Unassociated Document


    FORBEARANCE

    TO

    LOAN
AND SECURITY AGREEMENT

     

    This
FORBEARANCE to Loan and
Security Agreement (this “Forbearance”) is
entered into this 20th day of September, 2010 by and between Silicon Valley Bank
(“Bank”) and US DATAWORKS, INC., a
Nevada corporation (“Borrower”) whose address is One Sugar Creek Center
Blvd., 5th Floor, Sugar
Land, TX 77478.

     

    Recitals

     

    1.           Bank and Borrower have entered into that
certain Loan and Security Agreement dated as of February 9, 2010, as
amended by that certain First Amendment to Loan and Security Agreement dated as
of March 5, 2010 and that certain Second Amendment to Loan and Security
Agreement dated as of April 23, 2010 (as the same may from time to time be
further amended, modified, supplemented or restated, the “Loan
Agreement”).  Bank has extended credit to Borrower for the purposes
permitted in the Loan Agreement.

     

    2.           Borrower
is currently in default of the Loan Agreement for (I) failing to comply
with the covenants set forth in (i) Section 6.7(a) of the Loan Agreement for the
April, May, June and July 2010 measuring periods and (ii) Section 6.7(b) of the
Loan Agreement for the May, June and July 2010 measuring periods and (II) making
payments with respect to Subordinated Debt in violation of Section 7.9 of the
Loan Agreement and Section 3 of the Subordination Agreement (collectively, the
“Existing Defaults”).

     

    3.           Borrower
has requested that Bank forbear from exercising its rights and remedies against
Borrower from the date hereof through September 30, 2010 (the “Forbearance
Period”).  Although Bank is under no obligation to do so, Bank is
willing to forbear from exercising its rights and remedies against Borrower
through the Forbearance Period on the terms and conditions set forth in this
Forbearance, so long as Borrower complies with the terms, covenants and
conditions set forth in this Forbearance in a timely manner.

     

    Agreement

     

    Now,
Therefore, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

     

    1.           Definitions.  Capitalized
terms used but not defined in this Forbearance shall have the meanings given to
them in the Loan Agreement.

     

    2.           Forbearance.

     

    2.1           Forbearance
Period.  So long as no Event of Default, other than the
Existing Defaults, occurs, subject to the terms and conditions set forth herein,
Bank shall forbear from filing any legal action or instituting or enforcing any
rights and remedies it may have against Borrower through the Forbearance
Period.  Except as expressly provided herein, this Forbearance does
not constitute a waiver or release by Bank of any Obligations or of any existing
Event of Default other than the Existing Defaults or Event of Default which may
arise in the future after the date of execution of this
Forbearance.  If Borrower does not comply with the terms of this
Forbearance, Bank shall have no further obligations under this Forbearance and
shall be permitted to exercise at such time any rights and remedies against
Borrower as it deems appropriate in its sole and absolute
discretion.  Borrower understands that Bank has made no commitment and
is under no obligation whatsoever to grant any additional extensions of time at
the end of the Forbearance Period.

     


    
      
         


      

      
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    2.2           Forbearance
Terms.  Repayment and performance of all obligations of
Borrower to Bank under the Loan Agreement and this Forbearance shall be secured
by the Collateral.  Borrower shall not be permitted to request and
Bank shall not make any Credit Extensions until the Existing Defaults have been
waived in writing by Bank.

     

    3.           Limitation
of Forbearance.

     

    3.1           This
Forbearance is effective for the purposes set forth herein and shall be limited
precisely as written and shall not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan
Document, or (b) otherwise prejudice any right or remedy which Bank may now
have or may have in the future under or in connection with any Loan
Document.

     

    3.2           This
Forbearance shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents are hereby ratified and confirmed and
shall remain in full force and effect.

     

    4.           Representations and
Warranties.  To induce Bank to enter into this Forbearance,
Borrower hereby represents and warrants to Bank as follows:

     

    4.1           Immediately
after giving effect to this Forbearance and the delivery of the updates to the
Perfection Certificate (which Bank acknowledges it has received and hereby
consents to), (a) the representations and warranties contained in the Loan
Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to
an earlier date, in which case they are true and correct as of such date), and
(b) no Event of Default other than the Existing Defaults has occurred and is
continuing;

     

    4.2           Borrower
has the power and authority to execute and deliver this Forbearance and to
perform its obligations under the Loan Agreement;

     

    4.3           The
organizational documents of Borrower delivered to Bank on the Effective Date as
supplemented by the additional organizational documents subsequently delivered
to Bank (which Bank acknowledges it has received) remain true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;

     

    4.4           The
execution and delivery by Borrower of this Forbearance and the performance by
Borrower of its obligations under the Loan Agreement have been duly authorized
by all necessary action on the part of Borrower;

     

    4.5           The
execution and delivery by Borrower of this Forbearance and the performance by
Borrower of its obligations under the Loan Agreement do not and will not
contravene (a) any law or regulation binding on or affecting Borrower,
(b) any contractual restriction with a Person binding on Borrower,
(c) any order, judgment or decree of any court or other governmental or
public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

     

    4.6           The
execution and delivery by Borrower of this Forbearance and the performance by
Borrower of its obligations under the Loan Agreement do not require any order,
consent, approval, license, authorization or validation of, or filing, recording
or registration with, or exemption by any governmental or public body or
authority, or subdivision thereof, binding on either Borrower, except as already
has been obtained or made; and

     

    4.7           This
Forbearance has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of general
application and equitable principles relating to or affecting creditors’
rights.

     

    
      
         

      

      
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    5.           Prior
Agreement.  The Loan Documents are hereby ratified and
reaffirmed and shall remain in full force and effect.  This
Forbearance is not a novation and the terms and conditions of this Forbearance
shall be in addition to and supplemental to all terms and conditions set forth
in the Loan Documents.  In the event of any conflict or inconsistency
between this Forbearance and the terms of such documents, the terms of this
Forbearance shall be controlling, but such document shall not otherwise be
affected or the rights therein impaired.

     

    6.           Release by
Borrower.

     

    6.1           FOR GOOD AND VALUABLE
CONSIDERATION, Borrower hereby forever relieves, releases, and discharges
Bank and its present or former employees, officers, directors, agents,
representatives, attorneys, and each of them, from any and all claims, debts,
liabilities, demands, obligations, promises, acts, agreements, costs and
expenses, actions and causes of action, of every type, kind, nature, description
or character whatsoever, whether known or unknown, suspected or unsuspected,
absolute or contingent, arising out of or in any manner whatsoever connected
with or related to facts, circumstances, issues, controversies or claims
existing or arising from the beginning of time through and including the date of
execution of this Forbearance (collectively “Released
Claims”).  Without limiting the foregoing, the Released Claims
shall include any and all liabilities or claims arising out of or in any manner
whatsoever connected with or related to the Loan Documents, the Recitals hereto,
any instruments, agreements or documents executed in connection with any of the
foregoing or the origination, negotiation, administration, servicing and/or
enforcement of any of the foregoing.

     

    6.2           In
furtherance of this release, Borrower expressly acknowledges and waives any and
all rights under Section 1542 of the California Civil Code, which provides as
follows:

     

    “A general release does not
extend to claims which the creditor does not know or expect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.” (Emphasis
added.)

     

    6.3           By
entering into this release, Borrower recognizes that no facts or representations
are ever absolutely certain and it may hereafter discover facts in addition to
or different from those which it presently knows or believes to be true, but
that it is the intention of Borrower hereby to fully, finally and forever settle
and release all matters, disputes and differences, known or unknown, suspected
or unsuspected; accordingly, if Borrower should subsequently discover that any
fact that it relied upon in entering into this release was untrue, or that any
understanding of the facts was incorrect, Borrower shall not be entitled to set
aside this release by reason thereof, regardless of any claim of mistake of fact
or law or any other circumstances whatsoever.  Borrower acknowledges
that it is not relying upon and has not relied upon any representation or
statement made by Bank with respect to the facts underlying this release or with
regard to any of such party’s rights or asserted rights.

     

    6.4           This
release may be pleaded as a full and complete defense and/or as a
cross-complaint or counterclaim against any action, suit, or other proceeding
that may be instituted, prosecuted or attempted in breach of this
release.  Borrower acknowledges that the release contained herein
constitutes a material inducement to Bank to enter into this Forbearance, and
that Bank would not have done so but for Bank’s expectation that such release is
valid and enforceable in all events.

     

    6.5           Borrower
hereby represents and warrants to Bank, and Bank is relying thereon, as
follows:

     

    (a)           Except
as expressly stated in this Forbearance, neither Bank nor any agent, employee or
representative of Bank has made any statement or representation to Borrower
regarding any fact relied upon by Borrower in entering into this
Forbearance.

     


    
      
         


      

      
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    (b)           Borrower
has made such investigation of the facts pertaining to this Forbearance and all
of the matters appertaining thereto, as it deems necessary.

     

    (c)           The
terms of this Forbearance are contractual and not a mere recital.

     

    (d)           This
Forbearance has been carefully read by Borrower, the contents hereof are known
and understood by Borrower, and this Forbearance is signed freely, and without
duress, by Borrower.

     

    (e)           Borrower
represents and warrants that it is the sole and lawful owner of all right, title
and interest in and to every claim and every other matter which it releases
herein, and that it has not heretofore assigned or transferred, or purported to
assign or transfer, to any person, firm or entity any claims or other matters
herein released.  Borrower shall indemnify Bank, defend and hold it
harmless from and against all claims based upon or arising in connection with
prior assignments or purported assignments or transfers of any claims or matters
released herein.

     

    7.           Counterparts.  This
Forbearance may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.

     

    8.           Effectiveness.  This
Forbearance shall be deemed effective upon (a) the due execution and delivery to
Bank of this Forbearance by each party hereto, (b) Borrower’s repayment of all
Obligations owing to Bank under the Revolving Line in excess of One Hundred
Thousand Dollars ($100,000), (c) Borrower’s payment of forbearance fee in
an amount equal to Two Thousand Five Hundred Dollars ($2,500) and (d) the due execution and delivery to Bank
of completed Borrowing Resolutions for Borrower.

     

    9.           Governing Law.  This
Forbearance and the rights and obligations of the parties hereto shall be
governed by and construed in accordance with the laws of the State of
California.

     

    [Signature
page follows.]

     


    
      
         


      

      
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    In Witness
Whereof, the parties hereto have caused this Forbearance to be duly
executed and delivered as of the date first written above.

     

    
      
        	
                BANK

                 

                SILICON
      VALLEY BANK

                 

                 

                By:
      /s/ Phillip A.
      Wright

                Name:  Phillip A.
      Wright

                Title:
      Relationship
      Manager

              	
                BORROWER

                 

                US
      DATAWORKS, INC.

                 

                 

                By:
      /s/ Randall J.
      Frapart

                Name:  Randall J.
      Frapart

                Title:
      Chief Financial
      Officer