Unassociated Document


    
      FORBEARANCE
AND FIRST AMENDMENT

       

      TO

       

      AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT

       

      This
FORBEARANCE AND FIRST
AMENDMENT to Amended and Restated Loan and Security Agreement (this
“Amendment”) is entered
into as of February 8, 2011 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, Sugarland, TX 77478.

       

      Recitals

       

      A. Bank and
Borrower have entered into that certain Amended and Restated Loan and Security
Agreement dated effective as of October 27, 2010 (as the same may from time to
time be amended, modified, supplemented or restated, the “Loan
Agreement”).  Bank has extended credit to Borrower for the
purposes permitted in the Loan Agreement.

       

      B. Borrower
is currently in default of the Loan Agreement for failing to comply with the
covenant set forth in Section 6.7(a) of the Loan Agreement as in effect prior to
the date hereof for the three month period ending December 31, 2010 (the “Existing
Default”).

       

      C. Borrower
has requested that Bank forbear from exercising its rights and remedies against
Borrower from the date hereof through April 30, 2011 (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
Amendment, so long as Borrower complies with the terms, covenants and conditions
set forth in this Amendment in a timely manner.

       

      D. Borrower
has further requested that Bank amend the Loan Agreement to (i) extend the
Maturity Date and (ii) make certain other revisions to the Loan Agreement as
more fully set forth herein.  Bank has agreed to so amend certain
provisions of the Loan Agreement, but only to the extent, in accordance with the
terms, subject to the conditions and in reliance upon the representations and
warranties set forth below.

       

      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 Amendment 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 Default, 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 Amendment does not
constitute a waiver or release by Bank of any Obligations or of any existing
Event of Default other than the Existing Default or Event of Default which may
arise in the future after the date of execution of this Amendment.  If
Borrower does not comply with the terms of this Amendment, Bank shall have no
further obligations under this Amendment 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.

       

      2.2 Forbearance
Terms.  Repayment and performance of all obligations of
Borrower to Bank under the Loan Agreement and this Amendment shall be secured by
the Collateral.

       

       

      
        
           

        

        
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      3. Amendments
to Loan Agreement.

       

      3.1 Section 6.2 (Financial Statements,
Reports, Certificates).  Section 6.2(e) is amended in its
entirety and replaced with the following:

       

      “(e)           Provide
Bank with, as soon as available, but no later than thirty (30) days following each
Reconciliation Period, an aged listing of accounts receivable and accounts
payable by invoice date, in form acceptable to Bank.”

       

      3.2 Section 6.7 (Financial
Covenant). Section 6.7(a) is amended in its entirety and replaced with
the following:

       

      “(a)           EBITDA Performance to
Plan.  As of January 31, 2011, Borrower’s EBITDA for the three
(3) months ending on such measurement date shall be at least Two Hundred Fifty
Thousand Dollars ($250,000).  As of February 28, 2011, Borrower’s
EBITDA for the three (3) months ending on such measurement date shall be at
least Two Hundred Forty One Thousand Dollars ($241,000).  As of March
31, 2011, Borrower’s EBITDA for the three (3) months ending on such measurement
date shall be at least Two Hundred Twenty Three Thousand Dollars
($223,000).  As of the last day of each month beginning with the month
ending April 30, 2011, Borrower’s EBITDA for the three (3) months ending on such
measurement date shall be at least an amount mutually agreed upon between
Borrower and Bank on or prior to such date.

       

      3.3 Section 13
(Definitions).  The following term and its respective
definition set forth in Section 13.1 is amended in its entirety and replaced
with the following:

       

      “Maturity Date” is May 9,
2011.

       

      3.4 Section 13
(Definitions).  Subsection (o) in the definition of the term
“Eligible Accounts” set forth in Section 13.1 is hereby amended in its entirety
and replaced with the following:

       

      “(o)           Accounts
owing from an Account Debtor with respect to which Borrower has recognized
Deferred Revenue (but only to the extent of such Deferred Revenue), unless
otherwise consented to by Bank in writing, it being understood that when
Borrower is able to record such Deferred Revenue as actual revenue, the amount
of such recordable actual revenue shall become an Eligible
Account;”

       

      3.5 Exhibit B
is hereby replaced with Exhibit B attached hereto.

       

      3.6 Notwithstanding
anything to the contrary contained in the Loan Agreement or the Amended and
Restated Subordination Agreement by and between Bank and the creditors a party
thereto and approved by Borrower, made as of October 27, 2010, Bank hereby
consents to Borrower making the interest payment on the Subordinated Debt due in
January 2011 provided that the amount of such interest payment shall not exceed
Thirty Thousand One Hundred Dollars ($30,100).

       

      3.7 Notwithstanding
anything to the contrary contained in the Loan Agreement, the existence of the
Existing Default, in and of itself, will not prevent Bank from receiving
Advances during the Forbearance Period.

       

      4. Limitation
of Amendments.

       

      4.1 The
amendments set forth in Section
3, above, are 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.

       

       

      
        
           

        

        
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      4.2 This
Amendment 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, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

       

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

       

      5.1 Immediately
after giving effect to this Amendment (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 Default has
occurred and is continuing;

       

      5.2 Borrower
has the power and authority to execute and deliver this Amendment and to perform
its obligations under the Loan Agreement, as amended by this
Amendment;

       

      5.3 The
organizational documents of Borrower delivered to Bank on the Effective Date
remain true, accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect;

       

      5.4 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized by all necessary action on the part of
Borrower;

       

      5.5 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, 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;

       

      5.6 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, 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

       

      5.7 This
Amendment 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.

       

      6. Prior
Agreement.  Except as expressly provided for in this Amendment,
the Loan Documents, as amended by this Amendment, are hereby ratified and
reaffirmed and shall remain in full force and effect.  This Amendment
is not a novation and the terms and conditions of this Amendment 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
Amendment and the terms of such documents, the terms of this Amendment shall be
controlling, but such document shall not otherwise be affected or the rights
therein impaired.

       

      7. Release
by Borrower.

       

      7.1 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 Amendment (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.

       

      7.2 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.)

       

      7.3 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.

       

      7.4 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 Amendment, and that
Bank would not have done so but for Bank’s expectation that such release is
valid and enforceable in all events.

       

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

       

      (a) Except as
expressly stated in this Amendment, 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
Amendment.

       

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

       

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

       

      (d) This
Amendment has been carefully read by Borrower, the contents hereof are known and
understood by Borrower, and this Amendment 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.

       

      8. Counterparts.  This
Amendment 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.

       

       

      
        
           

        

        
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      9. Effectiveness.  This
Amendment shall be deemed effective upon (a) the due execution and delivery
to Bank of this Amendment by each party hereto, (b) Borrower’s payment of
an amendment and forbearance fee in an amount equal to Five Thousand Dollars
($5,000), and (c) the due execution and delivery to Bank of updated
Borrowing Resolutions.

       

      10. Governing Law.  This
Amendment 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.

       

      [Balance of Page Intentionally Left
Blank]

       

       

      
 

      
        
           

        

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

       

      
        
          	
                  BANK

                   

                  SILICON
      VALLEY BANK

                   

                   

                   

                  By:
      Priya
      Iyer

                  Name:
      Priya
      Iyer

                  Title:
      Relationship
      Manager

                	
                  BORROWER

                   

                  US
      DATAWORKS, INC.

                   

                   

                   

                  By:
      Randall J.
      Frapart

                  Name:
      Randall J.
      Frapart

                  Title:
      Chief Financial
      Officer

                


        

      

      


      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      [Signature Page to Forbearance and
First Amendment to

       

      Amended and Restated Loan and
Security Agreement]

       

      


       

      


       

       

       

       

       

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