EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated and effective as of
May 13, 2003 (the "Effective Date") is by and between US DATAWORKS, INC., a
Nevada corporation (the "Company"), and XXXXXXX X. XXXXX ("Xxxxx"). In
consideration of the mutual covenants and promises contained herein, the parties
agree as follows.
WHEREAS, Xxxxx has been employed by the Company since 2001, and the
services of Xxxxx, his managerial and financial experience, and his knowledge of
the affairs of the Company are of great value to the Company; and
WHEREAS, the Company deems it essential that it have the advantage of
the services of Xxxxx for a period extending beyond his present employment
agreement, and desires to enter into a continuing agreement of employment with
him, and to provide Xxxxx with compensation for past contributions to the
Company, including stock options which the Company had originally agreed to
grant to Xxxxx in his employment offer letter; and Xxxxx desires to enter into
such an agreement with the Company upon the terms and conditions stated
hereunder.
ARTICLE 1
GENERAL PROVISIONS
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Section 1.1 EMPLOYMENT. The Company hereby employs Xxxxx, and Xxxxx
accepts such employment by the Company upon the terms and conditions hereof.
Section 1.2 TERM. Subject to earlier termination as specifically set
forth herein, the initial term of this Agreement shall be three (3) years (the
"Term") commencing on the Effective Date. The Term shall be extended
automatically without further action by either party for successive one (1) year
terms, unless either party shall have served ninety (90) days prior written
notice upon the other party that this Agreement shall terminate.
Section 1.3 TERMINATION. Xxxxx'x employment and this Agreement shall
terminate upon the earliest to occur of any of the following events (the actual
date of such termination being referred to herein as the "Termination Date"):
(a) Pursuant to Section 1.2.
(b) In the event of Xxxxx'x death or disability as set forth in Section
3.7.
(c) Termination of Xxxxx'x employment by the Company for cause without
any prior notice (except as specifically set forth below), upon the occurrence
of any of the following events (each of which shall constitute "Cause"):
(i) any embezzlement or wrongful diversion of funds of the
Company or any affiliate of the Company by Xxxxx;
(ii) gross malfeasance by Xxxxx in the conduct of Xxxxx'x
duties;
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(iii) breach of this Agreement and, if such breach is capable
of being cured, as determined by the Board of Directors of the Company (the
"Board of Directors"), failure of Xxxxx to cure such breach after notice and
reasonable opportunity to cure such breach;
(iv) gross neglect by Xxxxx in carrying out Xxxxx'x duties; or
(v) willful violation by Xxxxx of any applicable federal or
state securities laws or regulations.
(d) Termination of Xxxxx'x employment by the Company at any time
without Cause.
(e) Termination by Xxxxx of his employment at any time.
Section 1.4 TERMINATION OBLIGATIONS: RETURN OF COMPANY PROPERTY. Upon
termination of this Agreement, Xxxxx shall promptly return all Company property.
ARTICLE 2
POSITION AND DUTIES; OTHER BUSINESS ACTIVITIES
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Section 2.1 POSITION. Xxxxx shall be employed as Chief Executive
Officer of the Company. Xxxxx also serves as Chairman of the Board of Directors
and shall continue to serve as a director at the pleasure of the Board of
Directors and the stockholders.
Section 2.2 DUTIES; FULL ATTENTION TO BUSINESS. Xxxxx shall perform
such services for the Company, that reasonably serve the purpose of this
Agreement and/or meet the needs of the Company, and that are consistent with the
position Xxxxx holds. Xxxxx shall devote his full business time, energies,
interest, abilities and productive efforts to the business of the Company.
Except as may be approved by the Company's Board of Directors (with Xxxxx
abstaining therefrom), Xxxxx shall not render any kind of employee-type or
consulting services to others for compensation and, in addition, shall not
engage in any activity which conflicts or interferes with his performance of
duties hereunder. Notwithstanding the provisions of this Section 2.2, Xxxxx may
continue to serve as a member of the Board of Directors of ViServ, Inc. and
Outreach Canada, Ltd.
Section 2.3 COVENANT NOT TO COMPETE DURING TERM. During the Term, Xxxxx
shall comply in all respects with the Company's written policies with respect to
conflicts of interest. Except as may be approved by the Company's Board of
Directors (with Xxxxx abstaining therefrom), Xxxxx shall not engage in or be
interested, directly or indirectly, in any business or operation competitive
with the Company. For the purpose of this paragraph, Xxxxx shall be deemed to be
interested in a business or operation which is competitive with the Company if
Xxxxx is a holder of five percent (5%) or more of the issued and outstanding
ownership interests in such business or operation, or serves as a director,
officer, employee, agent, partner, individual proprietor, lender, consultant, or
independent contractor of such business or operation. Notwithstanding the
provisions of this Section 2.3, Xxxxx may continue to serve as a member of the
Board of Directors of ViServ, Inc. and Outreach Canada, Ltd.
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Section 2.4 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Xxxxx
acknowledges that in connection with his employment by the Company or its
affiliates, he has and may acquire or learn "Confidential Information" of the
Company by virtue of a relationship of trust and confidence between Xxxxx and
the Company. Xxxxx warrants and agrees that during the Term he shall not
disclose to anyone (other than to officers of the Company or to such other
persons as such officers may designate), or use, except in the course of his
employment with the Company or its affiliates, any Confidential Information
acquired by him in the course of or in connection with his employment. As used
herein, the term "Confidential Information" shall include, but not be limited
to: all information of any type or kind, whether or not reduced to a writing and
whether or not conceived, originated, discovered or developed in whole or in
part by Xxxxx, which is directly related to the Company, its operations,
policies, agreements with third parties, its financial affairs and related
matters, including business plans, strategic planning information, product
information, purchase and sales information and terms, supplier negotiation
points, styles and strategies, contents and terms of contracts between the
Company and suppliers, advertisers, vendors, contact persons, terms of supplier
and/or vendor contracts or particular transactions, potential supplies and/or
vendors, or other related data; marketing information such as but not limited
to, prior, ongoing or proposed marketing programs, presentations, or agreements
by or on behalf of the Company, pricing information, customer bonus programs,
marketing tests and/or results of marketing efforts, computer files, lists and
reports, manuals and memos pertaining to the business of the Company, lists or
compilations of vendor and/or supplier names, addresses, phone numbers,
requirements and descriptions, contract information sheets, compensation
requirements or terms, benefits, policies, and any other financial information
whether about the Company, entities related or affiliated with the Company or
other key information pertaining to the business of the Company, including but
not limited to all information which is not generally available to or known in
the information services industry (or is available only as a result of an
unauthorized disclosure) and is treated by the Company as "Confidential
Information" during the term of this Agreement, regardless of whether or not
such Information is a "trade secret" as otherwise defined by applicable law
unless such information is in the public domain.
Section 2.5 NO SOLICITATION OF EMPLOYEES. Xxxxx specifically agrees
that during the Term and for a period of two (2) years after his termination of
employment with the Company, Xxxxx shall not, directly or indirectly, either for
himself or for any other person, firm, corporation or legal entity, solicit any
individual then employed by the Company to leave the employment of the Company.
Section 2.6 OWNERSHIP OF WORK PRODUCT AND IDEAS. Any discoveries,
inventions, patents, materials, licenses and ideas applicable to the industry or
relating to Xxxxx'x services for the Company or its affiliates, whether or not
patentable or copyrightable, created by Xxxxx during his employment by the
Company or its affiliates ("Work Product") and all business opportunities within
the industry ("Opportunities") introduced to Xxxxx by the Company or its
affiliates will be owned by the Company, and Xxxxx will have no personal
interest in such, except to the extent that the Company allows Xxxxx to invest
or participate in or have other rights to such Work Product or Opportunities.
Xxxxx will, in such connection, promptly disclose any such Work Product and
Opportunities to the Company and, upon request of the Company, will assign to
the Company all right in such Work Product and Opportunities.
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ARTICLE 3
COMPENSATION; BENEFITS
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Section 3.1 SALARY. The Company shall pay Xxxxx Eight Thousand Three
Hundred Thirty-Three and 33/100 Dollars ($8,333.33) on a semi-monthly basis, for
an annualized base salary ("Base Salary") of Two Hundred Thousand and NO/100
Dollars ($200,000.00). Beginning with the first anniversary of the date of the
Agreement and for each subsequent year of employment (or any portion of any such
year), Xxxxx shall be entitled to a base salary review by the Company to
determine if any increase to base salary is warranted as a result of
performance.
Section 3.2 BONUS. In addition to the Xxxxx'x base salary, Xxxxx shall
be eligible to receive a discretionary performance bonus ("Bonus") for each
fiscal year which shall be based on Xxxxx'x performance as may be determined by
the Board of Directors in its sole discretion.
Section 3.3 PAID VACATION. Xxxxx shall be entitled to four (4) weeks of
paid vacation during each year of service or such longer amount of vacation time
as Xxxxx and the Compensation Committee of the Board of Directors shall mutually
agree upon.
Section 3.4 STOCK OPTIONS.
(a) Subject to approval of the Compensation Committee of the Board of
Directors, the Company will grant to Xxxxx an option (the "First Option") to
purchase 1,970,000 shares of common stock of the Company under the Company's
2000 Stock Option Plan (the "Plan"), which shall be intended to qualify as an
incentive stock option to the maximum extent permitted under Section 422 of the
Internal Revenue Code of 1986, as amended. Subject to approval of the
Compensation Committee, the Company will also grant to Xxxxx an option to
purchase an additional 30,000 shares under the Plan (the "Second Option"),
provided that the Board of Directors and the stockholders of the Company have
approved an increase in the number of shares authorized for issuance under the
Plan to 15 million shares and a sufficient increase in the number of shares for
which options may be granted to an individual under the Plan (the "Plan
Amendment"). All such options will have an exercise price per share equal to the
fair market value of the Company's common stock as of the date of grant. Each
option shall be subject to the terms and conditions of the Plan and an option
agreement to be entered into between the Company and Xxxxx, in a form approved
by the Compensation Committee of the Board of Directors, which option agreement
shall provide that such option shall have a ten (10) year term (subject to
earlier termination in connection with termination of employment).
(b) The options shall vest and become exercisable, subject to continued
employment, as follows:
(i) in the case of the First Option, 1,400,000 shares shall
vest immediately upon the date of grant of such option, and the
remaining 570,000 shares shall vest on January 1, 2004, and
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(ii) in the case of the Second Option, all 30,000 shares shall
vest on January 1, 2004 (or, if later, the date of grant of the Second
Option);
in each case to become fully vested and exercisable upon a Change in
Control as defined in the Plan (a "Change in Control").
(c) Xxxxx shall be eligible to receive additional grants of options
pursuant to the Plan in the sole discretion of the Compensation Committee of the
Board of Directors.
(d) If the Company is subject to a Change in Control during the Term
but prior to the grant of the Second Option described in Section 3.4(a), Xxxxx
shall be entitled to a cash bonus equal to the excess of the fair market value
of the shares for which such options were not granted as of the date of the
Change in Control, over the fair market value of such shares as of May 12, 2003.
Any payments due hereunder shall be paid within sixty (60) days of the date of
the Change in Control.
Section 3.5 OTHER BENEFITS. During the Term, Xxxxx shall be entitled to
participate in present and future employee benefit plans which are available to
the Company's employees, subject to eligibility requirements thereunder.
Section 3.6 REIMBURSEMENT OF EXPENSES; ACCRUED COMPENSATION. The
Company shall provide Xxxxx with a corporate charge card to be used for
reasonable business purposes only and shall promptly reimburse Xxxxx for all
reasonable business expenses incurred by him in the performance of his duties
hereunder subject to and in accordance with the Company's business expense
reimbursement policies as in effect from time to time. In the event the Company
is subject to a Change in Control, and to the extent not paid prior to the date
thereof, the Company shall pay Xxxxx an amount in cash equal to all such
unreimbursed business expenses plus accrued unpaid compensation.
Section 3.7 DISABILITY OR DEATH. If the Board of Directors determines,
on the basis of professional medical advice, that Xxxxx has become unable to
substantially perform his duties under this Agreement due to illness or mental
or physical disability, and that such failure or inability has continued or is
reasonably expected to continue for any consecutive six-month period, the
Company shall have the option to terminate this Agreement by giving written
notice to Xxxxx thereof and the basis therefor at least thirty (30) days prior
to the effective date of termination. This Agreement shall also terminate
immediately upon Xxxxx'x death. If Xxxxx'x employment with the Company is
terminated pursuant to this Section 3.7, the Company shall pay Xxxxx the salary,
bonuses and commissions which are earned but unpaid as of the date of
termination. The Board of Directors shall have discretion to determine the
amount, if any, of Bonus which Xxxxx has earned prior to termination of
employment during a fiscal year.
Section 3.8 SEVERANCE.
(a) If the Company terminates Xxxxx'x employment other than for Cause
pursuant to Section 1.3(d), and other than by reason of death or Disability
pursuant to Section 3.7, or if Xxxxx resigns within ten (10) days following a
material diminution in his title within six (6) months following a Change in
Control then subject to Xxxxx'x continuing obligations under Section 2.4 and
Section 2.5 and in consideration of the execution, delivery and effectiveness of
a
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general release of claims in a standard form approved by the Company, the
Company shall pay to Xxxxx a lump sum of two (2) times Xxxxx'x current Base
Salary in cash within fifteen (15) days after the date of termination (or, if
later, upon the effectiveness of the general release following any applicable
revocation period) and shall vest one hundred percent (100%) of Xxxxx'x then
remaining unvested portion of the options granted in accordance with this
Agreement, in addition to other amounts payable from qualified plans,
nonqualified retirement plans, and deferred compensation plans, which amounts
shall be paid in accordance with the terms of such plans.
(b) If Xxxxx resigns within ten (10) days following a material
diminution in his title by the Board of Directors of the Company, other than in
connection with a Change in Control or a termination of his employment for Cause
or as a result of death or Disability pursuant to Section 3.7, then subject to
Xxxxx'x continuing obligations under Section 2.4 and Section 2.5 and in
consideration of the execution, delivery and effectiveness of a general release
of claims in a standard form approved by the Company, the Company shall vest
fifty percent (50%) of Xxxxx'x then remaining unvested portion of the options
granted in accordance with this Agreement, and Xxxxx'x entitlement to other
amounts payable from qualified plans, nonqualified retirement plans, and
deferred compensation plans shall be determined in accordance with the terms of
such plans.
(c) If the Company terminates Xxxxx'x employment for Cause, or if Xxxxx
resigns (other than pursuant to Section 3.8(b) above), then Xxxxx shall only be
entitled to be paid his accrued, unpaid Base Salary through the effective date
of his termination of employment and his entitlement to other amounts payable
from qualified plans, nonqualified retirement plans, and deferred compensation
plans shall be determined in accordance with the terms of such plans.
(d) No severance benefits shall be provided pursuant to Section 3.8(a)
or Section 3.8(b) if Xxxxx'x employment is terminated by reason of expiration or
non-renewal of this Agreement for any reason.
Section 3.9 EXCESS PARACHUTE PAYMENTS.
(a) If there is a "change in control" of the Company within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), a
portion of the benefits to which Xxxxx is entitled under this Agreement could be
characterized as "excess parachute payments" within the meaning of Section 280G
of the Code. The parties hereto acknowledge that the protections set forth in
this Section 3.9 are important, and it is agreed that Xxxxx should not have to
bear the full burden of the excise tax that might be levied under Section 4999
of the Code or any similar provision of federal, state of local law, in the
event that any portion of the benefits payable to Xxxxx pursuant to this
Agreement or the other incentive plans of the Company are treated as an excess
parachute payment. The parties, therefore, have agreed as set forth in this
Section 3.9.
(b) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution (including income
recognized by Xxxxx upon the early vesting of restricted property or upon the
exercise of options whose exercise date has been accelerated) by the Company or
any other Person to or for the benefit of Xxxxx (whether paid or
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payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 3.9 (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any similar provision of any federal, state or
local law or any interest or penalties are incurred by Xxxxx with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay an additional payment, not to exceed the amount of Xxxxx'x then
current Base Salary in the aggregate (a "Gross-Up Payment"), in an amount such
that after payment by Xxxxx of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed on the Gross-Up Payment, Xxxxx retains an amount of the Gross-Up
Payment equal to fifty percent (50%) of the Excise Tax imposed on the Payments.
Xxxxx will bear the cost of the remaining fifty percent (50%) until the
aggregate Gross-Up Payments from the Company have reached the amount of Xxxxx'x
then current Base Salary, and will thereafter bear all additional taxes,
interest or penalties.
(c) In the event of any dispute as to the applicability or amount of
any Gross-Up Payment, all determinations required to be made under this Section
3.9, including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the independent public accounting firm regularly
employed by the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and to Xxxxx within fifteen (15)
business days after the receipt of notice from Xxxxx that there has been a
Payment, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm will be borne by the Company. If the Accounting
Firm determines that no Excise Tax is payable by Xxxxx, it shall furnish Ramey
with a written statement that failure to report the Excise Tax on Xxxxx'x
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding on the Company and Xxxxx unless and until a final determination is
received from the Internal Revenue Service indicating a contrary result. As a
result of uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments may not have been made by the Company that should have
been made ("Underpayment"), consistent with the calculations required to be made
hereunder. If Xxxxx thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Xxxxx, consistent with the maximum limitation stated in this
Section 3.9. In the event it is determined by the Accounting Firm that the Gross
Payments previously made by the Company exceeded the limitations stated in this
Section 3.9, upon written notice from the Company, accompanied by a copy of the
Accounting Firm's calculation of same, the amount of such overpayment shall be
promptly paid by Xxxxx to the Company.
ARTICLE 4
MISCELLANEOUS PROVISIONS
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Section 4.1 ENTIRE AGREEMENT. This Agreement contains the entire
Agreement between the Parties and supersedes all prior oral and written
Agreements, understandings, commitments, or practices between the Parties with
respect to the subject matter hereof, including but not limited to that certain
Offer of Employment letter issued to Xxxxx by the Company dated as of December
4, 2001. Other than as expressly set forth herein, Xxxxx and the Company
acknowledge and represent that there are no other promises, terms, conditions or
representations (verbal or written) regarding any matter relevant hereto. No
supplement, modification, or amendment of any term, provision or condition of
this Agreement shall be binding or enforceable unless evidenced in writing and
executed by the parties. The provisions of Sections 2.3, 2.4, 2.5 and 2.6 shall
survive termination of this Agreement.
Section 4.2 APPLICABLE LAW. This Agreement shall be governed
exclusively by and construed in accordance with the laws of the State of Texas,
notwithstanding choice of law provisions thereof; and the venue of any
litigation commenced hereunder shall be Houston, Texas.
Section 4.3 INJUNCTIVE RELIEF. Xxxxx acknowledges that his services are
of a special, unique, unusual, extraordinary and intellectual character, which
gives them a peculiar value, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law. If he should breach this
Agreement, in addition to its rights and remedies under general law, the Company
shall be entitled to seek equitable relief by way of injunction or otherwise.
Section 4.4 PARTIAL INVALIDITY. If the application of any provision of
this Agreement, or any section, subsection, subdivision, sentence, clause,
phrase, word or portion of this Agreement should be held invalid or
unenforceable, the remaining provisions thereof shall not be affected thereby,
but shall continue to be given full force and effect as if the invalid or
unenforceable provision had not been included herein.
Section 4.5 NOTICES. Notices given under this Agreement shall be given
by registered or certified mail, postage prepaid, return receipt requested, or
by personal delivery to the respective addresses of the parties. Notices to
Xxxxx shall be sent to [need address]. Notices to the Company shall be sent to
0000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attn: Board of Directors.
A mailed first-class notice shall be deemed given two (2) business days after
deposit with U.S. Postal Service.
Section 4.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
Section 4.7 ASSIGNMENT. This Agreement may not be assigned or
encumbered in any way by Xxxxx. The Company may assign this Agreement to any
successor (whether by merger, consolidation, or purchase of the Company's stock)
to all or a controlling interest in the Company's business, in which case this
Agreement shall be binding upon and inure to the benefit of such successor(s)
and assign(s).
Section 4.8 LIMITATION ON WAIVER. A waiver of any term, provision, or
condition of this Agreement shall not be deemed to be, or constitute a waiver of
any other term, provision or
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condition herein, whether or not similar. No waiver shall be binding unless in
writing and signed by the waiving party.
Section 4.9 ATTORNEY'S FEES. In the event that any proceeding is
commenced involving the interpretation or enforcement of the provisions of this
Agreement, the Party prevailing in such proceeding shall be entitled to recover
its reasonable costs and attorneys' fees.
Section 4.10 ARBITRATION. If a dispute or claim shall arise with
respect to any of the terms or provisions of this Agreement, or with respect to
the performance by either of the parties under this Agreement, other than in
connection with the Company's enforcement of the provisions of Sections 2.3,
2.4, 2.5, and 2.6 or pursuant to Section 4.3, then either party may, by notice
as herein provided, require that the dispute be submitted under the Commercial
Arbitration Rules of the American Arbitration Association to an arbitrator in
good standing with the American Arbitration Association within fifteen (15) days
after such notice is given. The written decision of the single arbitrator
ultimately appointed by or for both parties shall be binding and conclusive on
the parties, including with respect to any award of attorneys' fees or costs.
Judgment may be entered on such written decision by the single arbitrator in any
court having jurisdiction and the parties consent to the jurisdiction of the
courts of the State of Texas for this purpose. Any arbitration undertaken
pursuant to the terms of this Section shall occur in the State of Texas.
Section 4.11 TAXES. All payments made pursuant to the provisions of
this Agreement shall be subject to the withholding of applicable taxes.
Section 4.12 NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. The
provisions of this Agreement are intended only for the regulation of relations
among the parties. This Agreement is not intended for the benefit of creditors
of the parties or other third parties and no rights are granted to creditors of
the parties or other third parties under this Agreement.
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IN WITNESS WHEREOF, this Agreement is executed as of the Effective
Date.
US DATAWORKS, INC.
By /S/ XXXXX X. XXXXXXXX
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Name XXXXX X. XXXXXXXX
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Title PRESIDENT
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/S/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
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