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EX-10.1 - US DATAWORKS INC | v200637_ex10-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date of
Report (Date of Earliest Event Reported): November 2, 2010 (October
27, 2010)
US DATAWORKS,
INC.
(Exact
name of registrant as specified in its charter)
Nevada
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001-15835
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84-1290152
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||
(State
or Other Jurisdiction of
Incorporation)
|
(Commission
File Number)
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(I.R.S.
Employer
Identification
Number)
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One
Sugar Creek Blvd., 5th
Floor
Sugar
Land, Texas
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77478
|
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(Address
of principal executive offices)
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(Zip
Code)
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(281) 504-8000
(Registrant’s
telephone number,
including
area code)
N/A
(Former
name or former address, if changed since last report.)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligations of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240-13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement
Effective
as of October 27, 2010, the Company entered into an Amended and Restated Loan
and Security Agreement (the “New Loan Agreement”) with Silicon Valley Bank
(“SVB”) and related agreements and documents providing for a senior credit
facility comprised of an asset-based accounts receivable line of credit (the
“A/R Line of Credit”) and a term loan (the “New Credit
Facility”). The New Loan Agreement amends and restates in its
entirety that certain Loan and Security Agreement between the Company and SVB
dated as of February 9, 2010, as amended by that certain First Amendment to Loan
and Security Agreement dated March 5, 2010 and that certain Second Amendment to
Loan and Security Agreement dated April 23, 2010 (the “Prior Loan
Agreement”).
In
connection with the closing of the New Credit Facility, the Company repaid
$402,750 of the outstanding principal amount of the term loan provided by SVB
under the Prior Loan Agreement (the “Prior Term Loan”), leaving a principal
balance of $402,750 on such term loan that is provided under and governed by the
New Loan Agreement (the “Refinanced Term Loan”). The maturity date of
the Refinanced Term Loan is February 1, 2013. The Refinanced Term
Loan accrues interest at the fixed annual rate of 7.00% and is payable
monthly. Principal payments on the Refinanced Term Loan will be made
in twenty eight (28) equal monthly installments beginning on November 1,
2010. The Company used its cash on hand and borrowings under the A/R
Line of Credit to fund the partial repayment of the Prior Term
Loan.
The
maximum availability under the A/R Line of Credit is $1,000,000. The
maturity date of the A/R Line of Credit is February 8, 2011. The
following finance charges and handling fees apply to the A/R Line of
Credit:
·
|
A
finance charge equal to 1.25% above SVB’s prime rate will
be applied to the full face amount of the financed
receivables.
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·
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An
additional collateral handling fee equal to 0.25% per month will applied
to the full face amount of the financed receivables. This
collateral handling fee will reduce to 0.10% per month if the Company’s
“adjusted quick ratio” is greater than 1.30 at all times during an
applicable testing month, with such reduction being effective for the
calendar month which is two months after such testing month and where the
“adjusted quick ratio” equals (A) cash on hand plus the amount of all
eligible accounts divided by (B) current
liabilities minus deferred revenue minus the portion of subordinated debt
that constitutes current
liabilities.
|
For
periods where the Company’s adjusted quick ratio is less than 1.30, it will be
subject to the higher collateral handling fee, yielding an indicative annual
interest rate on the A/R Line of Credit of approximately 10.31% based on the
current SVB prime rate. For periods where the collateral handling fee
is reduced as discussed above, the Company’s indicative annual interest rate on
the A/R Line of Credit would be approximately 8.06% based on the current SVB
prime rate. The finance charges and collateral handling fees for a
particular financed receivable are due when the advance made on such financed
receivable becomes due (as discussed below).
An
advance for a particular financed receivable under the A/R Line of Credit is
required to be repaid on the earlier to occur of (i) the date on which payment
is received on such financed receivable, (ii) the date on which such financed
receivable is no longer an eligible account, (iii) the date on which any
adjustment is asserted to such financed receivable (but only to the extent of
the adjustment if such financed receivable remains otherwise an eligible
account), (iv) the date on which there is a breach of certain warranties or
representations set forth in the New Loan Agreement related to such financed
receivable, or (v) the maturity date of the A/R Line of Credit.
-2-
Subject
to the commitment limits described above, the Company can borrow up to eighty
percent (80%) of its eligible accounts receivable subject to a number of
exceptions that include, but are not limited to, receivables that remain unpaid
more than 90 days from the invoice date and receivables for work performed that
have not yet been invoiced. Under certain circumstances, SVB can, in
its discretion, decrease the 80% cap, adjust the eligibility criteria to be more
stringent and/or elect not to make an advance on a particular
receivable. The Company will use the proceeds from the A/R Line of
Credit for general corporate purposes.
The New
Credit Facility requires that the Company comply with one financial
covenant. That covenant requires that the Company meets the following
minimum EBITDA requirements (where “EBITDA” is defined as earnings before
expenses relating to interest, taxes, depreciation and amortization in
accordance with GAAP, plus equity-based compensation expense):
·
|
The
Company’s EBITDA for the month ending August 31, 2010 shall be at least
one hundred twenty five percent (125%) of the Company’s projected
performance for such month as outlined in the Company’s business plan
submitted to SVB (the “Company
Plan”).
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·
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For
the two months ended September 30, 2010, the Company’s EBITDA shall be at
least seventy five percent (75%) of the Company’s projected performance
for such two (2) month period as outlined in the Company
Plan.
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·
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As
of each subsequent month beginning with the month ending October 31, 2010,
the Company’s EBITDA for the three (3) months ending on such measurement
date shall be at least seventy five percent (75%) of the Company’s
projected performance for such three (3) month period as outlined in the
Company Plan.
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The
indebtedness owed under the New Credit Facility will be fully secured by a
perfected first priority security interest in favor of SVB in all of the
Company’s assets, including its cash, accounts receivable, inventory, equipment,
intellectual property rights and contract rights.
Borrowing
under the A/R Line of Credit will be conditioned on (i) all representations and
warranties contained in the New Loan Agreement being true as of the date of the
borrowing request and (ii) no “event of default” having occurred and be
continuing or resulting from the requested advance. The New Loan
Agreement contains a number of representations and warranties, including, but
not limited to, those pertaining to due organization and existence, collateral,
accounts receivable, litigation, the Company’s financial statements, solvency,
regulatory compliance, investments, taxes and use of proceeds. The
New Loan Agreement also contains a number of affirmative covenants, including,
but not limited to, those pertaining to due organization and existence,
government approvals, delivery of financial statements and other certificates,
reports and other information, insurance, bank accounts, intellectual property
rights, litigation and audit rights. The New Loan Agreement also
contains a number of negative covenants, including, but not limited to, those
pertaining to disposition of assets, changes in business and senior management,
mergers and acquisitions, cash dividends, investments, transactions with
affiliates, subordinated debt and regulatory compliance.
-3-
The New
Loan Agreement specifies a number of “events of default,” including, but not
limited to, payment defaults, the occurrence of a material adverse change, legal
attachment to collateral, insolvency, cross-defaults with other agreements,
judgments, misrepresentations, and the occurrence or assertion that the New
Credit Facility is not senior to any subordinated debt. In addition,
a breach of any of the covenants, representations and warranties, or other
provisions of the New Loan Agreement will constitute an event of default, with
some of such breaches having a 10-30 day cure period and other breaches
(including the financial covenant, the negative covenants and affirmative
covenants relating to taxes, insurance, bank accounts and financial statement
and other information delivery requirements) having no cure
period. As long as an event of default occurs and is continuing, the
interest rates on the A/R Line of Credit and the Refinanced Term Loan will
increase by 5.00%.
In
addition, pursuant to the New Loan Agreement, SVB waived the following events of
default under the Prior Loan Agreement: (i) the Company’s violation of Section
6.7(a) of the Prior Loan Agreement for the April 2010, May 2010, June 2010, July
2010 and August 2010 measuring periods, (ii) the Company’s violation of Section
6.7(b) of the Prior Loan Agreement for the May 2010, June 2010, July 2010 and
August 2010 measuring periods, and (iii) the Company’s violations of Section 7.9
and 8.9 of the Prior Loan Agreement and Section 3 of the subordination agreement
(entered into in connection with the Prior Loan Agreement), for making interest
payments to its subordinated creditors during the period in which the events of
default described in clauses (i) and (ii) of this Section 12.13 had occurred and
were continuing, through the effective date of the New Loan
Agreement.
In
consideration of the New Credit Facility, the Company has paid or agreed to pay
the following fees to SVB: (1) an upfront cash fee of $2,500 payable at the
closing plus (2) an
early termination fee of $14,027.50 if the New Loan Agreement is terminated by
the Company prior to February 8, 2011 (or if SVB terminates the New Loan
Agreement before such date after the occurrence of an event of
default). The foregoing description of the New Loan Agreement and the
New Credit Facility is qualified in its entirety by reference to the New Loan
Agreement, a copy of which is attached to this Current Report as an exhibit and
incorporated herein by reference.
Item 9.01. Financial Statements and
Exhibits
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(a)
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Exhibits
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10.
1 Amended and Restated
Loan and Security Agreement by and between US Dataworks, Inc. and Silicon Valley
Bank dated as of October 27, 2010.
-4-
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Dated:
November 2, 2010
US
DATAWORKS, INC.
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By:
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/s/ Randall J. Fraprt
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Randall
J. Frapart
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Chief
Financial Officer
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-5-
EXHIBIT
INDEX
Exhibit No.
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Description
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10.
1
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Amended
and Restated Loan and Security Agreement by and between US Dataworks, Inc.
and Silicon Valley Bank dated as of October 27,
2010.
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