ex10_1.htm


    
      

    

    
      Exhibit
10.1


      


      
        
          
            
              		
                      Procera
      Networks, Inc.  |  100-C Cooper
      Court  |  Los Gatos, CA 95032

                    
	
                      p.
      408-890-7100  |  f.
      408-354-7211  |  www.proceranetworks.com

                    


            

          

        

      

      


      


      September
12, 2008

      


      Via
Hand-Delivery

      


      David E.
Stepner

      c/o
Procera Networks, Inc.

      100C
Cooper Court

      Los
Gatos, CA 95032

      


      Re:  Separation
and Consulting Agreement

       

      Dear
David:

       

      This
letter sets forth the terms and conditions of the separation and consulting
agreement (the “Agreement”)
that Procera Networks, Inc. (the “Company”)
is offering to you to aid in your employment transition.

       

      1.          
 Separation
Date.  Your last day of employment with the Company will be
October 1, 2008 (the “Separation
Date”).

       

      2.          
 Accrued
Salary and Vacation.  On the Separation Date, the Company will
pay you all accrued salary, and all accrued and unused vacation earned through
the Separation Date, subject to standard payroll deductions and
withholdings.  You are entitled to these payments by law. 

       

      3.         
  Health
Insurance.  To the extent provided by the federal COBRA law or,
if applicable, state insurance laws (collectively, “COBRA”),
and by the Company’s current group health insurance policies, you will be
eligible to continue your group health insurance benefits at your own expense
after the Separation Date.  Later, you may be able to convert to an
individual policy through the provider of the Company’s health insurance, if you
wish.  You will be provided with a separate notice describing your
rights and obligations under the applicable state and/or federal insurance laws
on or after the Separation Date.

       

      4.         
  Expense
Reimbursement.  You shall submit,
within ten (10) days after the Separation Date, expense reports to the Company
seeking reimbursement for any business expenses incurred through the Separation
Date.  The Company will reimburse you for these business expenses,
pursuant to its standard policies and practices.

       

      5.        
   Consulting
Relationship.  If you timely sign, date and return this
Agreement to the Company, and allow the releases contained herein to become
effective, and you fully comply with your obligations under this Agreement, the
Company will engage you as a consultant, and you hereby agree to serve as a
consultant, under the following terms and conditions (the “Consulting
Relationship”).

       

      (a)           Consulting
Period.  The Consulting Relationship shall commence on the
first day following the Separation Date and shall continue until the earliest to occur of the
following events (the “Consulting
Period”): (i) the date you terminate the Consulting Relationship for any
reason upon written notice to the Company; (ii) the date the Company terminates
the Consulting Relationship due to your material breach of this Agreement or any
other agreements or policies of the Company, upon written notice to you; or
(iii) on December 31, 2008.  In the event that both you and the
Company wish to continue the Consulting Relationship beyond the Consulting
Period, it will done only by mutual consent in a written amendment to this
Agreement signed by both parties.

       

      
        
           


        

        
          1

          
            

          

        

        
           


        

      


      (b)           Consulting
Services.  During the Consulting Period, you agree to provide
consulting services to the Company in any area of your experience or expertise
at the request of the Chief Technology Officer (“CTO”) of
the Company (the “Consulting
Services”).  The Consulting Services will include providing
engineering advice and operational assistance to the Company.  You
agree to make yourself available to perform such Consulting Services throughout
the Consulting Period, up to a maximum of 50 hours per month.  You
shall exercise the highest degree of professionalism and utilize your expertise
and creative talents in performing the Consulting Services.  In
addition, you will continue to abide by all of your continuing obligations to
the Company, including your obligations under this Agreement and your continuing
obligations under your Employee Confidentiality and Non-Solicitation Agreement
and Proprietary Information and Inventions Agreement (discussed in Section 9
below).

       

      (c)           Consulting
Fees.  During the Consulting Period, you will receive as
consulting fees $150.00 per hour for each hour or portion thereof that you
actually provide services to the Company (the “Consulting
Fees”).  You will submit detailed invoices of your Consulting
Services on a monthly basis, and the Company will provide payment of any owed
Consulting Fees within fifteen (15) days after receipt of such
invoices.  The Company will not withhold from the Consulting Fees any
amount for taxes, social security, or other payroll deductions.  The
Company will report your Consulting Fees on an IRS Form 1099.  You
acknowledge that you will be entirely responsible for payment of any taxes that
may be due with regard to the Consulting Fees, and you hereby agree to indemnify
and hold harmless the Company from any liability for any taxes that may be
assessed by any taxing authority with respect hereto.

       

      (d)           Independent Contractor
Relationship.  During the Consulting Period, your Consulting
Relationship with the Company will be that of an independent contractor, and
nothing in this Agreement is intended to, or should be construed to, create a
partnership, agency, joint venture or employment relationship.  Other
than as expressly provided in this Agreement, as an independent contractor
during the Consulting Period, you will not be entitled to, and will not receive,
any of the benefits which the Company may make available to its employees,
including, but not limited to, group health or life insurance, other than any
rights you may otherwise have with respect to such benefits due to your status
as a former employee (including your rights to continued group health insurance
coverage pursuant to COBRA).

       

      (e)           Restricted
Shares.  Pursuant to your May 21, 2007 Employment Agreement
(the “Employment
Agreement”), the Company’s board of directors approved the award to you
of 300,000 shares of restricted common stock of the Company, which as of the
Separation Date have vested as to 150,000 shares, with the remaining 150,000
shares unvested.  A certificate evidencing the currently vested
150,000 shares will be issued to you by the Company, subject to appropriate
arrangements being made by you to satisfy all applicable Company federal and
state income and employment withholding taxes.  As additional
consideration for your provision of Consulting Services, the remaining unvested
shares of restricted stock (150,000 shares) will vest on October 21, 2008 (the
“Vesting
Date”), and a certificate evidencing these shares will be issued to you
(subject to appropriate arrangements being made by you to satisfy all applicable
Company federal and state income and employment withholding taxes), provided that you deliver all
requested Consulting Services during the period between the Separation Date and
the Vesting Date and otherwise remain in compliance with the terms of this
Agreement.  Notwithstanding any provisions in your stock option
agreements or the governing stock option plan, all options that you hold to
purchase shares of the Company’s common stock shall cease vesting as of the
Separation Date.  Your right to exercise your option(s) for any vested
shares, and all other rights and obligations with respect to your stock
options(s), will be as set forth in your stock option agreement, grant notice
and applicable plan documents.

       

      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      (f)          
 Expenses.  The
Company will reimburse you, pursuant to its regular business practices, for
reasonable, documented business expenses incurred in performing the Consulting
Services, provided that these expenses are approved in advance by the
Company.

       

      (g)           Limitations on
Authority.  After the Separation Date, you have no authority to
bind the Company to any contractual obligations, whether written, oral or
implied without the express authorization of the Chief Executive Officer (“CEO”).  You
hereby agree that you will have no responsibilities or authority as a consultant
to the Company other than as provided above.  As a consultant, you
agree not to represent or purport to represent the Company in any manner
whatsoever to any third party unless expressly authorized by the CEO, in
writing, to do so.  Access to and use of the Company facilities or
equipment to perform the Consulting Services will be coordinated with the
CEO.

       

      (h)           Protection of
Information.  You agree that, during the Consulting Period and
thereafter, you will not use or disclose any confidential or proprietary
information or materials of the Company that you obtain or develop in the course
of performing the Consulting Services, except with permission of the
CEO.  Any and all work product you create in the course of performing
the Consulting Services will be the sole and exclusive property of the Company.
You hereby assign to the Company all right, title, and interest in all
inventions, techniques, processes, materials, and other intellectual property
developed in the course of performing the Consulting Services.

       

      (i)         
  Other Work
Activities.  Throughout the Consulting Period, you retain the
right to engage in employment, consulting, or other work relationships in
addition to your work for the Company, provided that such other employment,
consulting, or work relationships do not interfere with your continuing
obligations to the Company or otherwise create a conflict of interest with the
Company.  The Company will make reasonable arrangements to enable you
to perform the Consulting Services at such times and in such a manner so that it
will not interfere with other activities in which you may engage.  In
order to protect the trade secrets and confidential and proprietary information
of the Company, you agree that, during the Consulting Period, you will notify
the Company, in writing, before you obtain competitive employment, perform
competitive work for any business entity, or engage in any other work activity
that is competitive with the Company, and you will obtain the Company’s written
consent before engaging in any such competitive activity.  If you
engage in such competitive activity without the Company’s express written
consent, or otherwise materially breach this Agreement, then, in addition to any
other remedies, the Company’s obligation to pay you Consulting Fees will cease
immediately, and your
shares of restricted Company common stock will not vest after the Separation
Date as provided in Section 5(e).

       

      7.        
   Other
Compensation and Benefits.  You acknowledge that, except as
expressly provided in this Agreement, you have not earned and are not entitled
to receive from the Company any additional compensation, severance, or benefits
on or after the Separation Date, with the exception of any vested right you may
have under the express terms of a written ERISA-qualified benefit plan (e.g.,
401(k) account).  You further acknowledge and agree that you are not
currently entitled to receive any Change in Control benefits nor shall you be
entitled to receive any Change in Control benefits in the future (including
without limitation any accelerated vesting of your stock options or restricted
stock provided for in your Employment Agreement), notwithstanding your continued
service as a consultant.  Any such provisions in your Employment
Agreement providing for accelerated vesting of stock options or restricted stock
in the event of a Change in Control are hereby superseded and shall have no
further force or effect.

       

      
        
           


        

        
          3

          
            

          

        

        
           


        

      


      8.            Return of
Company Property.  On the Separation Date, you agree to return
to the Company all Company documents (and all copies thereof) and other property
of the Company in your possession or control, including, but not limited to,
Company files, notes, correspondence, memoranda, notebooks, drawings, records,
reports, lists, compilations of data, clinical data, proposals, agreements,
drafts, minutes, studies, plans, forecasts, purchase orders, financial and
operational information, product and training information, research and
development information, contact lists or directories, sales and marketing
information, personnel and compensation information, vendor information,
promotional literature and instructions, product specifications and
manufacturing information, computer-recorded information, electronic information
(including e-mail and correspondence), other tangible property and equipment
(including, but not limited to, computer equipment, facsimile machines, and
cellular telephones), credit cards, entry cards, identification badges and keys;
and any materials of any kind that contain or embody any proprietary or
confidential information of the Company (and all reproductions thereof in whole
or in part).  You agree to make a diligent and timely search to locate
any such documents, property and information.  In addition, if you
have used any personally owned computer, server, or e-mail system to receive,
store, review, prepare or transmit any Company confidential or proprietary data,
materials or information, then you agree to provide the Company, no later than
ten (days) following the Separation Date, with a computer-useable copy of all
such information and then permanently delete and expunge such Company
confidential or proprietary information from those systems without retaining any
reproductions (in whole or in part).  Your timely compliance with this
Section 8 is a precondition to your receipt of the Severance
Payment.  The Company will provide you with access to its confidential
and proprietary information or materials to the extent needed for you to perform
your Consulting Services.

       

      9.            Proprietary
Information Obligations.  You hereby acknowledge and reaffirm
your continuing obligations to the Company under your Employee Confidentiality
and Non-Solicitation Agreement and Proprietary Information and Inventions
Agreement both during and after the Consulting Period (the “Confidentiality
Agreement”).  A copy of the Confidentiality Agreement is
attached hereto as Exhibit
A for your
reference.

       

      10.          Nondisparagement.  You
agree not to disparage the Company and its current and former officers,
directors, employees, shareholders and agents, in any manner likely to be
harmful to them or their business, business reputations or personal reputations;
provided that you may respond accurately and fully to any request for
information to the extent required by legal process.

      


      12.          No
Admissions.  The promises and payments in consideration of this
Agreement shall not be construed to be an admission of any liability or
obligation by either party to the other party, and neither party makes any such
admission.

       

      
        
           


        

        
          4

          
            

          

        

        
           


        

      


      13.          Cooperation
and
Assistance.  You agree to cooperate fully with the Company in
connection with its actual or contemplated defense, prosecution, or
investigation of any claims or demands by or against third parties, or other
matters arising from events, acts, or failures to act that occurred during the
period of your employment by the Company.  Such cooperation includes,
without limitation, making yourself available to the Company upon reasonable
notice, without subpoena, to provide complete, truthful and accurate information
in witness interviews, depositions, and trial testimony.  The Company
will reimburse you for reasonable out-of-pocket expenses you incur in connection
with any such cooperation (excluding foregone wages, salary, or other
compensation) and will make reasonable efforts to accommodate your scheduling
needs.  In addition, you agree to execute all documents (if any)
necessary to carry out the terms of this Agreement.

       

      14.          Release
of Claims.

      


      (a)           General Release.  In
exchange for the consideration provided to you under this Agreement to which you
would not otherwise be entitled, including but not limited to the Severance
Payment and Consulting Relationship, you hereby generally and completely release
the Company and its current and former directors, officers, employees,
shareholders, partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released
Parties”) from any and all claims, liabilities and obligations, both
known and unknown, that arise out of or are in any way related to events, acts,
conduct, or omissions occurring prior to or on the date you sign this Agreement
(collectively, the “Released
Claims”).

      


      (b)           Scope of
Release.  The Released Claims include, but are not limited to:
(i) all claims arising out of or in any way related to your employment with
the Company, or the termination of that employment; (ii) all claims related
to your compensation or benefits from the Company, including salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership interests in the Company;
(iii) all claims for breach of contract, wrongful termination, and breach
of the implied covenant of good faith and fair dealing; (iv) all tort
claims, including claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (v) all federal, state, and local
statutory claims, including claims for discrimination, harassment, retaliation,
attorneys’ fees, or other claims arising under the federal Civil Rights Act of
1964 (as amended), the federal Americans with Disabilities Act of 1990, the
federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”),
the California Labor Code (as amended) and the California Fair Employment and
Housing Act (as amended).

      


      (c)           Excluded Claims.
Notwithstanding the foregoing, the following are not included in the
Released Claims (the “Excluded
Claims”): (i) any rights or claims for indemnification you may have
pursuant to any written indemnification agreement with the Company to which you
are a party or under applicable law; (ii) any rights which are not waivable
as a matter of law; and (iii) any claims for breach of this
Agreement.  In addition, nothing in this Agreement prevents you from
filing, cooperating with, or participating in any proceeding before the Equal
Employment Opportunity Commission, the Department of Labor, the California
Department of Fair Employment and Housing, or any other government agency,
except that you acknowledge and agree that you hereby waive your right to any
monetary benefits in connection with any such claim, charge or
proceeding.  You represent and warrant that, other than the Excluded
Claims, you are not aware of any claims you have or might have against any of
the Released Parties that are not included in the Released
Claims.


      
        
           


        

        
          5

          
            

          

        

        
           


        

      


      15.          ADEA
Waiver.  You
acknowledge that you are knowingly and voluntarily waiving and releasing any
rights you may have under the ADEA, and that the consideration given for the
waiver and release in the preceding paragraph hereof is in addition to anything
of value to which you are already entitled.  You further acknowledge
that you have been advised, as required by the ADEA,
that:  (i) your waiver and release do not apply to any rights or
claims that may arise after the date that you sign this Agreement; (ii) you
should consult with an attorney prior to signing this Agreement (although you
may choose voluntarily not to do so); (iii) you have twenty-one (21) days to
consider this Agreement (although you may choose voluntarily to sign it
earlier); (iv) you have seven (7) days following the date you sign this
Agreement to revoke the Agreement (by providing written notice of your
revocation to the CEO); and (v) this Agreement will not be effective until the
date upon which the revocation period has expired, which will be the eighth day
after the date that this Agreement is signed by you provided that you do not
revoke it (the “Effective
Date”).

       

      16.          Waiver of
Unknown Claims. In giving the releases
set forth in this Agreement, which include claims which may be unknown to you at
present, you acknowledge that you have read and understand Section 1542 of the
California Civil Code which reads as follows: “A general release does not extend to
claims which the creditor does not know or suspect to exist in his or her favor
at the time of executing the release, which if known by him or her must have
materially affected his or her settlement with the
debtor.”  You hereby expressly waive and relinquish all rights
and benefits under that section and any law or legal principle of similar effect
in any jurisdiction with respect to your release of claims herein, including but
not limited to the release of unknown and unsuspected claims.

       

      17.          Representations. You
hereby represent that you have been paid all compensation owed and for all hours
worked, have received all the leave and leave benefits and protections for which
you are eligible, and have not suffered any on-the-job injury for which you have
not already filed a workers’ compensation claim.

       

      18.          Dispute
Resolution.  To ensure rapid and economical resolution of any
disputes regarding this Agreement, the parties hereby agree that any and all
claims, disputes or controversies of any nature whatsoever arising out of, or
relating to, this Agreement, or its interpretation, enforcement, breach,
performance or execution, your employment with the Company, or the termination
of such employment, shall be resolved, to the fullest extent permitted by law
exclusively first, by mediation using a mediator mutually selected from Judicial
Arbitration and Mediation Services, Inc. (“JAMS”),
and if not thereby resolved, by final, binding and confidential arbitration in
San Jose, California conducted before a single arbitrator by JAMS, or its
successor, under the then applicable JAMS arbitration rules.  The parties each acknowledge that by
agreeing to this arbitration procedure, they waive the right to resolve any such
dispute, claim or demand through a trial by jury or judge or by administrative
proceeding.  You will have the right to be represented by legal
counsel at any arbitration proceeding.  The arbitrator shall: (i) have
the authority to compel adequate discovery for the resolution of the dispute and
to award such relief as would otherwise be available under applicable law in a
court proceeding; and (ii) issue a written statement signed by the arbitrator
regarding the disposition of each claim and the relief, if any, awarded as to
each claim, the reasons for the award, and the arbitrator’s essential findings
and conclusions on which the award is based.  The arbitrator, and not
a court, shall also be authorized to determine whether the provisions of this
paragraph apply to a dispute, controversy, or claim sought to be resolved in
accordance with these arbitration procedures.  Nothing in this
Agreement is intended to prevent either you or the Company from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion of
any arbitration.

       

      
        
           


        

        
          6

          
            

          

        

        
           


        

      


      19.          Miscellaneous.  This
Agreement, including Exhibit
A, constitutes the complete, final and exclusive embodiment of the entire
agreement between you and the Company with regard to its subject
matter.  It is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises, warranties or representations,
including but not limited to any promises, warranties or representations
contained in the Employment Agreement.  This Agreement may not be
modified or amended except in a written agreement signed by both you and a duly
authorized officer of the Company.  This Agreement will bind the
heirs, personal representatives, successors and assigns of both you and the
Company, and inure to the benefit of both you and the Company, and their heirs,
successors and assigns.  If any provision of this Agreement is
determined to be invalid or unenforceable, in whole or in part, this
determination will not affect any other provision of this Agreement and the
provision in question shall be deemed modified so as to be rendered enforceable
in a manner consistent with the intent of the parties, insofar as possible under
applicable law.  Any ambiguity in this Agreement shall not be
construed against either party as the drafter.  Any waiver of a breach
of this Agreement, or rights hereunder, shall be in writing and shall not be
deemed to be a waiver of any successive breach or rights
hereunder.  This Agreement shall be deemed to have been entered into,
and shall be construed and enforced, in accordance with the laws of the State of
California without regard to conflicts of law principles.  This
Agreement may be executed in counterparts, each of which shall be deemed to be
part of one original, and facsimile signatures shall be equivalent to original
signatures.

       

      If this
Agreement is acceptable to you, please sign and date below within twenty-one
(21) days after your receipt, and then send the fully signed Agreement to the
CEO.  The Company’s offer contained herein will automatically expire
if we do not receive the fully signed Agreement from you within this
timeframe.

       

      We wish
you the best in your future endeavors.

       

      Sincerely,

       

      Procera
Networks, Inc.

      


      


      
        
          
            	
                    By:

                  	
                    /s/ James Brear

                  	 
      
	 
      	
                    James
      Brear

                  	 
      
	 
      	
                    Chief
      Executive Officer

                  	 
      


          

        

      

      


      
        Exhibit
A–Confidentiality Agreement

      

      


      


      Understood
and Agreed:

      


       

      
        
          	
                  /s/ David E. Stepner

                	 
      
	
                  David
      E. Stepner

                	 
      
	 
      	 
      
	
                  September 18, 2008

                	 
      
	
                  Date

                	 
      


        

      


      
        
           


        

        
          7

          
            

          

        

        
           


        

      


      Exhibit
A

       

      Confidentiality
Agreement

       

       

      8