PACIFIC BUSINESS FUNDING

20195 STEVENS CREEK BLVD. • SUITE #220 • CUPERTINO, CA.  95014

TEL: (408) 255-9300   FAX (408) 255-9313

 

FACTORING AGREEMENT

 

                This Factoring Agreement (the "Agreement"), dated as of AUGUST
15, 2001, is entered into by and between PRIMIX SOLUTIONS INC. a [ý corporation,
o partnership, o sole proprietorship] ("Seller") having its principal place of
business and chief executive office at the address set forth below Seller's
signature, and Pacific Business Funding, a division of Cupertino National Bank
("Purchaser") having an office at the address identified above.

 

Capitalized terms used in this Agreement shall have the meanings assigned to
them in Section 13, Definitions.

 

1.                 Purchase of Accounts.

 

                1.1.                Schedule of Accounts. Seller may, at any
time, request that Purchaser purchase Accounts. Any such request by Seller shall
be made by delivering to Purchaser a Schedule of Accounts (the "Schedule of
Accounts") which describes in detail the Accounts Seller is requesting Purchaser
to purchase, including, (a) the name and address of the Account Debtor of each
such Account, (b) the amount owed by the Account Debtor of each such Account,
and (c) the date and number of the invoice evidencing each such Account. Each
Schedule of Accounts shall have attached to it an invoice for each Account
described on the Schedule of Accounts, and shall be signed by an authorized
representative of Seller.

                1.2.                Discretionary Approval of Accounts.
 Purchaser may, in its sole discretion, purchase any Account included in a
Schedule of Accounts, but is under no obligation to purchase any such Account.
Purchaser may exercise its sole discretion in approving each Account and the
credit of each Account Debtor before purchasing any Account.

                1.3.                Payment of Advance; Creation of a Book
Reserve. Upon approval, in Purchaser's sole discretion, of any of the Accounts
described on a Schedule of Accounts, Purchaser shall pay to Seller as the
purchase price for any  approved Account EIGHTY percent (80%) of the face amount
of such approved Account (the "Advance"). Purchaser may, from time to time, in
its discretion, upon notice to Seller, change the percentage of the Advance.
Upon payment of the Advance to Seller, Purchaser shall also create a reserve on
Purchaser's books and records with respect to each Purchased Account in an
amount equal to the face amount of the Purchased Account minus the Advance for
such Purchased Account (the "Reserve"). Notwithstanding the foregoing, in no
event shall the Reserve with respect to all Purchased Accounts outstanding at
any time be less than TWENTY percent (20%) of the Account Balance. Purchaser
may, in its discretion, upon notice to Seller, increase the percentage of the
Reserve at any time.

                1.4.                Transfer of Accounts.  At the time Purchaser
pays the Advance with respect to any Account, such Account shall constitute a
Purchased Account, and Seller hereby absolutely sells, transfers and assigns to
Purchaser, all of Seller's right, title and interest in and to each Purchased
Account. Seller also hereby sells, transfers and assigns to Purchaser all of the
goods represented by each Purchased Account, all of Seller's rights and remedies
as an unpaid seller under the California Uniform Commercial Code and other
applicable law, including the rights of stoppage in transit, replevin,
reclamation, and claim and delivery, and all of Seller's rights in and to all
security for each such Purchased Account and guaranties thereof, and all rights
against third parties with respect thereto. Any goods recovered or received by
Seller shall be set aside, marked with Purchaser's name, and held for
Purchaser's account as owner.

                1.5.                Collection of Accounts.  Each Purchased
Account shall be collected directly by Purchaser. At the request of Purchaser,
Seller and Purchaser shall jointly notify each Account Debtor by letter that
Purchased Accounts owed by such Account Debtor have been assigned and are
payable to Purchaser. Such notification shall be in form and substance
satisfactory to Purchaser. Seller shall not take or permit any action to change
or revoke any notification without Purchaser's prior written consent and shall
not request any Account Debtor to pay any Purchased Account to Seller.
Notwithstanding the foregoing, in the event Seller receives any payments of any
Purchased Accounts, Seller shall (A) immediately notify Purchaser of such
payment, (B) hold such payment in trust and safekeeping for Purchaser, and (C)
immediately turn over to Purchaser the identical checks, monies or other forms
of payment received, with any necessary endorsement or assignment. Purchaser
shall have the right to endorse Seller's name on all payments received in
connection with each Purchased Account and on any other proceeds of Collateral.
If Purchaser receives a check or item which is payment for both a Purchased
Account and a non-Purchased Account, the funds shall first be applied to the
Purchased Account and, so long as there does not then exist an Event of Default
or an event that with notice or lapse of time would constitute an Event of
Default, the excess shall be remitted to Seller. In the event Purchaser receives
any other payments of non-Purchased Accounts, Purchaser shall remit to Seller
the collections of such non-Purchased Accounts; provided, that if any Event of
Default or event that with notice or lapse of time or otherwise would constitute
an Event of Default then exists, Purchaser shall have no duty to remit any such
collections, which collections constitute Collateral, and may apply such
collections to reduce the Obligations.

                1.6.                Full Recourse.  The purchase by Purchaser of
Purchased Accounts from Seller shall be with full recourse against Seller.
Seller shall be liable for any deficiency in the event the Obligations exceed
the amount of Purchased Accounts and the other Collateral.

 

2.             Fees and Customer Payments.

                2.1.                Finance Fees.  Seller shall pay to Purchaser
on each Settlement Date, a finance fee in an amount equal to ONE percent (1%)
per month of the average daily Account Balance outstanding during the Settlement
Period ending on such Settlement Date (the "Finance Fees"). Such accrued Finance
Fees shall be netted against the Reserve as described in Section 3.3.

                2.2.                Administrative Fee.  Seller shall pay to
Purchaser on each Settlement Date, an Administrative Fee equal to ONE HALF
percent (.5%) of the face amount of each Account purchased by Purchaser during
the Settlement Period ending on such Settlement Date (the "Administrative Fee").
All Administrative Fees shall be netted against the Reserve as described in
Section 3.3.

                2.3.                Maximum Lawful Rate.  In no event shall any
charges that may constitute interest hereunder exceed the highest rate permitted
under applicable law. In the event that a court of competent jurisdiction makes
a final determination that Purchaser has received interest hereunder in excess
of the maximum lawful rate, then such excess shall be deemed a payment of
principal and the interest payable hereunder deemed amended to the amount
payable under the maximum lawful rate.

                2.4.                Crediting Customer Payments.  Upon
Purchaser's receipt of payment of a Purchased Account, Purchaser shall promptly
credit such customer payment (the "Customer Payments") to the amount outstanding
with respect to such Purchased Account. Notwithstanding the foregoing, if any
Customer Payment is subsequently dishonored or Purchaser does not receive good
funds for any reason, the amount of such uncollected Customer Payment shall be
included in the Account Balance as if such Customer Payment had not been
received, and Finance Fees shall accrue thereon, and the credit to the specific
Purchased Account shall be reversed. Notwithstanding the foregoing, upon the
occurrence of an Event of Default, Purchaser shall apply all Customer Payments
to Seller's Obligations under this Agreement in such order and manner as
Purchaser shall, in its sole discretion, determine.

                2.5.                Accounting.  Purchaser shall deliver to
Seller after each Settlement Date, a statement of Seller's account which shall
include an accounting of the transactions for that Settlement Period, including
the amount of all Finance Fees, Administrative Fees, Adjustments, Chargeback
Amounts, Customer Payments and Purchased Accounts. The accounting shall
constitute an account stated and shall be binding on Seller and deemed correct
unless Seller delivers to Purchaser a written objection within thirty (30) days
after such accounting is mailed to Seller.

3.                Adjustments, Chargebacks and Remittances.

 

                3.1.                Adjustments.  In the event any Account
Debtor asserts any offset, defense, counterclaim, dispute, discount, allowance,
right of return, right of recoupment, or warranty claim with respect to a
Purchased Account, or pays less than the face amount of such Purchased Account
(each, an "Adjustment"), Purchaser may, in its sole discretion, either (A)
deduct the amount of the Adjustment in calculating the Remittance, or (B)
chargeback to Seller the Purchased Account with respect to which the Adjustment
is asserted. Seller shall advise Purchaser immediately upon learning of any
Adjustment asserted by any Account Debtor.

 

                3.2.                Chargebacks.  Purchaser shall have the right
to chargeback to Seller any Purchased Account:

 

(A)

 

which remains unpaid ninety (90) calendar days after the invoice date;

(B)

 

with respect to which there has been a breach of any warranty, representation,
covenant or agreement set forth in this Agreement;

(C)

 

with respect to which the Account Debtor asserts any Adjustment; or

(D)

 

which is owed by an Account Debtor who has filed, or has had filed against it,
any bankruptcy cases, insolvency proceeding, assignment for the benefit of
creditors, receivership or insolvency proceeding, or who has become insolvent
(as defined in the United States Bankruptcy Code) or who is generally not paying
its debts as such debts become due.

 

Upon demand by Purchaser, Seller shall pay to Purchaser the full face amount of
any Purchased Account which has been charged back to Seller pursuant to this
Section 3.2, or to the extent partial payment has been made, the amount by which
the face amount of such Purchased Account exceeds such partial payment, together
with any attorneys' fees and costs incurred by Purchaser in connection with
collecting such Purchased Account (collectively, the "Chargeback Amount").
Purchaser shall advise Seller regarding how the Chargeback Amount shall be paid,
which may be by any one or a combination of the following. In Purchaser's sole
discretion: (1) payment in cash immediately upon demand; (2) deduction from or
offset against any Remittance that would otherwise be payable to Seller; (3)
payment from any Advances that may otherwise be made to Seller; (4) adjustment
to the Reserve pursuant to Section 1.3 hereof; or (5) delivery of substitute
Accounts and a Schedule of Accounts acceptable to Purchaser, which Accounts
shall constitute Purchased Accounts.

 

                3.3.                Remittance.  Purchaser shall remit to Seller
after the Settlement Date, the amount, if any, which Purchaser owes to Seller at
the end of the Settlement Period based on the following calculations set forth
below (the "Remittance"); provided, that if there then exists any Event of
Default or any event or condition that with notice or lapse of time would
constitute an Event of Default, Purchaser shall not be obligated to remit any
payments to Seller. If the amount resulting from the following calculation is a
positive number, such amount is the amount of the Remittance for such Settlement
Period. If the resulting amount is a negative number, such amount is the amount
owed by Seller to Purchaser.

 

                                The calculation to be used are as follows:

 

(A)

 

The sum of the following:

 

 

(1)

 

The Reserve as of the beginning of the subject Settlement Period, plus

 

 

(2)

 

The Reserve created for each Account purchased during the subject Settlement
Period;

 

 

 

 

 

MINUS

 

(B)

 

The sum of the following:

 

 

(1)

 

Finance Fees accrued during the subject Settlement Period; plus

 

 

(2)

 

Administrative Fees accrued during the subject Settlement Period; plus

 

 

(3)

 

Adjustments during the subject Settlement Period; plus

 

 

(4)

 

Chargeback Amounts, to the extent Purchaser has agreed to accept payment of any
such Chargeback Amount by deduction from the Remittance; plus

 

 

(5)

 

All professional fees and expenses as set forth in Section 10 for which oral or
written demand has been made by Purchaser during the subject Settlement Period;
plus

 

 

(6)

 

The Reserve for the Account Balance as of the first day of the following
Settlement Period in the minimum percentage set forth in Section 1.3 hereof.

 

If the foregoing calculations result in a Remittance payable to Seller,
Purchaser shall make such payment by check, subject to Purchaser's rights of
offset and recoupment, and its right to deduct any Chargeback Amount as set
forth in Section 3.2. If the foregoing calculations result in an amount due to
Purchaser from Seller, Seller shall make such payment by any one or a
combination of the methods set forth in Section 3.2 hereof for chargebacks, as
determined by Purchaser in its discretion.

 

4.             Power of Attorney.  Seller hereby appoints Purchaser and its
designees as Seller's true and lawful attorney in fact, to exercise in
Purchaser's discretion, and regardless of whether an Event of Default is then
existing, all of the following powers, such powers being coupled with an
interest: (A) to notify all Account Debtors with respect to the Purchased
Accounts to make payment directly to Purchaser; (B) to receive, deposit, and
endorse Seller's name on all checks, drafts, money orders and other forms of
payment relating to the Purchased Accounts; (C) to demand, collect, receive,
sue, and give releases to any Account Debtor for the monies due or which may
become due on or in connection with the Purchased Accounts; (D) to compromise,
prosecute, or defend any action, claim, case, or proceeding relating to the
Purchased Accounts, including the filing of a claim or the voting of such claims
in any bankruptcy case, all in Purchaser's name or Seller's name, as Purchaser
may elect; (E) to sell, assign, transfer, pledge, compromise, or discharge any
Purchased Accounts; (F) to receive, open, redirect and dispose of all mail
addressed to Seller for the purpose of collecting the Purchased Accounts and to
take all the actions permitted in subsection (B) above with respect to any
payment in such mail; (G) to execute in the name of Seller and file against
Seller in favor of Purchaser such financing statements and other agreements as
Purchaser deems necessary to evidence or perfect its security interest in the
Purchased Accounts and the other Collateral; and (H) to do all acts and things
necessary or expedient, in furtherance of any such purposes. Upon the occurrence
of an Event of Default, all of the power of attorney rights granted by Seller to
Purchaser hereunder shall be applicable with respect to all Collateral.

 

5.                Continuing Representations, Warranties and Covenants.  To
induce Purchaser to enter into this Agreement and purchase Accounts, and with
full knowledge that Purchaser is relying on the truth and accuracy of the
following in determining whether to purchase any Account, Seller represents,
warrants, covenants and agrees as follows, which representations, warranties,
covenants and agreements shall survive the execution and delivery of this
Agreement:

 

(A)

 

The information contained in each Schedule of Accounts is true and correct;

(B)

 

Each Schedule of Accounts is signed by an authorized representative of Seller,
and Purchaser shall have the right to rely on such signature as an authorized
signature of Seller;

(C)

 

Seller is the sole and absolute owner of each Account described in each Schedule
of Accounts and has the legal right to sell, transfer and assign such Account to
Purchaser;

(D)

 

Seller has performed all obligations required by the Account Debtor in
connection with each Account described in each Schedule of Accounts and payment
of each such Account is not contingent upon the fulfillment of any obligation or
contract, past or future;

(E)

 

Each Account described on each Schedule of Accounts is correctly stated therein,
is not in dispute, is presently and unconditionally owing at the time stated in
the invoice evidencing such account as attached to the Schedule of Accounts, is
not past due or in default, represents a bona fide indebtedness arising from the
actual sale of goods or performance of services to an Account Debtor in the
ordinary course of Seller's business which has been received and finally
accepted by the Account Debtor;

(F)

 

Each Account set forth on each Schedule of Accounts is not subject to any
offset, defense or counterclaim of any kind, whether bona fide or otherwise, and
no agreement has been made under which the Account Debtor may claim any
deduction or discount, except as otherwise stated in the Schedule of Accounts;

(G)

 

Each Account Debtor identified on each Schedule of Accounts is liable for the
amount set forth on such Schedule of Accounts and will not object to payment
for, or the quality or the quantity of the goods or services to which any
Account described on such Schedule of Accounts relates;

(H)

 

Seller, and to Seller's best knowledge, each Account Debtor set forth in each
Schedule of Accounts, is and shall remain solvent in that the present saleable
value of such entity's assets exceeds the total entity's liabilities;

(I)

 

Seller has not, as of the time Seller accepts an Advance from Purchaser, filed
or had filed against it a petition for relief under the United States Bankruptcy
Code;

(J)

 

Each Account and all other Collateral are free and clear of any and all liens,
security interests and encumbrances of any kind, other than those in favor of
Purchaser, and Seller will not assign, transfer, or grant any lien or security
interest in any Accounts or other Collateral to any other party, without
Purchaser's prior written consent;

(K)

 

Seller has not sold, assigned, transferred, pledged or otherwise conveyed any
Purchased Accounts to any party other than Purchaser, and Seller shall not sell,
assign, transfer, pledge or otherwise convey any Collateral without Purchaser's
prior consent, except for the sale of Accounts to Purchaser and the sale of
finished inventory in Seller's normal course of business;

(L)

 

Seller's name and form of organization are as set forth at the beginning of this
Agreement, and Seller's chief executive office, place of business and place
where Collateral and records concerning Accounts and other Collateral are kept
are as set forth below Seller's signature, and Seller will give Purchaser at
least thirty (30) days prior written notice if such name, organization, place of
business, location of Collateral or records concerning Collateral is to be
changed or added and shall execute any documents necessary to perfect
Purchaser's interest in the Purchased Accounts and the other Collateral; and

(M)

 

Seller shall pay all of its normal gross payroll for employees, and all federal
and state taxes, as and when due, including all payroll and withholding taxes
and state sales taxes.

 

6.             Grant of Security Interest.  To secure the prompt payment and
performance of all of Seller's Obligations to Purchaser, Seller hereby grants to
Purchaser a continuing lien upon and security interest in, and right of set off
with respect to, all of Seller's right, title and interest in, to and under the
following, whether now owned by or owing to, or hereafter acquired by or arising
in favor of, Seller, and regardless of where located (collectively the
"Collateral"):

 

(A)

 

All accounts, accounts receivable, chattel paper, contract rights, documents,
instruments, letters of credit, banker's acceptances, drafts, securities and
general intangibles, including all claims, causes of action, deposit accounts,
rights to receive tax refunds, rights in and claims under insurance policies
(including rights to unearned premiums), customer lists, copyrights, patents,
trademarks, license agreements, goodwill associated with trademarks and
trademark licenses, and other intellectual property of every kind and other
rights to payment;

(B)

 

All inventory;

(C)

 

All monies, remittances, and other amounts due under this Agreement and any
other agreement between Purchaser and Seller;

(D)

 

All equipment, machinery, motor vehicles, furniture, fixtures, tools and
supplies;

(E)

 

All investment securities;

(F)

 

All farm products, crops, timber, minerals and the like (including oil and gas);

(G)

 

All books and records relating to the foregoing, including all computer
programs, printed output and computer readable data;

(H)

 

All accessions to, and substitutions and replacements for, all of the foregoing;
and

(I)

 

All proceeds and products of the foregoing, whether due to voluntary or
involuntary disposition, including insurance proceeds. Seller shall sign and
deliver to Purchaser UCO financing statements, in form acceptable to Purchaser.
Seller agrees to deliver to Purchaser the originals of all instruments, chattel
paper and documents evidencing or related to Purchased Accounts and other
Collateral.

 

 

7.             Default.  The occurrence of any one or more of the following
shall constitute an event of default under this Agreement (each, as "Event of
Default"):

 

(A)

 

Seller fails to pay any amount owed to Purchaser as and when due under this
Agreement or fails to pay any other Obligations as and when due;

(B)

 

Any warranty or representation by Seller to Purchaser under this Agreement is
incorrect or untrue when made or thereafter becomes untrue or incorrect;

(C)

 

Seller fails to perform or breaches any covenant or agreement set forth in
Agreement or any other agreement between Purchaser and Seller;

(D)

 

There shall be commenced by or against Seller any voluntary or involuntary case
under the United States Bankruptcy Code, or any assignment for the benefit of
creditors, or appointment of a receiver or custodian for any of Seller's assets;

(E)

 

Seller shall become insolvent in that its debts are greater than the fair value
of its assets, or Seller is generally not paying its debts as they become due or
is left with unreasonably small capital;

(F)

 

Any involuntary lien, garnishment, attachment or the like is issued against or
attaches to the Purchased Accounts or the other Collateral;

(G)

 

An event of default shall occur under any guaranty executed by any guarantor of
the Obligations, or any material provision of any such guaranty shall for any
reason cease to be valid or enforceable or any such guaranty shall be repudiated
or terminated, including by operation of law; or

(H)

 

A default or event of default shall occur under any agreement between Seller and
any creditor of Seller who has entered into a subordination agreement with
Purchaser.

 

8.                Remedies Upon Default.  Upon the occurrence of an Event of
Default, Purchaser may, without notice, (A) without implying any obligation to
buy Accounts, cease buying Accounts; (B) accelerate the payment of all
Obligations by requiring Seller to repurchase all or any portion of the
Purchased Accounts then outstanding for cash in an amount equal to the Advance
made for each Purchased Account, and all accrued Finance Fees, Administrative
Fees, attorneys' fees and other Obligations then outstanding, which Obligations
shall be due and payable in full without demand; (C) exercise all the rights and
remedies under this Agreement and under applicable law, including the rights and
remedies of a secured party under the California Uniform Commercial Code.
Without limiting the generality of the foregoing, Purchaser may (1) exercise all
of the power of attorney rights described in Section 4 with respect to all
Collateral, and (2) collect, dispose of, sell, lease, use, and realize upon all
Purchased Accounts and other Collateral in any commercially reasonable manner.
Seller and Purchaser agree that any notice of sale required to be given to
Seller shall be deemed to be reasonable if given five (5) days prior to the date
on or after which any sale may be held. All remedies set forth herein shall be
cumulative and none exclusive.

 

9.             Accrual of Interest.   If any amount owed by Seller hereunder is
not paid when due, including any amounts under Section 3.3, Chargeback Amounts,
professional fees and expenses under Section 10 and any other Obligations, such
amounts shall bear interest at a per annum rate equal to the rate of used to
calculate the Finance Fees, annualized, until payment in good funds in the full
amount of all such obligations.

 

10.                Attorneys' Fees.  Seller shall pay to Purchaser immediately
upon demand, all costs and expenses, including reasonable fees and expenses of
attorneys and other professionals, that Purchaser incurs in connection with any
and all of the following: (A) preparing, amending, supplementing, negotiating
and enforcing this Agreement, or any other agreement executed in connection
herewith; (B) perfecting, protecting or enforcing Purchaser's interest in the
Purchased Accounts and the other Collateral; (C) collecting the Purchased
Accounts and the Obligations; (D) defending or in any way addressing claims made
or litigation initiated by or against Purchaser as a result of Purchaser's
relationship with Seller or any guarantor; and (E) representing Purchaser in
connection with any bankruptcy case or insolvency proceeding involving Seller,
any Purchased Account, or other Collateral or any Account Debtor. Any attorneys'
fees and expenses may, at Purchaser's option, be netted against the reserve as
set forth in Section 3.3.

 

11.          Term and Termination.  The term of this Agreement shall be for one
(1) year from the date hereof, and from year to year thereafter unless
terminated in writing by Purchaser or Seller. Seller and Purchaser shall each
have the right to terminate this Agreement at any time. Notwithstanding the
foregoing, any termination of this Agreement shall not affect Purchaser's
security interest in the Collateral and Purchaser's ownership of the Purchased
Accounts and this Agreement shall continue to be effective, and Purchaser's
rights and remedies hereunder shall survive such termination, until all
transactions entered into and Obligations incurred hereunder or in connection
herewith have been completed and satisfied in full.

 

12.                Miscellaneous.

 

                12.1.                Severability.  In the event that any
provision of this Agreement is held to be invalid or unenforceable, this
Agreement will be construed as not containing such provision and the remainder
of the Agreement shall remain in full force and effect.

                12.2.                Choice of Law.  This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.

                12.3.                Notices.  All notices shall be given to
Purchaser and Seller at the addresses set forth in this Agreement and shall be
deemed to have been delivered and received: (A) If mailed, three (3) calendar
days after deposited in the United States mail, first class, postage prepaid;
(B) one (1) calendar day after deposit with an overnight mail or messenger
service; or (C) on the same date of transmission if sent by hand delivery,
telecopy, telefax or telex.

                12.4.                Titles and Section Headings.  The titles
and section headings used herein are for convenience only and shall not be used
in interpreting this Agreement.

 

13.                Definitions.  All terms used herein which are defined in the
California Uniform Commercial Code shall have the meaning given therein unless
otherwise defined in this Agreement. The term "including" is not limiting or
exclusive. When used herein, the following terms shall have the following
meanings.

 

                13.1                "Account" shall mean all accounts, accounts
receivable, chattel paper, contract rights, documents, general intangibles,
instruments, letters of credit, banker's acceptances, and other rights to
payment, and proceeds thereof.

                13.2.                "Account Balance" shall mean, on any given
day, the gross face amount of all Purchased Accounts unpaid on that day.

                13.3.                "Account Debtor" shall have the meaning set
forth in the California Uniform Commercial Code and shall include any person
liable on any Purchased Account, including any guarantor of the Purchased
Account and any issuer of a letter of credit or banker's acceptance.

                13.4.                "Adjustment(s)" shall have the meaning set
forth in Section 3.1.

                13.5.                "Administrative Fee" shall have the meaning
as set forth in Section 2.2.

                13.6.                "Advance" shall have the meaning set forth
in Section 1.3.

                13.7.                "Chargeback Amount" shall have the meaning
set forth in Section 3.2.

                13.8.                "Collateral" shall have the meaning set
forth in Section 6.

                13.9.                "Customer Payments" shall have the meaning
set forth in Section 2.4.

                13.10.                "Event of Default" shall have the meaning
set forth in Section 7.

                13.11.                "Finance Fees" shall have the meaning set
forth in Section 2.1.

                13.12.                "Schedule of Accounts" shall have the
meaning set forth in Section 1.1.

                13.13.                "Obligations" shall mean all advances,
obligations, indebtedness and duties owing by Seller to Purchaser of any kind or
nature, present or future, arising under or in connection with this Agreement or
any other agreement entered into between Purchaser and Seller, weather direct or
indirect, including all Advances, Finance Fees, Administrative Fees, Chargeback
Amounts, attorneys' fees and expenses.

                13.14.                "Purchased Accounts" shall mean all
Accounts identified on any Schedule of Accounts delivered by Seller to Purchaser
which Purchaser elects to purchase and for which Purchaser makes an Advance, and
all monies due or to become due thereunder.

                13.15.                "Remittance" shall have the meaning set
forth in Section 3.3.

                13.16.                "Reserve" shall have the meaning set forth
in Section 1.3.

                13.17.                "Settlement Date" shall mean the last
calendar day of each Settlement Period.

                13.18.                "Settlement Period" shall mean each
calendar month of each year.

 

IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement on the day
and year written above.

 

"PURCHASER"

 

"SELLER"

 

 

 

 

 

PACIFIC BUSINESS FUNDING, a division of Cupertino National Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

By

/s/ William Chronert

 

By

/s/ David W. Chapman

Title

President

 

Title

Chief Financial Officer

 

 

 

 

 

Other Locations of Collateral, if any, in Addition to Above:

 

Address of Seller, Chief Executive Office and Location of Collateral

 

 

Street:

311 Arsenal Street

 

 

City:

Watertown

 

 

State:

MA

 

 

Zip Code:

02472

 

 

Telephone No.:

(617) 923-6500

 

 

Facsimile No.:

(617) 923-6565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMENDMENT TO FACTORING AGREEMENT

 

This Amendment to Factoring Agreement (this "Amendment") is entered into as of
this 15 day of AUG., 2001, by and among PRIMIX SOLUTIONS INC. ("Seller") and
Pacific Business Funding, a division of Cupertino National Bank ("Purchaser").

                WHEREAS, pursuant to that certain Factoring Agreement dated as
of 08.15.01, by and between Seller and Purchaser, as from time to time amended,
restated, supplemented or otherwise modified, (the "Factoring Agreement"),
Purchaser has made or will hereafter make, Advances to Seller for the purchase
of Accounts. All capitalized terms used but not otherwise defined in this
Amendment shall have the respective meanings assigned to such terms in the
Factoring Agreement.

                WHEREAS, pursuant to the terms of the Factoring Agreement,
Seller has granted to Purchaser a security interest in its personal property
assets to secure its Obligations.

                NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows

1.

 

Granting Clause. Section 6 of the Factoring Agreement is hereby amended and
restated to read in its entirety as follows:

 

 

"6.   Grant of Security Interest; Other Agreements.

 

 

61   To secure the prompt payment and performance of all of Seller's Obligations
to Purchaser, Seller hereby grants to Purchaser a continuing lien upon and
security interest in, and right of set off with respect to, all of Seller's
rights, title and interest in, to and under all personal property and other
assets, whether now owned by or owing to, or hereafter acquired by or arising in
favor of, Seller, and regardless of where located, including the following
(collectively, the "Collateral"):

 

 

 

(A)   All accounts, accounts receivable, chattel paper, contract rights,
documents, instruments, letters of credit, letter-of-credit rights, supporting
obligations, bankers' acceptances, drafts, securities and general intangibles,
including all software, payment intangibles, claims, causes of action, rights to
receive tax refunds, rights in and claims under insurance policies (including
rights to unearned premiums), customer lists, copyrights, patents, trademarks,
license agreements, goodwill associated with trademarks and trademark licenses,
and other intellectual property of every kind and other rights to payment;

 

 

 

(B)   All inventory;

 

 

 

(C)   All deposit accounts and deposits therein;

 

 

 

(D)   All monies, remittances, and other amounts due under this Agreement and
any other agreement between Purchaser and Seller;

 

 

 

(E)   All equipment, machinery, motor vehicles, furniture, tools and supplies;

 

 

 

(F)   All investment property;

 

 

 

(G)   All farm products, crops, timber, minerals and the like (including oil and
gas);

 

 

 

(H)   the following commercial tort claims [insert specific case captions or
description per Official Comment 5 to Section 9-108 of the Uniform Commercial
Code];

 

 

 

(I)   All books and records relating to the foregoing, including all computer
programs, printed output and computer readable data; and

 

 

 

(J)   to the extent not otherwise included, all proceeds, tort claims, insurance
claims and other rights to payments not otherwise included in the foregoing and
products of the foregoing and all accessions to, substitutions and replacements
for, and rents and profits of, each of the foregoing.

 

62   Seller hereby irrevocably authorizes the Purchaser at any time and from
time to time to file in any filing office in any Uniform Commercial Code
jurisdiction any initial financing statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of Seller or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Code or such jurisdiction, or (ii) as being
of an equal or lesser scope or with greater detail, and (b) contain any other
information required by part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance of any financing statement or amendment, including (i)
whether Seller is an organization, the type of organization and any organization
identification number issued to Seller, and (ii) in the case of a financing
statement filed as a fixture filing or indicating Collateral as as-extracted
collateral or  timber to be cut, a sufficient description of real property to
which the Collateral relates. Seller agrees to furnish any such information
Purchaser promptly upon request. Seller also ratifies its authorization for
Purchaser to have filed in any Uniform Commercial Code jurisdiction any initial
financing statements or amendments thereto if filed prior to the date hereof.

 

63   Seller shall sign and deliver to Purchaser UCC financing statements, in
form acceptable to Purchaser as to those jurisdictions that are not Uniform
Commercial Code jurisdictions.

 

64   Seller shall deliver to Purchaser the originals of all instruments,
certificated securities, chattel paper and documents evidencing or related to
Purchased Accounts and other Collateral.

 

65   Seller shall obtain signed acknowledgements of Purchaser's security
interests from bailees having possession of Seller's goods that they hold for
the benefit of Purchaser.

 

66   At the request of Purchaser, Seller shall obtain authenticated control
letters from each issuer of uncertificated securities, securities intermediary,
or commodities intermediary issuing or holding any financial assets or
commodities to or for Seller.

 

67   Seller shall maintain all of its deposit accounts with Purchaser.

 

68   If Seller is or becomes the beneficiary of a letter of credit, Seller shall
promptly, and in any event within two (2) business days after becoming a
beneficiary, notify Purchaser thereof and enter into a tri-party agreement with
Purchaser and the issuer and/or confirmation bank with respect to
letter-of-credit rights assigning such letter-of-credit rights to Purchaser.

 

 

69   Seller shall take all steps necessary to grant the Purchaser control of all
electronic chattel paper in accordance with the Code and all "transferable
records" as defined in each of the Uniform Electronic Transactions Act and the
Electronic Signatures in Global and National Commerce Act.

 

610    Seller shall promptly, and in any event within two (2) Business Days
after the same is acquired by it, notify Purchaser of any commercial tort claim
(as defined in the Code) acquired by it and unless otherwise consented by
Purchaser, Seller shall enter into a supplement to this Factoring Agreement,
granting to Purchaser a security interest in such commercial tort claim.

2.

 

Section 5(L) of the Factoring Agreement is hereby amended and restated to read
in its entirety as follows:

 

 

(L)   Seller's name as it appears in official filings in the state of its
incorporation or other organization, the type of entity of Seller (including
corporation, partnership, limited partnership or limited liability company),
organizational identification number issued by Seller's state of incorporation
or organization or a statement that no such number has been issued, Seller's
state or organization or incorporation, the location of Seller's chief executive
office, principal place of business, offices, all warehouses and premises where
Collateral is stored or located, and the locations of its books and records
concerning the Collateral are set forth below Seller's signature. Seller has
only one state of incorporation or organization."

3.

 

Additional Covenants.  The following clauses (N), and (O) are added to Section 5
of the Factoring Agreement:

 

 

(N)   Seller shall not reincorporate or reorganize itself under the laws of any
jurisdiction other than the jurisdiction in which it is incorporated or
organized as of the date hereof without the prior written consent of Purchaser;
and

 

 

(O)   Seller acknowledges that it is not authorized to file any financing
statement or amendment or termination statement with respect to any financing
statement without the prior written consent of Purchaser and agrees that it will
not do so without the prior written consent of Purchaser, subject to Seller's
rights under Section 9509(d)(2) of the Code.

4.   The following are hereby added as new definitions to Section 13 of the
Factoring Agreement:

"Code" means the California Commercial Code as in effect on July 1, 2001, as the
same may be amended from time to time.  "Uniform Commercial Code jurisdiction"
means any jurisdiction that had adopted all or substantially all of Article 9 as
contained in the 2000 Official Text of the Uniform Commercial Code, as
recommended by the National Conference of Commissioners on Uniform State Laws
and the American Law Institute, together with any subsequent amendments or
modifications to the Official Text.

5.   The definition of "Account" in Section 13.1 of the Factoring Agreement is
hereby amended and restated to read as follows:

"Account" shall mean all accounts, accounts receivable, chattel paper, contract
rights, documents, general intangibles, instruments, letters of credit,
letter-of-credit rights, supporting obligations, banker's acceptances, and other
rights to payment, and proceeds thereof.

6.   Effect on Factoring Agreement.  All references in the Factoring Agreement
to the Factoring Agreement shall be deemed to refer to the Factoring Agreement
as amended hereby.

7.   Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF CALIFORNIA (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES).

8.   Counterparts.  This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

                IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

"Seller"

 

"Purchaser"

 

 

 

 

 

 

PACIFIC BUSINESS FUNDING,  a division of Cupertino National Bank

 

 

 

 

 

 

 

 

 

 

By:

/s/ William Chronert

 

By:

/s/ David W. Chapman

Name:

William Chronert

 

Name:

David W. Chapman

Title:

President

 

Title:

Chief Financial Officer

 

 

 

 

 

State of Formation:

 

 

 

 

 

 

 

 

 

Organizational Identification Number: