FORBEARANCE TO LOAN AND SECURITY AGREEMENT
FORBEARANCE
TO
LOAN
AND SECURITY AGREEMENT
This
FORBEARANCE to Loan and
Security Agreement (this “Forbearance”) is
entered into this 30th day of September, 2010 by and between Silicon Valley Bank
(“Bank”) and US DATAWORKS, INC., a Nevada corporation (“Borrower”) whose address
is One ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇.
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”). Capitalized terms used but not otherwise defined herein
shall have the meanings set forth for such terms in 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, July and August 2010 measuring periods and (ii) Section 6.7(b)
of the Loan Agreement for the May, June, July and August 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
had requested that Bank, and Bank had agreed, pursuant to that certain
Forbearance to Loan and Security Agreement by and between Bank and Borrower
entered into on September 20, 2010, to forbear from exercising its rights and
remedies against Borrower with respect to the Existing Defaults from the date
thereof through September 30, 2010.
4. Borrower
has requested that Bank continue to forbear from exercising its rights and
remedies against Borrower from the date hereof through October 13, 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.
1
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.
2.3 Consent to Subordinated Debt
Payments. Notwithstanding the provisions of Section 7.9 of the
Loan Agreement and Section 3 of the Subordination Agreement, Bank hereby
consents to payments by Borrowers in respect of Subordinated Debt during the
Forbearance Period in an amount not to exceed Twenty Nine Thousand Two Hundred
Dollars ($29,200) in the aggregate.
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, (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;
2
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.
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.
3
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.
(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 and (b) 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.]
4
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/ ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
Title:
Relationship
Manager
|
BORROWER
US
DATAWORKS, INC.
By:
/s/ ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Title:
Chief Financial
Officer
|
5