Exhibit 10.2

 

FOURTH LOAN MODIFICATION AGREEMENT

 

This Fourth Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of                                  , but is effective as of June 30, 2012, by and between SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”) and NETWORK ENGINES, INC., a Delaware corporation with its chief executive office located at 25 Dan Road, Canton, Massachusetts 02021 (“Borrower”).

 

1.             DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of February 5, 2010, evidenced by, among other documents, a certain Amended and Restated Loan and Security Agreement dated as of February 5, 2010, between Borrower and Bank, as amended by a certain Consent and First Loan Modification Agreement dated as of January 18, 2011, between Borrower and Bank, as further  amended by a certain Second Loan Modification Agreement dated as of December 13, 2011, between Borrower and Bank, and as further  amended by a certain Third Loan Modification Agreement dated as of March 28, 2012, between Borrower and Bank (as amended, the “Loan Agreement”).  Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.

 

2.             DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “Security Documents”).  Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

 

3.             DESCRIPTION OF CHANGE IN TERMS.

 

A.                                    Modifications to Loan Agreement.

 

1                                         The Loan Agreement shall be amended by deleting the following definitions appearing in Section 13.1 thereof:

 

“              “Adjusted Quick Ratio” is the ratio of (a) Quick Assets to (b) (i) Current Liabilities minus (ii) Deferred Revenue.”

 

“              “Current Liabilities” are all obligations and liabilities of Borrower to Bank, including, without limitation, Borrower’s reimbursement obligations to Bank, whether actual or contingent, under any Letter of Credit or Letter of Credit Application, including, without limitation, the Dell Letter of Credit, and all of Borrower’s Included Indebtedness, plus, without duplication, the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year.”

 

“             “Quick Assets” is, on any date, Borrower’s consolidated unrestricted cash maintained with Bank plus net billed accounts receivable, determined according to GAAP.”

 

“             “Revolving Line Maturity Date” is June 30, 2012.” and inserting in lieu thereof the following:

 

“              “Adjusted Quick Ratio” is the ratio of (a) Quick Assets to (b) Current Liabilities.”

 











 

“              “Current Liabilities” are all obligations and liabilities of Borrower to Bank, including, without limitation, Borrower’s reimbursement obligations to Bank, whether actual or contingent, under any Letter of Credit or Letter of Credit Application, including, without limitation, the Dell Letter of Credit, and all of Borrower’s Included Indebtedness.”

 

“             “Quick Assets” is, on any date, Borrower’s consolidated unrestricted cash maintained with Bank plus gross billed accounts receivable, determined according to GAAP.”

 

“             “Revolving Line Maturity Date” is September 30, 2012.”

 

2                                         The Compliance Certificate appearing as Exhibit B to the Loan Agreement is hereby replaced with the Compliance Certificate attached as Exhibit A hereto.

 

4.             FEES.  Borrower shall pay to Bank a modification fee equal to Ten Thousand Dollars ($10,000.00), which fee shall be due on the date hereof and shall be deemed fully earned as of the date hereof.  Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.

 

5.             RATIFICATION OF PERFECTION CERTIFICATE.  Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a certain Perfection Certificate dated as of February 5, 2010 between Borrower and Bank (the “Perfection Certificate”), and acknowledges, confirms and agrees the disclosures and information above Borrower provided to Bank in the Perfection Certificate has not changed, as of the date hereof.

 

6.             CONSISTENT CHANGES.  The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

 

7.             RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.

 

8.             NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.

 

9.             CONTINUING VALIDITY.  Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect.  Bank’s agreement to modifications to the existing Obligations pursuant to this  Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations.  Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations.  It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing.  No maker will be released by virtue of this Loan Modification Agreement.

 

10.          COUNTERSIGNATURE.  This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower and Bank.

 

[The remainder of this page is intentionally left blank]

 











 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the date first written above.

 

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
NETWORK   ENGINES, INC.
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
BANK:
    	
 
    
	
 
    	
 
    
	
SILICON   VALLEY BANK
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    


 

 

The undersigned, NETWORK ENGINES INTERNATIONAL, INC. (“Guarantor”),  ratifies, confirms and reaffirms, all and singular, the terms and conditions of a certain: (i) Unlimited Guaranty dated January 18, 2011 (the “Guaranty”), (ii) Security Agreement dated February 11, 2011, between Guarantor and Bank (the “Security Agreement”), and (iii) Stock Pledge Agreement dated February 11, 2011, between Guarantor and Bank (the “ Stock Pledge Agreement”) and acknowledges, confirms and agrees that the Guaranty, the Security Agreement, and the Stock Pledge Agreement shall remain in full force and effect and shall in no way be limited by the execution of this Loan Modification Agreement, or any other documents, instruments and/or agreements executed and/or delivered in connection herewith.

 

 

	
GUARANTOR:
    	
 
    
	
 
    	
 
    
	
NETWORK   ENGINES INTERNATIONAL, INC.
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    


 











 

EXHIBIT A

 

COMPLIANCE CERTIFICATE

 

	
TO:  
    	
SILICON   VALLEY BANK
    	
 
    	
Date:
    	
 
    
	
FROM:    
    	
NETWORK   ENGINES, INC.
    	
 
    	
 
    


 

The undersigned authorized officer of NETWORK ENGINES, INC. (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period ending                                with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.  Attached are the required documents supporting the certification.  The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

	
Reporting Covenant
    	
 
    	
Required
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Monthly   consolidated plus consolidating financial statements with Compliance   Certificate
    	
 
    	
Monthly   within 30 days
    	
 
    	
Yes o  No o
    
	
Annual   consolidated plus consolidating financial statement (CPA Audited)
    	
 
    	
FYE   within120 days
    	
 
    	
Yes o  No o
    
	
10-Q,   10-K and 8-K and other public filings
    	
 
    	
Within   5 days after filing with SEC
    	
 
    	
Yes o  No o
    
	
A/R &   A/P Agings, Deferred Revenue reports and Inventory Sell-Through Reports
    	
 
    	
Monthly   within 15 days
    	
 
    	
Yes o  No o
    
	
Transaction   Reports
    	
 
    	
As   set forth in Section 6.2 of the Agreement
    	
 
    	
Yes o  No o
    
	
Budgets   and Projections
    	
 
    	
45   days after FYE
    	
 
    	
Yes o  No o
    


 

The following Intellectual Property was registered after the Effective Date (if no registrations, state “None”)

 

	
Financial Covenant
    	
 
    	
Required
    	
 
    	
Actual
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Adjusted   Quick Ratio (to be tested on the last day of each month)
    	
 
    	
*
    	
 
    	
          :1.0
    	
 
    	
Yes o  No o
    
	
Operating   Cash Flow (as of the last day of each calendar quarter)
    	
 
    	
$              **
    	
 
    	
$
    	
 
    	
Yes o  No o
    


 




*As set forth in Section 6.9(a) of the Agreement.

*As set forth in Section 6.9(b) of the Agreement.

 











 

The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

 

 

 

 

	
Network   Engines, Inc.
    	
BANK   USE ONLY
    
	
 
    	
 
    
	
 
    	
Received   by:
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
AUTHORIZED   SIGNER
    
	
Name:
    	
 
    	
 
    	
Date:
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Verified:
    	
 
    
	
 
    	
 
    	
AUTHORIZED   SIGNER
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    
	
 
    	
Compliance   Status: 
    	
Yes   o  No  o
    
						


 











 

Schedule 1 to Compliance Certificate

 

Financial Covenants of Borrower

 

Dated:

 

In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall control.

 

I.             Adjusted  Quick Ratio (Section 6.9(a))

 

Required:              *

Actual:                              :1.00

 

	
A.
    	
 
    	
Aggregate   value of the unrestricted cash of Borrower and its Subsidiaries at Bank
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
B.
    	
 
    	
Aggregate   value of the gross billed accounts receivable of Borrower and its Subsidiaries
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
C.
    	
 
    	
Quick   Assets (the sum of lines A through B)
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
D.
    	
 
    	
Aggregate   value of Obligations, including, without limitation, Borrower’s reimbursement   obligations to Bank, whether actual or contingent, under any Letter of Credit   or Letter of Credit Application, including, without limitation, the Dell   Letter of Credit, to Bank plus (a) indebtedness for borrowed money,   (b) obligations evidenced by notes, bonds, debentures or similar   instruments, and (c) capital lease obligations
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
E.
    	
 
    	
Aggregate   value of liabilities of Borrower and its Subsidiaries (including all   Indebtedness) that matures within one (1) year and current portion of   Subordinated Debt permitted by Bank to be paid by Borrower
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
F.
    	
 
    	
Current   Liabilities (the sum of lines D and E)
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
G.
    	
 
    	
Adjusted   Quick Ratio (line C divided by line F)
    	
 
    	
 
    


 




*As set forth in Section 6.9(a) of the Agreement.

 

Is line G equal to or greater than the required amount?

 

	
 
    	
             No,   not in compliance
    	
 
    	
        Yes,   in compliance
    


 

II.            Operating Cash Flow (Section 6.9(b))

 

Required:              Operating Cash Flow of at least  (i) ($2,000,000.00) as of December 31, 2009, (ii) ($5,000,000.00) as of each of March 31, 2010 and June 30, 2010, (iii) ($4,000,000.00) as of September 30, 2010, (iv) ($3,000,000.00) as of December 31, 2010, (v) ($2,000,000.00) as of March 31, 2011, (vi) ($1,000,000.00) as of June 30, 2011, (vii) $0.00 as of September 30, 2011, and (viii) $3,500,000.00 as of December 31, 2011, and as of the last day of each quarter thereafter.

 

Actual:                   $              

 











 

	
A.
    	
 
    	
Net   Income (as defined in the Agreement) for prior 12 month period
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
B.
    	
 
    	
Interest   Expense (as defined in the Agreement) for prior 12 month period
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
C.
    	
 
    	
Depreciation   expense and amortization expense for prior 12 month period
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
D.
    	
 
    	
Income   tax expense for prior 12 month period
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
E.
    	
 
    	
non-stock   compensation and other one-time non-cash expenses approved by Bank in writing   on a case-by-case basis for prior 12 month period
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
F.
    	
 
    	
EBITDA   (the sum of lines A through E)
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
G.
    	
 
    	
Capital   Expenditures (as defined in the Agreement) for prior 12 month period
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
H.
    	
 
    	
Borrower’s   cash taxes for prior 12 month period
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
I.
    	
 
    	
Operating   Cash Flow (line F minus line G minus line H)
    	
 
    	
$
    


 

Is Line I greater than or equal to the applicable amount above?

 

	
 
    	
         No,   not in compliance
    	
 
    	
        Yes,   in compliance