Exhibit 10.8

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Silicon Valley Bank

3003 Tasman Drive

Santa Clara, CA 95054

(408) 654–1000 – Fax (408) 980–6410

 

ACCOUNTS RECEIVABLE PURCHASE AGREEMENT

 

This Accounts Receivable Purchase Agreement (the “Agreement”) is made on this
29th day of July, 2002, by and between Silicon Valley Bank (“Buyer”) having a
place of business at the address specified above and Zarnba Corporation, a
Delaware corporation (“Seller”), having its principal place of business and
chief executive office at 3033 Excelsior Boulevard, Suite 200, Minneapolis,
Minnesota 55416 and with a FAX number of

 

1.             Definitions.  When used herein, the following terms shall have
the following meanings.

                “Account Balance” shall mean, on any given day, the gross amount
of all Purchased Receivables unpaid on that day.

                “Account Debtor” shall have the meaning set forth in the
California Uniform Commercial Code and shall include any person liable on any
Purchased Receivable, including without limitation, any guarantor of the
Purchased Receivable and any issuer of a letter of credit or banker’s
acceptance.

                “Adjustments” shall mean all discounts, allowances, returns,
disputes, counterclaims, offsets, defenses, rights of recoupment, rights of
return, warranty claims, or short payments, asserted by or on behalf of any
Account Debtor with respect to any Purchased Receivable.

                “Administrative Fee” shall have the meaning as set forth in
Section 3.3 hereof.

                “Advance” shall have the meaning set forth in Section 2.2
hereof.

                “Business Day” is any day that is not a Saturday, Sunday or a
day on which the Bank is closed.

                “Closing Date” is the date of this Agreement.

                “Collateral” shall have the meaning set forth in Section 8
hereof.

                “Collections” shall mean all good funds received by Buyer from
or on behalf of an Account Debtor with respect to Purchased Receivables.

                “Compliance Certificate” shall mean a certificate, in a form
provided by Buyer to Seller, which contains the certification of the chief
financial officer of Seller that, among other things, the representations and
warranties set forth in this Agreement are true and correct as of the date such
certificate is delivered.

                “Event of Default” shall have the meaning set forth in Section 9
hereof.

                “Facility Fee” is defined in Section 3.6 hereof.

                “Finance Charges” shall have the meaning set forth in Section
3.2 hereof.

                “Invoice Transmittal” shall mean a writing signed by an
authorized representative of Seller which accurately identifies the receivables
which Buyer, at its election, may purchase, and includes for each such
receivable the correct amount owed by the Account Debtor, the name and address
of the Account Debtor, the invoice number, the invoice date and the account
code.

                “Obligations” shall mean all advances, financial accommodations,
liabilities, obligations, covenants and duties owing, arising, due or payable by
Seller to Buyer of any kind or nature, present or future, arising under or in
connection with this Agreement or under any other document, instrument or
agreement, whether or not evidenced by any note, guarantee or other instrument,
whether arising on account or by overdraft, whether direct or indirect
(including those acquired by assignment) absolute or contingent, primary or
secondary, due or to become due, now owing or hereafter arising, and however
acquired; including, without limitation, all Advances, Finance Charges,
Administrative Fees, interest, Repurchase Amounts, fees, expenses, professional
fees and attorneys’ fees and any other sums chargeable to Seller hereunder or
otherwise.

                “Purchased Receivables” shall mean all those accounts,
receivables, chattel paper, instruments, contract rights, documents, general
intangibles, letters of credit, drafts, bankers acceptances, and rights to
payment, and all proceeds thereof (all of the foregoing being referred to as
“receivables”), arising out of the invoices and other agreements identified on
or delivered with any Invoice Transmittal delivered by Seller to Buyer which
Buyer elects to purchase and for which Buyer makes an Advance.

                “Refund” shall have the meaning set forth in Section 3.5 hereof.

                “Reserve” shall have the meaning set forth in Section 2.4
hereof.

                “Repurchase Amount” shall have the meaning set forth in Section
4.2 hereof.

 

 

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                “Reconciliation Date” shall mean the last calendar day of each
Reconciliation Period.

                “Reconciliation Period” shall mean each calendar month of every
year.

 

2.             Purchase and Sale of Receivables.

 

                2.1.  Offer to Sell Receivables.  During the term hereof, and
provided that there does not then exist any Event of Default or any event that
with notice, lapse of time or otherwise would constitute an Event of Default,
Seller may request that Buyer purchase receivables and Buyer may, in its sole
discretion, elect to purchase receivables. Seller shall deliver to Buyer an
Invoice Transmittal with respect to any receivable for which a request for
purchase is made. An authorized representative of Seller shall sign each Invoice
Transmittal delivered to Buyer. Buyer shall be entitled to rely on all the
information provided by Seller to Buyer on or with the Invoice Transmittal and
to rely on the signature on any Invoice Transmittal as an authorized signature
of Seller.

 

                2.2.  Acceptance of Receivables.  Buyer shall have no obligation
to purchase any receivable listed on an Invoice Transmittal. Buyer may exercise
its sole discretion in approving the credit of each Account Debtor before buying
any receivable. Upon acceptance by Buyer of all or any of the receivables
described on any Invoice Transmittal, Buyer shall pay to Seller 80(%) percent of
the face amount of each receivable Buyer desires to purchase. Such payment shall
be the “Advance” with respect to such receivable. Buyer may, from time to time,
in its sole discretion, change the percentage of the Advance. Upon Buyer’s
acceptance of the receivable and payment to Seller of the Advance, the
receivable shall become a “Purchased Receivable.” It shall be a condition to
each Advance that (i) all of the representations and warranties set forth in
Section 6 of this Agreement be true and correct on and as of the date of the
related Invoice Transmittal and on and as of the date of such Advance as though
made at and as of each such date, and (ii) no Event of Default or any event or
condition that with notice, lapse of time or otherwise would constitute an Event
of Default shall have occurred and be continuing, or would result from such
Advance. Notwithstanding the foregoing, in no event shall the aggregate amount
of all Purchased Receivables outstanding at any time exceed Two Million Five
Hundred Thousand Dollars ($2,500,000).

 

                2.3.  Effectiveness of Sale to Buyer.  Effective upon Buyer’s
payment of an Advance, and for and in consideration therefor and in
consideration of the covenants of this Agreement, Seller hereby absolutely
sells, transfers and assigns to Buyer, all of Seller’s right, title and interest
in and to each Purchased Receivable and all monies due or which may become due
on or with respect to such Purchased Receivable. Buyer shall be the absolute
owner of each Purchased Receivable. Buyer shall have, with respect to any goods
related to the Purchased Receivable, all the rights and remedies of an unpaid
seller under the California Uniform Commercial Code and other applicable law,
including the rights of replevin, claim and delivery, reclamation and stoppage
in transit.

 

                2.4.  Establishment of a Reserve.  Upon the purchase by Buyer of
each Purchased Receivable, Buyer shall establish a reserve. The reserve shall be
the amount by which the face amount of the Purchased Receivable exceeds the
Advance on that Purchased Receivable (the “Reserve”); provided, the Reserve with
respect to all Purchased Receivables outstanding at any one time shall be an
amount not less than 20(%) percent of the Account Balance at that time and may
be set at a higher percentage at Buyer’s sole discretion. The reserve shall be a
book balance maintained on the records of Buyer and shall not be a segregated
fund.

 

3.             Collections, Charges and Remittances.

 

                3.1.  Collections.  In computing Finance Charges on the
Obligations, all checks and other items of payment received by Buyer (including
proceeds of Purchased Receivables and payment of Obligations in full) shall be
deemed applied by Buyer on account of the Obligations three (3) Business Days
after receipt by Buyer of immediately available funds. If Seller is in default
under this Agreement, Buyer shall apply all Collections to Seller’s Obligations
hereunder in such order and manner as Buyer may determine. If an item of
collection is not honored or Buyer does not receive good funds for any reason,
the amount shall be included in the Account Balance as if the Collections had
not been received and Finance Charges under Section 3.2 shall accrue thereon.

 

                3.2.  Finance Charges.  On each Reconciliation Date Seller shall
pay to Buyer a finance charge in an amount equal to 1(%) percent per month of
the average daily Account Balance outstanding during the applicable
Reconciliation Period (the “Finance Charges”). Buyer shall deduct the accrued
Finance Charges from the Reserve as set forth in Section 3.5 below.

 

                3.3.  Administrative Fee.  On each Reconciliation Date Seller
shall pay to Buyer an Administrative Fee equal to 0.25(%) percent of the face
amount of each Purchased Receivable first purchased during that Reconciliation
Period

 

 

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(the “Administrative Fee”). Buyer shall deduct the Administrative Fee from the
Reserve as set forth in Section 3.5 below.

 

                3.4.  Accounting.  Buyer shall prepare and send to Seller after
the close of business for each Reconciliation Period, an accounting of the
transactions for that Reconciliation Period, including the amount of all
Purchased Receivables, all Collections, Adjustments, Finance Charges, and the
Administrative Fee. The accounting shall be deemed correct and conclusive unless
Seller makes written objection to Buyer within thirty (30) days after the Buyer
mails the accounting to Seller.

 

                3.5.  Refund to Seller.  Provided that there does not then exist
an Event of Default or any event or condition that with notice, lapse of time or
otherwise would constitute an Event of Default, Buyer shall refund to Seller by
check after the Reconciliation Date, the amount, if any, which Buyer owes to
Seller at the end of the Reconciliation Period according to the accounting
prepared by Buyer for that Reconciliation Period (the “Refund”). The Refund
shall be an amount equal to:

(A)

(1)

The Reserve as of the beginning of that Reconciliation Period, plus

 

(2)

the Reserve created for each Purchased Receivable purchased during that
Reconciliation Period, minus

(B)

The total for that Reconciliation Period of:

 

(1)

the Administrative Fee;

 

(2)

Finance Charges;

 

(3)

Adjustments;

 

(4)

Repurchase Amounts, to the extent Buyer has agreed to accept payment thereof by
deduction from the Refund;

 

(5)

the Reserve for the Account Balance as of the first day of the following
Reconciliation Period in the minimum percentage set forth in Section 2.4 hereof;
and

 

(6)

all amounts due, including professional fees and expenses, as set forth in
Section 12 for which oral

or written demand has been made by Buyer to Seller during that Reconciliation
Period to the extent Buyer has agreed to accept payment thereof by deduction
from the Refund. In the event the formula set forth in this Section 3.5 results
in an amount due to Buyer from Seller, Seller shall make such payment in the
same manner as set forth in Section 4.3 hereof for repurchases. If the formula
set forth in this Section 3.5 results in an amount due to Seller from Buyer,
Buyer shall make such payment by check, subject to Buyer’s rights under Section
4.3 and Buyer’s rights of offset and recoupment.

 

                3.6.  Facility Fee.  A fully earned, non–refundable facility fee
of $10,000.00 shall be due upon the Closing Date.

 

4.             Recourse and Repurchase Obligations.

 

                4.1.  Recourse.  Buyer’s acquisition of Purchased Receivables
from Seller shall be with full recourse against Seller. In the event the
Obligations exceed the amount of Purchased Receivables and Collateral, Seller
shall be liable for any deficiency.

 

                4.2.  Seller’s Agreement to Repurchase.  Seller agrees to pay to
Buyer on demand, the full face amount, or any unpaid portion, of any Purchased
Receivable:

 

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

(B) which is owed by any Account Debtor who has filed, or has had filed against
it, any bankruptcy case, 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; or

(C) with respect to which there has been any breach of warranty or
representation set forth in Section 6 hereof or any breach of any covenant
contained in this Agreement; or

(D) with respect to which the Account Debtor asserts any discount, allowance,
return, dispute, counterclaim, offset, defense, right of recoupment, right of
return, warranty claim, or short payment;

together with all reasonable attorneys’ and professional fees and expenses and
all court costs incurred by Buyer in collecting such Purchased Receivable and/or
enforcing its rights under, or collecting amounts owed by Seller in connection
with, this Agreement (collectively, the “Repurchase Amount”).

 

                4.3.  Seller’s Payment of the Repurchase Amount or Other Amounts
Due Buyer.  When any Repurchase Amount or other amount owing to Buyer becomes
due, Buyer shall inform Seller of the manner of payment which may be any one or
more of the following in Buyer’s sole discretion: (a) in cash immediately upon
demand therefor; (b) by delivery of substitute invoices and an Invoice
Transmittal acceptable to Buyer which shall thereupon become

 

 

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Purchased Receivables; (c) by adjustment to the Reserve pursuant to Section 3.5
hereof; (d) by deduction from or offset against the Refund that would otherwise
be due and payable to Seller–, (e) by deduction from or offset against the
amount that otherwise would be forwarded to Seller in respect of any further
Advances that may be made by Buyer, or (f) by any combination of the foregoing
as Buyer may from time to time choose.

 

                4.4.  Seller’s Agreement to Repurchase All Purchased
Receivables.  Upon and after the occurrence of an Event of Default, Seller
shall, upon Buyer’s demand (or, in the case of an Event of Default under Section
9(B), immediately without notice or demand from Buyer) repurchase all the
Purchased Receivables then outstanding, or such portion thereof as Buyer may
demand. Such demand may, at Buyer’s option, include and Seller shall pay to
Buyer immediately upon demand, cash in an amount equal to the Advance with
respect to each Purchased Receivable then outstanding together with all accrued
Finance Charges, Adjustments, Administrative Fees, attorney’s and professional
fees, court costs and expenses as provided for herein, and any other
Obligations. Upon receipt of payment in full of the Obligations, Buyer shall
immediately instruct Account Debtors to pay Seller directly, and return to
Seller any Refund due to Seller. For the purpose of calculating any Refund due
under this Section only, the Reconciliation Date shall be deemed to be the date
Buyer receives payment in good funds of all the Obligations as provided in this
Section 4.4.

 

5.             Power of Attorney.  Seller does hereby irrevocably appoint Buyer
and its successors and assigns as Seller’s true and lawful attorney in fact, and
hereby authorizes Buyer, regardless of whether there has been an Event of
Default, (a) to sell, assign, transfer, pledge, compromise, or discharge the
whole or any part of the Purchased Receivables; (b) to demand, collect, receive,
sue, and give releases to any Account Debtor for the monies due or which may
become due upon or with respect to the Purchased Receivables and to compromise,
prosecute, or defend any action, claim, case or proceeding relating to the
Purchased Receivables, including the filing of a claim or the voting of such
claims in any bankruptcy case, all in Buyer’s name or Seller’s name, as Buyer
may choose; (c) to prepare, file and sign Seller’s name on any notice, claim,
assignment, demand, draft, or notice of or satisfaction of lien or mechanics’
lien or similar document with respect to Purchased Receivables–, (d) to notify
all Account Debtors with respect to the Purchased Receivables to pay Buyer
directly; (e) to receive, open, and dispose of all mail addressed to Seller for
the purpose of collecting the Purchased Receivables; (f) to endorse Seller’s
name on any checks or other forms of payment on the Purchased Receivables; (g)
to execute on behalf of Seller any and all instruments, documents, financing
statements and the like to perfect Buyer’s interests in the Purchased
Receivables and Collateral; and (h) to do all acts and things necessary or
expedient, in furtherance of any such purposes. If Buyer receives a check or
item which is payment for both a Purchased Receivable and another receivable,
the funds shall first be applied to the Purchased Receivable and, so long as
there does not exist an Event of Default or an event that with notice, lapse of
time or otherwise would constitute an Event of Default, the excess shall be
remitted to Seller. Upon the occurrence and continuation of an Event of Default,
all of the power of attorney rights granted by Seller to Buyer hereunder shall
be applicable with respect to all Purchased Receivables and all Collateral.

 

6.             Representations, Warranties and Covenants.

 

                6.1.  Receivables’ Warranties, Representations and Covenants. 
To induce Buyer to buy receivables and to renders its services to Seller, and
with full knowledge that the truth and accuracy of the following are being
relied upon by the Buyer in determining whether to accept receivables as
Purchased Receivables, Seller represents, warrants, covenants and agrees, with
respect to each Invoice Transmittal delivered to Buyer and each receivable
described therein, that:

(A) Seller is the absolute owner of each receivable set forth in the Invoice
Transmittal and has full legal right to sell, transfer and assign such
receivables;

(B) The correct amount of each receivable is as set forth in the Invoice
Transmittal and is not in dispute;

(C) The payment of each receivable is not contingent upon the fulfillment of any
obligation or contract, past or future and any and all obligations required of
the Seller have been fulfilled as of the date of the Invoice Transmittal;

(D) Each receivable set forth on the Invoice Transmittal is based on an actual
sale and delivery of goods and/or services actually rendered, is presently due
and owing to Seller, is not past due or in default, has not been previously
sold, assigned, transferred, or pledged, and is free of any and all liens,
security interests and encumbrances other than liens, security interests or
encumbrances in favor of Buyer or any other division or affiliate of Silicon
Valley Bank;

(E) There are no defenses, offsets, or counterclaims against any of the
receivables, and no agreement has been made under which the Account Debtor may
claim any deduction or discount, except as otherwise stated in the Invoice
Transmittal;

 

 

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(F) Each Purchased Receivable shall be the property of the Buyer and shall be
collected by Buyer, but if for any reason it should be paid to Seller, Seller
shall promptly notify Buyer of such payment, shall hold any checks, drafts, or
monies so received in trust for the benefit of Buyer, and shall promptly
transfer and deliver the same to the Buyer;

(G) Buyer shall have the right of endorsement, and also the right to require
endorsement by Seller, on all payments received in connection with each
Purchased Receivable and any proceeds of Collateral;

(H) Seller, and to Seller’s best knowledge, each Account Debtor set forth in the
Invoice Transmittal, are and shall remain solvent as that term is defined in the
United States Bankruptcy Code and the California Uniform Commercial Code, and no
such Account Debtor has filed or had filed against it a voluntary or involuntary
petition for relief under the United States Bankruptcy Code;

(1) Each Account Debtor named on the Invoice Transmittal will not object to the
payment for, or the quality or the quantity of the subject matter of, the
receivable and is liable for the amount set forth on the Invoice Transmittal;

(J) Seller will remit all payments for accounts to Buyer by the close of
business on each Friday along with a detailed cash receipts journal and shall
immediately notify and direct all of the Seller’s Account Debtor’s to make all
payments for Seller’s accounts to a lockbox account established with Buyer
(“Lockbox”) or to wire transfer payments to a cash collateral account that Buyer
controls. It will be considered an immediate Event of Default if the Lockbox is
not set–up and operational within 45 days from the date of this Agreement; and

(K) All receivables forwarded to and accepted by Buyer after the date hereof,
and thereby becoming Purchased Receivables, shall comply with each and every one
of the foregoing representations, warranties, covenants and agreements referred
to above in this Section 6.1.

 

                6.2.  Additional Warranties, Representations and Covenants.  In
addition to the foregoing warranties, representations and covenants, to induce
Buyer to buy receivables and to render its services to Seller, Seller hereby
represents, warrants, covenants and agrees that:

(A) Seller will not assign, transfer, sell, or grant, or permit any lien or
security interest in any Purchased Receivables or Collateral to or in favor of
any other party, without Buyer’s prior written consent;

(B) The Seller’s name, form of organization, chief executive office, and the
place where the records concerning all Purchased Receivables and Collateral are
kept is set forth at the beginning of this Agreement, Collateral is located only
at the location set forth in the beginning of this Agreement, or, if located at
any additional location, as set forth on a schedule attached to this Agreement,
and Seller will give Buyer at least thirty (30) days prior written notice if
such name, organization, chief executive office or other locations of Collateral
or records concerning Purchased Receivables or Collateral is changed or added
and shall execute any documents necessary to perfect Buyer’s interest in the
Purchased Receivables and the Collateral;

(C) Seller shall (i) pay all of its normal gross payroll for employees, and all
federal and state taxes, as and when due, including without limitation all
payroll and withholding taxes and state sales taxes; (ii) deliver at any time
and from time to time at Buyer’s request, evidence satisfactory to Buyer that
all such amounts have been paid to the proper taxing authorities; and (iii) if
requested by Buyer, pay its payroll and related taxes through a bank or an
independent payroll service acceptable to Buyer,

(D) Seller has not, as of the time Seller delivers to Buyer an Invoice
Transmittal, or as of the time Seller accepts any Advance from Buyer, filed a
voluntary petition for relief under the United States Bankruptcy Code or had
filed against it an involuntary petition for relief;

(E) If Seller owns, holds or has any interest in, any copyrights (whether
registered, or unregistered), patents or trademarks, and licenses of any of the
foregoing, such interest has been disclosed to Buyer and is specifically listed
and identified on a schedule to this Agreement, and Seller shall immediately
notify Buyer if Seller hereafter obtains any interest in any additional
copyrights, patents, trademarks or licenses that are significant in value or are
material to the conduct of its business;

(F) Seller shall provide Buyer, as soon as available, but no later than 30 days
following each Reconciliation Period, a company prepared balance sheet and
income statement, prepared under GAAP, consistently applied, covering Seller’s
operations during the period;

(G) On request by Buyer, Seller will promptly furnish any information Buyer may
reasonably request to determine financial condition of Seller, including, but
not limited to all of Seller’s Obligations, and the condition of any of Seller’s
receivables which may include but are not limited to Purchased Receivables;

(H) Seller will maintain its primary operating deposit accounts with Buyer;

(1) Seller shall provide Buyer with, (i) as soon as available, but no later than
30 days following each Reconciliation Period, a deferred revenue, deposits
report, and an aged listing of accounts receivable and accounts payable; (ii) as
soon as available, but no later than 120 days after the last day of Seller’s
fiscal year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm

 

 

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reasonably acceptable to Buyer; (iii) a prompt report of any legal actions
pending or threatened against Seller that could result in damages or costs to
Seller; and (iv) budgets, sales projections, operating plans or other financial
information Buyer reasonably requests; and

(J) Seller shall provide Buyer with, as soon as available, but no later than 30
days following each Reconciliation Period, a Compliance Certificate, or on a
more frequent or other basis if and as requested by Buyer.

 

7.             Adjustments.  In the event of a breach of any of the
representations, warranties, or covenants set forth in Section 6.1, or in the
event any Adjustment or dispute is asserted by any Account Debtor, Seller shall
promptly advise Buyer and shall, subject to the Buyer’s approval, resolve such
disputes and advise Buyer of any adjustments. Unless the disputed Purchased
Receivable is repurchased by Seller and the full Repurchase Amount is paid,
Buyer shall remain the absolute owner of any Purchased Receivable which is
subject to Adjustment or repurchase under Section 4.2 hereof, and any rejected,
returned, or recovered personal property, with the right to take possession
thereof at any time. If such possession is not taken by Buyer, Seller is to
resell it for Buyer’s account at Seller’s expense with the proceeds made payable
to Buyer. While Seller retains possession of said returned goods, Seller shall
segregate said goods and mark them “property of Silicon Valley Bank.”

 

8.             Security Interest.  To secure the prompt payment and performance
to Buyer of all of the Obligations, Seller hereby grants to Buyer a continuing
lien upon and security interest in all of Seller’s now existing or hereafter
arising rights and interest in the following, whether now owned or existing or
hereafter created, acquired, or arising, and wherever located (collectively, the
“Collateral”):

(A) All accounts, receivables, contract rights, chattel paper, instruments,
documents, letters of credit, bankers acceptances, drafts, checks, cash,
securities, and general intangibles (including, without limitation, all claims,
causes of action, deposit accounts, guaranties, rights in and claims under
insurance policies (including rights to premium refunds), rights to tax refunds,
copyrights, patents, trademarks, rights in and under license agreements, and all
other intellectual property);

(B) All inventory, including Seller’s rights to any returned or rejected goods,
with respect to which Buyer shall have all the rights of any unpaid seller,
including the rights of replevin, claim and delivery, reclamation, and stoppage
in transit;

(C) All monies, refunds and other amounts due Seller, including, without
limitation, amounts due Seller under this Agreement (including Seller’s right of
offset and recoupment);

(D) All equipment, machinery, furniture, furnishings, fixtures, tools, supplies
and motor vehicles;

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

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

(G) All books and records pertaining to all of the foregoing; and

(H) All proceeds of the foregoing, whether due to voluntary or involuntary
disposition, including insurance proceeds.

Seller is not authorized to sell, assign, transfer or otherwise convey any
Collateral without Buyer’s prior written consent, except for the sale of
finished inventory in the Seller’s usual course of business. From time to time
the Seller sells private securities, consent for these securities will not be
unreasonably withheld or delayed. Proceeds of the sale of private securities are
to be directed to the lockbox, as set forth in Section 14 hereof. Seller agrees
to sign UCC financing statements, in a form acceptable to Buyer, and any other
instruments and documents requested by Buyer to evidence, perfect, or protect
the interests of Buyer in the Collateral. Seller agrees to deliver to Buyer the
originals of all instruments, chattel paper and documents evidencing or related
to Purchased Receivables and Collateral.

 

9.             Default.  The occurrence of any one or more of the following
shall constitute an Event of Default hereunder.

(A) Seller fails to pay any amount owed to Buyer as and when due;

(B) 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 its assets;

(C) Seller shall become insolvent or Seller is generally not paying its debts as
they become due;

(D) Any involuntary lien, garnishment, attachment or the like is issued against
or attaches to the Purchased Receivables or any Collateral;

(E) Seller shall breach any covenant, agreement, warranty, or representation
shall constitute an immediate default hereunder;

(F) Seller is not in compliance with, or otherwise is in default under, any term
of any document, instrument or agreement evidencing a debt, obligation or
liability of any kind or character of Seller, now or hereafter existing, in
favor of Buyer or any division or affiliate of Silicon Valley Bank, regardless
of whether such debt, obligation or liability is direct or indirect, primary or
secondary, joint, several or joint and several, or fixed or

 

 

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contingent, together with any and all renewals and extensions of such debts,
obligations and liabilities, or any part thereof;

(G) An event of default shall occur under any guaranty executed by any guarantor
of the Obligations of Seller to Buyer under this Agreement, 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;

(H) A default or event of default shall occur under any agreement between Seller
and any creditor of Seller that has entered into a subordination agreement with
Buyer;

(1) Any creditor that has entered into a subordination agreement with Buyer
shall breach any of the terms of or not comply with such subordination
agreement; or

(J) (i) There is a material adverse change in the business, operations, or
condition (financial or otherwise) of the Seller, or (ii) there is a material
impairment of the prospect of repayment of any portion of the Obligations or
(iii) there is a material impairment of the value or priority of Buyer’s
security interests in the Collateral.

 

10.           Remedies Upon Default.  Upon the occurrence of an Event of
Default, (1) without implying any obligation to buy receivables, Buyer may cease
buying receivables or extending any financial accommodations to Seller; (2) all
or a portion of the Obligations shall be, at the option of and upon demand by
Buyer, or with respect to an Event of Default described in Section 9(B),
automatically and without notice or demand, due and payable in full; and (3)
Buyer shall have and may 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, all the power of
attorney rights described in Section 5 with respect to all Collateral, and the
right to collect, dispose of, sell, lease, use, and realize upon all Purchased
Receivables and all Collateral in any commercial reasonable manner. Seller and
Buyer 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 the sale may be held. In the event that the Obligations are accelerated
hereunder, Seller shall repurchase all of the Purchased Receivables as set forth
in Section 4.4.

 

11.           Accrual of Interest.  If any amount owed by Seller hereunder is
not paid when due, including, without limitation, amounts due under Section 3.5,
Repurchase Amounts, amounts due under Section 12, and any other Obligations,
such amounts shall bear interest at a per annum rate equal to the per annum rate
of the Finance Charges until the earlier of (i) payment in good funds or (ii)
entry of a final judgment thereof, at which time the principal amount of any
money judgment remaining unsatisfied shall accrue interest at the highest rate
allowed by applicable law.

 

12.           Fees, Costs and Expenses; Indemnification.  The Seller will pay to
Buyer immediately upon demand all fees, costs and expenses (including fees of
attorneys and professionals and their costs and expenses) that Buyer incurs or
may from time to time impose in connection with any of the following: (a)
preparing, negotiating, administering, and enforcing this Agreement or any other
agreement executed in connection herewith, including any amendments, waivers or
consents in connection with any of the foregoing, (b) any litigation or dispute
(whether instituted by Buyer, Seller or any other person) in any way relating to
the Purchased Receivables, the Collateral, this Agreement or any other agreement
executed in connection herewith or therewith, (c) enforcing any rights against
Seller or any guarantor, or any Account Debtor, (d) protecting or enforcing its
interest in the Purchased Receivables or the Collateral, (e) collecting the
Purchased Receivables and the Obligations, and (f) the representation of Buyer
in connection with any bankruptcy case or insolvency proceeding involving
Seller, any Purchased Receivable, the Collateral, any Account Debtor, or any
guarantor. Seller shall indemnify and hold Buyer harmless from and against any
and all claims, actions, damages, costs, expenses, and liabilities of any nature
whatsoever arising in connection with any of the foregoing.

 

13.            Severability, Waiver, and Choice of Law.  In the event that any
provision of this Agreement is deemed invalid by reason of law, this Agreement
will be construed as not containing such provision and the remainder of the
Agreement shall remain in full force and effect. Buyer retains all of its
rights, even if it makes an Advance after an Event of Default. If Buyer waives
an Event of Default, it may enforce a later Event of Default. Any consent or
Waiver under, or amendment of, this Agreement must be in writing. Nothing
contained herein, or any action taken or not taken by Buyer at any time, shall
be construed at any time to be indicative of any obligation or willingness on
the part of Buyer to amend this Agreement or to grant to Seller any waivers or
consents. This Agreement has been transmitted by Seller to Buyer at Buyer’s
office in the State of California and has been executed and accepted by Buyer in
the State of California. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of California.

 

 

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14.           Lockbox Account Collection Services.  Seller shall enter into a
three party agreement (the “Lockbox Agreement”) with Buyer and a lockbox
provider (the “Lockbox Provider”). The Lockbox Agreement and Lockbox Provider
shall be acceptable to Buyer. Seller shall use the lockbox address as the
payment address on all invoices issued by Seller and shall direct all its
Account Debtors to remit their payments to the lockbox address. The Lockbox
Agreement shall provide that the Lockbox Provider shall remit all collections
received in the lockbox to Buyer. Upon Buyer’s receipt of such collections, and
provided that there does not then exist an Event of Default or event that with
notice, lapse or time or otherwise would constitute an Event of Default, and
subject to Buyer’s rights in the Collateral, Buyer agrees to remit promptly to
Seller the amount of the receivables collections it receives with respect to
receivables other than Purchased Receivables. It is understood and agreed by
Seller that this Section does not impose any affirmative duty on Buyer to do any
act other than to turn over such amounts. All such receivables and collections
are Collateral and in the event of Seller’s default hereunder, Buyer shall have
no duty to remit collections of Collateral and may apply such collections to the
obligations hereunder and Buyer shall have the rights of a secured party under
the California Uniform Commercial Code.

 

15.           Notices.  All notices shall be given to Buyer and Seller at the
addresses or faxes set forth on the first page of 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 pre–paid,
(b) one (1) calendar day after deposit with an overnight mail or messenger
service; or (c) on the same date of confirmed transmission if sent by hand
delivery, telecopy, telefax or telex.

 

16.           Jury Trial.  SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT; AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS
DETERMINED FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL,
AND KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.

 

17.           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 Buyer or Seller. Seller and Buyer shall each have the 
right to terminate this Agreement at any time. Notwithstanding the foregoing,
any termination of this Agreement shall not affect Buyer’s security interest in
the Collateral and Buyer’s ownership of the Purchased Receivables, and this
Agreement shall continue to be effective, and Buyer’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.

 

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

 

19.           Other Agreements.  The terms and provisions of this Agreement
shall not adversely affect the rights of Buyer or any other division or
affiliate of Silicon Valley Bank under any other document, instrument or
agreement. The terms of such other documents, instruments and agreements shall
remain in full force and effect notwithstanding the execution of this Agreement.
In the event of a conflict between any provision of this Agreement and any
provision of any other document, instrument or agreement between Seller on the
one hand, and Buyer or any other division or affiliate of Silicon Valley Bank on
the other hand, Buyer shall determine in its sole discretion which provision
shall apply. Seller acknowledges specifically that any security agreements,
liens and/or security interests currently securing payment of any obligations of
Seller owing to Buyer or any other division or affiliate of Silicon Valley Bank
also secure Seller’s obligations under this Agreement, and are valid and
subsisting and are not adversely affected by execution of this Agreement. Seller
further acknowledges that (a) any collateral under other outstanding security
agreements or other documents between Seller and Buyer or any other division or
affiliate of Silicon Valley Bank secures the obligations of Seller under this
Agreement and (b) a default by Seller under this Agreement constitutes a default
under other outstanding agreements between Seller and Buyer or any other
division or affiliate of Silicon Valley Bank.

 

 

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

 

SELLER: ZAMBA CORPORATION

 

 

 

 

 

 

By

/s/ Michael H. Carrel

Title

EVP & CFO

 

 

 

BUYER: SILICON VALLEY BANK

 

 

 

 

 

 

By

/s/ Ryan Dammeyer

Title

V.P.

 

 

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EXHIBIT “A”

 

TO FINANCING STATEMENT AND SECURITY AGREEMENT

 

This FINANCING STATEMENT and SECURITY AGREEMENT covers the following types or
items of property (in addition to, and without limiting the types of property
set forth on page 1 hereof):

 

A)                                  All accounts, receivables, contract rights,
chattel paper, instruments, documents, letters of credit, bankers acceptances,
drafts, checks, cash, securities, deposit accounts, and general intangibles
(including, without limitation, all claims, causes of action, guaranties, rights
in and claims under insurance policies (including rights to premium refunds),
rights to tax refunds, copyrights, patents, trademarks, rights in and under
license agreements, and all other intellectual property);

 

B)                                    All inventory, including Seller’s rights
to any returned or rejected goods, with respect to which Buyer shall have all
the rights of any unpaid seller, including the rights of replevin, claim and
delivery, reclamation, and stoppage in transit;

 

C)                                    All monies, refunds and other amounts due
Seller, including, without limitation, amounts due Seller under this Agreement
(including Seller’s right of offset and recoupment);

 

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

 

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

 

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

 

G)                                    All books and records pertaining to all of
the foregoing; and

 

H)                                   All proceeds of the foregoing, whether due
to voluntary or involuntary disposition, including insurance proceeds.

 

 

 

 

Initials

 

 

 

 

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Silicon Valley Bank

3003 Tasman Drive

Santa Clara, California 95054

(408) 654–1000 – Fax (408) 980–6410

 

CERTIFICATION of OFFICERS

 

The undersigned, being all the officers of Zamba Corporation, a Delaware
corporation (the “Corporation”), hereby certify to Silicon Valley Bank (“SVB”)
that:

 

                1.             The correct name of the Corporation is Zamba
Corporation, as set forth in the Articles of Incorporation.

 

                2.             The Corporation was incorporated
on                   , under the laws of the State of Delaware, and is in good
standing under such laws.

 

                3.             The Corporation’s place of business and chief
executive office being the place at which the Corporation maintains its books
and records pertaining to accounts, accounts receivables, contract rights,
chattel paper, general intangibles, instruments, documents, inventory, and
equipment, is located at:

 

3033 Excelsior Boulevard, Suite 200

Minneapolis, Minnesota 55416

 

                4.             The Corporation has other places of business at
the following addressees:

 

None

 

 

                5.             There is no provision in the Certificate of
Incorporation, Articles of Incorporation, or Bylaws of the Corporation, or in
the laws of the State of its incorporation, requiring any vote or consent of
shareholders to authorize ‘the sale of receivables or the grant of a security
interest in any assets of the Corporation. Such power is vested exclusively in
the Corporation’s Board of Directors.

 

                6.             The officers of the Corporation, and their
respective titles and signatures are as follows:

 

President:

 

(Signature)

 

Vice President:

 

(Signature)

 

Secretary:

 

(Signature)

 

Treasurer:

 

(Signature)

 

Other Officer:
Title:

 

(Signature)

 

 

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                7.             Except as indicated in this paragraph 7, each of
the officers listed in paragraph 6 has signatory powers with respect to all the
Corporation’s transactions with SVB.  Explanation of exceptions:

 

                8.             The undersigned shall give SVB prompt written
notice of any change or amendment with respect to any of the foregoing.  Until
such written notice is received by SVB, SVB shall be entitled to rely upon the
foregoing in all respects.

 

                IN WITNESS WHEREOF, the undersigned have executed this
Certification of Officers on 07/29/02.

 

President:

 

Vice President:

 

Secretary:

 

Treasurer:

 

 

 

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Silicon Valley Bank

3003 Tasman Drive

Santa Clara, California 95054

(408) 654–1000 – Fax (408) 980–6410

 

SECRETARY’S CERTIFICATE OF RESOLUTION

 

                The undersigned, as Secretary of Zamba Corporation, a Delaware
corporation (the “Corporation”), hereby certifies to Silicon Valley Bank that at
a meeting duly convened at which a quorum was present the following resolutions
were adopted by the Board of Directors of the Corporation and that such
resolutions have not been modified, amended, or rescinded in any respect and are
in full force and effect as of today’s date.

 

                RESOLVED, that this corporation be and hereby is authorized to
sell this corporation’s accounts receivable to Silicon Valley Bank, and to grant
Silicon Valley Bank a security interest in this corporation’s assets, including,
without limitation, accounts, accounts receivable, contract rights, chattel
paper, general intangibles, instruments, documents, letters of credit, drafts,
inventory and equipment, presently owned or hereafter acquired and proceeds and
products of the foregoing (the “ Collateral,” as defined in the Accounts
Receivable Purchase Agreement).

 

                RESOLVED, that this corporation be and hereby is authorized and
directed to execute and deliver certain agreements in connection with the sale
of receivables, and granting of security interests in the Collateral to Silicon
Valley Bank including, without limitations, a Accounts Receivable Purchase
Agreement and UCC-1 financing statement.

 

                RESOLVED, that the following named officers of this corporation
(“Authorized Officers”) be, and any of them hereby are, authorized, empowered,
and directed to execute and deliver to Silicon Valley Bank on behalf of this
corporation all such further agreements and instruments as may be deemed
necessary or advisable in order to fully effectuate the purposes and intent of
the foregoing resolutions.

 

Print Names of Authorized Officers:

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                RESOLVED, that the Secretary or Assistant
Secretary of this corporation be, and hereby is authorized, empowered and
directed to certify to the passage of the foregoing resolutions under the seal
of this corporation.

 

IN WITNESS WHEREOF, the undersigned has duly executed this Certificate this 29th
day of July, 2002.

 

 

Signature

 

Secretary of Zarnba Corporation

 

 

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Consent and Release

 

Silicon Valley Bank sincerely appreciates your business and would like to
publicize your Company recently joining our “family”.  In order to do so, kindly
complete the following and return to us.

 

Zamba Corporation (“Client”) consents to and releases Silicon Valley Bank
(“Bank”) from any liability in its use of (check all that apply):

 

Company Name

 

 

 

Individual Name

 

 

 

Quotation

 

 

 

Photograph

 

 

 

Client Reference

 

 

 

Type of Credit Facility

 

 

 

Amount of Credit Facility

 

 

in Bank’s written and oral presentations, advertising and promotional materials
and Internet Web site.

 

Client Name:

 

Zamba Corporation

 

 

 

Signature

 

 

Name and Title

 

 

Date

 

 

 

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