**Exhibit 10.8**

 

**Silicon Valley Bank**

3003 Tasman Drive

Santa Clara, CA 95054

(408) 654–1000 – Fax (408) 980–6410

 

**ACCOUNTS RECEIVABLE PURCHASE AGREEMENT**

 

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

 

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

                “AccountBalance” shall mean, on any given day, the gross amount of all PurchasedReceivables unpaid on that day.

**               **“Account Debtor” shall have the meaning set forth in the CaliforniaUniform Commercial Code and shall include any person liable on any PurchasedReceivable, including without limitation, any guarantor of the Purchased Receivableand 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, orshort payments, asserted by or on behalf of any Account Debtor with respect toany Purchased Receivable.

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

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

                “BusinessDay” is any day that is not a Saturday, Sunday or a day on which the Bank isclosed.

                “ClosingDate” 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 AccountDebtor with respect to Purchased Receivables.

                “ComplianceCertificate” 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 thisAgreement are true and correct as of the date such certificate is delivered.

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

                “FacilityFee” is defined in Section 3.6 hereof.

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

                “InvoiceTransmittal” shall mean a writing signed by an authorized representative ofSeller which accurately identifies the receivables which Buyer, at itselection, may purchase, and includes for each such receivable the correctamount 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 anykind or nature, present or future, arising under or in connection with thisAgreement or under any other document, instrument or agreement, whether or notevidenced by any note, guarantee or other instrument, whether arising onaccount or by overdraft, whether direct or indirect (including those acquiredby assignment) absolute or contingent, primary or secondary, due or to becomedue, now owing or hereafter arising, and however acquired; including, withoutlimitation, all Advances, Finance Charges, Administrative Fees, interest,Repurchase Amounts, fees, expenses, professional fees and attorneys’ fees andany other sums chargeable to Seller hereunder or otherwise.

                “PurchasedReceivables” shall mean all those accounts, receivables, chattel paper,instruments, contract rights, documents, general intangibles, letters ofcredit, drafts, bankers acceptances, and rights to payment, and all proceedsthereof (all of the foregoing being referred to as “receivables”), arising outof the invoices and other agreements identified on or delivered with anyInvoice Transmittal delivered by Seller to Buyer which Buyer elects to purchaseand 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.

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

 

 

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

                “ReconciliationPeriod” shall mean each calendar month of every year.

 

2.             **Purchase andSale of Receivables.**

 

                2.1.  **Offer toSell Receivables.**  During theterm hereof, and provided that there does not then exist any Event of Defaultor any event that with notice, lapse of time or otherwise would constitute anEvent of Default, Seller may request that Buyer purchase receivables and Buyermay, in its sole discretion, elect to purchase receivables. Seller shalldeliver to Buyer an Invoice Transmittal with respect to any receivable forwhich a request for purchase is made. An authorized representative of Sellershall sign each Invoice Transmittal delivered to Buyer. Buyer shall be entitledto rely on all the information provided by Seller to Buyer on or with theInvoice Transmittal and to rely on the signature on any Invoice Transmittal asan authorized signature of Seller.

 

                2.2.  **Acceptanceof Receivables.**  Buyer shallhave no obligation to purchase any receivable listed on an Invoice Transmittal.Buyer may exercise its sole discretion in approving the credit of each AccountDebtor before buying any receivable. Upon acceptance by Buyer of all or any ofthe receivables described on any Invoice Transmittal, Buyer shall pay to Seller**80(%)****percentof the face amount of each receivable Buyer desires to purchase. Such paymentshall be the “Advance” with respect to such receivable. Buyer may, from time totime, in its sole discretion, change the percentage of the Advance. UponBuyer’s acceptance of the receivable and payment to Seller of the Advance, thereceivable shall become a “Purchased Receivable.” It shall be a condition toeach Advance that (i) all of the representations and warranties set forth inSection 6 of this Agreement be true and correct on and as of the date of therelated Invoice Transmittal and on and as of the date of such Advance as thoughmade at and as of each such date, and (ii) no Event of Default or any event orcondition that with notice, lapse of time or otherwise would constitute anEvent of Default shall have occurred and be continuing, or would result fromsuch Advance. Notwithstanding the foregoing, in no event shall the aggregate amountof all Purchased Receivables outstanding at any time exceed **Two MillionFive Hundred Thousand Dollars ($2,500,000).**

 

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

 

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

 

3.             **Collections,Charges and Remittances.**

 

                3.1.  **Collections. **Incomputing Finance Charges on the Obligations, all checks and other items ofpayment received by Buyer (including proceeds of Purchased Receivables andpayment of Obligations in full) shall be deemed applied by Buyer on account ofthe Obligations **three (3)** BusinessDays after receipt by Buyer of immediately available funds. If Seller is indefault under this Agreement, Buyer shall apply all Collections to Seller’sObligations hereunder in such order and manner as Buyer may determine. If anitem of collection is not honored or Buyer does not receive good funds for anyreason, the amount shall be included in the Account Balance as if theCollections had not been received and Finance Charges under Section 3.2 shallaccrue thereon.

 

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

 

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

 

 

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

 

                3.4.  **Accounting. **Buyershall prepare and send to Seller after the close of business for eachReconciliation Period, an accounting of the transactions for thatReconciliation Period, including the amount of all Purchased Receivables, allCollections, Adjustments, Finance Charges, and the Administrative Fee. Theaccounting shall be deemed correct and conclusive unless Seller makes writtenobjection to Buyer within thirty (30) days after the Buyer mails the accountingto Seller.

 

                3.5.  **Refund to Seller. **Provided that there does not then exist an Event of Defaultor any event or condition that with notice, lapse of time or otherwise wouldconstitute an Event of Default, Buyer shall refund to Seller by check after theReconciliation Date, the amount, if any, which Buyer owes to Seller at the endof the Reconciliation Period according to the accounting prepared by Buyer forthat Reconciliation Period (the “Refund”). The Refund shall be an amount equalto:
| (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 toSeller during that Reconciliation Period to the extent Buyer has agreed toaccept payment thereof by deduction from the Refund. In the event the formulaset 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 4.3hereof for repurchases. If the formula set forth in this Section 3.5 results inan 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 andrecoupment.

 

                3.6.  **Facility Fee. **Afully earned, non–refundable facility fee of **$10,000.00**shall be due uponthe Closing Date.

 

4.             **Recourse andRepurchase Obligations.**

 

                4.1.  **Recourse. **Buyer’sacquisition of Purchased Receivables from Seller shall be with full recourseagainst Seller. In the event the Obligations exceed the amount of PurchasedReceivables and Collateral, Seller shall be liable for any deficiency.

 

                4.2.  **Seller’s Agreement to Repurchase. **Seller agrees to pay to Buyer ondemand, the full face amount, or any unpaid portion, of any PurchasedReceivable:

 

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

(B) which is owed by anyAccount Debtor who has filed, or has had filed against it, any bankruptcy case,assignment for the benefit of creditors, receivership, or insolvency proceedingor 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 whichthere has been any breach of warranty or representation set forth in Section 6hereof or any breach of any covenant contained in this Agreement; or

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

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

 

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

 

 

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

 

                4.4.  **Seller’s Agreement to Repurchase All PurchasedReceivables. **Upon and afterthe 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 withoutnotice or demand from Buyer) repurchase all the Purchased Receivables thenoutstanding, or such portion thereof as Buyer may demand. Such demand may, atBuyer’s option, include and Seller shall pay to Buyer immediately upon demand,cash in an amount equal to the Advance with respect to each PurchasedReceivable then outstanding together with all accrued Finance Charges,Adjustments, Administrative Fees, attorney’s and professional fees, court costsand expenses as provided for herein, and any other Obligations. Upon receipt ofpayment in full of the Obligations, Buyer shall immediately instruct AccountDebtors 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, theReconciliation Date shall be deemed to be the date Buyer receives payment ingood funds of all the Obligations as provided in this Section 4.4.

 

5.             **Power of Attorney. **Seller doeshereby irrevocably appoint Buyer and its successors and assigns as Seller’strue and lawful attorney in fact, and hereby authorizes Buyer, regardless ofwhether there has been an Event of Default, (a) to sell, assign, transfer,pledge, compromise, or discharge the whole or any part of the PurchasedReceivables; (b) to demand, collect, receive, sue, and give releases to anyAccount Debtor for the monies due or which may become due upon or with respectto the Purchased Receivables and to compromise, prosecute, or defend anyaction, claim, case or proceeding relating to the Purchased Receivables,including the filing of a claim or the voting of such claims in any bankruptcycase, all in Buyer’s name or Seller’s name, as Buyer may choose; (c) toprepare, file and sign Seller’s name on any notice, claim, assignment, demand,draft, or notice of or satisfaction of lien or mechanics’ lien or similardocument with respect to Purchased Receivables–, (d) to notify allAccount Debtors with respect to the Purchased Receivables to pay Buyerdirectly; (e) to receive, open, and dispose of all mail addressed to Seller forthe purpose of collecting the Purchased Receivables; (f) to endorse Seller’sname on any checks or other forms of payment on the Purchased Receivables; (g)to execute on behalf of Seller any and all instruments, documents, financingstatements and the like to perfect Buyer’s interests in the PurchasedReceivables and Collateral; and (h) to do all acts and things necessary orexpedient, in furtherance of any such purposes. If Buyer receives a check oritem which is payment for both a Purchased Receivable and another receivable,the funds shall first be applied to the Purchased Receivable and, so long asthere does not exist an Event of Default or an event that with notice, lapse oftime or otherwise would constitute an Event of Default, the excess shall beremitted to Seller. Upon the occurrence and continuation of an Event ofDefault, all of the power of attorney rights granted by Seller to Buyerhereunder shall be applicable with respect to all Purchased Receivables and allCollateral.

 

6.             **Representations,Warranties and Covenants.**

 

                6.1.  **Receivables’ Warranties, Representations andCovenants. **To induce Buyerto buy receivables and to renders its services to Seller, and with fullknowledge that the truth and accuracy of the following are being relied upon bythe Buyer in determining whether to accept receivables as PurchasedReceivables, Seller represents, warrants, covenants and agrees, with respect toeach Invoice Transmittal delivered to Buyer and each receivable describedtherein, that:

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

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

(C) The payment of eachreceivable is not contingent upon the fulfillment of any obligation orcontract, past or future and any and all obligations required of the Sellerhave been fulfilled as of the date of the Invoice Transmittal;

(D) Each receivable setforth on the Invoice Transmittal is based on an actual sale and delivery ofgoods 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 interestsand encumbrances other than liens, security interests or encumbrances in favorof 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 hasbeen 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 PurchasedReceivable 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 notifyBuyer of such payment, shall hold any checks, drafts, or monies so received intrust for the benefit of Buyer, and shall promptly transfer and deliver thesame to the Buyer;

(G) Buyer shall have theright of endorsement, and also the right to require endorsement by Seller, onall payments received in connection with each Purchased Receivable and anyproceeds of Collateral;

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

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

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

(K) All receivablesforwarded to and accepted by Buyer after the date hereof, and thereby becomingPurchased Receivables, shall comply with each and every one of the foregoingrepresentations, warranties, covenants and agreements referred to above in thisSection 6.1.

 

                6.2.  **Additional Warranties, Representations andCovenants. **In addition tothe foregoing warranties, representations and covenants, to induce Buyer to buyreceivables 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 anyPurchased Receivables or Collateral to or in favor of any other party, withoutBuyer’s prior written consent;

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

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

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

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

(F) Seller shall provideBuyer, as soon as available, but no later than 30 days following eachReconciliation Period, a company prepared balance sheet and income statement,prepared under GAAP, consistently applied, covering Seller’s operations duringthe period;

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

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

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

 

 

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

(J) Seller shall provideBuyer with, as soon as available, but no later than 30 days following eachReconciliation Period, a Compliance Certificate, or on a more frequent or otherbasis if and as requested by Buyer.

 

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

 

8.             **SecurityInterest. **To secure theprompt payment and performance to Buyer of all of the Obligations, Sellerhereby grants to Buyer a continuing lien upon and security interest in all ofSeller’s now existing or hereafter arising rights and interest in thefollowing, whether now owned or existing or hereafter created, acquired, orarising, and wherever located (collectively, the “Collateral”):

(A) All accounts,receivables, contract rights, chattel paper, instruments, documents, letters ofcredit, bankers acceptances, drafts, checks, cash, securities, and generalintangibles (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 otherintellectual property);

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

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

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

(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 recordspertaining to all of the foregoing; and

(H) All proceeds of theforegoing, whether due to voluntary or involuntary disposition, includinginsurance proceeds.

Seller is not authorized tosell, assign, transfer or otherwise convey any Collateral without Buyer’s priorwritten consent, except for the sale of finished inventory in the Seller’susual course of business. From time to time the Seller sells privatesecurities, consent for these securities will not be unreasonably withheld ordelayed. Proceeds of the sale of private securities are to be directed to thelockbox, as set forth in Section 14 hereof. Seller agrees to sign UCC financingstatements, in a form acceptable to Buyer, and any other instruments anddocuments requested by Buyer to evidence, perfect, or protect the interests ofBuyer in the Collateral. Seller agrees to deliver to Buyer the originals of allinstruments, chattel paper and documents evidencing or related to PurchasedReceivables and Collateral.

 

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

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

(B) There shall be commencedby or against Seller any voluntary or involuntary case under the United StatesBankruptcy Code, or any assignment for the benefit of creditors, or appointmentof a receiver or custodian for any of its assets;

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

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

(E) Seller shall breach anycovenant, agreement, warranty, or representation shall constitute an immediatedefault hereunder;

(F) Seller is not incompliance with, or otherwise is in default under, any term of any document,instrument or agreement evidencing a debt, obligation or liability of any kindor character of Seller, now or hereafter existing, in favor of Buyer or anydivision 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 withany and all renewals and extensions of such debts, obligations and liabilities,or any part thereof;

(G) An event of defaultshall occur under any guaranty executed by any guarantor of the Obligations ofSeller to Buyer under this Agreement, or any material provision of any suchguaranty shall for any reason cease to be valid or enforceable or any suchguaranty shall be repudiated or terminated, including by operation of law;

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

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

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

 

10.           **RemediesUpon Default. **Upon theoccurrence of an Event of Default, (1) without implying any obligation to buyreceivables, Buyer may cease buying receivables or extending any financialaccommodations to Seller; (2) all or a portion of the Obligations shall be, atthe option of and upon demand by Buyer, or with respect to an Event of Defaultdescribed in Section 9(B), automatically and without notice or demand, due andpayable in full; and (3) Buyer shall have and may exercise all the rights andremedies under this Agreement and under applicable law, including the rightsand remedies of a secured party under the California Uniform Commercial Code,all the power of attorney rights described in Section 5 with respect to allCollateral, and the right to collect, dispose of, sell, lease, use, and realizeupon all Purchased Receivables and all Collateral in any commercial reasonablemanner. Seller and Buyer agree that any notice of sale required to be given toSeller shall be deemed to be reasonable if given five (5) days prior to thedate on or after which the sale may be held. In the event that the Obligationsare accelerated hereunder, Seller shall repurchase all of the PurchasedReceivables as set forth in Section 4.4.

 

11.           **Accrual ofInterest. **If any amount owedby Seller hereunder is not paid when due, including, without limitation, amountsdue under Section 3.5, Repurchase Amounts, amounts due under Section 12, andany other Obligations, such amounts shall bear interest at a per annum rateequal 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 timethe principal amount of any money judgment remaining unsatisfied shall accrueinterest at the highest rate allowed by applicable law.

 

12.           **Fees, Costsand Expenses; Indemnification. **TheSeller 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 thefollowing: (a) preparing, negotiating, administering, and enforcing thisAgreement or any other agreement executed in connection herewith, including anyamendments, waivers or consents in connection with any of the foregoing, (b)any litigation or dispute (whether instituted by Buyer, Seller or any otherperson) in any way relating to the Purchased Receivables, the Collateral, thisAgreement 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 theCollateral, (e) collecting the Purchased Receivables and the Obligations, and(f) the representation of Buyer in connection with any bankruptcy case orinsolvency proceeding involving Seller, any Purchased Receivable, theCollateral, any Account Debtor, or any guarantor. Seller shall indemnify andhold Buyer harmless from and against any and all claims, actions, damages,costs, expenses, and liabilities of any nature whatsoever arising in connectionwith any of the foregoing.

 

13.            **Severability, Waiver, and Choice of Law. **In the event that any provisionof this Agreement is deemed invalid by reason of law, this Agreement will beconstrued as not containing such provision and the remainder of the Agreementshall remain in full force and effect. Buyer retains all of its rights, even ifit makes an Advance after an Event of Default. If Buyer waives an Event ofDefault, 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 atany time to be indicative of any obligation or willingness on the part of Buyerto amend this Agreement or to grant to Seller any waivers or consents. ThisAgreement has been transmitted by Seller to Buyer at Buyer’s office in theState of California and has been executed and accepted by Buyer in the State ofCalifornia. This Agreement shall be governed by and interpreted in accordancewith the internal laws of the State of California.

 

 

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14.           **LockboxAccount Collection Services. **Sellershall enter into a three party agreement (the “Lockbox Agreement”) with Buyerand a lockbox provider (the “Lockbox Provider”). The Lockbox Agreement andLockbox Provider shall be acceptable to Buyer. Seller shall use the lockboxaddress as the payment address on all invoices issued by Seller and shalldirect all its Account Debtors to remit their payments to the lockbox address.The Lockbox Agreement shall provide that the Lockbox Provider shall remit allcollections received in the lockbox to Buyer. Upon Buyer’s receipt of suchcollections, and provided that there does not then exist an Event of Default orevent that with notice, lapse or time or otherwise would constitute an Event ofDefault, and subject to Buyer’s rights in the Collateral, Buyer agrees to remitpromptly to Seller the amount of the receivables collections it receives withrespect to receivables other than Purchased Receivables. It is understood andagreed by Seller that this Section does not impose any affirmative duty onBuyer to do any act other than to turn over such amounts. All such receivablesand 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 suchcollections to the obligations hereunder and Buyer shall have the rights of asecured party under the California Uniform Commercial Code.

 

15.           **Notices. **All notices shall be given toBuyer and Seller at the addresses or faxes set forth on the first page of thisAgreement and shall be deemed to have been delivered and received: (a) ifmailed, three (3) calendar days after deposited in the United States mail,first class, postage pre–paid, (b) one (1) calendar day after depositwith an overnight mail or messenger service; or (c) on the same date ofconfirmed transmission if sent by hand delivery, telecopy, telefax or telex.

 

16.           **JuryTrial. **SELLER AND BUYER EACHHEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTIONARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, ORANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREETHAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTERINTO THIS AGREEMENT; AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THISWAIVER, HAS DETERMINED FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITSLEGAL COUNSEL, AND KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.

 

17.           **Term andTermination. **The term ofthis Agreement shall be for one (1) year from the date hereof, and from year toyear thereafter unless terminated in writing by Buyer or Seller. Seller andBuyer shall each have the  right toterminate this Agreement at any time. Notwithstanding the foregoing, anytermination of this Agreement shall not affect Buyer’s security interest in theCollateral and Buyer’s ownership of the Purchased Receivables, and thisAgreement shall continue to be effective, and Buyer’s rights and remedieshereunder shall survive such termination, until all transactions entered intoand Obligations incurred hereunder or in connection herewith have been–completedand satisfied in full.

 

18.             **Titles and Section Headings. **The titles and section headingsused herein are for convenience only and shall not be used in interpreting thisAgreement.

 

19.           **OtherAgreements. **The terms andprovisions of this Agreement shall not adversely affect the rights of Buyer orany other division or affiliate of Silicon Valley Bank under any otherdocument, instrument or agreement. The terms of such other documents,instruments and agreements shall remain in full force and effectnotwithstanding the execution of this Agreement. In the event of a conflictbetween any provision of this Agreement and any provision of any otherdocument, instrument or agreement between Seller on the one hand, and Buyer orany other division or affiliate of Silicon Valley Bank on the other hand, Buyershall determine in its sole discretion which provision shall apply. Selleracknowledges specifically that any security agreements, liens and/or securityinterests currently securing payment of any obligations of Seller owing toBuyer or any other division or affiliate of Silicon Valley Bank also secureSeller’s obligations under this Agreement, and are valid and subsisting and arenot adversely affected by execution of this Agreement. Seller further acknowledgesthat (a) any collateral under other outstanding security agreements or otherdocuments between Seller and Buyer or any other division or affiliate ofSilicon Valley Bank secures the obligations of Seller under this Agreement and(b) a default by Seller under this Agreement constitutes a default under otheroutstanding agreements between Seller and Buyer or any other division oraffiliate of Silicon Valley Bank.

 

 

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IN WITNESS WHEREOF, Seller and Buyer haveexecuted 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”**

 

**TOFINANCING STATEMENT AND SECURITY AGREEMENT**

 

This FINANCING STATEMENT and SECURITYAGREEMENT covers the following types or items of property (in addition to, andwithout limiting the types of property set forth on page 1 hereof):

 

A)                                  All accounts,receivables, contract rights, chattel paper, instruments, documents, letters ofcredit, bankers acceptances, drafts, checks, cash, securities, depositaccounts, 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 otherintellectual property);

 

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

 

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

 

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

 

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

 

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

 

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

 

H)                                   All proceeds ofthe foregoing, whether due to voluntary or involuntary disposition, includinginsurance proceeds.

 

 

 

 
| **Initials** |   |
|--------------|--------|

 

 

 

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**SiliconValley 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 **ZambaCorporation,**a Delaware corporation (the “Corporation”), herebycertify to Silicon Valley Bank (“SVB”) that:

 

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

 

                2.             The Corporation was incorporatedon                   ,under the laws of the State of Delaware, and is in good standing under suchlaws.

 

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

 

**3033Excelsior Boulevard, Suite 200**

**Minneapolis,Minnesota 55416**

 

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

 

None

 

 

                5.             There is no provision in theCertificate of Incorporation, Articles of Incorporation, or Bylaws of theCorporation, or in the laws of the State of its incorporation, requiring anyvote or consent of shareholders to authorize ‘the sale of receivables or thegrant of a security interest in any assets of the Corporation. Such power isvested 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 thisparagraph 7, each of the officers listed in paragraph 6 has signatory powerswith respect to all the Corporation’s transactions with SVB.  Explanation of exceptions:

 

                8.             The undersigned shall give SVBprompt written notice of any change or amendment with respect to any of theforegoing.  Until such written notice isreceived by SVB, SVB shall be entitled to rely upon the foregoing in allrespects.

 

                INWITNESS WHEREOF, the undersigned have executed this Certification of Officerson 07/29/02.

 
| **President:**      |   |
|---------------------|--------|
| **Vice President:** |   |
| **Secretary:**      |   |
| **Treasurer:**      |   |

 

 

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**SiliconValley Bank**

3003 Tasman Drive

Santa Clara, California 95054

(408) 654–1000 – Fax (408) 980–6410

 

**SECRETARY’S CERTIFICATE OF RESOLUTION**

 

                Theundersigned, as Secretary of Zamba Corporation, a Delaware corporation (the“Corporation”), hereby certifies to Silicon Valley Bank that at a meeting dulyconvened at which a quorum was present the following resolutions were adoptedby the Board of Directors of the Corporation and that such resolutions have notbeen modified, amended, or rescinded in any respect and are in full force andeffect as of today’s date.

 

                RESOLVED,that this corporation be and hereby is authorized to sell this corporation’saccounts receivable to Silicon Valley Bank, and to grant Silicon Valley Bank asecurity 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 theforegoing (the “ Collateral,” as defined in the Accounts Receivable PurchaseAgreement).

 

                RESOLVED,that this corporation be and hereby is authorized and directed to execute anddeliver certain agreements in connection with the sale of receivables, andgranting of security interests in the Collateral to Silicon Valley Bankincluding, without limitations, a Accounts Receivable Purchase Agreement andUCC-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 executeand deliver to Silicon Valley Bank on behalf of this corporation all suchfurther agreements and instruments as may be deemed necessary or advisable inorder 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 corporationbe, and hereby is authorized, empowered and directed to certify to thepassage of the foregoing resolutions under the seal of this corporation.

 

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

 
|                                 |
|--------------------------------------|
| Signature                            |
|                                 |
| Secretary of **Zarnba  Corporation** |

 

 

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**Consent andRelease**

 

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

 

Zamba Corporation (“Client”) consents to andreleases Silicon Valley Bank (“Bank”) from any liability in its use of (checkall 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:

 

ZambaCorporation

 

 
|           |
|----------------|
| Signature      |
|           |
|           |
| Name and Title |
|           |
|           |
| Date           |

 

 

 

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