
to the terms and conditions of this Agreement, Bank shall make Advances not
exceeding the Availability Amount.  Amounts borrowed hereunder may be
repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to
the applicable terms and conditions precedent herein.

     

    (b)           Termination;
Repayment.  The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest
thereon, and all other Obligations, if any, relating to the Revolving Line shall
be immediately due and payable.

     

    (c)           Permitted Early Termination
of Revolving Line.   So long as no Event of Default has
occurred and is continuing, Borrower shall be permitted to terminate the
Revolving Line provided Borrower (i) delivers written notice to Bank of its
election to terminate the Revolving Line at least thirty (30) days prior to such
termination, and (ii) pays, on the date of such termination (A) all outstanding
principal plus accrued and unpaid interest with respect to the Revolving Line,
(B) the Revolving Line Early Termination Fee, and (C) all other sums, if any,
that shall have become due and payable with respect to the Revolving Line,
including interest at the Default Rate with respect to any past due amounts owed
with respect to the Revolving Line; provided however that the Revolving Line
Early Termination Fee shall be waived if Borrower transfers to another division
of Bank.

     

    2.1.2      Letters
of Credit Sublimit.

     

    (a)           As
part of the Revolving Line, Bank shall issue or have issued Letters of Credit
denominated in Dollars or a Foreign Currency for Borrower’s
account.  The aggregate Dollar Equivalent amount utilized for the
issuance of Letters of Credit shall at all times reduce the amount otherwise
available for Advances under the Revolving Line.  The aggregate Dollar
Equivalent of the face amount of outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not
exceed the lesser of (A) Two Hundred Thousand Dollars ($200,000), minus the sum
of all amounts used for Cash Management Services or (B) the lesser of
Revolving Line or the Borrowing Base, minus the sum of all outstanding principal
amounts of any Advances (including any amounts used for Cash Management
Services).


    
      
         


      

      
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    (b)           If,
on the Revolving Line Maturity Date (or the effective date of any termination of
this Agreement or the Revolving Line), there are any outstanding Letters of
Credit, then on such date Borrower shall provide to Bank cash collateral in an
amount equal to one hundred five percent (105%) of the Dollar Equivalent of the
face amount of all such Letters of Credit plus all interest, fees, and costs due
or to become due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to such Letters of
Credit.  All Letters of Credit shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank’s standard Application and Letter of Credit Agreement (the
“Letter of Credit
Application”).  Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.  Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and
opened for Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower understands and
agrees that Bank shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto.

     

    (c)           The
obligation of Borrower to immediately reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional, and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.

     

    2.1.3   
  Cash Management
Services Sublimit.  Borrower may use the Revolving Line for
Bank’s cash management services, which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services identified
in Bank’s various cash management services agreements (collectively, the “Cash Management Services”), in
an aggregate amount not to exceed the lesser of (A) Two Hundred Thousand Dollars
($200,000), minus the Dollar Equivalent of the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit or (B) the
lesser of Revolving Line or the Borrowing Base, minus (i) the sum of all
outstanding principal amounts of any Advances, minus (ii) the Dollar Equivalent
of the face amount of any outstanding Letters of Credit.  Any amounts
Bank pays on behalf of Borrower for any Cash Management Services will be treated
as Advances under the Revolving Line and will accrue interest at the interest
rate applicable to Advances.

     

    2.1.4   
  Term
Loan.

     

    (a)           Availability.  Bank
shall make one (1) term loan available to Borrower in an amount equal to the
Term Loan Amount on the Effective Date subject to the satisfaction of the terms
and conditions of this Agreement.   Borrower shall use a portion
of the Term Loan to repay Seven Hundred Seventy Thousand Dollars ($770,000)
of  the outstanding principal amount of the Nicholson/Ramey
Subordinated Debt.

     

    (b)           Repayment.  Borrower
shall repay the Term Loan in (i) thirty six (36) equal installments of
principal, plus (ii) monthly payments of accrued interest (each, a “Term Loan
Payment”).  Beginning on the first day of the month following
the month in which the Funding Date occurs, each Term Loan Payment shall be
payable on the first day of each month.  Borrower’s final Term Loan
Payment, due on the Term Loan Maturity Date, shall include all outstanding
principal and accrued and unpaid interest under the Term Loan.  Once
repaid, the Term Loan may not be reborrowed.

     

    (c)           Permitted Prepayment of Term
Loan.  So long as no Event of Default has occurred and is
continuing, Borrower shall have the option to prepay all, but not less than all,
of the Term Loan advanced by Bank under this Agreement, provided Borrower (i)
delivers written notice to Bank of its election to prepay the Term Loan at least
thirty (30) days prior to such prepayment, and (ii) pays, on the date of such
prepayment (A) all outstanding principal plus accrued and unpaid interest with
respect to the Term Loan, (B) if applicable, the Term Loan Prepayment Fee,
and (C) all other sums, if any, that shall have become due and payable with
respect to the Term Loan, including interest at the Default Rate with respect to
any past due amounts owed with respect to the Term Loan; provided however that
the Term Loan Prepayment Fee shall be waived if Borrower transfers to another
division of Bank.

     

    2.2        Overadvances.  If,
at any time, the sum of (a) the outstanding principal amount of any Advances
(including any amounts used for Cash Management Services) plus (b) the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) exceeds the lesser of the Revolving Line or the Borrowing
Base, Borrower shall immediately pay to Bank in cash such excess
amount.


    
      
         


      

      
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    2.3    
     Payment of Interest on the Credit
Extensions.

     

    (a)          Interest
Rate.

     

    (i)           Advances.   Subject
to Section 2.3(b), the principal amount outstanding under the Revolving Line
shall accrue interest at a floating per annum rate equal to the greater of (A)
one and one quarter percentage points (1.25%) above the Prime Rate or (B) five
and one quarter percentage points (5.25%), which interest shall be payable
monthly in accordance with Section 2.3(f).

     

    (ii)          Term
Loan.  Subject to Section 2.3(b), the principal amount
outstanding under the Term Loan shall accrue interest at a fixed per annum rate
equal to six and one half percentage points (6.50%), which interest shall be
payable monthly.

     

    (b)          Default
Rate.  Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is five percentage points (5.00%) above the rate that is
otherwise applicable thereto (the “Default Rate”) unless Bank
otherwise elects from time to time in its sole discretion to impose a smaller
increase.  Fees and expenses which are required to be paid by Borrower
pursuant to the Loan Documents (including, without limitation, Bank Expenses)
but are not paid when due shall bear interest until paid at a rate equal to the
highest rate applicable to the Obligations.  Payment or acceptance of
the increased interest rate provided in this Section 2.3(b) is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Bank.

     

    (c)          Adjustment to Interest
Rate.  Changes to the interest rate of any Credit Extension
based on changes to the Prime Rate shall be effective on the effective date of
any change to the Prime Rate and to the extent of any such change.

     

    (d)          Computation; 360-Day
Year.  In computing interest, the date of the making of any
Credit Extension shall be included and the date of payment shall be excluded;
provided, however, that
if any Credit Extension is repaid on the same day on which it is made, such day
shall be included in computing interest on such Credit
Extension.  Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed.

     

    (e)          Debit of
Accounts.  Bank may debit any of Borrower’s deposit accounts
maintained with Bank, including the Designated Deposit Account, for principal
and interest payments or any other amounts Borrower owes Bank when
due.  These debits shall not constitute a set-off.

     

    (f)          Interest Payment
Date.  Unless otherwise provided, interest is payable monthly
on the first calendar day of each month.

     

    2.4    
    Fees.  Borrower
shall pay to Bank:

     

    (a)          Commitment
Fee.  A fully earned, non-refundable commitment fee of Fifteen
Thousand Dollars ($15,000) on the Effective Date and Bank hereby acknowledges
receipt of Nine Thousand Dollars ($9,000) prior to the Effective Date which
shall be applied to such commitment fee on the Effective Date;

     

    (b)          Letter of Credit
Fee.  Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, including, without limitation, a letter of credit
fee of two percent (2.00%) per annum of the Dollar Equivalent of the face amount
of each Letter of Credit issued, upon the issuance of such Letter of Credit,
each anniversary of the issuance during the term of such Letter of Credit, and
upon the renewal of such Letter of Credit by Bank;

     

    (c)          Revolving Line Early
Termination Fee.  The Revolving Line Early Termination Fee if
and when due pursuant to the terms of Section 2.1.1(c);

     

    (d)          Term Loan Prepayment
Fee.  The Term Loan Prepayment Fee if and when due pursuant to
the terms of Section 2.1.4(c); and


    
      
         


      

      
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    (e)           Bank
Expenses.  All Bank Expenses (including reasonable attorneys’
fees and expenses for documentation and negotiation of this Agreement) incurred
through and after the Effective Date, promptly upon request for payment
therefor.

     

    2.5   
     Payments; Application of Payments.

     

    (a)           All
payments (including prepayments) to be made by Borrower under any Loan Document
shall be made in immediately available funds in U.S. Dollars, without setoff or
counterclaim, before 12:00 p.m. Pacific time on the date when
due.  Payments of principal and/or interest received after 12:00 p.m.
Pacific time are considered received at the opening of business on the next
Business Day.  When a payment is due on a day that is not a Business
Day, the payment shall be due the next Business Day, and additional fees or
interest, as applicable, shall continue to accrue until paid.

     

    (b)           Bank
shall apply the whole or any part of collected funds against the Revolving Line
or credit such collected funds to a depository account of Borrower with Bank (or
an account maintained by an Affiliate of Bank), the order and method of such
application to be in the sole discretion of Bank.  Borrower shall have
no right to specify the order or the accounts to which Bank shall allocate or
apply any payments required to be made by Borrower to Bank or otherwise received
by Bank under this Agreement when any such allocation or application is not
specified elsewhere in this Agreement.

     

    3      
     CONDITIONS OF
LOANS

     

    3.1    
    Conditions Precedent to Initial
Credit Extension.  Bank’s obligation to make the initial Credit
Extension is subject to the condition precedent that Bank shall have received,
in form and substance satisfactory to Bank, such documents, and completion of
such other matters, as Bank may reasonably deem necessary or appropriate,
including, without limitation:

     

    (a)           duly
executed copies of signatures to the Loan Documents which are not specifically
listed below;

     

    (b)           Borrower’s
Operating Documents and a good standing certificate of Borrower certified by the
Secretary of State of the State of Nevada as of a date no earlier than thirty
(30) days prior to the Effective Date;

     

    (c)           duly
executed copies of signatures to the completed Borrowing Resolutions for
Borrower;

     

    (d)           the
Subordination Agreement, together with the duly executed copies of signatures
thereto;

     

    (e)           certified
copies, dated as of a recent date, of financing statement searches, as Bank
shall request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;

     

    (f)        
   the Perfection Certificate of Borrower, together with the duly
executed original signatures thereto;

     

    (g)           the
completion of the Initial Audit with results satisfactory to Bank in its sole
and absolute discretion (provided however such Initial Audit shall only be a
condition precedent to the first Advance and not to the making of the Term
Loan); and

     

    (h)           payment
of the commitment fee as specified in Section 2.4(a).


    
      
         


      

      
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    3.2     
   Conditions
Precedent to all Credit Extensions.  Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following conditions precedent:

     

    (a)           except
as otherwise provided in Section 3.5(a), timely receipt of an executed
Payment/Advance Form;

     

    (b)           (A)
the representations and warranties in this Agreement shall be true, accurate,
and complete in all material respects on the date of the Payment/Advance Form
and on the Funding Date of each Credit Extension; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof (but only to the extent of such qualification or modification); and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and (B) no Event of Default shall have occurred and be
continuing or result from the Credit Extension.  Each Credit Extension
is Borrower’s representation and warranty on that date that the representations
and warranties in this Agreement remain true, accurate, and complete in all
material respects; provided, however, that such materiality qualifier shall not
be applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof (but only to the extent of such
qualification or modification); and provided, further that those representations
and warranties expressly referring to a specific date shall be true, accurate
and complete in all material respects as of such date; and

     

    (c)           in
Bank’s sole discretion, there has not been a Material Adverse
Change.

     

    3.3    
    Post-Closing
Conditions.  Within thirty (30) days after the Effective Date,
Bank shall have received, in form and substance satisfactory to
Bank:

     

    (a)           duly
executed original signatures to the Loan Documents which are not specifically
listed below;

     

    (b)           duly
executed original signatures to the completed Borrowing Resolutions for
Borrower;

     

    (c)           the
Subordination Agreement, together with the duly executed original signatures
thereto;

     

    (d)           payment
of the Bank Expenses then due as specified in Section 2.4 hereof;

     

    (e)           a
landlord’s consent in favor of Bank for each of Borrower’s leased locations by
the respective landlord thereof, together with the duly executed original
signatures thereto; and

     

    (f)           evidence
satisfactory to Bank that the insurance policies required by Section 6.5 hereof
are in full force and effect, together with appropriate evidence showing lender
loss payable and/or additional insured clauses or endorsements in favor of
Bank.

     

    3.4    
    Covenant to
Deliver.  Except as otherwise provided in Section 3.3, in
connection with each Credit Extension, Borrower agrees to deliver to Bank each
item required to be delivered to Bank under this Agreement as a condition
precedent to such Credit Extension.  Borrower expressly agrees that a
Credit Extension made prior to the receipt by Bank of any such item shall not
constitute a waiver by Bank of Borrower’s obligation to deliver such item, and
the making of any Credit Extension in the absence of a required item shall be in
Bank’s sole discretion.

     

    3.5     
   Procedures
for Borrowing.

     

    (a)           Advances.  Subject
to the prior satisfaction of all other applicable conditions to the making of an
Advance set forth in this Agreement, to obtain an Advance (other than Advances
under Sections 2.1.2 or 2.1.3), Borrower shall notify Bank (which notice shall
be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m.
Pacific time on the Funding Date of the Advance.  Together with any
such electronic or facsimile notification, Borrower shall deliver to Bank by
electronic mail or facsimile a completed Payment/Advance Form executed by a
Responsible Officer or his or her designee.  Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee.  Bank shall credit Advances to the Designated Deposit
Account.  Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due.


    
      
         


      

      
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    (b)           Term
Loan.  Subject to the prior satisfaction of all other
applicable conditions to the making of the Term Loan set forth in this
Agreement, if any portion of the proceeds of the Term Loan shall be used to
purchase or finance Equipment, Borrower shall deliver to Bank by electronic mail
or facsimile a copy of the invoice for the Equipment to be purchased or
refinanced and the request for the Term Loan.

     

    4    
       CREATION OF SECURITY
INTEREST

     

    4.1     
   Grant of
Security Interest.  Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products
thereof.

     

    4.2    
    Priority of Security
Interest.  Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Bank’s Lien under this
Agreement).  If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower of the
general details thereof and grant to Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to
Bank.

     

    If this
Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid in full in
cash.  Upon payment in full in cash of the Obligations and at such
time as Bank’s obligation to make Credit Extensions has terminated, Bank shall,
at Borrower’s sole cost and expense, take the steps necessary to release its
Liens in the Collateral and all rights therein shall revert to
Borrower.

     

    4.3    
    Authorization to File Financing
Statements; Power of Attorney.  Borrower hereby authorizes Bank
to file financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights in the Collateral
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person in violation of this Agreement shall be deemed to
violate the rights of Bank under the Code.  Such financing statements
may indicate the Collateral as “all assets of the Debtor” or words of similar
effect, or as being of an equal or lesser scope, or with greater detail, all in
Bank’s discretion.  Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the Collateral
regardless of whether an Event of Default has occurred.  Bank’s
foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights
and powers, coupled with an interest, are irrevocable until all Obligations have
been fully repaid and performed and Bank’s obligation to provide Credit
Extensions terminates.

     

    5      
     REPRESENTATIONS AND
WARRANTIES

     

    Borrower
represents and warrants to Bank as follows:

     

    5.1   
     Due Organization, Authorization;
Power and Authority.  Borrower is duly existing and in
good standing as a Registered Organization in its jurisdiction of formation and
is qualified and licensed to do business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership of property
requires that it be qualified except where the failure to do so could not
reasonably be expected to have a material adverse effect on Borrower’s
business.  In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower
entitled “Perfection Certificate”.  Borrower represents and warrants
to Bank that (a) Borrower’s exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof; (b) Borrower is an
organization of the type and is organized in the jurisdiction set forth in the
Perfection Certificate; (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately states that
Borrower has none; (d) the Perfection Certificate accurately sets forth
Borrower’s place of business, or, if more than one, its chief executive office
as well as Borrower’s mailing address (if different than its chief executive
office); (e) Borrower (and each of its predecessors) has not, in the past
five (5) years, changed its jurisdiction of formation, organizational structure
or type, or any organizational number assigned by its jurisdiction; and (f) all
other information set forth on the Perfection Certificate pertaining to Borrower
and each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date with the written consent of Bank
and/or to the extent explicitly permitted by one or more specific provisions in
this Agreement).  If Borrower is not now a Registered Organization but
later becomes one, Borrower shall promptly notify Bank of such occurrence and
provide Bank with Borrower’s organizational identification number, which
notification shall constitute a permitted update to the Perfection
Certificate.


    
      
         


      

      
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    The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not (i) conflict with any of
Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any of its Subsidiaries or any of their property or assets may
be bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or (v) constitute
an event of default under any material agreement by which Borrower is
bound.  Borrower is not in default under any agreement to which it is
a party or by which it is bound in which the default could reasonably be
expected to have a material adverse effect on Borrower’s business.

     

    5.2   
     Collateral.  Borrower
has good title to, has rights in, and the power to transfer each item of the
Collateral upon which it purports to grant a Lien hereunder, free and clear of
any and all Liens except Permitted Liens.  Borrower has no deposit
accounts other than the deposit accounts with Bank, the deposit accounts, if
any, described in the Perfection Certificate delivered to Bank in connection
herewith, or of which Borrower has given Bank notice and taken such actions as
are necessary to give Bank a perfected security interest therein.  The
Accounts are bona fide, existing obligations of the Account
Debtors.

     

    The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection
Certificate.  None of the components of the Collateral shall be
maintained at locations other than as provided in the Perfection Certificate or
as permitted pursuant to Section 7.2; provided, however, that Bank consents to
Borrower, from time to time, (i) depositing copies of its source code in escrow
in the ordinary course of business and (ii) providing copies of confidential
information concerning Borrower to third parties subject to standard
non-disclosure agreements.

     

    Borrower
is the sole owner of the Intellectual Property which it owns or purports to own
except for (a) non-exclusive licenses granted to its customers in the ordinary
course of business, (b) over-the-counter software that is commercially available
to the public, and (c) material Intellectual Property licensed to Borrower and
noted on the Perfection Certificate.  Each Patent which it owns or
purports to own and which is material to Borrower’s business is valid and
enforceable, and no part of the Intellectual Property which Borrower owns or
purports to own and which is material to Borrower’s business has been judged
invalid or unenforceable, in whole or in part.  To the best of
Borrower’s knowledge, no claim has been made that any part of the Intellectual
Property violates the rights of any third party except to the extent such claim
would not reasonably be expected to have a material adverse effect on Borrower’s
business.

     

    Except as
noted on the Perfection Certificate, Borrower is not a party to, nor is it bound
by, any Restricted License.

     

    5.3   
     Accounts
Receivable.  For any Eligible Account listed in any Borrowing
Base Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents evidencing such Eligible Accounts, and all of Borrower’s Books with
respect to such Eligible Accounts are genuine and in all respects what they
purport to be.  Whether or not an Event of Default has occurred and is
continuing, Bank may notify any Account Debtor owing Borrower money of Bank’s
security interest in such funds and verify the amount of such Eligible
Account.  All sales and other transactions underlying or giving rise
to each Eligible Account shall comply in all material respects with all
applicable laws and governmental rules and regulations.  Borrower has
no knowledge of any actual or imminent Insolvency Proceeding of any Account
Debtor whose accounts are Eligible Accounts listed in any Borrowing Base
Certificate.  To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Eligible Accounts listed in any Borrowing Base Certificate are genuine, and all
such documents, instruments and agreements are legally enforceable in accordance
with their terms.


    
      
         


      

      
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    5.4    
    Litigation.  Except
as otherwise disclosed to Bank in writing, there are no actions or proceedings
pending or, to the knowledge of the Responsible Officers, threatened in writing
by or against Borrower or any of its Subsidiaries involving more than,
individually or in the aggregate, One Hundred Thousand Dollars
($100,000).

     

    5.5     
   Financial
Statements; Financial Condition.  All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations (subject to normal year-end
adjustments).  There has not been any material deterioration in
Borrower’s consolidated financial condition since the date of the most recent
financial statements submitted to Bank.

     

    5.6    
    Solvency.  The fair
salable value of Borrower’s assets (including goodwill minus disposition costs)
exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they
mature.

     

    5.7   
     Regulatory
Compliance.  Borrower is not an “investment company” or a
company “controlled” by an “investment company” under the Investment Company Act
of 1940, as amended.  Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations X, T and U of
the Federal Reserve Board of Governors).  Borrower has complied in all
material respects with the Federal Fair Labor Standards Act.  Neither
Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of
a “holding company” or a “subsidiary company” of a “holding company” as each
term is defined and used in the Public Utility Holding Company Act of
2005.  Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to have a material adverse
effect on its business.  None of Borrower’s or any of its
Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally.  Borrower and each of its Subsidiaries have obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all Government Authorities that are necessary to
continue their respective businesses as currently conducted except for such
failures to perform the foregoing that would not reasonably be expected to
result in a Material Adverse Change.

     

    5.8    
    Subsidiaries;
Investments.  Borrower does not own any stock, partnership
interest or other equity securities except for Permitted
Investments.

     

    5.9    
    Tax
Returns and Payments; Pension Contributions.  Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid
all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower except for such failures to perform the foregoing
that would not reasonably be expected to result in a Material Adverse Change on
its business.  Borrower may defer payment of any contested taxes,
provided that Borrower (a) in good faith contests its obligation to pay the
taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps
required to prevent the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a “Permitted
Lien.”  Borrower is unaware of any claims or adjustments proposed for
any of Borrower’s prior tax years which could result in additional taxes
becoming due and payable by Borrower other than as disclosed to Bank in
writing.  Borrower has paid all amounts necessary to fund all present
pension, profit sharing and deferred compensation plans in accordance with their
terms (except for such failures to perform the foregoing that would not
reasonably be expected to result in a Material Adverse Change), and Borrower has
not withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any material
liability of Borrower, including any material liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental
agency.


    
      
         


      

      
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    5.10  
    Use of
Proceeds.  Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements and not for personal, family, household or agricultural purposes;
provided, however, that a portion of the Term Loan proceeds will be used to pay
down the Nicholson/Ramey Subordinated Debt.

     

    5.11   
   Full
Disclosure.  No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements given to
Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that (i) the projections
and forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results, and (ii) in the case of a Compliance Certificate, any
minor inaccuracies in the calculation of the financial covenants will not be
deemed to he material unless such inaccuracies cause the calculations to
indicate compliance with a financial covenant when, in fact, the Company was not
in compliance with such financial covenant).

     

    5.12  
    Definition of “Knowledge.”  For purposes of
the Loan Documents, whenever a representation or warranty is made to Borrower’s
knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge, after
reasonable investigation, of the Responsible Officers.

     

    6       
    AFFIRMATIVE
COVENANTS

     

    Borrower
shall do all of the following:

     

    6.1  
      Government Compliance.

     

    (a)           Maintain
its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
have a material adverse effect on Borrower’s business or
operations.  Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, noncompliance
with which could have a material adverse effect on Borrower’s
business.

     

    (b)           Obtain
all of the Governmental Approvals necessary for the performance by Borrower of
its obligations under the Loan Documents to which it is a party and the grant of
a security interest to Bank in all of its property except for such failures to
perform the foregoing that would not reasonably be expected to result in a
Material Adverse Change.  Borrower shall promptly provide copies of
any such obtained Governmental Approvals to Bank.

     

    6.2    
    Financial Statements, Reports,
Certificates.  Deliver to Bank:

     

    (a)           Borrowing Base
Reports.  Within thirty (30) days after the last day of each
month, aged listings of accounts receivable and accounts payable (by invoice
date) and a report of Deferred Revenue as of the last day of such month (the
“Borrowing Base
Reports”);

     

    (b)           Borrowing Base
Certificate.  Within thirty (30) days after the last day of
each month and together with the Borrowing Base Reports, a duly completed
Borrowing Base Certificate signed by a Responsible Officer;

     

    (c)           Monthly Financial
Statements.  As soon as available, but no later than thirty
(30) days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower’s consolidated operations
for such month certified by a Responsible Officer and in a form acceptable to
Bank (the “Monthly Financial
Statements”);


    
      
         


      

      
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    (d)           Monthly Compliance
Certificate.  Within thirty (30) days after the last day of
each month and together with the Monthly Financial Statements, a duly completed
Compliance Certificate signed by a Responsible Officer, certifying that as of
the end of such month, Borrower was in full compliance with all of the terms and
conditions of this Agreement (except as noted therein), and setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement (except as noted therein) and such other information as Bank shall
reasonably request;

     

    (e)           Annual Audited Financial
Statements.  As soon as available, but no later than one
hundred five (105) days after the last day of Borrower’s fiscal year (beginning
with the 2010 fiscal year), audited consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
acceptable to Bank in its reasonable discretion;

     

    (f)           Annual Financial
Projections.  As soon as available, but no later than the
earlier of (i) fifteen (15) days after presentation by Borrower’s management to
Borrower’s board of directors or (ii) April 30 of each year, Borrower’s annual
budget for its fiscal year ending on March 31 of the following
year;

     

    (g)           Other
Statements.  Within five (5) Business Days of delivery, copies
of all statements, reports and notices made available to Borrower’s common stock
holders as a group;

     

    (h)           SEC
Filings.  Within five (5) Business Days of filing, copies of
all periodic and other reports, proxy statements and other materials filed by
Borrower with the SEC, any Governmental Authority succeeding to any or all of
the functions of the SEC or with any national securities exchange, or
distributed to its shareholders (as a group), as the case may
be.  Documents required to be delivered pursuant to the terms hereof
(to the extent any such documents are included in materials otherwise filed with
the SEC) may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the date on which Borrower posts such documents, or
provides a link thereto, on Borrower’s website on the Internet at Borrower’s
website address;

     

    (i)      
     Legal Action
Notice.  A prompt report of any legal actions pending or
threatened in writing against Borrower or any of its Subsidiaries that could
result in damages or costs to Borrower or any of its Subsidiaries of,
individually or in the aggregate, One Hundred Thousand Dollars ($100,000) or
more;

     

    (j)   
        Intellectual Property
Notice.  Prompt written notice of (i) any material change in the
composition of the Intellectual Property, (ii) the registration of any
copyright, including any subsequent ownership right of Borrower in or to any
copyright, patent or trademark not previously disclosed in writing to Bank, and
(iii) Borrower’s knowledge of an event that could reasonably be expected to
materially and adversely affect the value of the Intellectual Property;
and

     

    (k)           Other Financial
Information.  Such other budgets, sales projections, operating
plans and other financial information reasonably requested by Bank.

     

    6.3     
   Intentionally Omitted.

     

    6.4    
    Taxes;
Pensions.  Timely file, and require each of its Subsidiaries to
timely file, all required material tax returns and reports and timely pay, and
require each of its Subsidiaries to timely pay, all material foreign, federal,
state and local taxes, assessments, deposits and contributions owed by Borrower
and each of its Subsidiaries, except for deferred payment of any taxes contested
pursuant to the terms of Section 5.9, and shall deliver to Bank, promptly on
demand, appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms.


    
      
         


      

      
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    In the
event any payments are received by Bank from Borrower pursuant to this
Agreement, such payments will be made subject to applicable withholding for any
taxes, levies, fees, deductions, withholding, restrictions or conditions of any
nature whatsoever.  Notwithstanding the foregoing, if at any time any
Governmental Authority, applicable law, regulation or international agreement
requires Borrower to make any such deduction or withholding from any such
payment or other sum payment hereunder to Bank, the amount due from Borrower
with respect to such payment or other sum payable hereunder will be increased to
the extent necessary to ensure that, after the making of such required deduction
or withholding, Bank receives a net sum equal to the sum which it would have
received had no deductions or withholding been required, and Borrower shall pay
the full amount deducted or withheld to the relevant Governmental Authority.
Borrower will, upon request, furnish Bank with proof satisfactory to Bank
indicating that Borrower has made such withholding payment; provided, however,
that Borrower need not make any withholding payment if the amount or validity of
such withholding payment is contested in good faith by appropriate proceedings
and as to which payment in full is bonded or reserved against by Borrower. The
agreements and obligations of Borrower contained in this provision shall survive
the termination of this Agreement.

     

    6.5    
    Insurance.  Keep its
business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Bank may reasonably
request.  Insurance policies shall be in a form, with insurance
providers, and in amounts that are satisfactory to Bank.  All property
policies shall have a lender’s loss payable endorsement showing Bank as lender
loss payee and waive subrogation against Bank.  All liability policies
shall show, or have endorsements showing, Bank as an additional
insured.  All policies (or the loss payable and additional insured
endorsements) shall provide that the insurer shall give Bank at least twenty
(20) days notice before canceling, amending, or declining to renew its
policy.  At Bank’s request, Borrower shall deliver certified copies of
policies and evidence of all premium payments.  Proceeds payable under
any policy shall, at Bank’s option, be payable to Bank on account of any
Obligations due and owing at the time of such payment.  If Borrower
fails to obtain insurance as required under this Section 6.5 or to pay any
amount or furnish any required proof of payment to third persons and Bank, Bank
may make all or part of such payment or obtain such insurance policies required
in this Section 6.5, and take any action under the policies Bank deems
prudent.

     

    6.6    
    Operating Accounts. Maintain
all of its operating and other deposit accounts and securities accounts with
Bank; provided however that Bank may maintain account number 3260410 at Amegy
Bank until the date thirty (30) days after the Effective Date;

     

    6.7    
    Financial
Covenants.  Maintain as of the last day of each month, on a
consolidated basis with respect to Borrower:

     

    (a)           Adjusted Quick
Ratio.  A ratio of Quick Assets to Current Liabilities minus
Deferred Revenue and minus the current portion of Subordinated Debt of at least
(i) 1.15 to 1.0 for measurement dates occurring from the Effective Date through
March 31, 2010, (ii) 1.35 to 1.0 for measurement dates occurring from April 1,
2010 through June 30, 2010 and (iii) 1.50 to 1.0 for measurement dates occurring
after June 30, 2010.

     

    (b)           Fixed Charge Coverage
Ratio.  A Fixed Charge Coverage Ratio of at least 1.40 to
1.0.

     

    6.8    
    Protection and Registration of Intellectual Property
Rights.

     

    (a)           (i)
Protect, defend and maintain the validity and enforceability of its Intellectual
Property; (ii) promptly advise Bank in writing of material infringements of its
Intellectual Property; and (iii) not allow any Intellectual Property material to
Borrower’s business to be abandoned, forfeited or dedicated to the public
without Bank’s written consent.

     

    (b)           If,
after the Effective Date, Borrower (i) obtains any Patent, registered Trademark,
registered Copyright, registered mask work, or any pending application for any
of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for
any Patent or the registration of any Trademark, then Borrower shall immediately
provide written notice thereof to Bank and shall execute such intellectual
property security agreements and other documents and take such other actions as
Bank shall request in its good faith business judgment to perfect and maintain a
first priority perfected security interest in favor of Bank in such
property.  If Borrower decides to register any Copyrights or mask
works in the United States Copyright Office, Borrower shall: (x) provide
Bank with at least fifteen (15) days prior written notice of Borrower’s intent
to register such Copyrights or mask works together with a copy of the
application it intends to file with the United States Copyright Office
(excluding exhibits thereto); (y) execute an intellectual property security
agreement and such other documents and take such other actions as Bank may
request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Bank in the Copyrights or mask
works intended to be registered with the United States Copyright Office; and
(z) record such intellectual property security agreement with the United
States Copyright Office contemporaneously with filing the Copyright or mask work
application(s) with the United States Copyright Office.  Borrower
shall promptly provide to Bank copies of all applications that it files for
Patents or for the registration of Trademarks, Copyrights or mask works,
together with evidence of the recording of the intellectual property security
agreement necessary for Bank to perfect and maintain a first priority perfected
security interest in such property.


    
      
         


      

      
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    (c)           Provide
written notice to Bank within ten (10) days of entering or becoming bound by any
Restricted License (other than over-the-counter software that is commercially
available to the public).  Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (i) any Restricted License to be deemed
“Collateral” and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such Restricted
License, whether now existing or entered into in the future, and (ii) Bank
to have the ability in the event of a liquidation of any Collateral to dispose
of such Collateral in accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.

     

    6.9    
    Litigation
Cooperation.  From the Effective Date and continuing through
the termination of this Agreement, make available to Bank, without expense to
Bank, Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

     

    6.10  
    Access
to Collateral; Books and Records.  Allow Bank, or its agents,
at reasonable times, on one (1) Business Day’s notice (provided no notice is
required if an Event of Default has occurred and is continuing), to inspect the
Collateral and audit and copy Borrower’s Books; provided, however, that if no
Event of Default has occurred and is continuing, the foregoing inspection right
shall be limited to once per calendar year.  The foregoing inspections
and audits shall be at Borrower’s expense, and the charge therefor shall be
Eight Hundred Fifty Dollars ($850) per person per day (or such higher amount as
shall represent Bank’s then-current standard charge for the same), plus
reasonable out-of-pocket expenses.  In the event Borrower and Bank
schedule an audit more than ten (10) days in advance, and Borrower cancels or
seeks to reschedule the audit with less than ten (10) days written notice to
Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall
pay Bank a fee of One Thousand Dollars ($1,000) plus any out-of-pocket expenses
incurred by Bank to compensate Bank for the anticipated costs and expenses of
the cancellation or rescheduling.

     

    6.11  
    Further
Assurances.  Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the
Collateral or to effect the purposes of this Agreement.  Deliver to
Bank, within five
(5) Business Days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
effect on any of the Governmental Approvals or otherwise on the operations of
Borrower or any of its Subsidiaries.

     

    7       
    NEGATIVE
COVENANTS

     

    Borrower
shall not do any of the following without Bank’s prior written
consent:

     

    7.1     
   Dispositions.  Convey,
sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of
its Subsidiaries to Transfer, all or any part of its business or property,
except for Transfers (a) of Inventory in the ordinary course of business;
(b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens
and Permitted Investments; (d) involving the grant of a
non-exclusive license to its customers in the ordinary course of business; and
(e) other assets with a value not to exceed Twenty Five Thousand Dollars
($25,000).

     

    7.2    
    Changes
in Business, Management or Business Locations.  (a) Engage
in or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower and such Subsidiary, as applicable,
or reasonably related thereto; or reasonable extensions thereof; or (b)
liquidate or dissolve; or (c) have a change in CEO.


    
      
         


      

      
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    Borrower
shall not, without at least thirty (30) days prior written notice to Bank: (1)
add any new offices or business locations, including warehouses (unless such new
offices or business locations contain less than Ten Thousand Dollars ($10,000)
in the Collateral) or deliver any portion of the Collateral valued, individually
or in the aggregate, in excess of Ten Thousand Dollars ($10,000) to a bailee at
a location other than to a bailee and at a location already disclosed in the
Perfection Certificate, (2) change its jurisdiction of organization, (3) change
its organizational structure or type, (4) change its legal name, or (5) change
any organizational number (if any) assigned by its jurisdiction of
organization.  If Borrower intends to deliver any portion of the
Collateral valued, individually or in the aggregate, in excess of Ten Thousand
Dollars ($10,000) to a bailee, and Bank and such bailee are not already parties
to a bailee agreement governing both the Collateral and the location to which
Borrower intends to deliver the Collateral, then Borrower will first receive the
written consent of Bank, and such bailee shall execute and deliver a bailee
agreement in form and substance satisfactory to Bank in its sole
discretion.

     

    7.3    
    Mergers
or Acquisitions.  Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person.  A Subsidiary may merge
or consolidate into another Subsidiary or into Borrower.

     

    7.4  
      Indebtedness.  Create,
incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do
so, other than Permitted Indebtedness.

     

    7.5    
    Encumbrance.  Create,
incur, allow, or suffer any Lien on any of the Collateral or assign or convey
any right to receive income, including the sale of any Accounts, or permit any
of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral
not to be subject to the first priority security interest granted herein, or
enter into any agreement, document, instrument or other arrangement (except with
or in favor of Bank) with any Person which directly or indirectly prohibits or
has the effect of prohibiting Borrower or any Subsidiary from assigning,
mortgaging, pledging, granting a security interest in or upon, or encumbering
any of Borrower’s or any Subsidiary’s Intellectual Property, except as is
otherwise permitted in Section 7.1 hereof and the definition of “Permitted
Liens” herein.

     

    7.6      
  Maintenance of
Collateral Accounts.  Maintain any Collateral Account except
pursuant to the terms of Section 6.6.

     

    7.7       
 Distributions;
Investments.  (a) Pay any cash dividends or make any cash
distribution or payment or redeem, retire or purchase for cash any capital
stock; or (b) directly or indirectly make
any Investment other than Permitted Investments, or permit any of its
Subsidiaries to do so.

     

    7.8     
   Transactions
with Affiliates.  Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower, except for (i)
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person and
transactions permitted pursuant to the terms of Section 7.3; (ii) employment and
similar agreements and other compensation arrangements with members of
Borrower’s management and members of Borrower’s board of directors; and (iii)
the Nicholson/Ramey Subordinated Debt.

     

    7.9     
   Subordinated
Debt.  (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the Subordination Agreement and any other
subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document
relating to the Subordinated Debt which would increase the amount thereof or
adversely affect the subordination thereof to Obligations owed to
Bank.

     

    7.10   
   Compliance.  Become
an “investment company” or a company controlled by an “investment company”,
under the Investment Company Act of 1940, as amended, or undertake as one of its
important activities extending credit to purchase or carry margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System), or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
failure to comply or violation could reasonably be expected to have a material
adverse effect on Borrower’s business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.


    
      
         


      

      
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    8      
     EVENTS OF
DEFAULT

     

    Any one
of the following shall constitute an event of default (an “Event of Default”) under this
Agreement:

     

    8.1    
    Payment
Default.  Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay
any other Obligations, in each case within three (3) Business Days after such
payment of principal or interest or such Obligations are due and payable (which
three (3) Business Day cure period shall not apply to payments due on the
Revolving Line Maturity Date or the Term Loan Maturity Date).  During
the cure period, the failure to make or pay any payment specified under clause
(a) or (b) hereunder is not an Event of Default (but no Credit Extension will be
made during the cure period);

     

    8.2    
    Covenant Default.

     

    (a)           Borrower
fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.7,
or 6.10 or violates any covenant in Section 7; or

     

    (b)           Borrower
fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement or any Loan
Documents, and as to any default (other than those specified in this Section 8)
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure the default within ten (10) days after the occurrence
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to cure the default shall not
be deemed an Event of Default (but no Credit Extensions shall be made during
such cure period).  Cure periods provided under this section shall not
apply, among other things, to financial covenants or any other covenants set
forth in clause (a) above;

     

    8.3   
     Material Adverse
Change.  A Material Adverse Change occurs;

     

    8.4    
    Attachment; Levy; Restraint on Business.

     

    (a)           (i)
The service of process seeking to attach, by trustee or similar process, any
funds in excess of Ten Thousand Dollars ($10,000) of Borrower or of any entity
under the control of Borrower (including a Subsidiary) on deposit or otherwise
maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is
filed against any of Borrower’s assets by any government agency, and the same
under subclauses (i) and (ii) hereof are not, within ten (10) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); provided, however, no Credit Extensions shall be made during any
ten (10) day cure period; or

     

    (b)           (i)
any material portion of Borrower’s assets is attached, seized, levied on, or
comes into possession of a trustee or receiver, or (ii) any court order
enjoins, restrains, or prevents Borrower from conducting any material part of
its business;

     

    8.5    
    Insolvency  (a)
Borrower is unable to pay its debts (including trade debts) as they become due
or otherwise becomes insolvent; (b) Borrower initiates an Insolvency Proceeding;
or (c) an Insolvency Proceeding is initiated against Borrower and not dismissed
or stayed within thirty (30) days (but no Credit Extensions shall be made while
of any of the conditions described in clause (a) exist and/or until any
Insolvency Proceeding is dismissed);


    
      
         


      

      
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    8.6    
    Other
Agreements.  There is, under any agreement to which Borrower or
any Guarantor is a party with a third party or parties, (a) any default
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount individually or in
the aggregate in excess of One Hundred Thousand Dollars ($100,000); or (b) any
default by Borrower, the result of which could have a material adverse effect on
Borrower’s business.

     

    8.7     
   Judgments.  One or
more final judgments, orders, or decrees for the payment of money in an amount,
individually or in the aggregate, of at least One Hundred Thousand Dollars
($100,000) (not covered by independent third-party insurance as to which
liability has been accepted by such insurance carrier) shall be rendered against
Borrower and the same are not, within ten (10) days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal, or such
judgments are not discharged prior to the expiration of any such stay (provided
that no Credit Extensions will be made prior to the discharge, stay, or bonding
of such judgment, order, or decree);

     

    8.8  
      Misrepresentations.  Borrower
or any Person acting for Borrower makes any written representation, warranty, or
other written statement now or later in this Agreement, any Loan Document or in
any writing delivered to Bank or to induce Bank to enter this Agreement or any
Loan Document, and such written representation, warranty, or other statement is
incorrect in any material respect when made; or

     

    8.9    
    Subordinated
Debt.  Any document, instrument, or agreement evidencing any
Subordinated Debt shall for any reason be revoked or invalidated or otherwise
cease to be in full force and effect, any Person shall be in breach thereof or
contest in any manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder, or the Obligations shall for any
reason be subordinated or shall not have the priority contemplated by this
Agreement.

     

    9    
       BANK’S RIGHTS AND
REMEDIES

     

    9.1    
    Rights
and Remedies.  While an Event of Default occurs and is
continuing, Bank may, without notice or demand, do any or all of the
following:

     

    (a)           declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs, all Obligations are immediately due and payable
without any action by Bank);

     

    (b)           stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;

     

    (c)           demand
that Borrower (i) deposit cash with Bank in an amount equal to one hundred five
percent (105%) of the Dollar Equivalent of the aggregate face amount of all
Letters of Credit remaining undrawn (plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its good faith
business judgment)), to secure all of the Obligations relating to such Letters
of Credit, as collateral security for the repayment of any future drawings under
such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid
or payable over the remaining term of any Letters of Credit;

     

    (d)           settle
or adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Bank considers advisable, notify any Person owing Borrower
money of Bank’s security interest in such funds, and verify the amount of such
account;

     

    (e)           make
any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral.  Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates.  Bank may enter premises where the Collateral is located,
take and maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Borrower grants Bank a license
to enter and occupy any of its premises, without charge, to exercise any of
Bank’s rights or remedies;


    
      
         


      

      
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    (f)           apply
to the Obligations any (i) balances and deposits of Borrower it holds, or (ii)
any amount held by Bank owing to or for the credit or the account of
Borrower;

     

    (g)           ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral.  Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;

     

    (h)           place
a “hold” on any account maintained with Bank and/or deliver a notice of
exclusive control, any entitlement order, or other directions or instructions
pursuant to any Control Agreement or similar agreements providing control of any
Collateral;

     

    (i)     
      demand and receive possession of Borrower’s
Books; and

     

    (j)    
       exercise all rights and remedies
available to Bank under the Loan Documents or at law or equity, including all
remedies provided under the Code (including disposal of the Collateral pursuant
to the terms thereof).

     

    9.2    
    Power
of Attorney.  Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to:  (a) endorse Borrower’s name
on any checks or other forms of payment or security; (b) sign Borrower’s name on
any invoice or bill of lading for any Account or drafts against Account Debtors;
(c) settle and adjust disputes and claims about the Accounts directly with
Account Debtors, for amounts and on terms Bank determines are reasonable; (d)
make, settle, and adjust all claims under Borrower’s insurance policies; (e)
pay, contest or settle any Lien, charge, encumbrance, security interest, and
adverse claim in or to the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; and (f) transfer
the Collateral into the name of Bank or a third party as the Code
permits.  Bank’s foregoing appointment as Borrower’s attorney in fact,
and all of Bank’s rights and powers, coupled with an interest, are irrevocable
until all Obligations have been fully repaid and performed and Bank’s obligation
to provide Credit Extensions terminates.

     

    9.3   
     Protective
Payments.  If Borrower fails to obtain the insurance called for
by Section 6.5 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable upon
presentment to Borrower, bearing interest at the then highest rate applicable to
the Obligations, and secured by the Collateral.  Bank will make
reasonable efforts to provide Borrower with notice of Bank obtaining such
insurance at the time it is obtained or within a reasonable time
thereafter.  No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of
Default.

     

    9.4    
    Application of Payments and Proceeds
Upon Default.  If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Bank shall determine in its sole
discretion.  Any surplus shall be paid to Borrower or other Persons
legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency.  If Bank, in its good faith business judgment, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Bank shall have the option, exercisable at
any time, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Bank of cash therefor.

     

    9.5   
     Bank’s Liability for
Collateral.  So long as Bank complies with reasonable banking
practices and the applicable provisions of the Code regarding the safekeeping of
the Collateral in the possession or under the control of Bank, Bank shall not be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other
Person.  Except as otherwise provided by the Code, Borrower bears all
risk of loss, damage or destruction of the Collateral.


    
      
         


      

      
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    9.6    
    No
Waiver; Remedies Cumulative.  Bank’s failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement or any other Loan Document shall not waive, affect, or diminish any
right of Bank thereafter to demand strict performance and compliance herewith or
therewith.  No waiver hereunder shall be effective unless signed by
the party granting the waiver and then is only effective for the specific
instance and purpose for which it is given.  Bank’s rights and
remedies under this Agreement and the other Loan Documents are
cumulative.  Bank has all rights and remedies provided under the Code,
by law, or in equity.  Bank’s exercise of one right or remedy is not
an election and shall not preclude Bank from exercising any other remedy under
this Agreement or other remedy available at law or in equity, and Bank’s waiver
of any Event of Default is not a continuing waiver.  Bank’s delay in
exercising any remedy is not a waiver, election, or acquiescence.

     

    9.7    
    Demand
Waiver.  Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

     

    10   
      NOTICES

     

    All
notices, consents, requests, approvals, demands, or other communication by any
party to this Agreement or any other Loan Document must be in writing and shall
be deemed to have been validly served, given, or delivered: (a) upon the earlier
of actual receipt and three (3) Business Days after deposit in the U.S. mail,
first class, registered or certified mail return receipt requested, with proper
postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below.  Bank or Borrower may change its mailing or electronic mail
address or facsimile number by giving the other party written notice thereof in
accordance with the terms of this Section 10.

     

    
      
        
          	
                  If
      to Borrower:

                	
                  US
      DATAWORKS, INC.

                
	 
      	
                  One
      Sugar Creek Center Blvd., 5th Floor

                
	 
      	
                  Sugarland,
      TX 77478

                
	 
      	
                  Randall
      J. Frapart, Chief Financial Officer

                
	 
      	
                  Fax:  (281)
      504-8101

                
	 
      	
                  Email:
      rfrapart@usdataworks.com

                
	 	 
	
                  If
      to Bank:

                	
                  Silicon
      Valley Bank

                
	 
      	
                  7000
      North MoPac Expressway, Suite 360

                
	 
      	
                  Austin,
      TX 78731

                
	 
      	
                  Attn:  Phillip
      Wright

                
	 
      	
                  Fax:  (512)
      794-0853

                
	 
      	
                  Email:   pwright@svbank.com

                


        

      

    

    


    11       
  CHOICE OF
LAW, VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

     

    California
law governs the Loan Documents without regard to principles of conflicts of
law.  Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank.  Borrower
expressly submits and consents in advance to such jurisdiction in any action or
suit commenced in any such court, and Borrower hereby waives any objection that
it may have based upon lack of personal jurisdiction, improper venue, or forum
non conveniens and hereby consents to the granting of such legal or equitable
relief as is deemed appropriate by such court.  Borrower hereby waives
personal service of the summons, complaints, and other process issued in such
action or suit and agrees that service of such summons, complaints, and other
process may be made by registered or certified mail addressed to Borrower at the
address set forth in, or subsequently provided by Borrower in accordance with,
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.


    
      
         


      

      
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    TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.

     

    WITHOUT
INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is
not enforceable, the parties hereto agree that any and all disputes or
controversies of any nature between them arising at any time shall be decided by
a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court.  The reference proceedings shall be
conducted pursuant to and in accordance with the provisions of California Code
of Civil Procedure §§ 638 through 645.1, inclusive.  The private judge
shall have the power, among others, to grant provisional relief, including
without limitation, entering temporary restraining orders, issuing preliminary
and permanent injunctions and appointing receivers.  All such
proceedings shall be closed to the public and confidential and all records
relating thereto shall be permanently sealed.  If during the course of
any dispute, a party desires to seek provisional relief, but a judge has not
been appointed at that point pursuant to the judicial reference procedures, then
such party may apply to the Santa Clara County, California Superior Court for
such relief.  The proceeding before the private judge shall be
conducted in the same manner as it would be before a court under the rules of
evidence applicable to judicial proceedings.  The parties shall be
entitled to discovery which shall be conducted in the same manner as it would be
before a court under the rules of discovery applicable to judicial
proceedings.  The private judge shall oversee discovery and may
enforce all discovery rules and orders applicable to judicial proceedings in the
same manner as a trial court judge.  The parties agree that the
selected or appointed private judge shall have the power to decide all issues in
the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to California Code of Civil Procedure §
644(a).  Nothing in this paragraph shall limit the right of any party
at any time to exercise self-help remedies, foreclose against collateral, or
obtain provisional remedies.  The private judge shall also determine
all issues relating to the applicability, interpretation, and enforceability of
this paragraph.

     

    12      
   GENERAL
PROVISIONS

     

    12.1  
    Successors and
Assigns.  This Agreement binds and is for the benefit of the
successors and permitted assigns of each party.  Borrower may not
assign this Agreement or any rights or obligations under it without Bank’s prior
written consent (which may be granted or withheld in Bank’s
discretion).  Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, assign, negotiate, or grant participation in all or
any part of, or any interest in, Bank’s obligations, rights, and benefits under
this Agreement and the other Loan Documents.

     

    12.2   
   Indemnification.  Borrower
agrees to indemnify, defend and hold Bank and its directors, officers,
employees, agents, attorneys, or any other Person affiliated with or
representing Bank (each, an “Indemnified Person”) harmless
against:  (a) all obligations, demands, claims, and liabilities
(collectively, “Claims”)
claimed or asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or expenses (including
Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person
as a result of, following from, consequential to, or arising from transactions
between Bank and Borrower (including reasonable attorneys’ fees and expenses),
except in each case for Claims and/or losses directly caused by any Indemnified
Person’s gross negligence or willful misconduct.


    
      
         


      

      
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    12.3           Time of
Essence.  Time is of the essence for the performance of all
Obligations in this Agreement.

     

    12.4           Severability of
Provisions.  Each provision of this Agreement is severable from
every other provision in determining the enforceability of any
provision.

     

    12.5           Correction of Loan
Documents.  Bank may correct patent errors and fill in any
blanks in the Loan Documents consistent with the agreement of the parties so
long as Bank provides Borrower with written notice of such correction and allows
Borrower at least ten (10) days to object to such correction.  In the
event of such objection, such correction shall not be made except by an
amendment signed by both Bank and Borrower.

     

    12.6           Amendments in Writing; Waiver;
Integration.  No purported amendment or modification of any
Loan Document, or waiver, discharge or termination of any obligation under any
Loan Document, shall be enforceable or admissible unless, and only to the
extent, expressly set forth in a writing signed by the party against which
enforcement or admission is sought.  Without limiting the generality
of the foregoing, no oral promise or statement, nor any action, inaction, delay,
failure to require performance or course of conduct shall operate as, or
evidence, an amendment, supplement or waiver or have any other effect on any
Loan Document.  Any waiver granted shall be limited to the specific
circumstance expressly described in it, and shall not apply to any subsequent or
other circumstance, whether similar or dissimilar, or give rise to, or evidence,
any obligation or commitment to grant any further waiver.  The Loan
Documents represent the entire agreement about this subject matter and supersede
prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of the Loan Documents merge into the Loan
Documents.

     

    12.7           Counterparts.  This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, is an
original, and all taken together, constitute one Agreement.

     

    12.8           Survival.  All
covenants, representations and warranties made in this Agreement continue in
full force until this Agreement has terminated pursuant to its terms and all
Obligations (other than inchoate indemnity obligations and any other obligations
which, by their terms, are to survive the termination of this Agreement) have
been paid in full and satisfied.  The obligation of Borrower in
Section 12.2 to indemnify Bank shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

     

    12.9           Confidentiality.  In
handling any confidential information, Bank shall exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to
prospective transferees or purchasers of any interest in the Credit Extensions
(provided, however, Bank shall use its best efforts to obtain any prospective
transferee’s or purchaser’s agreement to the terms of this provision);
(c) as required by law, regulation, subpoena, or other order; (d) to
Bank’s regulators or as otherwise required in connection with Bank’s examination
or audit; (e) as Bank considers appropriate in exercising remedies under
the Loan Documents (provided, however, Bank shall use its best efforts to obtain
any prospective transferee’s or purchaser’s agreement to the terms of this
provision); and (f) to third-party service providers of Bank so long as such
service providers have executed a confidentiality agreement with Bank with terms
no less restrictive than those contained herein.  Confidential
information does not include information that is either: (i) in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (ii) disclosed to Bank by a third
party if Bank does not know that the third party is prohibited from disclosing
the information.

     

    Bank may
use confidential information for the development of databases, reporting
purposes, and market analysis so long as such confidential information is
aggregated and anonymized prior to distribution unless otherwise expressly
permitted by Borrower.  The provisions of the immediately preceding
sentence shall survive the termination of this Agreement.

     

    12.10         Attorneys’ Fees, Costs and
Expenses.  In any action or proceeding between Borrower and
Bank arising out of or relating to the Loan Documents, the prevailing party
shall be entitled to recover its reasonable attorneys’ fees and other costs and
expenses incurred, in addition to any other relief to which it may be
entitled.


    
      
         


      

      
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    12.11         Electronic Execution of
Documents.  The words “execution,” “signed,” “signature” and
words of like import in any Loan Document shall be deemed to include electronic
signatures or the keeping of records in electronic form, each of which shall be
of the same legal effect, validity and enforceability as a manually executed
signature or the use of a paper-based recordkeeping systems, as the case may be,
to the extent and as provided for in any applicable law, including, without
limitation, any state law based on the Uniform Electronic Transactions
Act.

     

    12.12         Captions.  The
headings used in this Agreement are for convenience only and shall not affect
the interpretation of this Agreement.

     

    12.13         Construction of
Agreement.  The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement.  In cases of uncertainty, this Agreement shall be construed
without regard to which of the parties caused the uncertainty to
exist.

     

    12.14         Relationship.  The
relationship of the parties to this Agreement is determined solely by the
provisions of this Agreement.  The parties do not intend to create any
agency, partnership, joint venture, trust, fiduciary or other relationship with
duties or incidents different from those of parties to an arm’s-length
contract.

     

    12.15         Third
Parties.  Nothing in this Agreement, whether express or
implied, is intended to: (a) confer any benefits, rights or remedies under or by
reason of this Agreement on any persons other than the express parties to it and
their respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

     

    13             
DEFINITIONS

     

    13.1           Definitions.  As
used in the Loan Documents, the word “shall” is mandatory, the word “may” is
permissive, the word “or” is not exclusive, the words “includes” and “including”
are not limiting, the singular includes the plural, and numbers denoting amounts
that are set off in brackets are negative.  As used in this Agreement,
the following capitalized terms have the following meanings:

     

    “Account” is any “account” as
defined in the Code with such additions to such term as may hereafter be made,
and includes, without limitation, all accounts receivable and other sums owing
to Borrower.

     

    “Account Debtor” is any
“account debtor” as defined in the Code with such additions to such term as may
hereafter be made.

     

    “Advance” or “Advances” means an advance (or
advances) under the Revolving Line.

     

    “Affiliate” is, with respect to
any Person, each other Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control
with the Person, and each of that Person’s senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person’s
managers and members.

     

    “Agreement” is defined in the
preamble hereof.

     

    “Availability Amount” is (a)
the lesser of (i) the Revolving Line or (ii) the amount available under the
Borrowing Base minus (b) the Dollar Equivalent amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) minus (c)
any amounts used for Cash Management Services, and minus (d) the outstanding
principal balance of any Advances.

     

    “Bank” is defined in the
preamble hereof.

     

    “Bank Expenses” are all audit
fees and expenses, costs, and expenses (including reasonable attorneys’ fees and
expenses) for preparing, amending, negotiating, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred in
connection with appeals or Insolvency Proceedings) or otherwise incurred with
respect to Borrower.


    
      
         


      

      
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    “Borrower” is defined in the
preamble hereof.

     

    “Borrower’s Books” are all
Borrower’s books and records including ledgers, federal and state tax returns,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any
equipment containing such information.

     

    “Borrowing Base” is eighty
percent (80%) of the face amount of all Eligible Accounts as determined by Bank
from Borrower’s most recent Borrowing Base Certificate; provided, however, that
Bank may decrease the foregoing percentage in its good faith business judgment
based on events, conditions, contingencies, or risks which, as determined by
Bank, may adversely affect Collateral.

     

    “Borrowing Base Certificate” is
that certain certificate in the form attached hereto as Exhibit
C.

     

    “Borrowing Base Report” is
defined in Section 6.2(a).

     

    “Borrowing Resolutions” are,
with respect to any Person, those resolutions substantially in the form attached
hereto as Exhibit D.

     

    “Business Day” is any day that
is not a Saturday, Sunday or a day on which Bank is closed.

     

    “Cash Equivalents” means
(a) marketable direct obligations issued or unconditionally guaranteed by
the United States or any agency or any State thereof having maturities of not
more than one (1) year from the date of acquisition; (b) commercial paper
maturing no more than one (1) year after its creation and having the highest
rating from either Standard & Poor’s Ratings Group or Moody’s Investors
Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than
one (1) year after issue; and (d) money market funds at least ninety-five
percent (95%) of the assets of which constitute Cash Equivalents of the kinds
described in clauses (a) through (c) of this definition.

     

    “Cash Management Services” is
defined in Section 2.1.3.

     

    “Code” is the Uniform
Commercial Code, as the same may, from time to time, be enacted and in effect in
the State of California; provided, that, to the extent that the Code is used to
define any term herein or in any Loan Document and such term is defined
differently in different Articles or Divisions of the Code, the definition of
such term contained in Article or Division 9 shall govern; provided further,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection, or priority of, or remedies with respect to, Bank’s
Lien on any Collateral is governed by the Uniform Commercial Code in effect in a
jurisdiction other than the State of California, the term “Code” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for
purposes of the provisions thereof relating to such attachment, perfection,
priority, or remedies and for purposes of definitions relating to such
provisions.

     

    “Collateral” is any and all
properties, rights and assets of Borrower described on Exhibit
A.

     

    “Compliance Certificate” is
that certain certificate in the form attached hereto as Exhibit
E.

     

    “Contingent Obligation” is, for
any Person, any direct or indirect liability, contingent or not, of that Person
for (a) any indebtedness, lease, dividend, letter of credit or other obligation
of another Person such as an obligation, in each case, directly or indirectly
guaranteed, endorsed, co-made, discounted or sold with recourse by that Person,
or for which such Person is directly or indirectly liable; (b) any obligations
for undrawn letters of credit for the account of such Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement
designated to protect such Person against fluctuation in interest rates,
currency exchange rates or commodity prices; but “Contingent Obligation” does
not include endorsements in the ordinary course of business.  The
amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
such Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.


    
      
         


      

      
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    “Copyrights” are any and all
copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade
secret.

     

    “Credit Extension” is any
Advance, Letter of Credit, amount utilized for Cash Management Services, the
Term Loan, or any other extension of credit by Bank for Borrower’s
benefit.

     

    “Current Liabilities” are all
obligations and liabilities of Borrower to Bank, plus, without duplication, the
aggregate amount of Borrower’s Total Liabilities, in each case, that mature
within one (1) year from the date of measurement.

     

    “Default Rate” is defined in
Section 2.3(b).

     

    “Deferred Revenue” is all
amounts received or invoiced by Borrower in advance of performance under
contracts and not yet recognized as revenue.

     

    “Designated Deposit Account” is
Borrower’s deposit account, account number 3300713341, maintained with
Bank.

     

    “Dollars,” “dollars” or use of the sign
“$” means only lawful
money of the United States and not any other currency, regardless of whether
that currency uses the “$” sign to denote its currency or may be readily
converted into lawful money of the United States.

     

    “Dollar Equivalent” is, at any
time, (a) with respect to any amount denominated in Dollars, such amount, and
(b) with respect to any amount denominated in a Foreign Currency, the equivalent
amount therefor in Dollars as determined by Bank at such time on the basis of
the then-prevailing rate of exchange in San Francisco, California, for sales of
the Foreign Currency for transfer to the country issuing such Foreign
Currency.

     

    “Domestic Subsidiary” means a
Subsidiary organized under the laws of the United States or any state or
territory thereof or the District of Columbia.

     

    “EBITDA” shall mean (a) Net
Income, plus (b) Interest Expense, plus (c) to the extent deducted in the
calculation of Net Income, depreciation expense and amortization expense, plus
(d) income tax expense.

     

    “Effective Date” is defined in
the preamble hereof.

     

    “Eligible Accounts” means
Accounts which arise in the ordinary course of Borrower’s business that meet all
Borrower’s representations and warranties in Section 5.3.  Bank
reserves the right upon prior written notice to Borrower at any time after the
Effective Date to adjust any of the criteria set forth below and to establish
new criteria in its good faith business judgment.  Unless Bank
otherwise agrees in writing, Eligible Accounts shall not include:

     

    (a)           Accounts
that the Account Debtor has not paid within ninety (90) days of invoice date
regardless of invoice payment period terms;

     

    (b)           Accounts
owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have
not been paid within ninety (90) days of invoice date;

     

    (c)           Accounts
owing from an Account Debtor which does not have its principal place of business
in the United States;

     

    (d)           Accounts
billed and/or payable outside of the United States;


    
      
         


      

      
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    (e)           Accounts
owing from an Account Debtor to the extent that Borrower is indebted or
obligated in any manner to the Account Debtor (as creditor, lessor, supplier or
otherwise - sometimes called “contra” accounts, accounts payable, customer
deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

     

    (f)           Accounts
for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;

     

    (g)           Accounts
with credit balances over ninety (90) days from invoice date;

     

    (h)           Accounts
owing from an Account Debtor, including Affiliates, whose total obligations to
Borrower exceed twenty-five percent (25%) of all Accounts, except for American
Express and FRB Cleveland, for which such percentage is thirty five percent
(35%), in each case for the amounts that exceed those percentages, unless Bank
approves in writing;

     

    (i)           Accounts
owing from an Account Debtor which is a United States government entity or any
department, agency, or instrumentality thereof unless Borrower has assigned its
payment rights to Bank and the assignment has been acknowledged under the
Federal Assignment of Claims Act of 1940, as amended;

     

    (j)           Accounts
for demonstration or promotional equipment, or in which goods are consigned, or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or other
terms if Account Debtor’s payment may be conditional;

     

    (k)           Accounts
owing from an Account Debtor that has not been invoiced or where goods or
services have not yet been rendered to the Account Debtor (sometimes called memo
billings or pre-billings);

     

    (l)           Accounts
subject to contractual arrangements between Borrower and an Account Debtor where
payments shall be scheduled or due according to completion or fulfillment
requirements where the Account Debtor has a right of offset for damages suffered
as a result of Borrower’s failure to perform in accordance with the contract
(sometimes called contracts accounts receivable, progress billings, milestone
billings, or fulfillment contracts);

     

    (m)           Accounts
owing from an Account Debtor the amount of which may be subject to withholding
based on the Account Debtor’s satisfaction of Borrower’s complete performance
(but only to the extent of the amount withheld; sometimes called retainage
billings);

     

    (n)           Accounts
subject to trust provisions, subrogation rights of a bonding company, or a
statutory trust;

     

    (o)           Accounts
owing from an Account Debtor that has been invoiced for goods that have not been
shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor have
entered into an agreement acceptable to Bank in its sole discretion wherein the
Account Debtor acknowledges that (i) it has title to and has ownership of the
goods wherever located, (ii) a bona fide sale of the goods has occurred, and
(iii) it owes payment for such goods in accordance with invoices from Borrower
(sometimes called “bill and hold” accounts);

     

    (p)           Accounts
for which the Account Debtor has not been invoiced;

     

    (q)           Accounts
that represent non-trade receivables or that are derived by means other than in
the ordinary course of Borrower’s business;

     

    (r)           Accounts
for which Borrower has permitted Account Debtor’s payment to extend beyond 90
days;

     

    (s)           Accounts
subject to chargebacks or others payment deductions taken by an Account Debtor
(but only to the extent the chargeback is determined to be
valid);


    
      
         


      

      
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    (t)           Accounts
in which the Account Debtor disputes liability or makes any claim (but only up
to the disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
and

     

    (u)           Accounts
for which Bank in its good faith business judgment after inquiry and
consultation with Borrower determines collection to be doubtful.

     

    “Equipment” is all “equipment”
as defined in the Code with such additions to such term as may hereafter be
made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing.

     

    “ERISA” is the Employee
Retirement Income Security Act of 1974, and its regulations.

     

    “Event of Default” is defined
in Section 8.

     

    “Exchange Act” is the
Securities Exchange Act of 1934, as amended.

     

    “Fixed Charge Coverage Ratio”
means a ratio of EBITDA, plus non-cash stock based compensation expense
minus cash taxes and non-financed capital expenditures, divided by all principal
and interest owed by Borrower with respect to all Indebtedness, all measured on
a trailing six (6) month basis, provided however that for the first six (6)
months following the Effective Date all principal and interest owed by Borrower
with respect to all Indebtedness shall be annualized and divided by two
(2).

     

     “Foreign Currency” means lawful
money of a country other than the United States.

     

    “Foreign Subsidiary” means any
Subsidiary which is not a Domestic Subsidiary.

     

    “Funding Date” is any date on
which a Credit Extension is made to or for the account of Borrower which shall
be a Business Day.

     

     “GAAP” is generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other Person as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

     

    “General Intangibles” is all
“general intangibles” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without
limitation, all Intellectual Property, claims, income and other tax refunds,
security and other deposits, payment intangibles, contract rights, options to
purchase or sell real or personal property, rights in all litigation presently
or hereafter pending (whether in contract, tort or otherwise), insurance
policies (including without limitation key man, property damage, and business
interruption insurance), payments of insurance and rights to payment of any
kind.

     

    “Governmental Approval” is any
consent, authorization, approval, order, license, franchise, permit,
certificate, accreditation, registration, filing or notice, of, issued by, from
or to, or other act by or in respect of, any Governmental
Authority.

     

    “Governmental Authority” is any
nation or government, any state or other political subdivision thereof, any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities exchange
and any self-regulatory organization.

     

    “Indebtedness” is (a)
indebtedness for borrowed money or the deferred price of property or services,
such as reimbursement and other obligations for surety bonds and letters of
credit, (b) obligations evidenced by notes, bonds, debentures or similar
instruments, (c) capital lease obligations, and (d) Contingent
Obligations.


    
      
         


      

      
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    “Indemnified Person” is defined
in Section 12.2.

     

    “Initial Audit” is Bank’s
inspection of Borrower’s Accounts, the other Collateral, and Borrower’s
Books.

     

    “Insolvency Proceeding” is any
proceeding by or against any Person under the United States Bankruptcy Code, or
any other bankruptcy or insolvency law, including assignments for the benefit of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.

     

    “Intellectual Property” means
all of Borrower’s right, title, and interest in and to the
following:

     

    (a)           its
Copyrights, Trademarks and Patents;

     

    (b)           any
and all trade secrets and trade secret rights, including, without limitation,
any rights to unpatented inventions, know-how, operating manuals;

     

    (c)           any
and all source code;

     

    (d)           any
and all design rights which may be available to a Borrower;

     

    (e)           any
and all claims for damages by way of past, present and future infringement of
any of the foregoing, with the right, but not the obligation, to sue for and
collect such damages for said use or infringement of the Intellectual Property
rights identified above; and

     

    (f)           all
amendments, renewals and extensions of any of the Copyrights, Trademarks or
Patents.

     

    “Interest Expense” means for
any fiscal period, interest expense (whether cash or non-cash) determined in
accordance with GAAP for the relevant period ending on such date, including, in
any event, interest expense with respect to any Credit Extension and other
Indebtedness of Borrower and its Subsidiaries, including, without limitation or
duplication, all commissions, discounts, or related amortization and other fees
and charges with respect to letters of credit and bankers’ acceptance financing
and the net costs associated with interest rate swap, cap, and similar
arrangements, and the interest portion of any deferred payment obligation
(including leases of all types).

     

    “Inventory” is all “inventory”
as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products, including without limitation such inventory as is
temporarily out of Borrower’s custody or possession or in transit and including
any returned goods and any documents of title representing any of the
above.

     

    “Investment” is any beneficial
ownership interest in any Person (including stock, partnership interest or other
securities), and any loan, advance or capital contribution to any
Person.

     

    “IP Agreement” is that certain
Intellectual Property Security Agreement executed and delivered by Borrower to
Bank dated as of the Effective Date.

     

     “Letter of Credit” means a
standby letter of credit issued by Bank or another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Bank as
set forth in Section 2.1.2.

     

    “Letter of Credit Application”
is defined in Section 2.1.2(b).

     

     “Lien” is a claim, mortgage,
deed of trust, levy, charge, pledge, security interest or other encumbrance of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise against any property.

     

     “Loan Documents” are,
collectively, this Agreement, the Perfection Certificate, the IP Agreement, the
Subordination Agreement, any note, or notes or guaranties executed by Borrower,
and any other present or future agreement between Borrower and/or for the
benefit of Bank in connection with this Agreement, all as amended, restated, or
otherwise modified.


    
      
         


      

      
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    “Material Adverse Change” is
(a) a material impairment in the perfection or priority of Bank’s Lien in the
Collateral or in the value of such Collateral; (b) a material adverse change in
the business, operations, or condition (financial or otherwise) of Borrower; or
(c) a material impairment of the prospect of repayment of any portion of the
Obligations.

     

    “Monthly Financial Statements”
is defined in Section 6.2(c).

     

    “Net Income” means, as
calculated on a consolidated basis for Borrower and its Subsidiaries in
accordance with GAAP for any period as at any date of determination, the net
profit (or loss), after provision for taxes, of Borrower and its Subsidiaries
for such period taken as a single accounting period.

     

    “Obligations” are Borrower’s
obligations to pay when due any debts, principal, interest, Bank Expenses and
other amounts Borrower owes Bank now or later, whether under this Agreement, the
Loan Documents, or otherwise, including, without limitation, all obligations
relating to letters of credit (including reimbursement obligations for drawn and
undrawn letters of credit), cash management services, and foreign exchange
contracts, if any, and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to Bank, and
to perform Borrower’s duties under the Loan Documents.

     

    “Operating Documents” are, for
any Person, such Person’s charter documents, as certified by the Secretary of
State of such Person’s state of formation on a date that is no earlier than 30
days prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications
thereto.

     

    “Nicholson/Ramey Subordinated
Debt” means that certain Subordinated Debt in the form of amended
refinance notes (and related loan documents) in the aggregate principal amount
of approximately Three Million Nine Hundred Thousand Dollars ($3,900,000) held
by John L. Nicholson and Charles E. Ramey with a maturity date of January 1,
2014.

     

    “Patents” means all patents,
patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

     

    “Payment/Advance Form” is that
certain form attached hereto as Exhibit
B.

     

    “Perfection Certificate” is
defined in Section 5.1.

     

    “Permitted Indebtedness”
is:

     

    (a)           Borrower’s
Indebtedness to Bank under this Agreement and the other Loan
Documents;

     

    (b)           Indebtedness
of Borrower existing on the Effective Date and shown on the Perfection
Certificate;

     

    (c)           any
Subordinated Debt, including the Nicholson/Ramey Subordinated Debt;

     

    (d)           unsecured
Indebtedness of Borrower to trade creditors incurred in the ordinary course of
business;

     

    (e)           Indebtedness
of Borrower incurred as a result of endorsing negotiable instruments received in
the ordinary course of business;


    
      
         


      

      
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    (f)           Indebtedness
of Borrower secured by Liens permitted under clauses (a) and (c) of the
definition of “Permitted Liens” hereunder;

     

    (g)           extensions,
refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (f) above, provided that the principal amount
thereof is not increased or the terms thereof are not modified to impose more
burdensome terms upon Borrower or its Subsidiary, as the case may be;
and

     

    (h)           unsecured
Indebtedness of Borrower that does not otherwise qualify as Permitted
Indebtedness pursuant to clauses (a) through (g) in an aggregate amount not
exceeding One Hundred Thousand Dollars ($100,000).

     

    “Permitted Investments”
are:

     

    (a)           Investments
of Borrower (including, without limitation, Subsidiaries) existing on the
Effective Date and shown on the Perfection Certificate;

     

    (b)           (i)
Investments of Borrower consisting of Cash Equivalents, and (ii) any Investments
of Borrower permitted by Borrower’s investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved in writing by Bank;

     

    (c)           Investments
of Borrower consisting of the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
Borrower;

     

    (d)           Investments
of Borrower consisting of deposit accounts in which Bank has a perfected
security interest;

     

    (e)           Investments
of Borrower accepted in connection with Transfers permitted by Section
7.1;

     

    (f)           Investments
of Borrower consisting of (i) travel advances and employee relocation loans and
other employee loans and advances in the ordinary course of business, and (ii)
loans to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower’s Board of Directors;

     

    (g)           Investments
of Borrower (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business;

     

    (h)           Investments
of Borrower consisting of notes receivable of, or prepaid royalties and other
credit extensions, to customers and suppliers who are not Affiliates, in the
ordinary course of business; provided that this paragraph (h) shall not apply to
Investments of Borrower in any Subsidiary; and

     

    (i)           Investments
that do not otherwise qualify as a Permitted Investment pursuant to clauses (a)
through (h) in an aggregate amount not exceeding One Hundred Thousand Dollars
($100,000)..

     

    “Permitted Liens”
are:

     

    (a)           Liens
existing on the Effective Date and shown on the Perfection Certificate or
arising under this Agreement and the other Loan Documents;

     

    (b)           Liens
for taxes, fees, assessments or other government charges or levies, either (i)
not due and payable or (ii) being contested in good faith and for which Borrower
maintains adequate reserves on its Books, provided that no
notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations adopted
thereunder;


    
      
         


      

      
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    (c)           purchase
money Liens (i) on Equipment acquired or held by Borrower incurred for financing
the acquisition of the Equipment securing no more than One Hundred Thousand
Dollars ($100,000) in the aggregate amount outstanding, or (ii) existing on
Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the
Equipment;

     

    (d)           Liens
of carriers, warehousemen, suppliers, or other Persons that are possessory in
nature arising in the ordinary course of business so long as such Liens attach
only to Inventory, securing liabilities in the aggregate amount not to exceed
One Hundred Thousand Dollars ($100,000) and which are not delinquent or remain
payable without penalty or which are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;

     

    (e)           Liens
to secure payment of workers’ compensation, employment insurance, old-age
pensions, social security and other like obligations incurred in the ordinary
course of business (other than Liens imposed by ERISA);

     

    (f)           Liens
incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase
other than as a result of accrued interest and penalties;

     

    (g)           leases
or subleases of real property granted in the ordinary course of Borrower’s
business (or, if referring to another Person, in the ordinary course of such
Person’s business), and leases, subleases, non-exclusive licenses or sublicenses
of personal property (other than Intellectual Property) granted in the ordinary
course of Borrower’s business (or, if referring to another Person, in the
ordinary course of such Person’s business), if the leases,
subleases, licenses and sublicenses do not prohibit granting Bank a security
interest therein;

     

    (h)           non-exclusive
licenses of Intellectual Property granted to third parties in the ordinary
course of business, and licenses of Intellectual Property that could not result
in a legal transfer of title of the licensed property that may be exclusive in
respects other than territory and that may be exclusive as to territory only as
to discreet geographical areas outside of the United States; and

     

    (i)           Liens
arising from attachments or judgments, orders, or decrees in circumstances not
constituting an Event of Default under Sections 8.4 and 8.7.

     

    “Person” is any individual,
sole proprietorship, partnership, limited liability company, joint venture,
company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.

     

    “Prime Rate” is Bank’s most
recently announced “prime rate,” even if it is not Bank’s lowest
rate.

     

    “Quick Assets” is, as of a
particular date, Borrower’s unrestricted cash at Bank plus the face amount of
all Eligible Accounts, as of such date.

     

    “Registered Organization” is
any “registered organization” as defined in the Code with such additions to such
term as may hereafter be made.

     

    “Requirement of Law” is as to
any Person, the organizational or governing documents of such Person, and any
law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

     

    “Responsible Officer” is any of
the Chief Executive Officer, President, Chief Financial Officer and Controller
of Borrower.


    
      
         


      

      
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    “Restricted License” is any
material license or other agreement with respect to which Borrower is the
licensee (a) that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower’s interest in such license or agreement or any
other property, or (b) for which a default under or termination of could
interfere with the Bank’s right to sell any Collateral.

     

    “Revolving Line” is an Advance
or Advances in an amount equal to (i) Two Hundred Fifty Thousand Dollars
($250,000) at all times prior to March 31, 2010, provided that Borrower
maintained an Adjusted Quick Ratio of at least 1.15 to 1.0 as of the last day of
the prior calendar month, (ii) Two Hundred Fifty Thousand Dollars ($250,000) at
all times from April 1, 2010 through June 30, 2010, provided that Borrower
maintained an Adjusted Quick Ratio of at least 1.35 to 1.0 as of the last day of
the prior calendar month and (iii) One Million Dollars ($1,000,000) at all times
beginning on July 1, 2010 provided that Borrower maintained an Adjusted Quick
Ratio of at least 1.50 to 1.0 as of the last day of the prior calendar
month.  If Borrower fails to meet the foregoing Adjusted Quick Ratio
Requirements the Revolving Line shall be immediately reduced to Zero Dollars
($0), provided however when Borrower is back in compliance with the foregoing
Adjusted Quick Ratio amounts as of the last day of a subsequent calendar month,
the foregoing amounts of the Revolving Line shall be re-instated for as long as
Borrower remains in compliance therewith.

     

    “Revolving Line Early Termination
Fee” is an amount equal to one percent (1.00%) of the amount of the
Revolving Line if the Revolving Line is terminated by Borrower on or before
the Revolving Line Maturity Date;

     

    “Revolving Line Maturity Date”
is the date three hundred sixty four (364) days from the Effective
Date.

     

    “SEC” shall mean the Securities
and Exchange Commission, any successor thereto, and any analogous Governmental
Authority.

     

    “Subordinated Debt” is
indebtedness incurred by Borrower subordinated to all of Borrower’s now or
hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or
other similar agreement in form and substance satisfactory to Bank entered into
between Bank and the other creditor), on terms acceptable to Bank, including the
Nicholson/Ramey Subordinated Debt.

     

    “Subordination Agreement” is
that certain Subordination Agreement by and among, Charles E. Ramey, John L.
Nicholson, M.D. and the Bank dated as of the Effective Date.

     

    “Subsidiary” is, as to any
Person, a corporation, partnership, limited liability company or other entity of
which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such
Person.  Unless the context otherwise requires, each reference to a
Subsidiary herein shall be a reference to a Subsidiary of Borrower.

     

    “Term Loan” is a loan made by
Bank pursuant to the terms of Section 2.1.4 hereof.

     

    “Term Loan Amount” is an
amount equal to One Million Dollars ($1,000,000).

     

    “Term Loan Prepayment Fee” is
an amount equal to one percent (1.00%) of the outstanding Term Loan if the
prepayment is made on or before the first anniversary of the Effective
Date;

     

    “Term Loan Maturity Date” is
February 9, 2013.

     

    “Term Loan Payment” is defined
in Section 2.1.4(b).

     

    “Total Liabilities” is on any
day, all obligations that should, under GAAP, be classified as liabilities on
Borrower’s consolidated balance sheet, including all
Indebtedness.


    
      
         


      

      
        29

        
          

        

      

      
         


      

    


    “Trademarks” means any
trademark and servicemark rights, whether registered or not, applications to
register and registrations of the same and like protections, and the entire
goodwill of the business of Borrower connected with and symbolized by such
trademarks.

     

    “Transfer” is defined in
Section 7.1.

     

    [Signature page follows.]


    
      
         


      

      
        30

        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the Effective
Date.

     

    BORROWER:

     

    US
DATAWORKS, INC.

     

    
      
        
          
            
              
                	
                        By:

                      	
                        /s/
      Randall J. Frapart

                      
	
                        Name:

                      	
                        Randall
      J. Frapart

                      
	
                        Title:

                      	
                        Chief
      Financial
Officer

                      


              

            

          

        

      

    

    


     

    BANK:

     

    SILICON
VALLEY BANK

     

    
      
        
          
            
              	
                      By:

                    	
                      /s/
      Phillip A. Wright

                    
	
                      Name:

                    	
                      Phillip
      A. Wright

                    
	
                      Title:

                    	
                      Relationship
      Manager

                    


            

          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT A
– COLLATERAL DESCRIPTION

    


    The
Collateral consists of all of Borrower’s right, title and interest in and to the
following personal property:

     

    All
goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), securities, and all
other investment property, supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and

     

    all
Borrower’s Books relating to the foregoing, and any and all claims, rights and
interests in any of the above and all substitutions for, additions, attachments,
accessories, accessions and improvements to and replacements, products, proceeds
and insurance proceeds of any or all of the foregoing.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      EXHIBIT B – LOAN
PAYMENT/ADVANCE REQUEST FORM

      


      
        Deadline
for same day processing is Noon Pacific Time*

      

      


      Fax
To:                                                                                                       Date:
_____________________

      


      


      
        
          
            
              
                
                  
                    	
                            Loan
      Payment:

                          	 
      	
                             
      US DATAWORKS, INC.

                          
	 
      	 
      	 
      
	
                            From
      Account #____________________________

                          	 
      	
                            To
      Account #____________________________

                          
	
                            (Deposit
      Account #)

                          	 
      	
                            (Loan
      Account #)

                          
	
                            Principal
      $_________________________________

                          	 
      	
                            and/or
      Interest $__________________________

                          
	 
      	 
      	 
      
	
                            Authorized
      Signature: _______________________

                          	 
      	
                                    Phone
      Number: _______________________

                          
	
                            Print
      Name/Title: ___________________________

                          	 
      	 
      
	 	 	 


                  

                

              

            

          

        

      

      


      
        
          
            
              
                
                  
                    	
                            Loan
    Advance:

                          
	 
      	 
      	 
      
	
                            Complete
      Outgoing Wire
      Request section below if all or a portion of the funds from this
      loan advance are for an outgoing wire.

                          
	 
      	 
      	 
      
	
                            From
      Account #____________________________

                          	 
      	
                            To
      Account #____________________________

                          
	
                                                                   
      (Loan Account #)

                          	 
      	
                            (Deposit
      Account #)

                          
	 
      	 
      	 
      
	
                            Amount
      of Advance $_______________________

                          	 
      	 
      
	 
      	 
      	 
      
	
                            All
      Borrower’s representations and warranties in the Loan and Security
      Agreement are true, correct and complete in all material respects on the
      date of the request for an advance; provided, however, that such
      materiality qualifier shall not be applicable to any representations and
      warranties that already are qualified or modified by materiality in the
      text thereof (but only to the extent of such qualification or
      modification); and provided, further that those representations and
      warranties expressly referring to a specific date shall be true, accurate
      and complete in all material respects as of such date:

                          
	 
      	 
      	 
      
	
                            Authorized
      Signature: _________________________

                          	 
      	
                                          
      Phone Number: ____________________

                          
	
                            Print
      Name/Title: _____________________________

                          	 
      	 
      
	 	 	 


                  

                

              

            

          

        

      

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      Outgoing Wire
      Request:

                                      Complete
      only if all or a portion of funds from the loan advance above is to be
      wired.

                                      Deadline
      for same day processing is noon, Pacific Time

                                    
	 
      	 
      	 
      
	
                                      Beneficiary
      Name: _____________________________

                                    	 
      	
                                      Amount
      of Wire: $ ______________________________

                                    
	
                                      Beneficiary
      Bank: ______________________________

                                    	 
      	
                                      Account
      Number:  ______________________________

                                    
	
                                      City
      and State:  ________________________________

                                    	 
      	 
      
	 
      	 
      	 
      
	Beneficiary
      Bank Transit (ABA) #:
      _________________     Beneficiary
      Bank Code (Swift, Sort, Chip, etc.): __________
	
                                      (For
      International Wire Only)

                                    
	 
      	 
      	 
      
	Intermediary
      Bank: ______________________________   
      Transit
      (ABA) #: _________________________________
	For
      Further Credit to: ______________________________________________________________________________
      
	 
      	 
      	 
      
	Special
      Instruction: ________________________________________________________________________________
	 
      	 
      	 
      
	
                                      By
      signing below, I (we) acknowledge and agree that my (our) funds transfer
      request shall be processed in accordance with and subject to the terms and
      conditions set forth in the agreements(s) covering funds transfer
      service(s), which 

                                      agreements(s)
      were previously received and executed by me (us).

                                    
	 
      	 
      	 
      
	
                                      Authorized
      Signature: ____________________

                                    	 
      	
                                      2nd
      Signature (if required): ________________________

                                    
	
                                      Print
      Name/Title: ________________________

                                    	 
      	
                                      Print
      Name/Title: ________________________________

                                    
	
                                      Telephone
      #: ___________________________

                                    	 
      	
                                      Telephone
      #:
___________________________________

                                    


                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      


      
        
          

        


      
        * Unless otherwise provided for an
Advance bearing interest at LIBOR.

      


      
        
           


        

        
           


          
            

          

        

        
           


        

      



    EXHIBIT C - BORROWING BASE
CERTIFICATE

    


    
      
        
          

        


      Borrower:
US Dataworks, Inc.

       

      Lender:  Silicon
Valley Bank

       

      Commitment
Amount:       (i) Two Hundred Fifty Thousand
Dollars ($250,000) at all times prior to March 31, 2010, provided that Borrower
maintained an Adjusted Quick Ratio of at least 1.15 to 1.0 as of the last day of
the prior calendar month, (ii) Two Hundred Fifty Thousand Dollars ($250,000) at
all times from April 1, 2010 through June 30, 2010, provided that Borrower
maintained an Adjusted Quick Ratio of at least 1.35 to 1.0 as of the last day of
the prior calendar month and (iii) One Million Dollars ($1,000,000) at all times
beginning on July 1, 2010 provided that Borrower maintained an Adjusted Quick
Ratio of at least 1.50 to 1.0 as of the last day of the prior calendar
month.  If Borrower fails to meet the foregoing Adjusted Quick Ratio
Requirements the Revolving Line shall be immediately reduced to Zero Dollars
($0), provided however when Borrower is back in compliance with the foregoing
Adjusted Quick Ratio amounts as of the last day of a subsequent calendar month,
the foregoing amounts of the Revolving Line shall be re-instated for as long as
Borrower remains in compliance therewith.

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	
                                          ACCOUNTS
      RECEIVABLE

                                        	 	 
      
	
                                          1.

                                        	 	
                                          Accounts
      Receivable (invoiced) Book Value as of ____________

                                        	 	
                                          $_______________

                                        
	
                                          2.

                                        	 	
                                          Additions
      (please explain on reverse)

                                        	 	
                                          $_______________

                                        
	
                                          3.

                                        	 	
                                          TOTAL
      ACCOUNTS RECEIVABLE

                                        	 	
                                          $_______________

                                        
	 
      	 	 
      	 	 
      
	
                                          ACCOUNTS
      RECEIVABLE DEDUCTIONS (without duplication)

                                        	 	 
      
	
                                          4.

                                        	 	
                                          90
      Days Past Invoice Date

                                        	 	
                                          $_______________

                                        
	
                                          5.

                                        	 	
                                          Balance
      of 50% over 90 Day Accounts

                                        	 	
                                          $_______________

                                        
	
                                          6.

                                        	 	
                                          Foreign
      Account Debtor Accounts

                                        	 	
                                          $_______________

                                        
	
                                          7.

                                        	 	
                                          Foreign
      Invoiced Accounts

                                        	 	
                                          $_______________

                                        
	
                                          8.

                                        	 	
                                          Contra/Customer
      Deposit Accounts

                                        	 	
                                          $_______________

                                        
	
                                          9.

                                        	 	
                                          Intercompany/Employee
      Accounts

                                        	 	
                                          $_______________

                                        
	
                                          10.

                                        	 	
                                          Credit
      Balances over 90 Days

                                        	 	
                                          $_______________

                                        
	
                                          11.

                                        	 	
                                          Concentration
      Limits

                                        	 	
                                          $_______________

                                        
	
                                          12.

                                        	 	
                                          U.S.
      Governmental Accounts

                                        	 	
                                          $_______________

                                        
	
                                          13.

                                        	 	
                                          Promotion
      or Demo Accounts; Guaranteed Sale or Consignment Sale
    Accounts

                                        	 	
                                          $_______________

                                        
	
                                          14.

                                        	 	
                                          Accounts
      with Progress/Milestone/Pre-billings; Contract Accounts

                                        	 	
                                          $_______________

                                        
	
                                          15.

                                        	 	
                                          Accounts
      for Retainage Billings

                                        	 	
                                          $_______________

                                        
	
                                          16.

                                        	 	
                                          Trust
      Accounts

                                        	 	
                                          $_______________

                                        
	
                                          17.

                                        	 	
                                          Bill
      and Hold Accounts

                                        	 	
                                          $_______________

                                        
	
                                          18.

                                        	 	
                                          Unbilled
      Accounts

                                        	 	
                                          $_______________

                                        
	
                                          19.

                                        	 	
                                          Non-Trade
      Accounts

                                        	 	
                                          $_______________

                                        
	
                                          20.

                                        	 	
                                          Accounts
      with Extended Term Invoices

                                        	 	
                                          $_______________

                                        
	
                                          21.

                                        	 	
                                          Accounts
      Subject to Chargebacks

                                        	 	
                                          $_______________

                                        
	
                                          22.

                                        	 	
                                          Disputed
      Accounts

                                        	 	
                                          $_______________

                                        
	
                                          23.

                                        	 	
                                          Other
      (please explain on reverse)

                                        	 	
                                          $_______________

                                        
	
                                          24.

                                        	 	
                                          TOTAL
      ACCOUNTS RECEIVABLE DEDUCTIONS

                                        	 	
                                          $_______________

                                        
	
                                          25.

                                        	 	
                                          Eligible
      Accounts (#3 minus #24)

                                        	 	
                                          $_______________

                                        
	
                                          26.

                                        	 	
                                          ELIGIBLE
      AMOUNT OF ACCOUNTS (80% of #25)

                                        	 	
                                          $_______________

                                        
	 
      	 	 
      	 	 
      
	
                                          BALANCES

                                        	 	 
      
	
                                          27.

                                        	 	
                                          Maximum
      Loan Amount

                                        	 	
                                          $_______________

                                        
	
                                          28.

                                        	 	
                                          Total
      Funds Available [Lesser of #26 or 27]

                                        	 	
                                          $_______________

                                        
	
                                          29.

                                        	 	
                                          Present
      balance owing on Line of Credit

                                        	 	
                                          $_______________

                                        
	
                                          30.

                                        	 	
                                          Outstanding
      under Sublimits

                                        	 	
                                          $_______________

                                        
	
                                          31.

                                        	 	
                                          RESERVE
      POSITION (#28 minus #29 and #30)

                                        	 	
                                          $_______________

                                        


                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    [Continued
on following page.]


    
      
         


      

      
        1

        
          

        

      

      
         


      

    


    The
undersigned represents and warrants that this is true, complete and correct, and
that the information in this Borrowing Base Certificate complies with the
applicable representations and warranties contained in the Loan and Security
Agreement between the undersigned and Silicon Valley Bank.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	 
      	
                                  COMMENTS:

                                	 
      	
                                  BANK USE ONLY

                                
	  	  	  	
                                   Received by:  

                                	  
	  	  	  	
                                      authorized signer

                                
	  	
                                  By:

                                	  	  	
                                   Date:  

                                	  
	  	
                                  Authorized Signer

                                	  	
                                   Verified:  

                                	  
	  	
                                  Date:

                                	  	  	
                                    authorized signer

                                
	  	  	  	
                                   Date:  

                                	  
	  	  	  	
                                   Compliance Status:                      Yes           No

                                


                        

                      

                    

                  

                

              

            

          

        

      

    


    
      
          

      

      
        2

        
          

        

      

      
         


      

    


    EXHIBIT
D

    


    BORROWING
RESOLUTIONS

    


    

    


    CORPORATE
BORROWING CERTIFICATE

    


    


    
      
        	
                Borrower:  US Dataworks,
      Inc.

              	 
      	
                Date:
      February __, 2010

              


      

    

    Bank:            Silicon
Valley Bank

    


    I hereby
certify as follows, as of the date set forth above:

     

    1.  I
am the Secretary, Assistant Secretary or other officer of the
Borrower.   My title is as set forth below.

    


    2.  Borrower’s
exact legal name is set forth above.  Borrower is a corporation
existing under the laws of the State of

                                                                   
.

                 [print
name of state]

    


    3.  Attached
hereto are true, correct and complete copies of Borrower’s Articles/Certificate
of Incorporation (including amendments), as filed with the Secretary of State of
the state in which Borrower is incorporated as set forth in paragraph 2
above.  Such Articles/Certificate of Incorporation have not been
amended, annulled, rescinded, revoked or supplemented, and remain in full force
and effect as of the date hereof.

    


    4.  The
following resolutions were duly and validly adopted by Borrower’s Board of
Directors at a duly held meeting of such directors (or pursuant to a unanimous
written consent or other authorized corporate action).  Such
resolutions are in full force and effect as of the date hereof and have not been
in any way modified, repealed, rescinded, amended or revoked, and Bank may rely
on them until Bank receives written notice of revocation from
Borrower.

    


    Resolved,
that any one of the
following officers or employees of Borrower, whose names, titles and signatures
are below, may act on behalf of Borrower:

    
      	
               

               

              Name

            	 	
               

               

              Title

            	 	
               

               

              Signature

            	 	
              Authorized to

              Add or Remove

              Signatories

            
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	
              o

            
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	
              o

            
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	
              o

            
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	
              o

            


    

    


    Resolved
Further, that any
one of the persons designated above with a checked box beside his or her
name may, from time to time, add or remove any individuals to and from the above
list of persons authorized to act on behalf of Borrower.

    


    Resolved
Further, that
such individuals may, on behalf of Borrower:

    


    Borrow
Money.  Borrow money from Silicon Valley Bank
(“Bank”).

    Execute Loan
Documents.  Execute any loan documents Bank
requires.

    Grant
Security.  Grant Bank a security interest in any of Borrower’s
assets.

    Negotiate
Items.  Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

    Letters of
Credit.  Apply for letters of credit from Bank.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Further
Acts.  Designate other individuals to request advances, pay
fees and costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they believe to be
necessary to effectuate such resolutions.

    


    Resolved
Further, that all
acts authorized by the above resolutions and any prior acts relating thereto are
ratified.

    


    5.  The
persons listed above are Borrower’s officers or employees with their titles and
signatures shown next to their names.

    


    
      
        
          
            
              	 
      	
                      US
      DATAWORKS, INC.

                    
	 
      	 
      
	 
      	
                      By:

                    	 
      
	 
      	
                      Name:

                    	 
      
	 
      	
                      Title:

                    	 
      


            

          

        

      

    

    


    *** If the Secretary, Assistant
Secretary or other certifying officer executing above is designated by the
resolutions set forth in paragraph 4 as one of the authorized signing officers,
this Certificate must also be signed by a second authorized officer or director
of Borrower.

    


    I, the __________________________ of
Borrower, hereby certify as to paragraphs 1 through 5 above, as

              [print
title]

    of the
date set forth above.

    


    
      
        
          
            
              	 
      	
                      By:

                    	 
      
	 
      	
                      Name:

                    	 
      
	 
      	
                      Title:

                    	  
      


            

          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
E

    


    COMPLIANCE
CERTIFICATE

     

    
      
        
          	
                  TO: 
      

                	
                  SILICON
      VALLEY BANK

                	 
      	
                  Date:

                	 
      
	
                  FROM:
      

                	
                  US
      DATAWORKS, INC.

                	 
      	 
      	 
      


        

      

    

    


    The
undersigned authorized officer of US DATAWORKS, INC. (“Borrower”) certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”):

     

    (1) Borrower
is in complete compliance for the period ending _______________ with all
required covenants except as noted below; (2) there are no Events of
Default except as noted below; (3) all representations and warranties in
the Agreement are true and correct in all material respects on this date except
as noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof (but only to the extent of such
qualification or modification); and provided, further that those representations
and warranties expressly referring to a specific date shall be true, accurate
and complete in all material respects as of such date; (4) Borrower, and
each of its Subsidiaries, has timely filed all required tax returns and reports,
and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement; and (5) no
Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank except for Permitted
Liens.

    


    Attached
are the required documents supporting this certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes and subject to normal year-end adjustments for
interim period unaudited financial statements.  The undersigned
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the applicable
terms of the Agreement, and that compliance is determined not just at the date
this certificate is delivered.  Capitalized terms used but not
otherwise defined herein shall have the meanings given them in the
Agreement.

     

    
      	
              Please
      indicate compliance status by circling Yes/No under “Complies”
      column.

            


    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  	
                                                          Reporting Covenant

                                                        	 	
                                                          Required

                                                        	 	
                                                          Complies

                                                        
	 
      	 	 
      	 	 
      
	
                                                          Monthly
      financial statements with

                                                          Compliance
      Certificate

                                                        	 	
                                                          Monthly
      within 30 days

                                                        	 	
                                                          Yes   No

                                                        
	
                                                          Annual
      financial statement (CPA Audited) + CC

                                                        	 	
                                                          FYE
      within 105 days

                                                        	 	
                                                          Yes   No

                                                        
	
                                                          10-Q,
      10-K and 8-K

                                                        	 	
                                                          Within
      5 Business Days after filing with

                                                          SEC

                                                        	 	
                                                          Yes   No

                                                        
	
                                                          Borrowing
      Base Certificate A/R & A/P Agings, Deferred Revenue
    Report

                                                        	 	
                                                          Monthly
      within 30 days

                                                        	 	
                                                          Yes   No

                                                        
	
                                                          Annual
      Projections

                                                        	 	
                                                          The
      earlier of 15 days after board

                                                          approval
      or 4/30

                                                        	 	
                                                          Yes   No

                                                        
	 
      
	
                                                          The
      following Intellectual Property was registered (or a registration
      application submitted) after the Effective Date (if no registrations,
      state “None”)

                                                          ___________________________________________________________________________________________

                                                          ___________________________________________________________________________________________

                                                           

                                                        


                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            Financial Covenant

                                          	 	
                                            Required

                                          	 	
                                            Actual

                                          	 	
                                            Complies 

                                          
	 
      	 	 
      	 	 
      	 	 
      
	
                                            Maintain
      on a Monthly Basis:

                                          	 	 
      	 	 
      	 	 
      
	
                                            Minimum
      Adjusted Quick Ratio

                                          	 	
                                            *

                                          	 	
                                            _____:1.0

                                          	 	
                                            Yes   No

                                          
	
                                            Minimum
      Fixed Charge Coverage Ratio

                                          	 	
                                            1.40:1.0

                                          	 	
                                            _____:1.0

                                          	 	
                                            Yes   No

                                          


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    *
at least (i) 1.15 to 1.0 for measurement dates occurring from the Effective Date
through March 31, 2010, (ii) 1.35 to 1.0 for measurement dates occurring from
April 1, 2010 through June 30, 2010 and (iii) 1.50 to 1.0 for measurement dates
occurring after June 30, 2010.

    


    The
following financial covenant analyses and information set forth in Schedule 1
attached hereto are true and accurate as of the date of this
Certificate.

     

    The
following are the exceptions with respect to the certification
above:  (If no exceptions exist, state “No exceptions to
note.”)

     

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 	
                                    US
      DATAWORKS, INC.

                                  	
                                    BANK
      USE ONLY

                                  
	 	 
      	 
      
	 	 
      	
                                    Received
      by: _____________________

                                  
	 	
                                    By:

                                  	 	 
      	
                                    authorized
      signer

                                  
	 	
                                    Name:

                                  	 	 
      	
                                    Date:  _________________________

                                  
	 	
                                    Title:

                                  	 	 
      	 
      
	 	 
      	
                                    Verified:
      ________________________

                                  
	 	 
      	
                                    authorized
      signer

                                  
	 	 
      	
                                    Date:  _________________________

                                  
	 	 
      	 
      
	 	 
      	
                                    Compliance
      Status:               Yes     No

                                  


                          

                        

                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Schedule 1 to Compliance
Certificate

    


    Financial Covenants of
Borrower

    


    In the
event of a conflict between this Schedule and the Loan Agreement, the terms of
the Loan Agreement shall govern.

     

    Dated:  ____________________

    


    I.           Adjusted Quick Ratio (Section
6.7(a))

     

    Required:       at
least (i) 1.15 to 1.0 for measurement dates occurring from the Effective Date
through March 31, 2010, (ii) 1.35 to 1.0 for measurement dates occurring from
April 1, 2010 through June 30, 2010 and (iii) 1.50 to 1.0 for measurement dates
occurring after June 30, 2010.

    


    Actual:

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                   
      A.

                                	
                                  Aggregate
      amount of the unrestricted cash of Borrower held at Bank as of the
      measurement date

                                	 	
                                  $           

                                
	 	 	 	 
	
                                   
      B.

                                	
                                  Aggregate
      amount of the Eligible Accounts of Borrower as of the measurement
      date

                                	 	
                                  $           

                                
	 	 	 	 
	
                                   
      C.

                                	
                                  Quick
      Assets (line A plus line B)

                                	 	
                                  $           

                                
	 	 	 	 
	
                                   
      D.

                                	
                                  Aggregate
      amount of Obligations to Bank that matures within one (1) year as of the
      measurement date

                                	 	
                                  $           

                                
	 	 	 	 
	
                                   
      E.

                                	
                                  Aggregate
      amount of liabilities that should, under GAAP, be classified as
      liabilities on Borrower’s consolidated balance sheet, including all
      Indebtedness, and not otherwise reflected in line D above that matures
      within one (1) year as of the measurement date

                                	 	
                                   

                                  $           

                                
	 	 	 	 
	
                                   
      F.

                                	
                                  Aggregate
      amount of Deferred Revenue as of the measurement date

                                	 	
                                  $           

                                
	 	 	 	 
	
                                   
      G.

                                	
                                  Aggregate
      amount of the current portion Subordinated Debt as of the measurement
      date

                                	 	
                                  $           

                                
	 	 	 	 
	
                                   
      H.

                                	
                                  Current
      Liabilities (line D plus line E minus line F minus line G)

                                	 	
                                  $           

                                
	 	 	 	 
	
                                   
      I.

                                	
                                  Quick
      Ratio (line C divided by line H)

                                	 	
                                  ______

                                


                        

                      

                    

                  

                

              

            

          

        

      

    

    


    Is line I
equal to or greater than at least (i) 1.15 to 1.0 for measurement dates
occurring from the Effective Date through March 31, 2010, (ii) 1.35 to 1.0 for
measurement dates occurring from April 1, 2010 through June 30, 2010 and (iii)
1.50 to 1.0 for measurement dates occurring after June 30, 2010?

    


                       No,
not in
compliance                                                                                       Yes,
in compliance


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    II.           Fixed Charge Coverage Ratio
(Section 6.7(b))

    


    Required:                      1.40:1.00
for all measurement dates

    


    Actual:

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	
                                           
      A.

                                        	
                                          Net
      Income (for the 6 months ending on the measurement date)

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      B.

                                        	
                                          To
      the extent included in the determination of Net Income (each, for the
      trailing 6 months):

                                        	 
      
	 	 	 
	 
      	
                                          1.           Income
      tax expense

                                        	
                                          $           

                                        
	 	 	 
	 
      	
                                          2.           Depreciation
      expense

                                        	
                                          $           

                                        
	 	 	 
	 
      	
                                          3.           Amortization
      expense

                                        	
                                          $           

                                        
	 	 	 
	 
      	
                                          4.           Net
      Interest Expense

                                        	
                                          $           

                                        
	 	 	 
	 
      	
                                          5.           sum
      of lines 1 through 4

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      C.

                                        	
                                          EBITDA
      (line A plus line B)

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      D.

                                        	
                                          Non-cash
      stock based compensation expense (for the 6 months ending on the
      measurement date)

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      E.

                                        	
                                          Cash
      taxes (for the 6 months ending on the measurement date)

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      F.

                                        	
                                          Non-financed
      capital expenditures (for the 6 months ending on the measurement
      date)

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      G.

                                        	
                                          Interest
      payments made on all Indebtedness (for the 6 months ending on the
      measurement date) *

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      H.

                                        	
                                          Principal
      payments made on all Indebtedness (for the 6 months ending on the
      measurement date)*

                                        	
                                          $           

                                        
	 	 	 
	
                                           
      I.

                                        	
                                          Fixed
      Charge Coverage Ratio is the sum of line C plus line D minus line E minus
      line F, all divided by the sum of line G and line H

                                        	
                                          ______

                                        


                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    *for the
first six (6) months following the Effective Date all principal and
interest  payments made by Borrower with respect to all Indebtedness
shall be annualized and divided by two (2).

    


    Is line I
equal to or greater than 1.40:1:00?

     

    
                         No,
not in
compliance                                                                                       Yes,
in compliance