Document:

ex10_3.htm

Exhibit 10.3

 

WAIVER AND FIRST AMENDMENT TO

 

LOAN AND SECURITY AGREEMENT

 

THIS WAIVER AND FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into this 7th day of May, 2010, by and between SILICON VALLEY BANK (“Bank”) and PROCERA NETWORKS, INC., a Nevada corporation (“Borrower”).

 

Recitals

 

A.            Bank and Borrower have entered into that certain Loan and Security Agreement dated as of December 10, 2009 (as the same has been amended, modified, supplemented or restated, the “Loan Agreement”).

 

B.            Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

C.            Borrower is currently in default of the Loan Agreement for failing to comply with the Performance to Plan covenant for the quarter ending March 31, 2010 pursuant to Section 6.7(a) of the Loan Agreement (“Existing Event of Default”).

 

D.            Borrower has requested that Bank amend the Loan Agreement to (i) waiver the Existing Event of Default and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

 

E.            Although Bank is under no obligation to do so, Bank is willing to waive the Existing Event of Default and amend certain provisions of the Loan Agreement, all on the terms and conditions set forth in this Agreement, so long as Borrower complies with the terms, covenants and conditions set forth in this Agreement in a timely manner.

 

Agreement

 

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.      Definitions.  Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Loan Agreement.

 

2.      Amendments to Loan Agreement.

 

2.1     Section 13 (Definitions). The definition of Permitted Investments set forth in Section 13.1 of the Loan Agreement is hereby amended in its entirety and replaced with the following:

 

“Permitted Investments” are: (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any state maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc., (iii) Bank’s certificates of deposit issued maturing no more than 1 year after issue, (iv) any other investments administered through Bank, and (v) Investments by Borrower in Netintact not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) in the aggregate in any fiscal year.

 

  

  

  

3.      Waiver of Existing Event of Default.  Bank hereby waives the Existing Event of Default.  Except as otherwise specifically provided for in this Agreement, nothing contained herein shall be construed as a consent or waiver by Bank of any covenant or provision of the Loan Agreement, the other Loan Documents, this Agreement or any other contract or instrument between Borrower and Bank, and the failure of Bank at any time or times hereafter to require strict performance by Borrower of any provision thereof shall not waive, affect or diminish any right of Bank to thereafter demand strict compliance therewith.

 

4.             Limitation of Amendments.

 

4.1          The amendment set forth in Section 2 above and the waiver set forth in Section 3 above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

 

4.2          This Agreement shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

 

4.3          Failure to perform all of the terms of this Agreement shall cause an Event of Default under the Loan Documents.

 

5.            Representations and Warranties.  To induce Bank to enter into this Agreement, Borrower hereby represents and warrants to Bank as follows:

 

5.1         Immediately after giving effect to this Agreement (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default, other than the Existing Event of Default, has occurred and is continuing;

 

5.2         Borrower has the power and authority to execute and deliver this Agreement and to perform its obligations under the Loan Agreement, as amended by this Agreement;

 

5.3     The organizational documents of Borrower delivered to Bank on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

  

  

  

5.4     The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Agreement, have been duly authorized;

 

5.5     The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Agreement, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

 

5.6     The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Agreement, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made;

 

5.7     This Agreement has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights;

 

5.8     To ensure the legality, validity, enforceability or admissability into evidence of this Agreement in each of the jurisdictions in which Borrower is incorporated or organized and any jurisdiction in which Borrower conducts business, it is not necessary that (i) this Agreement be filed or recorded with any court or other authority in such jurisdiction, (ii) any other filings, notices, authorizations, approvals be obtained or other actions taken, or (iii) any stamp or similar tax be paid on or with respect to this Agreement, or, if any of the foregoing actions are necessary, they have been duly taken; and

 

5.9     Neither Borrower nor their respective properties has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under applicable law.

 

6.      Release by Borrower.

 

6.1     FOR GOOD AND VALUABLE CONSIDERATION, Borrower hereby forever relieves, releases, and discharges Bank and its present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims existing or arising from the beginning of time through and including the date of execution of this Agreement (collectively “Released Claims”).  Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Documents, the Recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.

 

  

  

  

6.2     In furtherance of this release, Borrower expressly acknowledges and waives any and all rights under Section 1542 of the California Civil Code, which provides as follows:

 

“A general release does not extend to claims which the creditor does not know or expect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” (Emphasis added.)

 

6.3     By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever.  Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

 

6.4     This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release.  Borrower acknowledges that the release contained herein constitutes a material inducement to Bank to enter into this Agreement, and that Bank would not have done so but for Bank’s expectation that such release is valid and enforceable in all events.

 

6.5     Borrower hereby represents and warrants to Bank, and Bank is relying thereon, as follows:

 

(a)           Except as expressly stated in this Agreement, neither Bank nor any agent, employee or representative of Bank has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Agreement.

 

(b)           Borrower has made such investigation of the facts pertaining to this Agreement and all of the matters appertaining thereto, as it deems necessary.

 

(c)           The terms of this Agreement are contractual and not a mere recital.

 

(d)           This Agreement has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Agreement is signed freely, and without duress, by Borrower.

 

  

  

  

(e)           Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released.  Borrower shall indemnify Bank, defend and hold it harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.

 

7.      Counterparts.  This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

8.      Effectiveness.  This Agreement shall be deemed effective upon (a) the due execution and delivery to Bank of this Agreement by each party hereto, (b) Borrower’s payment of an amendment fee in an amount equal to Five Hundred Dollars ($500), and (c) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Agreement.

 

[Signature page follows.]

  

  

  

In Witness Whereof, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.

 

	
BANK

	  
	 	 
	
SILICON VALLEY BANK

	  
	 	 
	 	 
	
By: 

	/s/ Aman Johal	  
	  	
Name: Aman Johal

	  
	  	
Title: Relationship Manager

	  
	  	  	  
	 	 	 
	
BORROWER

	  
	 	 
	
PROCERA NETWORKS, INC.

	  
	 	 
	 	 
	
By: 

	/s/ Charles Constanti	  
	  	
Name: Charles Constanti

	  
	  	
Title: Chief Financial Officerex10_4.htm

Exhibit 10.4

 

SECOND AMENDMENT TO

 

LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into this 2nd day of September, 2010, by and between SILICON VALLEY BANK (“Bank”) and PROCERA NETWORKS, INC., a Nevada corporation (“Borrower”).

 

Recitals

 

A.            Bank and Borrower have entered into that certain Loan and Security Agreement dated as of December 10, 2009 (as the same has been amended, modified, supplemented or restated, the “Loan Agreement”).

 

B.            Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

C.            Borrower has requested that Bank amend the Loan Agreement to (i) modify the Performance to Plan financial covenant and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

 

D.            Although Bank is under no obligation to do so, Bank is willing to amend certain provisions of the Loan Agreement, all on the terms and conditions set forth in this Agreement, so long as Borrower complies with the terms, covenants and conditions set forth in this Agreement in a timely manner.

 

Agreement

 

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.            Definitions.  Capitalized terms used but not defined in this Agreement, including its preamble and recitals, shall have the meanings given to them in the Loan Agreement.

 

2.            Amendments to Loan Agreement.

 

2.1          Section 6.7 (Financial Covenants).  Section 6.7(a) of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

 

(a)           Performance to Plan.  Commencing with the calendar quarter ending September 30, 2010 and as of the last day of each calendar quarter thereafter, Borrower’s gross revenue for such quarter, as outlined in Borrower’s business plan delivered to Bank on August 13, 2010, shall not be less than the following amounts for the corresponding quarter as outlined below:

 

  

  

  

	
Calendar Quarter Ending

	
Gross Revenues

	
September 30, 2010

	
$4,709,000

	
December 31, 2010

	
$6,290,000

	
March 31, 2011,

June 30, 2011,

September 30, 2011 and

December 31, 2011

	
Required amount to be determined by Bank based on Borrower’s Board approved 2011 fiscal year operating plan, but in no event shall such amount be less than $5,000,000 in any given quarter

3.            Compliance Certificate.  From and after the date hereof, Exhibit B of the Loan Agreement is replaced in its entirety with Exhibit B attached hereto.  From and after the date hereof, all references in the Loan Agreement to the Compliance Certificate shall be deemed to refer to Exhibit B attached hereto.

 

4.            Limitation of Amendments.

 

4.1           The amendments set forth in Sections 2 and 3 above are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

 

4.2           This Agreement shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

 

5.            Representations and Warranties.  To induce Bank to enter into this Agreement, Borrower hereby represents and warrants to Bank as follows:

 

5.1           Immediately after giving effect to this Agreement (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

 

5.2           Borrower has the power and authority to execute and deliver this Agreement and to perform its obligations under the Loan Agreement, as amended by this Agreement;

 

5.3           The organizational documents of Borrower delivered to Bank on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

  

2

  

 

5.4           The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Agreement, have been duly authorized;

 

5.5           The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Agreement, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

 

5.6           The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Agreement, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

 

5.7           This Agreement has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

 

6.            Counterparts.  This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

7.            Effectiveness.  This Agreement shall be deemed effective upon (a) the due execution and delivery to Bank of this Agreement by each party hereto, (b) Bank’s receipt of the Acknowledgment of Amendment and Reaffirmation of Guaranty substantially in the form attached hereto as Schedule 1, duly executed and delivered by Guarantor, (c) Borrower’s payment of an amendment fee in an amount equal to Five Thousand Dollars ($5,000), and (d) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Agreement.

 

[Signature page follows.]

  

3

  

In Witness Whereof, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.

 

	
BANK

	  
	 	 
	
SILICON VALLEY BANK

	  
	 	 
	 	 
	
By:

	
/s/ Megan Willard

	  
	  	
Name: Megan Willard

	  
	  	
Title: Vice President

	  
	  	  	  
	
BORROWER

	  
	 	 
	
PROCERA NETWORKS, INC.

	  
	 	 
	 	 
	
By:

	
/s/ Charles Constanti

	  
	  	
Name: Charles Constanti

	  
	  	
Title: Chief Financial Officer

	  

  

  

  

EXHIBIT B

 

 

SPECIALTY FINANCE DIVISION

Compliance Certificate

 

I, an authorized officer of Procera Networks, Inc. (“Borrower”) certify under the Loan and Security Agreement (the “Agreement”) between Borrower and Silicon Valley Bank (“Bank”) as follows (all capitalized terms used herein shall have the meaning set forth in the Agreement):

 

Borrower represents and warrants for each Financed Receivable:

 

Each Financed Receivable is an Eligible Account.

 

Borrower is the owner with legal right to sell, transfer, assign and encumber such Financed Receivable;

 

The correct amount is on the Invoice Transmittal and is not disputed;

 

Payment is not contingent on any obligation or contract and Borrower has fulfilled all its obligations as of the Invoice Transmittal date;

 

Each Financed Receivable is based on an actual sale and delivery of goods and/or services rendered, is due to Borrower,  is not past due or in default, has not been previously sold, assigned, transferred, or pledged and is free of any liens, security interests and encumbrances other than Permitted Liens;

 

There are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount;

 

It reasonably believes no Account Debtor is insolvent or subject to any Insolvency Proceedings;

 

It has not filed or had filed against it Insolvency Proceedings and does not anticipate any filing;

 

Bank has the right to endorse and/ or require Borrower to endorse all payments received on Financed Receivables and all proceeds of Collateral.

 

No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement contained in the certificates or statement not misleading.

 

Additionally, Borrower represents and warrants as follows:

 

Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change.  The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s organizational documents, nor constitute an event of default under any material agreement by which Borrower is bound.  Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change.

  

  

  

Borrower has good title to the Collateral, free of Liens except Permitted Liens.  All inventory is in all material respects of good and marketable quality, free from material defects.

 

Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005.  Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower has complied in all material respects with the Federal Fair Labor Standards Act.  Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change.  None of Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally.  Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP.  Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to obtain or make such consents, declarations, notices or filings would not reasonably be expected to cause a Material Adverse Change.

 

Borrower is in compliance with the Financial Covenant(s) set forth in Section 6.7 of the Agreement.

 

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

	  	  	  
	
Reporting Covenant

	
Required

	
Complies

	  	  	  
	
Monthly financial statements with Compliance Certificate

	
Monthly within 30 days

	
Yes  No

	
10 Q, 10 K and 8-K

	
Within 5 days after filing with SEC

	
Yes  No

	
Borrowing Base Certificate A/R & A/P Agings

	
Monthly within 30 days

	
Yes  No

	
Operating Plan

	
For the 2011 fiscal year due not later November 30, 2010

	
Yes  No

	
Deferred Revenue

	
Monthly within 30 days

	
Yes  No

  

  

  

	
INSERT ANY PERFORMANCE PRICING TESTS HERE

	
Net Cash > $2,000,000

	
No Collateral Handling Fee

	
Yes  No

	
Net Cash < $2,000,000

	
Collateral Handling Fee of 0.55%

	
Yes  No

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

 

	
Financial Covenant

	
Required

	
Actual

	
Complies

	  	  	  	  
	
Maintain on a Quarterly Basis:

	  	  	  
	
Performance to plan gross revenues of not less than:

	  	
$______

	
Yes  No

	  	
$4,709,000 for the quarter ending September 30, 2010

	
$______

	
Yes  No

	  	
$6,290,000 for the quarter ending December 31, 2010

	
$______

	
Yes  No

	  	
Required amount for each of March 31, 2011, June 30, 2011, September 30, 2011, and December 31, 2011 to be determined by Bank based on Borrower’s Board approved 2011 fiscal year operating plan, but in no event shall such amount be less than $5,000,000 in any given quarter

	
$______

	
Yes  No

 

All representations and warranties in the Agreement are true and correct in all material respects on this date, and Borrower represents that there is no existing Event of Default.

 

Sincerely,

 

PROCERA NETWORKS, INC.

 

	  	  
	
Signature

	  
	  	  
	
Title

	  
	  	  
	
Date

	  

  

  

  

Schedule 1

 

ACKNOWLEDGMENT OF AMENDMENT

AND REAFFIRMATION OF GUARANTY

 

Section 1.                      NETINTACT AB (Reg. No. 556596-0001), a company organized under the laws of the Kingdom of Sweden (the “Guarantor”) hereby acknowledges and confirms that it has reviewed and approved the terms and conditions of the Second Amendment to Loan and Security Agreement dated as of even date herewith (the “Amendment”).

 

Section 2.                      Guarantor hereby consents to the Amendment and agrees that the Guaranty relating to the Obligations of Borrower under the Loan Agreement shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of the Amendment or any other document or instrument delivered in connection herewith.

 

Section 3.                      Guarantor represents and warrants that, after giving effect to the Amendment, all representations and warranties contained in the Guaranty are true, accurate and complete as if made the date hereof.

 

Dated as of September 2, 2010

 

	
GUARANTOR

	  	
NETINTACT AB

	 	 	 
	 	 	 
	  	  	
By:

	
/s/ James Brear

	  	  	  	
Name: James Brear

	  	  	  	
Title: Director

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