EX-10.22 2 doc2.txt EXHIBIT 10.22 Pacific Business Funding A Member of the Greater Bay Bancorp Family [GRAPHIC OMITED] 20195 Stevens Creek Boulevard Suite #220 Cupertino, California 95014 Tel. (408) 255-9300 Fax (408) 255-9313 FACTORING AGREEMENT This Factoring Agreement (the "Agreement"), dated as of March 28, 2001, is entered into by and between GENUS, INC. a corporation, partnership, sole proprietorship] ("Seller") having its principal place of business and chief executive office at the address set forth below Seller's signature, and Pacific Business Funding, a division of Cupertino National Bank ("Purchaser") having an office at the address identified above. Capitalized terms used in this Agreement shall have the meanings assigned to them in Section 13, Definitions. 1. Purchase of Accounts 1.1 Schedule of Accounts. Seller may, at any time, request that Purchaser purchase Accounts. Any such request by Seller shall be made by delivering to Purchaser a Schedule of Accounts (the "Schedule of Accounts") which describes in detail the Accounts Seller is requesting Purchaser to purchase, including, (a) the name and address of the Account Debtor of each such Account, (b) the amount owed by the Account Debtor of each such Account, and (c) the date and number of the invoice evidencing each such Account. Each Schedule of Accounts shall have attached to it an invoice for each Account described on the Schedule of Accounts, and shall be signed by an authorized representative of Seller. 1.2 Discretionary Approval of Accounts. Purchaser may, in its sole discretion, purchase any Account included in a Schedule of Accounts, but is under no obligation to purchase any such Account. Purchaser may exercise its sole discretion in approving each Account and the credit of each Account Debtor before purchasing any Account. 1.3 Payment of Advances; Creation of a Book Reserve. Upon approval, in Purchaser's sole discretion, of any of the Accounts described on a Schedule of Accounts, Purchaser shall pay to Seller as the purchase price for any approved Account EIGHTY PERCENT (80%) of the face amount of such approved Account (the "Advance"). Purchaser may, time to time, in its discretion, upon notice to Seller, change the percentage of the Advance. Upon payment of the Advance to Seller, Purchaser shall also create a reserve on Purchaser's book and records with respect to each Purchased Account in an amount equal to the face amount of the Purchased Account minus the Advance for such Purchased Account (the "Reserve"). Notwithstanding the foregoing, in no event shall the Reserve with respect to all Purchased Accounts outstanding at any time be less than TWENTY PERCENT (20%) of the Account Balance. Purchaser, may in its discretion, upon notice to Seller, increase the percentage of the reserve at any time. 1.4 Transfer of Accounts. At the time Purchaser pays the Advance with respect to any Account such Account shall constitute a Purchased Account, and Seller hereby absolutely sells, transfers and assigns to Purchaser, all of Seller's right, title and interest in and to each Purchased Account. Seller also hereby sells, transfers and assigns to Purchaser all of the goods represented by each Purchased Account, all of Seller's rights and remedies as an unpaid seller under the California Commercial Code and other applicable law, including the rights of stoppage in transit, replevin, reclamation, and claim and delivery, and all Seller's rights in and to all security for each such Purchased Account and guaranties thereof, and all rights against third parties with respect thereto. Any goods recovered or received by Seller shall be set aside marked with Purchaser's name, and held for Purchaser's account as owner. 1.5 Collection of Accounts. Each Purchased Account shall be collected directly by the Purchaser. At the request of Purchaser, Seller and Purchaser shall jointly notify each Account Debtor by letter that Purchased Accounts owed by such Account Debtor have been assigned and are payable to Purchaser. Such notification shall be in form and substance satisfactory to Purchaser. Seller shall not take or permit any action to change or revoke any notification without Purchaser's prior written consent and shall not request any Account Debtor to pay any Purchased Account to Seller. Notwithstanding the foregoing, in the event Seller received any payments of any Purchased Accounts, Seller shall (A) immediately notify Purchaser of such payment, (B) hold such payment in trust and safekeeping for Purchaser, and (C) immediately turn over to Purchaser the identical checks, monies or any other forms of payment received, with any necessary endorsement or assignment. Purchaser shall have the right to endorse Seller's name on all payments received in connection with each Purchased Account and on any other proceeds of Collateral. If Purchaser receives a check or item which is payment for both a Purchased Account and a non-Purchased Account, the funds shall first be applied to the Purchased Account and, and so long as there does not then exist an Event of Default or an event that with notice or lapse of time would constitute an Event of Default, the excess shall be remitted to Seller. In the event Purchaser receives any other payments of non-Purchased Accounts, Purchaser shall remit to Seller the collections of such non-Purchased Accounts; provided, that if any Event of Default or event that with notice or lapse of time or otherwise would constitute an Event of Default then exists, Purchaser shall have no duty to remit any such collections, which collections constitute Collateral, and may apply such collections to reduce Obligations. 1.6 Full Recourse. The purchase by Purchaser of Purchased Accounts from Seller shall be with full recourse against Seller. Seller shall be liable for any deficiency in the event the Obligations exceed the amount of Purchased Accounts and the other Collateral. 2. Fees and Customer Payments. 2.1 Finance Fees. Seller shall pay to Purchaser on each Settlement Date, a finance fee in an amount equal to EIGHT TENTHS OF ONE PERCENT (0.8%) per month of the average daily Account Balance outstanding during the Settlement Period ending on such Settlement Date (the "Finance Fees"). Such accrued Finance Fees shall be netted against the Reserve as described in Section 3.3, 2.2 Administrative Fees. Seller shall pay to Purchaser on each Settlement Date, an Administrative Fee equal to ONE FOURTH OF ONE PERCENT (0.25%) of the face amount of each Account purchased by Purchaser during the Settlement Period ending on such Settlement Date (the "Administrative Fee"). All Administrative Fees shall be netted against the Reserve as described in Section 3.3. 2.3 Maximum Lawful Rate. In no event shall any charges that may constitute interest hereunder exceed the highest rate permitted under applicable law. In the event that a court of competent jurisdiction makes a final determination that Purchaser has received interest hereunder in excess of the maximum lawful rate, then such excess shall be deemed a payment of principal and the interest payable hereunder deemed amended to the amount payable under the maximum lawful rate. 2.4 Crediting Customer Payments. Upon Purchaser's receipt of payment of a Purchase Account, Purchaser shall promptly credit such customer payment (the Customer Payments") to the amount outstanding with respect to such Purchased Account. Notwithstanding the foregoing, if any Customer Payment is subsequently dishonored or Purchaser does not receive good funds for any reason, the amount of such uncollected Customer Payment shall be included in the Account Balance as if such Customer Payment had not been received, and Finance Fees shall accrue thereon, and the credit to the specific Purchased Account shall be reversed. Notwithstanding the foregoing, upon the occurrence of an Event of Default, Purchaser shall apply all Customer Payments to Seller's Obligations under this Agreement in such order and manner as Purchaser shall, in its sole discretion, determine. 2.5 Accounting. Purchaser shall deliver to Seller after each Settlement Date, a statement of Seller's account which shall include and accounting of the transactions of the Settlement Period, including the amount of all Finance Fees, Administrative Fees, Adjustments, Chargeback Amounts, Customer Payments and Purchased Accounts. The accounting shall constitute an account stated and shall be binding on Seller and deemed correct unless Seller delivers to Purchaser a written objection within thirty (30) days after such accounting is mailed to Seller. 3. Adjustments, Chargebacks and Remittances. 3.1 Adjustments. In the event any Account Debtor asserts any offsets, defense, counterclaim, dispute, discount, allowance, right of return, right of recoupment, or warranty claim with respect to a Purchased Accounts, or pays less than the face amount of such Purchased Accounts (each, an "Adjustment"), Purchaser may, in its sole discretion, either (A) deduct the amount of the Adjustment in calculating the Remittance, or (B) chargeback to Seller the Purchased Account with respect to which the Adjustment is asserted. Seller shall advise Purchaser immediately upon learning of any Adjustment asserted by any Account Debtor. 3.2 Chargebacks. Purchaser shall have the right to chargeback to Seller any Purchased Account: (A) which remains unpaid ninety (90) calendar days after the invoice dated; (B) with respect to which there has been a breach of any warranty, representation, covenant or agreement set forth in this Agreement; (C) with respect to which the Account Debtor asserts any Adjustment; or (D) which is owned by an Account Debtor who has filed, or has had filed against it, any bankruptcy case, insolvency proceeding, assignment of the benefit of creditors, receivership or insolvency proceeding, or who has become insolvent (as defined in the United States of Bankruptcy Code) or who is generally not paying its debts become due. Upon demand by Purchaser, Seller shall pay to Purchaser the full face amount of any Purchased Account which has been charged back to Seller pursuant to this Section 3.2, or the extent partial payment has been made, the amount by which the face amount of such Purchased Account exceeds such partial payment, together with any attorneys' fees and cost incurred by Purchaser in connection with collecting such Purchased Account (collectively, the "Chargeback Amount"). Purchaser shall advise Seller regarding how to Chargeback Amount shall be paid, which may be by any one or a combination of the following, in Purchaser's sole discretion: (1) payment in cash immediately upon demand; (2) deduction from or offset against any Remittance that would otherwise be payable to Seller; (3) payment from any Advances that may otherwise be made to Seller; (4) adjustment to the Reserve pursuant to Section 1.3 hereof; or (5) delivery or substitute Accounts and Schedule of Accounts acceptable to Purchaser, which Accounts shall constitute Purchased Accounts. 3.3 Remittance. Purchaser shall remit to Seller after the Settlement Date, the amount, if any, which Purchaser owes to Seller at the end of the Settlement Period based on the following calculations set forth below (the "Remittance"); provided, that if there then exists any Event of Default or any event or condition that with notice or lapse of time would constitute an Event of Default, Purchaser shall not be obligated to remit any payment to Seller. If the amount resulting from the following calculation is a positive number, such amount is the amount of the Remittance for such Settlement Period. If the resulting amount is a negative number, such amount is the amount owed by Seller to Purchaser. The calculations to be used are as follows: (A) The sum of the following: (1) The Reserve as of the beginning of the subject Settlement Period, plus (2) The Reserve created for each Account purchased during the subject Settlement Period; MINUS (B) The sum of the following: (1) Finance Fees accrued during the subject Settlement Period; plus (2) Administrative Fees accrued during the subject Settlement Period; plus (3) Adjustments during the subject Settlement Period; plus (4) Chargeback Amounts, to the extent Purchaser has agreed to accept payment of any such Chargeback Amount by deduction from the Remittances; plus (5) All professional fees and expenses as set forth in the Section 10 for which oral or written demand has been made by Purchaser during the subject Settlement Period; plus (6) The Reserve for the Account Balance as of the first day of the following Settlement Period in the minimum percentage set forth in Section 1.3 hereof. In the foregoing calculations result in a Remittance payable to Seller, Purchaser shall make such payment by check, subject to Purchaser's rights of offset and recoupment, and its right to deduct any Chargeback Amount as set forth in Section 3.2. If the foregoing calculations result in an amount due to Purchaser from Seller, Seller shall make such payment by any one or a combination of the methods set forth in Section 3.2 hereof for chargebacks, as determined by Purchaser in its discretion. 4. Power of Attorney. Seller hereby appoints Purchaser and its designees as Seller's true and lawful attorney in fact, to exercise in Purchaser's discretion, and regardless of whether an Event of Default is then existing, all of the following powers, such powers being coupled with an interest: (A) to notify all Account Debtors with respect to the Purchased Accounts to make payment directly to Purchaser; (B) to receive, deposit, and endorse Seller's name on all checks, drafts, money orders and other forms of payment relating to the Purchased Accounts; (C) to demand, collect, receive, sue and give releases to any Account Debtor for the monies due or which may become due on or in connection with the Purchased Accounts; (D) to compromise, prosecute, or defend any action, claim, case, or proceeding relating to the Purchased Accounts, including the filing of a claim or the voting of such claims in any bankruptcy case, all in Purchaser's name or Seller's name, as Purchaser may elect; (E) to sell, assign, transfer, pledge, compromise, or discharge any Purchased Accounts;(F) to receive, open, redirect and dispose of all mail addressed to Seller for the purpose of collecting the Purchased Accounts and to take all the actions permitted in subsection (B) above with respect to any payment in any such mail; (G) to execute in the name of Seller and files against Seller in favor of Purchaser such financing statements and other agreements as Purchaser deems necessary to evidence or perfect is security interest in the Purchased Accounts and the other Collateral; and (H) to do all acts and things necessary or expedient, in furtherance of any such purposes. Upon the occurrence of an Event of Default, all of the power of attorney rights granted by Seller to Purchaser hereunder shall be applicable with respect to all Collateral. 5. Continuing Representation, Warranties and Covenants. To induce Purchaser to enter into this Agreement and purchase Accounts, and with full knowledge that Purchaser is relying on the truth accuracy of the following in determining whether to purchase any Account, Seller represents, warrants, covenants and agrees as follows, which representations, warranties, covenants and agreements shall be deemed made each time Purchaser purchases Accounts hereunder and shall survive the execution and delivery of this Agreement: (A) The information contained in each Schedule of Accounts is true and correct; (B) Each Schedule of Accounts is signed by an authorized representative of Seller, and Purchaser shall have the right to rely on such signature as an authorized signature of Seller; (C) Seller is the sole and absolute owner of each Account described in each Schedule of Accounts and has the legal rights to sell, transfer, and assign such Account to Purchaser; (D) Seller has performed all obligations required by the Account Debtor in connection with each Account described in each Schedule of Accounts and payment of each such Account is not contingent upon the fulfillment of any obligation or contract, past or future; (E) Each Account described on each Schedule of Accounts is correctly stated therein, is not in dispute, is presently and unconditionally owing at the time stated in the invoice evidencing such Account as attached to the Schedule of Accounts, is not past due or in default, represent a bona fide indebtedness arising from the actual sale of goods or performance of service to an Account Debtor in the ordinary course of Seller's business which has been received and finally accepted by the Account Debtor; (F) Each Account set forth on each Schedule of Accounts is not subject to any offset, defense or counterclaim of any kind, whether bona fide or otherwise, and no agreement has been made under which the Account Debtor may claim any deduction or discount except as otherwise stated in the Schedule of Accounts; (G) Each Account Debtor identified on each Schedule of Accounts is liable for the amount set forth on such Schedule of Accounts and will not be object to payment for, or the quality or the quantity of the goods or services to which any Account described on such Schedule of Accounts relates; (H) Seller, and the Seller's best knowledge, each Account Debtor set forth in each Schedule of Accounts, is and shall remain in that the present saleable value of such entity's assets exceeds the total of such entity's liabilities; (I) Seller has not, as of the time Seller accepts an Advance from Purchaser, filed or had filed against it a petition for relief under the United States Bankruptcy Code; (J) Except for Permitted Liens, each Account and all other Collateral are free and clear of any and all liens, security interest and encumbrances of any kind, other than those in favor of Purchaser and Seller will not assign, transfer, or grant any lien or security interest in any Accounts or other Collateral to any other party, without Purchaser's prior written consent; (K) Seller has not sold, assigned, transferred, pledged or otherwise conveyed any Purchased Accounts to any party other than Purchaser, and Seller shall not sell, assign, transfer, pledge or otherwise convey any Collateral without Purchaser's prior consent, except for the of Accounts to Purchaser and the sale of finished inventory in Seller's normal course of business; (L) Seller's name and form of organization are as set forth at the beginning of this Agreement, and Seller's chief executive office, place of business and place where Collateral and records concerning Accounts and other Collateral are kept are as set forth below Seller's signature, and Seller will give Purchaser at least thirty (30) days prior written notice if such name, organization, place of business, location of Collateral or records concerning Collateral is to be changed or added and shall execute any documents necessary to perfect Purchaser's interest in the Purchased Accounts and the other Collateral; and (M) Seller shall pay all of its normal gross payroll for employees, and all federal and state taxes, as and when due, including all payroll and withholding taxes and state sales taxes. 6. Grant of Security Interest. To secure the prompt payment and performance of all of Seller's Obligations to Purchaser, Seller hereby grants to Purchaser a continuing lien upon and security interest in, and right of set off with respect to, all of Seller's right, title and interest in, to and under the following, whether now owned by or owing to, or hereafter acquired by or arising in favor of, Seller, and regardless of where located (collectively the "Collateral"): (A) All accounts, accounts receivable, chattel paper, contract rights, documents, instruments, letter of credit, banker's acceptances, drafts, securities and general intangibles, including all claims, causes of action, deposit accounts, rights to receive tax refunds, rights in and claims under insurance policies (including rights to unearned premiums), customer lists, copyrights, patents, trademarks, license agreements, goodwill associated with trademarks and trademark licenses, and other intellectual property of every kind and other rights to payment; (B) All inventory; (C) All monies, remittances, and other amounts due under this Agreement and any other agreement between Purchaser and Seller; (D) All equipment, machinery, motor vehicles, furniture, fixtures, tools and supplies; (E) All investment securities; (F) All farm products, crops, timber, minerals and like (including oil and gas); (G) All books and records relating to the foregoing, including all computer programs, printed output and computer readable data; (H) All accessions to, and substitutions and replacements for, all of the foregoing; and (I) All proceeds and products of the foregoing, whether due to voluntary or involuntary disposition, including insurance proceeds. Seller shall sign and deliver to Purchaser UCC financing statements, in form acceptable to Purchaser. Seller agrees to deliver to Purchaser the originals of all instruments. chattel paper and documents evidencing or related to Purchased Accounts and other Collateral. Notwithstanding the foregoing, the security interest granted herein shall not extend to and the term "Collateral" shall not include any property, rights or licenses to the extent the granting of a security interest therein would be contrary to applicable law or is prohibited by or would constitute a default under any agreement or document governing such property, rights or licenses (but only to the extent such prohibition is enforceable under applicable law); provided that the preceding sentence shall in no case exclude from the definition of "Collateral" any Accounts, proceeds of the disposition of any property, or any general intangible consisting of rights to payment, all of which shall at all times constitute "Collateral"; and provided further that upon the termination or lapsing of any such prohibition or restriction, such otherwise excluded property shall automatically be part of the Collateral. 7. Default. The occurrence of any one or more of the following shall constitute an event of default under this Agreement (each, an "Event of Default"): (A) Seller fails to pay any amount owed to Purchaser an and when due under this Agreement or fails to pay any other Obligations as and when due; (B) Any warranty or representation by Seller to Purchaser under this Agreement is incorrect or untrue when made; (C) Seller fails to perform or breaches any covenant or agreement set forth in this Agreement or any other agreement between Purchaser and Seller and such failure shall continue uncured for five business days after written notice thereof to Seller by Purchaser; (D) There shall be commenced by or against Seller any voluntary or involuntary case under the United States Bankruptcy Code, or any assignment for the benefit of creditors, or appointment of a receiver or custodian for any of Seller's assets; (E) Seller shall become insolvent in that its debts are greater than the fair value of its assets, or Seller is generally not paying its debts as they become due; (F) Except for Permitted Liens, any involuntary lien, garnishment, attachment or the like is issued against or attaches to the Purchased Accounts or the other Collateral; (G) [Reserved]; or (H) A default or event of default shall occur under any agreement between Seller and any creditor or Seller who has entered into a subordination agreement with Purchaser and such default or event of default shall continue uncured for the cure period, if any, permitted under such agreement after written notice thereof to Seller. 8. Remedies Upon Default. Upon the Occurrence of an Event of Default, Purchaser may, without notice, (A) without implying any obligation to by Accounts, cease buying Accounts; (B) accelerate the payment of all Obligations by requiring Seller to purchase all or any portion of the Purchased Accounts then outstanding for cash in an amount equal to the Advance made for each Purchased Account and all accrued Finance Fees, Administrative Fees, attorneys' fees and other Obligations then outstanding, which Obligations shall be due and payable in full without demand; (C) exercise all the rights and remedies under this Agreement and under applicable law, including the rights and remedies of a secured party under the California Commercial Code. Without limiting the generality of the foregoing, Purchaser may (1) exercise all of the power of attorney rights described in Section 4 with respect to all Collateral, and (2) collect, dispose of, sell, lease, use, and realize upon all Purchased Accounts and other Collateral in any commercially reasonable manner. Seller and Purchaser agree that any notice of sale required to be given to Seller shall be deemed to be reasonable if given five (5) days prior to the date on or after which any sale may be held. All remedies set forth herein shall be cumulative and none exclusive. 9. Accrual of Interest. If any amount owed by Seller hereunder is not paid when is due, including any amounts due under Section 3.3, Chargeback Amounts, professional fees and expenses under Section 10 and any other Obligations, such amounts shall bear interest at a per annum rate equal to the rate used to calculate the Finance Fees, annualized, until Payment in good funds in the full of all such obligations. 10. Attorneys' Fees. Seller shall pay to Purchaser immediately upon demand, all costs and expenses, including reasonable fees and expenses of attorneys and other professionals, that Purchaser incurs in connection with any and all of the following: (A) preparing, amending, supplementing, negotiating and enforcing this Agreement, or any other agreement executed in connection herewith; (B) perfecting, protecting or enforcing Purchaser's interest in the Purchased Accounts and the other Collateral; (C) Collecting the Purchased Accounts and the Obligations; (D) defending or in any way addressing claims made or litigation initiated by or against Purchaser as a result of Purchaser's relationship with Seller or any guarantor; and (E) representing Purchaser in connection with any bankruptcy case or insolvency proceeding involving Seller, any Purchased Account, any other Collateral or Account Debtor. Any Attorneys' fees and expense may, at Purchaser's option. be netted against the reserve as set forth in Section 3.3. 11. Term and Termination. The term of this Agreement shall be for one (1) year from the dated hereof, and from year to year thereafter unless terminated in writing by Purchaser or Seller. Seller and Purchaser shall each have the right to terminated this Agreement at any time. Notwithstanding the foregoing, any termination of this Agreement shall not affect Purchaser's security interest in the Collateral and Purchaser's ownership of the Purchased Accounts, and this Agreement shall continue to be effective, and Purchaser's rights and remedies hereunder shall survive such termination, until all transactions entered into and Obligations incurred hereunder or in connection herewith have been completed and satisfied in full. 12. Miscellaneous. 12.1 Severability. In the event that any provision of this Agreement is held to be invalid or unenforceable, this Agreement will be construed as no containing such provision and the remainder of the Agreement shall remain in force and effect. 12.2 Choice of Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. 12.3 Notices. All notices shall be given to Purchaser and Seller at the addresses set forth in this Agreement and shall be deemed to have been delivered and received: (A) if mailed, three (3) calendar days after deposited in the United States mail, first class, postage prepaid; (B) one (1) calendar day after deposit with an overnight mail or messenger service; or (C) on the same date of transmission if sent by delivery, telecopy, telefax, or telex. 12.4 Titles and Section Headings. The titles and section headings used herein are for convenience only and shall not be used in interpreting this Agreement. 13. Definitions. All terms used herein which are defined in the California Uniform Commercial Code shall have the meaning given therein unless otherwise defined in this Agreement. The term "including" is not limiting or exclusive. When used herein, the following terms shall have the following meanings. 13.1 "Account" shall mean all accounts, accounts receivable, chattel paper, contract rights, documents, general intangibles, instruments, letters of credit, banker's acceptances, and other rights to payment, and proceeds thereof. 13.2 "Account Balance" shall mean, on any given day, the gross face amount of all Purchased Accounts unpaid on that day. 13.3 "Account Debtor" shall have the meaning set forth in the California Commercial Code and shall include any person liable on any Purchased Account, including any guarantor of the Purchased Account and any issuer of a letter of credit or banker's acceptance. 13.4 "Adjustment(s)" shall have the meaning set in Section 3.1. 13.5 "Administrative Fee" shall have the meaning as set forth in Section 2.2. 13.6 "Advance" shall have the meaning set forth in Section 1.3. 13.7 "Chargeback Amount" shall have the meaning set forth in Section 3.2. 13.8 "Collateral" shall have the meaning set forth in Section 6. 13.9 "Customer Payments" shall have the meaning set forth in Section 2.4. 13.10 "Event of Default" shall have the meaning set forth in Section 7. 13.11 "Finance Fees" shall have the meaning set forth in Section 2.1. 13.12 "Schedule of Accounts" shall have the meaning set forth in Section 1.1. 13.13 "Obligations" shall mean all advances, obligations, indebtedness and duties owing by Seller to Purchaser of any kind or nature, present or future arising under or in connection with this Agreement entered into between Purchaser and Seller, weather direct or indirect, including all Advances, Finance Fees, Administrative Fees, Chargeback Amounts, attorneys' fees and expenses. 13.14 "Permitted Liens" shall mean: (1) liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Seller maintains adequate reserves on its books, if they have no priority over any of Purchaser's security interests; (2) materialmen's, mechanics', artisan's, workmen's, repairmen's, employees', or other like liens arising in the ordinary course of business, which either are not delinquent or are being contested in good faith by Seller; (3) liens that are not prior to the Purchaser's lien which constitute rights of set-off of a customary nature or banker's liens with respect to amount on deposit, whether arising by operation of law or by contract, in connection with arrangements entered in to with banks in the ordinary course of business; (4) deposits under worker's compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business; (5) purchase money liens (a) on Collateral acquired or held by Seller incurred for financing the acquisition of the Collateral or (b) existing on Collateral when acquired; (6) liens on insurance proceeds in favor of insurance companies granted solely as security for refinanced premiums; (7) liens in favor of Purchaser; (8) liens arising from judgments or attachments that are not prior to the lien of Purchaser and that are removed within thirty (30) days after such judgment or attachment and (9) liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by liens of the type described in clauses 1 through 8 above, provided that any extension, renewal or replacement lien shall be limited to the property encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase. 13.15 "Purchased Accounts" shall mean all Accounts identified on any Schedule of Accounts delivered by Seller to Purchaser with Purchaser elects to purchase and for which Purchaser makes an Advance, and all monies due or to become due thereunder. 13.16 "Remittance" shall have the meaning set forth in Section 3.3. 13.17 "Reserve" shall have the meaning set forth in Section 1.3. 13.18 "Settlement Date" shall mean the last calendar day of each Settlement Period. 13.19 "Settlement Period" shall mean each calendar month of each year. IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement on the day and year written above. "PURCHASER" "SELLER" GENUS, INC. PACIFIC BUSINESS FUNDING, By /s/ William W. R. Elder a division of Cupertino National ------------------------ Bank By: /s/ William Chronert Title Chief Executive Officer -------------------- ----------------------- Title: President Address of Seller, Chief Executive --------- Office and Location of Collateral Street: 1139 Karlstad Drive ------------------- Other Locations of Collateral, City: Sunnyvale if any, in Addition to Above: State: California __________________________________ Zip Code: 94089 __________________________________ Telephone No.: (408)747-7140 __________________________________ Facsimile No.: (408)747-7198