PROCERA NETWORKS, INC. PENINSULA BANK BUSINESS FUNDING, A DIVISION OF THE PRIVATE BANK OF THE PENINSULA LOAN AND SECURITY AGREEMENT
PROCERA
NETWORKS, INC.
PENINSULA
BANK BUSINESS FUNDING,
A
DIVISION OF THE PRIVATE BANK OF THE PENINSULA
This
Loan
And Security Agreement is entered into as of March 13, 2009, by and
between Peninsula
Bank Business Funding, a division of The Private Bank of the Peninsula
(“Bank”) and PROCERA
NETWORKS, INC. (“Borrower”).
Recitals
Borrower
wishes to obtain credit from time to time from Bank, and Bank desires to extend
credit to Borrower. This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower will repay the amounts owing to
Bank.
Agreement
The
parties agree as follows:
1.
Definitions
and Construction.
1.1 Definitions. As
used in this Agreement, the following terms shall have the following
definitions:
“Accounts”
means all presently existing and hereafter arising accounts, contract rights,
payment intangibles, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower’s Books relating to any of the
foregoing.
“Advance”
or “Advances” means a cash advance or cash advances under the Revolving
Facility.
“Affiliate”
means, with respect to any Person, any Person that owns or controls directly or
indirectly such Person, any Person that controls or is controlled by or is under
common control with such Person, and each of such Person’s senior executive
officers, directors, and partners.
“Bank
Expenses” means all: reasonable costs or expenses (including
reasonable attorneys’ fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and
expenses incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.
“Borrower’s
Books” means all of Borrower’s books and records including: ledgers;
records concerning Borrower’s assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files, and
the equipment, containing such information.
“Borrowing
Base” means an amount equal to (i) eighty percent (80%) of Eligible Accounts
(excluding Accounts with respect to which the account debtors’ principal place
of business is Canada) plus (ii) sixty percent (60%) of Eligible Accounts with
respect to which the account debtors’ principal place of business is Canada, in
each case as determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by Borrower.
“Business
Day” means any day that is not a Saturday, Sunday, or other day on which banks
in the State of California are authorized or required to close.
“Change
in Control” shall mean a transaction in which any “person” or “group” (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such “person” or
“group” to elect a majority of the Board of Directors of Borrower, who did not
have such power before such transaction.
“Closing
Date” means the date of this Agreement.
“Code”
means the California Uniform Commercial Code.
“Collateral”
means the property described on Exhibit A attached
hereto.
“Contingent
Obligation” means, as applied to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to (i) any indebtedness,
lease, dividend, letter of credit or other obligation of another; (ii) any
obligations with respect to undrawn letters of credit, corporate credit cards,
or merchant services issued or provided for the account of that Person; and
(iii) all obligations arising under any agreement or arrangement designed to
protect such Person against fluctuation in interest rates, currency exchange
rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determined amount of the
primary obligation in respect of which such Contingent Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by Bank in good faith; provided, however, that
such amount shall not in any event exceed the maximum amount of the obligations
under the guarantee or other support arrangement.
“Copyrights”
means any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof.
“Credit
Extension” means each Advance or any other extension of credit by Bank for the
benefit of Borrower hereunder.
“Current
Assets” means, as of any applicable date, all amounts that should, in accordance
with GAAP, be included as current assets on the consolidated balance sheet of
Borrower and its Subsidiaries as at such date.
“Current
Liabilities” means, as of any applicable date, all amounts that should, in
accordance with GAAP, be included as current liabilities on the consolidated
balance sheet of Borrower and its Subsidiaries, as at such date, plus, to the
extent not already included therein, all outstanding Credit Extensions made
under this Agreement.
“Daily
Balance” means the amount of the Obligations owed at the end of a given
day.
“Eligible
Accounts” means those Accounts that arise in the ordinary course of Borrower’s
or its Eligible Subsidiaries’ business that comply with all of Borrower’s
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank’s reasonable judgment and upon ten (10) days prior notification thereof to
Borrower (provided that no notice shall be required if an Event of Default has
occurred and is continuing) in accordance with the provisions
hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall
not include the following:
(a) Accounts
that the account debtor has failed to pay within ninety (90) days of invoice
date (or, in the case of account debtors whose principal place of business is an
Asia Pacific country, Accounts that the account debtor has failed to pay within
one hundred (100) days of invoice date) that are not subject to any offset by
the account debtor;
(b) Accounts
with respect to an account debtor, twenty-five percent (25%) of whose Accounts
the account debtor has failed to pay within ninety (90) days of invoice
date;
(c) Accounts
with respect to which the account debtor is an officer, employee, or agent of
Borrower;
(d) Accounts
with respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, ▇▇▇▇ and hold, or other terms by reason of which the
payment by the account debtor may be conditional;
(e) Accounts
with respect to which the account debtor is an Affiliate of
Borrower;
(f) Accounts
with respect to which the account debtor does not have its principal place of
business in the United States or Canada, except for Eligible Foreign
AccountsAccounts with respect to which the account debtor is the United States
or any department, agency, or instrumentality of the United States, except for
Accounts of the United States if the payee has assigned its payment rights to
Bank, the assignment has been acknowledged
under the Assignment of Claims Act of 1940 (31 U.S.C. Section 3727), and such
assignment otherwise complies with the Assignment of Claims Act to Lender’s
reasonable satisfaction in the exercise of its reasonable credit
judgment;
(g) Accounts
with respect to which Borrower is liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower or for deposits or other
property of the account debtor held by Borrower, but only to the extent of any
amounts owing to the account debtor against amounts owed to
Borrower;
(h) Accounts
with respect to an account debtor, including Subsidiaries and Affiliates, whose
total obligations to Borrower exceed twenty-five percent (25%) of all Accounts,
to the extent such obligations exceed the aforementioned percentage, except as
approved in writing by Bank;
(i) Accounts
with respect to which the account debtor disputes liability or makes any claim
with respect thereto as to which Bank believes, in its sole discretion, that
there may be a basis for dispute (but only to the extent of the amount subject
to such dispute or claim), or is subject to any Insolvency Proceeding, or
becomes insolvent, or goes out of business; and
(j) Accounts
the collection of which Bank reasonably determines to be doubtful.
“Eligible
Foreign Accounts” means Accounts with respect to which the account debtor does
not have its principal place of business in the United States and Canada and
that (i) are supported by a credit insurance policy naming Bank as an additional
insured (including the declarations page, policy form, and all endorsements)
issued by AIG/Insurance Company of the State of Pennsylvania or another carrier
acceptable to Bank and having account debtor limits, deductibles, and other
terms and conditions as may be satisfactory to Bank in its sole and absolute
discretion or (ii) that Bank approves on a case-by-case basis.
“Eligible
Subsidiaries” means Netinact PTY, organized under the laws of Australia, and
Netinact AB, organized under the laws of Sweden, both of which are wholly-owned
Subsidiaries of Borrower.
“Equipment”
means all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder.
“Event of
Default” has the meaning assigned in Article 8.
“GAAP”
means generally accepted accounting principles as in effect from time to
time.
“Indebtedness”
means (a) all indebtedness for borrowed money or the deferred purchase price of
property or services, including without limitation reimbursement and other
obligations with respect to surety bonds and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
all capital lease obligations and (d) all Contingent Obligations.
“Insolvency
Proceeding” means any proceeding commenced by or against any person or entity
under any provision of the United States Bankruptcy Code, as amended, or under
any other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extension generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
relief.
“Intellectual
Property Collateral” means all of Borrower’s right, title, and interest in and
to the following: Copyrights, Trademarks and Patents; all trade secrets, all
design rights, claims for damages by way of past, present and future
infringement of any of the rights included above, all licenses or other rights
to use any of the Copyrights, Patents or Trademarks, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights; all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and all proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
“Inventory”
means all inventory in which Borrower has or acquires any interest, including
work in process and finished products intended for sale or lease or to be
furnished under a contract of service, of every kind and description now or at
any time hereafter owned by or in the custody or possession, actual or
constructive, of Borrower, including such inventory as is temporarily out of its
custody or possession or in transit and including any returns upon any accounts
or other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title representing any
of the above, and Borrower’s Books relating to any of the
foregoing.
“Investment”
means any beneficial ownership of (including stock, partnership interest or
other securities) any Person, or any loan, advance or capital contribution to
any Person.
“IRC”
means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
“Lien”
means any mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.
“Loan
Documents” means, collectively, this Agreement, any note or notes executed by
Borrower, and any other agreement entered into in connection with this
Agreement, all as amended or extended from time to time.
“Management
Plan” means the plan dated January 9, 2009, captioned “Procera Networks, Inc.
Preliminary Results Q4 2008” presented to The Private Bank of the Peninsula, a
copy of which was emailed by Borrower to Bank on February 20, 2009.
“Material
Adverse Effect” means a material adverse effect on (i) the business operations
or financial condition of Borrower and its Subsidiaries taken as a whole or (ii)
the ability of Borrower to repay the Obligations or otherwise perform its
obligations under the Loan Documents or (iii) the value or priority of Bank’s
security interests in the Collateral.
“Negotiable
Collateral” means all letters of credit of which Borrower is a beneficiary,
notes, drafts, instruments, securities, documents of title, and chattel paper,
and Borrower’s Books relating to any of the foregoing.
“Obligations”
means all debt, principal, interest, Bank Expenses and other amounts owed to
Bank by Borrower pursuant to this Agreement or any other agreement, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
including any interest that accrues after the commencement of an Insolvency
Proceeding and including any debt, liability, or obligation owing from Borrower
to others that Bank may have obtained by assignment or otherwise.
“Patents”
means all patents, patent applications and like protections including without
limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
“Periodic
Payments” means all installments or similar recurring payments that Borrower may
now or hereafter become obligated to pay to Bank pursuant to the terms and
provisions of any instrument, or agreement now or hereafter in existence between
Borrower and Bank.
“Permitted
Indebtedness” means:
(a) Indebtedness
of Borrower in favor of Bank arising under this Agreement or any other Loan
Document;
(b) Indebtedness
existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness
secured by a lien described in clause (c) of the defined term “Permitted Liens,”
provided (i) such Indebtedness does not exceed the lesser of the cost or fair
market value of the equipment financed with such Indebtedness and (ii) such
Indebtedness does not exceed $250,000 in the aggregate at any given time;
and
(d) Subordinated
Debt;
(e) Indebtedness
to trade creditors in the ordinary course of business in connection with
obtaining goods, materials or services; and
(f)
Extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that (i) the principal amount is not increased, (ii) the
terms are not modified to impose more burdensome terms upon Borrower, or its
Subsidiary, as the case may be, and (iii) such renewal or refinancing is
otherwise in compliance with this Agreement.
“Permitted
Investment” means:
(a) Investments
existing on the Closing Date disclosed in the Schedule; and
(b) (i)
marketable direct obligations issued or unconditionally guaranteed by the United
States of America or any agency or any State thereof maturing within one (1)
year from the date of acquisition thereof, (ii) commercial paper maturing no
more than one (1) year from the date of creation thereof and currently having
rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or
▇▇▇▇▇’▇ Investors Service, (iii) certificates of deposit maturing no more than
one (1) year from the date of investment therein issued by Bank and (iv) Bank’s
money market accounts;.
(c) Investments
of Borrower in the Qualified Subsidiaries not to exceed $15,000,000 in the
aggregate in any fiscal year, provided that (i) such Investments are made by
Borrower in the ordinary course of business and are used by the Qualified
Subsidiaries to defray payroll, overhead, and other business expenses in the
ordinary course of business, (ii) the Qualified Subsidiaries have executed
guaranties, security agreements and such other documents as required by Bank,
and (iii) Bank has a first-priority security interest in all assets of the
Qualified Subsidiaries subject only to Permitted Liens.
(d) Investments
not to exceed $500,000 in the aggregate consisting of (i) compensation of
employees, officers and directors of Borrower so long as the Board of Directors
of Borrower determines that such compensation is in the best interests of
Borrower, (ii) travel advances, employee relocation loans and other employee
loans and advances in the ordinary course of business, and (iii) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower pursuant to employee stock purchase plans or agreements approved by
Borrower’s Board of Directors;
(e) Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
ordinary course of Borrower’s business, provided that (i) promptly upon the
receipt of the original of any promissory note by Borrower received by Borrower,
such promissory note shall be endorsed to the order of Bank by such Borrower and
promptly delivered to Bank as so endorsed and (ii) if Borrower receives stock or
another instrument in respect of indebtedness of any such customer or supplier,
the original of any such stock or instrument evidencing such obligations shall
be promptly delivered to Bank, together with such stock power, assignment or
endorsement by Borrower as Bank may request; and
(f) Investments
consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary
course of business, provided that (i) promptly upon Borrower’s receipt of the
original of any promissory note by Borrower, such promissory note shall be
endorsed by Borrower to the order of Bank and promptly delivered to Bank as so
endorsed, and (ii) this subparagraph (f) shall not apply to Investments of
Borrower in any Subsidiary.
“Permitted
Liens” means the following:
(a) Any
Liens existing on the Closing Date and disclosed in the Schedule or arising
under this Agreement or the other Loan Documents;
(b) Liens
for taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings, provided
the same have no priority over any of Bank’s security interests;
(c) Liens
(i) upon or in any equipment which was not financed by Bank acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such
equipment;
(d) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (a) through (c)
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 does not increase;
and
(e)
Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Sections 8.4 (attachment) or 8.7
(judgments).
“Person”
means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint stock company,
estate, entity or governmental agency.
“Prime
Rate” means the variable rate of interest, per annum, that appears in The Wall Street
Journal from time to time, whether or not such announced rate is the
lowest rate available from Bank.
“Responsible
Officer” means each of the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer and the Controller of Borrower.
“Revolving
Facility” means the facility under which Borrower may request Bank to issue
Advances, as specified in Section 2.1(a) hereof.
“Revolving
Line” means a credit extension of (i) up to One Million Dollars ($1,000,000)
commencing on the Closing Date and continuing up to the Revolving Line Step-Up
Date, and (ii) Three Million Dollars ($3,000,000) from and after the Revolving
Line Step-Up Date until the Revolving Maturity Date.
“Revolving
Line Step-Up Date” means the date that the following conditions have been
satisfied or waived in writing by Bank and Bank has given written notice to
Borrower that such conditions have been satisfied: (i) Bank shall
have reviewed and be satisfied in its sole and absolute discretion with
Borrower’s cash-basis financial statements for the period ending December 31,
2008, and the period ending March 31, 2009; (ii) Bank shall have
completed an audit of Borrower’s Accounts and such audit shall be acceptable to
Bank in its sole and absolute discretion; and (iii) Bank shall have received,
reviewed, and approved, in its sole and absolute discretion, a credit insurance
policy naming Bank as an additional insured (including the declarations page,
policy form, and all endorsements) issued by AIG/Insurance Company of the State
of Pennsylvania or another carrier acceptable to Bank and having debtor limits,
deductibles, and other terms and conditions as may be satisfactory to Bank in
its sole and absolute discretion.
“Revolving
Maturity Date” means March 12, 2010.
“Schedule”
means the schedule of exceptions attached hereto and approved by Bank, if
any.
“Subordinated
Debt” means any debt incurred by Borrower that is subordinated to the debt owing
by Borrower to Bank on terms acceptable to Bank (and identified as being such by
Borrower and Bank).
“Subsidiary”
means any corporation, company or partnership in which (i) any general
partnership interest or (ii) more than 50% of the stock or other units of
ownership which by the terms thereof has the ordinary voting power to elect the
Board of Directors, managers or trustees of the entity, at the time as of which
any determination is being made, is owned by Borrower, either directly or
through an Affiliate.
“Trademarks”
means any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
such trademarks.
1.2 Accounting
Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations made hereunder
shall be made in accordance with GAAP. When used herein, the terms
“financial statements” shall include the notes and schedules
thereto.
2.
Loan and
Terms Of Payment.
2.1 Credit
Extensions.
Borrower
promises to pay to the order of Bank, in lawful money of the United States of
America, the aggregate unpaid principal amount of all Credit Extensions made by
Bank to Borrower hereunder. Borrower shall also pay interest on the
unpaid principal amount of such Credit Extensions at rates in accordance with
the terms hereof.
(a) Revolving
Advances.
(i)
Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of (i) the Revolving Line or (ii) the Borrowing
Base. Subject to the terms and conditions of this Agreement, amounts
borrowed pursuant to this Section 2.1(a) may be repaid and re-borrowed at any
time prior to the Revolving Maturity Date, at which time all Advances under this
Section 2.1(a) shall be immediately due and payable. Borrower may
prepay any Advances without penalty or premium.
(ii) Whenever
Borrower desires an Advance, Borrower will notify Bank by facsimile transmission
or telephone no later than 11:00 a.m. Pacific time, on the Business Day that the
Advance is to be made. Each such notification shall be promptly
confirmed by a Payment/Advance Form in substantially the form of Exhibit B
hereto. Borrower will deliver copies of invoices in connection with
any Advance request and all supporting documents, plus transaction files for all
invoices and payment application in an electronic format acceptable to Bank for
processing. Documents received by 11:00 a.m. California time on
accounts acceptable to Bank will be processed on the same Business
Day. Documents received after then will be processed on the next
Business Day. Bank is authorized to make Advances under this
Agreement, based upon instructions received from a Responsible Officer or a
designee of a Responsible Officer, or without instructions if in Bank’s
discretion such Advances are necessary to meet Obligations which have become due
and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such
reliance. Bank will credit the amount of Advances made under this
Section to Borrower’s deposit account.
2.2 Overadvances. If
the aggregate amount of the outstanding Advances exceeds the lesser of the
Revolving Line or the Borrowing Base at any time, Borrower shall immediately pay
to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and
Calculations.
(a) Interest
Rates.
(i)
Advances. Except as
set forth in Section 2.3(b), and subject to Section 2.3(a)(ii) below, the
Advances shall bear interest, on the outstanding Daily Balance thereof, at a
rate equal to three and one-half percent (3.5%) above the Prime
Rate. In no event, however, shall such rate be less than eight
percent (8.0%) per annum, irrespective of the Prime Rate.
(ii) Minimum
Interest. Irrespective of the amount of Advances outstanding
from time to time, Borrower shall pay Bank a minimum interest payment of not
less than Twenty Four Thousand Dollars ($24,000) per quarter (the “Minimum
Interest Payment”). Any payments of interest actually made by
Borrower during each calendar quarter shall be credited to the Minimum Interest
Payment required to be paid for such quarter. Notwithstanding the
preceding provisions of this Section 2.3(a)(ii) to the contrary, if Bank
determines that the conditions precedent to the occurrence of the Revolving Line
Step-Up Date (as set forth in the definition of the term “Revolving Line Step-Up
Date”) will not occur, then from and after such determination the Minimum
Interest Payment shall be reduced to Eight Thousand Dollars ($8,000) per
calendar quarter. At Borrower’s written request, Bank shall make such
determination within ten (10) business days after Bank has received the last of
the documents referenced in clauses (i), (ii) and (iii) in the definition of the
term “Revolving Line Step-Up Date.” The Minimum Interest Payment
shall be prorated (on the basis of a 90-day quarter) for each calendar quarter
based on the date that Bank determines that the Revolving Line Step-Up Date will
not occur. By way of example, if on May 31, 2009, Bank determines
that the conditions to the Revolving Line Step-Up Date will not occur, then for
the calendar quarter commencing April 1, 2009, and ending June 30, 2009, for the
period within such quarter from April 1, 2009, through May 31, 2009, the Minimum
Interest Payment would be $16,000 (i.e., $24,000 x 60 days/90 days), and for the
period within such quarter beginning June 1, 2009, and ending June 30, 2009, the
Minimum Interest Payment would be $2,666.67 (i.e., $8,000 x 30 days/90
days).
(b) Late Fee; Default
Rate. If any payment is not made within ten (10) days after
the date such payment is due, Borrower shall pay Bank a late fee equal to the
lesser of (i) five percent (5%) of the amount of such unpaid amount or (ii) the
maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest
hereunder shall be due and payable on the last business day of each month during
the term hereof. Minimum Interest Payments shall be due and payable
on the last business day of each quarter during the term hereof. Bank
shall, at its option, charge such interest, all Minimum Interest Payments, all
Bank Expenses, and all Periodic Payments against any of Borrower’s deposit
accounts or against the Revolving Line, in which case those amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder. All payments shall be free and clear of any
taxes, withholdings, duties, impositions or other charges, to the end that Bank
will receive the entire amount of any Obligations payable hereunder, regardless
of source of payment.
(d) Lockbox. Borrower
shall cause all account debtors to wire any amounts owing to Borrower to such
account (the “Collateral Account”) as Bank shall specify, and to mail all
payments made by check to a post office box under Bank ’s
control. All invoices shall specify such post office box as the
payment address. Bank shall have sole authority to collect such
payments and deposit them to the Collateral Account. If
Borrower receives any amount despite such instructions, Borrower shall
immediately deliver such payment to Bank in the form received, except for an
endorsement to the order of Bank and, pending such delivery, shall hold such
payment in trust for Bank. One (1) Business Day after clearance of
any checks, Bank shall credit all amounts paid into the Collateral Account
first, against any amounts outstanding under the Revolving Line, and then, of
any remaining balance of such amount, to Borrower’s operating
account. Borrower shall enter into such lockbox agreement as Bank
shall reasonably request from time to time. Bank will provide reports
of invoice entry and payment to Borrower on each Business Day, and will from
time to time deliver a detailed aging of open invoices upon Borrower’s
request.
(e) Computation. In the
event the Prime Rate is changed from time to time hereafter, the applicable rate
of interest hereunder shall be increased or decreased, effective as of the day
the Prime Rate is changed, by an amount equal to such change in the Prime
Rate. All interest chargeable under the Loan Documents shall be
computed on the basis of a three hundred sixty (360) day year for the actual
number of days elapsed.
2.4 Crediting
Payments. Prior to the occurrence of an Event of Default, Bank
shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein,
any wire transfer or payment received by Bank after 12:00 noon Pacific time
shall be deemed to have been received by Bank as of the opening of business on
the immediately following Business Day. Whenever any payment to Bank
under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such
extension.
2.5 Fees.
(a) Facility Fee. On
the Closing Date, Borrower shall pay to Bank a Facility Fee equal to Thirty
Thousand Dollars ($30,000) which shall be nonrefundable. Bank
acknowledges receipt of Ten Thousand Dollars ($10,000), which shall be credited
to the Facility Fee. Borrower also has paid Bank an application fee
in the amount of Two Thousand Dollars, which is non-refundable.
(b) Bank Expenses. On
the Closing Date, Borrower shall pay to Bank all Bank Expenses incurred through
the Closing Date, including reasonable attorneys’ fees and expenses and, after
the Closing Date, Borrower shall pay to Bank all Bank Expenses, including
reasonable attorneys’ fees and expenses, as and when they are incurred by
Bank.
2.6 Term. This
Agreement shall become effective on the Closing Date and, subject to Section
12.7, shall continue in full force and effect for so long as any Obligations
remain outstanding or Bank has any obligation to make Credit Extensions under
this Agreement. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Credit Extensions under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Bank’s Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding. Borrower may terminate this Agreement at any time upon
giving written notice of such termination to Bank and upon payment in full in
cash of the Obligations, including without limitation all principal, interest,
fees, and Bank Expenses, provided such termination shall not relieve Borrower of
any indemnification or similar obligations that expressly survive the
termination of this Agreement.
3.
Conditions
of Loans.
3.1 Conditions Precedent to Initial
Credit Extension. The obligation of Bank to make the initial
Credit Extension is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the
following:
(a) this
Agreement;
(b) a
certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this
Agreement;
(c) UCC
National Form Financing Statement;
(d) an
intellectual property security agreement;
(e) one
or more warrants to purchase stock, which shall be provided within thirty (30)
days after Closing;
(f) a
certificate of insurance naming Bank as loss payee and additional
insured;
(g) payment
of the fees and Bank Expenses then due specified in Section 2.5
hereof;
(h) current
financial statements of Borrower;
(i) an
audit of the Collateral, the results of which shall be satisfactory to Bank;
(j)
as a condition to the making of any Advances with respect to Eligible
Foreign Accounts, (A) an absolute and unconditional guaranty of payment of the
Obligations executed and delivered by each of the Eligible Subsidiaries, (B) a
security agreement or agreements executed and delivered by each of the Eligible
Subsidiaries granting to Bank a first security interest and lien (except as
otherwise consented to in writing by Bank) upon all of the assets of each
Eligible Subsidiary, and (C) such other opinions of counsel, agreements,
documents and instruments as Bank may require, including, but not limited to,
supplements and amendments hereto and other loan agreements or instruments
evidencing the obligations of each such Eligible Subsidiary to Bank,
and
(k)
such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit
Extensions. The obligation of Bank to make each Credit
Extension, including the initial Credit Extension, is further subject to the
following conditions:
(a) timely
receipt by Bank of the Payment/Advance Form as provided in Section 2.1;
and
(b) the
representations and warranties contained in Section 5 shall be true and correct
in all material respects on and as of the date of such Payment/Advance Form and
on the effective date of each Credit Extension as though made at and as of each
such date, and no Event of Default shall have occurred and be continuing, or
would exist after giving effect to such Credit Extension. The making
of each Credit Extension shall be deemed to be a representation and warranty by
Borrower on the date of such Credit Extension as to the accuracy of the facts
referred to in this Section 3.2.
4.
Creation of
Security Interest.
4.1 Grant of Security
Interest. Borrower grants and pledges to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule,
such security interest constitutes a valid, first priority security interest in
the presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation
Required. Borrower shall from time to time execute and deliver
to Bank, at the request of Bank, all Negotiable Collateral, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue the perfection of Bank’s security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents. Borrower from
time to time may deposit with Bank specific time deposit accounts to secure
specific Obligations. Borrower authorizes Bank to hold such balances in pledge
and to decline to honor any drafts thereon or any request by Borrower or any
other Person to pay or otherwise transfer any part of such balances for so long
as the Obligations are outstanding.
4.3 Right to
Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower’s usual business hours but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower’s Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower’s financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5.
Representations
and Warranties.
Borrower
represents and warrants as follows:
5.1 Due Organization and
Qualification. Borrower and each Subsidiary is a corporation
duly existing under the laws of its state of incorporation and qualified and
licensed to do business in any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No
Conflict. The execution, delivery, and performance of the Loan
Documents are within Borrower’s powers, have been duly authorized, and are not
in conflict with nor constitute a breach of any provision contained in
Borrower’s Articles of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound. Borrower is not in default under any
material agreement to which it is a party or by which it is bound.
5.3 No Prior
Encumbrances. Borrower has good and marketable title to its
property, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible
Accounts. The Eligible Accounts are bona fide existing
obligations. The property and services giving rise to such Eligible
Accounts has been delivered or rendered to the account debtor or to the account
debtor’s agent for immediate and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor that is included in any Borrowing
Base Certificate as an Eligible Account.
5.5 Merchantable
Inventory. All Inventory is in all material respects of good
and marketable quality, free from all material defects, except for Inventory for
which adequate reserves have been made.
5.6 Intellectual Property
Collateral. Borrower is the sole owner of the Intellectual
Property Collateral, except for non-exclusive licenses granted by Borrower to
its customers in the ordinary course of business. Each of the Patents
is valid and enforceable, and no part of the Intellectual Property Collateral
has been judged invalid or unenforceable, in whole or in part, and no claim has
been made that any part of the Intellectual Property Collateral violates the
rights of any third party. Except as set forth in the Schedule,
Borrower’s rights as a licensee of intellectual property do not give rise to
more than five percent (5%) of its gross revenue in any given month, including
without limitation revenue derived from the sale, licensing, rendering or
disposition of any product or service. Except as set forth in the
Schedule, Borrower is not a party to, or bound by, any agreement that restricts
the grant by Borrower of a security interest in Borrower’s rights under such
agreement.
5.7 Name; Location of Chief Executive
Office. Except as disclosed in the Schedule, Borrower has not
done business under any name other than that specified on the signature page
hereof. The chief executive office of Borrower is located at the
address indicated in Section 10 hereof. All Borrower’s Inventory and
Equipment is located only at the location set forth in Section 10 hereof;
provided, however, that Borrower shall have the right, in the normal course of
Borrower’s business, to deliver product to prospective customers for
demonstration and evaluation purposes so long as the aggregate value of such
product does not exceed $1,750,000, or such greater amount as may be approved in
writing by Bank in its reasonable credit judgment. Borrower shall
provide Bank on a quarterly basis a listing of the names of all customers in
possession of such product, a description of the product, and the value of such
product.
5.8 Litigation. Except
as set forth in the Schedule, there are no actions or proceedings pending by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect, or a material
adverse effect on Borrower’s interest or Bank’s security interest in the
Collateral.
5.9 No Material Adverse Change in
Financial Statements. All consolidated and consolidating
financial statements related to Borrower and any Subsidiary that Bank has
received from Borrower fairly present in all material respects Borrower’s
financial condition as of the date thereof and Borrower’s consolidated and
consolidating results of operations for the period then ended. There
has not been a material adverse change in the consolidated or the consolidating
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank.
5.10 Solvency, Payment of
Debts. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.11 Regulatory
Compliance. Borrower and each Subsidiary have met the minimum
funding requirements of ERISA with respect to any employee benefit plans subject
to ERISA, and no event has occurred resulting from Borrower’s failure to comply
with ERISA that could result in Borrower’s incurring any material
liability. Borrower is not an “investment company” or a company
“controlled” by an “investment company” within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one
of the important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations T and
U of the Board of Governors of the Federal Reserve System). Borrower
has complied with all the provisions of the Federal Fair Labor Standards
Act. Borrower has not violated any statutes, laws, ordinances or
rules applicable to it, violation of which could have a Material Adverse
Effect.
5.12 Environmental
Condition. Except as disclosed in the Schedule, none of
Borrower’s or any Subsidiary’s properties or assets has ever been used by
Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower’s knowledge, none of
Borrower’s properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 Taxes. Borrower and
each Subsidiary have filed or caused to be filed all tax returns required to be
filed, and have paid, or have made adequate provision for the payment of, all
taxes reflected therein.
5.14 Subsidiaries. Borrower
does not own any stock, partnership interest or other equity securities of any
Person, except for Permitted Investments.
5.15 Government
Consents. Borrower and each Subsidiary have obtained all
material consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower’s business as currently
conducted.
5.16 Accounts. None of
Borrower’s nor any Subsidiary’s property is maintained or invested with a Person
other than Bank.
5.17 Full Disclosure. No
representation, warranty or other statement made by Borrower in any certificate
or written statement furnished to Bank contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained in such certificates or statements not
misleading.
6.
Affirmative
Covenants.
Borrower
shall do all of the following:
6.1 Good
Standing. Borrower shall maintain its and each of its
Subsidiaries’ corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which it is
required under applicable law. Borrower shall maintain, and shall
cause each of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
6.2 Government
Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect.
6.3 Financial Statements, Reports,
Certificates. Borrower shall deliver the following to
Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each calendar month, a company prepared consolidated
balance sheet, income, and cash flow statement covering Borrower’s consolidated
operations during such period, prepared in accordance with GAAP, consistently
applied (with the exception of non-cash items), in a form acceptable to Bank and
certified by a Responsible Officer, together with a comparison of Borrower’s
financial results for such month with Borrower’s budget; (b) as soon as
available, but in any event within one hundred twenty (120) days after the end
of Borrower’s fiscal year, audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied (with the exception of
non-cash items), together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) copies of all statements, reports and notices sent or
made available generally by Borrower to its security holders or to any holders
of Subordinated Debt and, if applicable, all reports on Forms 10-K and 10-Q
filed with the Securities and Exchange Commission; (d) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of Fifty Thousand Dollars ($50,000) or more; and (e) such
budgets, sales projections, operating plans, other financial information
including information related to the verification of Borrower’s Accounts as Bank
may reasonably request from time to time.
Within
twenty (20) days after the last day of each month, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together
with aged listings of accounts receivable and accounts payable.
Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of Exhibit D hereto.
Bank
shall have a right from time to time hereafter to audit Borrower’s Accounts and
appraise Collateral at Borrower’s expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default has
occurred and is continuing.
6.4 Inventory;
Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower
shall make, and shall cause each Subsidiary to make, due and timely payment or
deposit of all material federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and deliver to Bank, on
demand, appropriate certificates attesting to the payment or deposit thereof;
and Borrower will make, and will cause each Subsidiary to make, timely payment
or deposit of all material tax payments and withholding taxes required of it by
applicable laws, including, but not limited to, those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Bank with proof satisfactory to Bank indicating that
Borrower or a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity of
such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower.
6.6 Insurance.
(a) Borrower,
at its expense, shall keep the Collateral insured against loss or damage by
fire, theft, explosion, sprinklers, and all other hazards and risks, and in such
amounts, as ordinarily insured against by other owners in similar businesses
conducted in the locations where Borrower’s business is conducted on the date
hereof. Borrower shall also maintain insurance relating to Borrower’s
business, ownership and use of the Collateral in amounts and of a type that are
customary to businesses similar to Borrower’s.
(b) All
such policies of insurance shall be in such form, with such companies, and in
such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender’s loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof, and all liability insurance policies shall show the Bank as an
additional insured and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any
reason. Upon Bank’s request, Borrower shall deliver to Bank certified
copies of such policies of insurance and evidence of the payments of all
premiums therefor. All proceeds payable under any such policy shall,
at the option of Bank, be payable to Bank to be applied on account of the
Obligations.
6.7 Accounts. Within
sixty (60) days after the Closing, Borrower shall establish (and shall cause
each of its Subsidiaries to establish) and thereafter maintain its primary
depository, operating, and investment accounts with Bank.
6.8 Minimum Operating
Margin. Borrower shall maintain at all times an Operating
Margin, measured on a quarterly basis, of not less than ninety percent (90%) of
the Operating Margin set forth in the page of the Management Plan captioned
‘Q4-08 to Q4-09 P&L Worst Case (12/01/08) “Management Plan,”’ measured on a
monthly basis. The term “Operating Margin” shall have the meaning
given to such term in the Management Plan.
6.9 Minimum
Cash. Borrower shall maintain at all times a cash balance of
not less than ninety percent (90%) of the cash balance shown on the balance
sheet and cash flow statements included in the Management Plan, measured on a
monthly basis.
6.10 Intellectual Property
Rights.
(a) Borrower
shall promptly give Bank written notice of any applications or registrations of
intellectual property rights filed with the United States Patent and Trademark
Office, including the date of such filing and the registration or application
numbers, if any. Borrower shall (i) give Bank not less than 30 days
prior written notice of the filing of any applications or registrations with the
United States Copyright Office, including the title of such intellectual
property rights to be registered, as such title will appear on such applications
or registrations, and the date such applications or registrations will be filed,
and (ii) prior to the filing of any such applications or registrations, shall
execute such documents as Bank may reasonably request for Bank to maintain its
perfection in such intellectual property rights to be registered by Borrower,
and upon the request of Bank, shall file such documents simultaneously with the
filing of any such applications or registrations. Upon filing any
such applications or registrations with the United States Copyright Office,
Borrower shall promptly provide Bank with (i) a copy of such applications or
registrations, without the exhibits, if any, thereto, (ii) evidence of the
filing of any documents requested by Bank to be filed for Bank to maintain the
perfection and priority of its security interest in such intellectual property
rights, and (iii) the date of such filing.
(b) Bank
may audit Borrower's Intellectual Property Collateral to confirm compliance with
this Section, provided such audit may not occur more often than twice per year,
unless an Event of Default has occurred and is continuing. Bank shall
have the right, but not the obligation, to take, at Borrower's sole expense, any
actions that Borrower is required under this Section to take but which Borrower
fails to take, after 15 days' notice to Borrower. Borrower shall
reimburse and indemnify Bank for all reasonable costs and reasonable expenses
incurred in the reasonable exercise of its rights under this
Section.
6.11 Further
Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this
Agreement.
7.
Negative
Covenants.
Borrower
will not do any of the following:
7.1 Dispositions. Convey,
sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of its business or
property, other than: (i) Transfers of Inventory in the ordinary
course of business; (ii) Transfers of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) Transfers of worn-out or obsolete
Equipment which was not financed by Bank.
7.2 Change in Business; Change in Control
or Executive Office. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto); or cease to conduct business in substantially the
manner conducted by Borrower as of the Closing Date; or suffer or permit a
Change in Control; or without thirty (30) days prior written notification to
Bank, relocate its chief executive office or state of incorporation or change
its legal name; or without Bank’s prior written consent, change the date on
which its fiscal year ends.
7.3 Mergers or
Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another
Person.
7.4 Indebtedness. Create,
incur, assume or be or remain liable with respect to any Indebtedness, or permit
any Subsidiary so to do, other than Permitted Indebtedness.
7.5 Encumbrances. Create,
incur, assume or suffer to exist any Lien with respect to any of its property,
or assign or otherwise convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries so to do, except for Permitted
Liens, or agree with any Person other than Bank not to grant a security interest
in, or otherwise encumber, any of its property, or permit any Subsidiary to do
so.
7.6 Distributions. Pay
any dividends or make any other distribution or payment on account of or in
redemption, retirement or purchase of any capital stock, or permit any of its
Subsidiaries to do so, except that Borrower may repurchase the stock of former
employees pursuant to stock repurchase agreements as long as an Event of Default
does not exist prior to such repurchase or would not exist after giving effect
to such repurchase.
7.7 Investments. Directly
or indirectly acquire or own, or make any Investment in or to any Person, or
permit any of its Subsidiaries so to do, other than Permitted Investments; or
maintain or invest any of its property with a Person other than Bank or permit
any of its Subsidiaries to do so unless such Person has entered into an account
control agreement with Bank in form and substance satisfactory to Bank; or
suffer or permit any Subsidiary to be a party to, or be bound by, an agreement
that restricts such Subsidiary from paying dividends or otherwise distributing
property to Borrower.
7.8 Transactions with
Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower except for
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated
Person.
7.9 Subordinated
Debt. Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank’s prior written
consent.
7.10 Inventory and Equipment. Store
the Inventory or the Equipment with a bailee, warehouseman, or other third party
unless the third party has been notified of Bank’s security interest and Bank
(a) has received an acknowledgment from the third party that it is holding or
will hold the Inventory or Equipment for Bank’s benefit or (b) is in pledge
possession of the warehouse receipt, where negotiable, covering such Inventory
or Equipment. Store or maintain any Equipment or Inventory at a location other
than the location set forth in Section 10 of this Agreement.
7.11 Compliance. Become
an “investment company” or be controlled by an “investment company,” within the
meaning of the Investment Company Act of 1940, or become principally engaged in,
or undertake as one of its important activities, the business of extending
credit for the purpose of purchasing or carrying margin stock, or use the
proceeds of any Credit Extension for such purpose. Fail to meet the
minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair
Labor Standards Act or violate any law or regulation, which violation could have
a Material Adverse Effect, or a material adverse effect on the Collateral or the
priority of Bank’s Lien on the Collateral, or permit any of its Subsidiaries to
do any of the foregoing.
8.
Events of
Default.
Any one
or more of the following events shall constitute an Event of Default by Borrower
under this Agreement:
8.1 Payment Default. If
Borrower fails to pay (i) any of the principal or interest when due or (ii) any
of the other Obligations within five (5) days of the date due (provided that no
Credit Extensions shall be made during such five day period).
8.2 Covenant Default.
(a) If
Borrower fails to perform any obligation under Sections 6.2, 6.3, 6.5, 6.6, 6.7,
6.8, or 6.9, or if Borrower violates any of the covenants contained in Article 7
of this Agreement; or
(b) If
Borrower fails or neglects to perform or observe any other material term,
provision, condition, covenant contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition or covenant
that can be cured, has failed to cure such default within twenty days after
Borrower receives notice thereof or any officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the ten day period or cannot after diligent attempts by Borrower be cured
within such twenty day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed 30 days) to attempt to cure such default, and
within such reasonable time period the failure to have cured such default shall
not be deemed an Event of Default but no Credit Extensions will be
made.
8.3 Material Adverse
Effect. If there occurs a Material Adverse
Effect;
8.4 Attachment. If any
portion of Borrower’s assets is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes into the possession of any
trustee, receiver or person acting in a similar capacity and such attachment,
seizure, writ or distress warrant or levy has not been removed, discharged or
rescinded within twenty (20) days, or if Borrower is enjoined, restrained, or in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower’s assets, or if a notice of
lien, levy, or assessment is filed of record with respect to any of Borrower’s
assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within twenty (20) days after Borrower receives
notice thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower (provided that no Credit Extensions
will be required to be made during such cure period);
8.5 Insolvency. If
Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by
Borrower, or if an Insolvency Proceeding is commenced against Borrower and is
not dismissed or stayed within sixty (60) days (provided that no Credit
Extensions will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other
Agreements. If there is a default or other failure to perform
in any agreement to which Borrower is a party or by which it is bound resulting
in a right by a third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or which could have a Material Adverse Effect; provided, however, that the Event of Default
under this Section 8.6 caused by the occurrence of a default under such other
agreement shall be cured or waived for purposes of this Agreement upon Bank
receiving written notice from the party asserting such default that such default
has been fully cured or that such party has unconditionally waived the default
under such other agreement, if at the time of such cure or waiver under such
other agreement (a) Bank has not declared an Event of Default under this
Agreement and/or exercised any rights with respect thereto; (b) any such cure or
waiver does not result in an Event of Default under any other provision of this
Agreement or any Loan Document; and (c) in connection with any such cure or
waiver under such other agreement, the terms of any agreement with such third
party are not modified or amended in any manner which could in the good faith
judgment of Bank be materially less advantageous to Borrower;
8.7 Judgments. If a
judgment or judgments for the payment of money in an amount, individually or in
the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) shall
be rendered against Borrower and shall remain unsatisfied and unstayed for a
period of twenty (20) days (provided that no Credit Extensions will be made
prior to the satisfaction or stay of such judgment); or
8.8 Misrepresentations. If
any material misrepresentation or material misstatement exists now or hereafter
in any warranty or representation set forth herein or in any certificate
delivered to Bank by any Responsible Officer pursuant to this Agreement or to
induce Bank to enter into this Agreement or any other Loan
Document.
8.9 Guaranty. If
any guaranty of all or a portion of the Obligations (a “Guaranty”) ceases for
any reason to be in full force and effect, or any guarantor fails to perform any
obligation under any Guaranty or a security agreement securing any Guaranty
(collectively, the “Guaranty Documents”), or any event of default occurs under
any Guaranty Document or any guarantor revokes or purports to revoke a Guaranty,
or any material misrepresentation or material misstatement exists now or
hereafter in any warranty or representation set forth in any Guaranty Document
or in any certificate delivered to Bank in connection with any Guaranty
Document, or if any of the circumstances described in Sections 8.3 through 8.8
occur with respect to any guarantor or any guarantor dies or becomes subject to
any criminal prosecution, or any circumstances arise causing Bank, in good
faith, to become insecure as to the satisfaction of any of any guarantor’s
obligations under the Guaranty Documents.
9.
Bank’s
Rights and Remedies.
9.1 Rights and
Remedies. Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:
(a) Declare
all Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable (provided that upon the
occurrence of an Event of Default described in Section 8.5, all Obligations
shall become immediately due and payable without any action by
Bank);
(b) Cease
advancing money or extending credit to or for the benefit of Borrower under this
Agreement or under any other agreement between Borrower and Bank;
(c) Settle
or adjust disputes and claims directly with account debtors for amounts, upon
terms and in whatever order that Bank reasonably considers
advisable;
(d) Make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank’s determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower’s
owned premises, Borrower hereby grants Bank a license to enter into possession
of such premises and to occupy the same, without charge, in order to exercise
any of Bank’s rights or remedies provided herein, at law, in equity, or
otherwise;
(e) Set
off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by Bank, or (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by Bank;
(f)
Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower’s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section 9.1, Borrower’s
rights under all licenses and all franchise agreements shall inure to Bank’s
benefit;
(g) Dispose
of the Collateral by way of one or more contracts or transactions, for cash or
on terms, in such manner and at such places (including Borrower’s premises) as
Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;
(h) Bank
may credit bid and purchase at any public sale; and
(i) Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Borrower.
9.2 Power of
Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank’s designated officers, or employees) as Borrower’s true and
lawful attorney to: (a) send requests for verification of Accounts or
notify account debtors of Bank’s security interest in the Accounts; (b) endorse
Borrower’s name on any checks or other forms of payment or security that may
come into Bank’s possession; (c) sign Borrower’s name on any invoice or ▇▇▇▇ of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower’s policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the
Collateral. The appointment of Bank as Borrower’s attorney in fact,
and each and every one of Bank’s rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions hereunder is
terminated.
9.3 Accounts
Collection. At any time after the occurrence of an Event of
Default, Bank may notify any Person owing funds to Borrower of Bank’s security
interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for
Bank, receive in trust all payments as Bank’s trustee, and immediately deliver
such payments to Bank in their original form as received from the account
debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If
Borrower fails to pay any amounts or furnish any required proof of payment due
to third persons or entities, as required under the terms of this Agreement,
then Bank may do any or all of the following after reasonable notice to
Borrower: (a) make payment of the same or any part thereof; (b) set
up such reserves under a loan facility in Section 2.1 as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.6 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute
Bank Expenses, shall be immediately due and payable, and shall bear interest at
the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an
agreement by Bank to make similar payments in the future or a waiver by Bank of
any Event of Default under this Agreement.
9.5 Bank’s Liability for
Collateral. So long as Bank complies with reasonable banking
practices, Bank shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person
whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
9.6 Remedies
Cumulative. Bank’s rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by Bank of one right or remedy shall be deemed an
election, and no waiver by Bank of any Event of Default on Borrower’s part shall
be deemed a continuing waiver. No delay by Bank shall constitute a
waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 Demand;
Protest. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. Notices.
Unless
otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
telefacsimile to Borrower or to Bank, as the case may be, at its addresses set
forth below:
|
|
If
to Borrower:
|
PROCERA
NETWORKS, INC.
|
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇▇▇▇▇▇/iCFO, VP Finance
FAX: (▇▇▇)
▇▇▇-▇▇▇▇
|
|
If
to Bank:
|
Peninsula
Bank Business Funding,
|
a
division of The Private Bank of the Peninsula
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇▇▇▇▇▇
FAX: (▇▇▇)
▇▇▇-▇▇▇▇
The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF
LAW AND VENUE; JURY TRIAL WAIVER.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of California, without regard to principles of conflicts of
law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
If the
jury waiver set forth in this Section is not enforceable, then any dispute,
controversy or claim arising out of or relating to this Agreement, the Loan
Documents or any of the transactions contemplated therein shall be settled by
judicial reference pursuant to Code of Civil Procedure Section 638 et seq.
before a referee sitting without a jury, such referee to be mutually acceptable
to the parties or, if no agreement is reached, by a referee appointed by the
Presiding Judge of the California Superior Court for Santa ▇▇▇▇▇
County. This Section shall not restrict a party from exercising
remedies under the Code or from exercising pre-judgment remedies under
applicable law.
12. General
Provisions.
12.1 Successors and
Assigns. This Agreement shall bind and inure to the benefit of
the respective successors and permitted assigns of each of the parties;
provided, however, that neither this Agreement nor any rights hereunder may be
assigned by Borrower without Bank’s prior written consent, which consent may be
granted or withheld in Bank’s sole discretion. Bank shall have the
right without the consent of or notice to Borrower to sell, transfer, negotiate,
or grant participation in all or any part of, or any interest in, Bank’s
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower
shall defend, indemnify and hold harmless Bank and its officers, employees, and
agents against: (a) all obligations, demands, claims, and liabilities
claimed or asserted by any other party in connection with the transactions
contemplated by this Agreement; and (b) all losses or Bank Expenses in any way
suffered, incurred, or paid by Bank as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under this Agreement, or otherwise (including without limitation reasonable
attorneys’ fees and expenses), except for losses caused by Bank’s gross
negligence or willful misconduct.
12.3 Time of
Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of
Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing,
Integration. Neither this Agreement nor the Loan Documents can
be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged into this Agreement and the Loan
Documents.
12.6 Counterparts. This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement.
12.7 Survival. All
covenants, representations and warranties made in this Agreement shall continue
in full force and effect so long as any Obligations remain outstanding or Bank
has any obligation to make Credit Extensions to Borrower. The
obligations of Borrower to indemnify Bank with respect to the expenses, damages,
losses, costs and liabilities described in Section 12.2 shall survive until all
applicable statute of limitations periods with respect to actions that may be
brought against Bank have run.
12.8 Confidentiality. In
handling any confidential information Bank and all employees and agents of Bank,
including but not limited to accountants, shall exercise the same degree of care
that it exercises with respect to its own proprietary information of the same
types to maintain the confidentiality of any non-public information thereby
received or received pursuant to this Agreement except that disclosure of such
information may be made (i) to the subsidiaries or affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Loans,
provided that they have entered into a comparable confidentiality agreement in
favor of Borrower and have delivered a copy to Borrower, (iii) as required by
law, regulations, rule or order, subpoena, judicial order or similar order, (iv)
as may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information
hereunder shall not include information that either: (a) is in the
public domain or in the knowledge or possession of Bank when disclosed to Bank,
or becomes part of the public domain after disclosure to Bank through no fault
of Bank; or (b) is disclosed to Bank by a third party, provided Bank does not
have actual knowledge that such third party is prohibited from disclosing such
information.
12.9 Patriot Act
Notice. Bank hereby notifies Borrower that, pursuant to the
requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into
law on October 26, 2001) (the “ Patriot Act "”), it is required to obtain, verify and record
information that identifies the Borrower, which information includes names and
addresses and other information that will allow Bank, as applicable, to identify
the Borrower in accordance with the Patriot Act.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the date first above written.
|
PROCERA
NETWORKS, INC.
|
||
|
By:
|
||
|
Title:
|
||
|
Peninsula
Bank Business Funding,
|
||
|
a
division of The Private Bank of the Peninsula
|
||
|
By:
|
||
|
Title:
|
||
|
DEBTOR:
|
PROCERA
NETWORKS, INC.
|
|
SECURED
PARTY:
|
PENINSULA
BANK BUSINESS FUNDING,
|
A
DIVISION OF THE PRIVATE BANK OF THE PENINSULA
EXHIBIT
A
COLLATERAL
DESCRIPTION ATTACHMENT
All
personal property of Borrower (herein referred to as “Borrower” or “Debtor”)
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:
(a) all
accounts (including health-care-insurance receivables), chattel paper (including
tangible and electronic chattel paper), deposit accounts, documents (including
negotiable documents), equipment (including all accessions and additions
thereto), general intangibles (including payment intangibles and software),
goods (including fixtures), instruments (including promissory notes), inventory
(including all goods held for sale or lease or to be furnished under a contract
of service, and including returns and repossessions), investment property
(including securities and securities entitlements), letter of credit rights,
money, and all of Debtor’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and
records;
(b) any
and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to
payment. All terms above have the meanings given to them in the
California Uniform Commercial Code, as amended or supplemented from time to
time.
EXHIBIT
B
ADVANCE
REQUEST FORM
|
Date:
|
|
Client: PROCERA
NETWORKS, INC.
Client
ID:
Line
Limit:
|
1. Availability
(from Client Summary):
|
|
||
|
2. $25
Wire Fee (if applicable):
|
|
||
|
3. Advance
Request:
|
|
||
|
4. Ending
Availability (1- 2-3):
|
|
The
Undersigned Represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and The Private Bank of the
Peninsula.
|
Client:
|
|
||
|
Authorized
▇▇▇▇▇▇:
|
|||
|
Bank
Use Only
|
||||
|
Received
by:
|
Date:
|
|||
|
AUTHORIZED
SIGNER
|
||||
|
Approved
by:
|
Date:
|
|||
|
AUTHORIZED
SIGNER
|
||||
IF
FUNDING TODAY PLEASE FAX BACK OR E-MAIL PDF BY 11:00 AM
|
Technology
& Asset Based Lending For Emerging Growth
Companies
|
|
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
|
Telephone
(650) “The Bank” ▇▇▇-▇▇▇▇
|
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
▇▇▇.▇▇▇-▇▇▇▇▇▇▇-▇▇▇▇.▇▇▇
EXHIBIT
C
BORROWING
BASE CERTIFICATE
|
Borrower: PROCERA
NETWORKS, INC.
|
Lender: Peninsula
Bank Business Funding,
a
division of The Private Bank of the Peninsula
|
|
|
Commitment
Amount: $1,000,000*
|
|
|
ACCOUNTS
RECEIVABLE
|
|||||||
|
1.
|
Accounts
Receivable Book Value as of ___
|
$
|
|||||
|
2.
|
Additions
(please explain on reverse)
|
$
|
|||||
|
3.
|
TOTAL
ACCOUNTS RECEIVABLE
|
$
|
|||||
|
ACCOUNTS
RECEIVABLE DEDUCTIONS (without duplication)
|
|||||||
|
4.
|
Amounts
over 90 days due
|
$
|
|||||
|
5.
|
Balance
of 25% over 90 day accounts
|
$
|
|||||
|
6.
|
Concentration
Limits
|
||||||
|
7.
|
Foreign
Accounts
|
$
|
|||||
|
8.
|
Governmental
Accounts
|
$
|
|||||
|
9.
|
Contra
Accounts
|
$
|
|||||
|
10.
|
Demo
Accounts
|
$
|
|||||
|
11.
|
Intercompany/Employee
Accounts
|
$
|
|||||
|
12.
|
Other
(please explain on reverse)
|
$
|
|||||
|
13.
|
TOTAL
ACCOUNTS RECEIVABLE DEDUCTIONS
|
$
|
|||||
|
14.
|
Eligible
Accounts (#3 minus #13)
|
$
|
|||||
|
15.
|
LOAN
VALUE OF ACCOUNTS (__% of #14)
|
$
|
|||||
|
BALANCES
|
|||||||
|
16.
|
Maximum
Loan Amount
|
$
|
|||||
|
17.
|
Total
Funds Available [Lesser of #16 or #15]
|
$
|
|||||
|
18.
|
Present
balance owing on Line of Credit
|
$
|
|||||
|
19.
|
Outstanding
under Sublimits (if any)
|
$
|
|||||
|
20.
|
RESERVE
POSITION (#17 minus #18 and #19)
|
$
|
|||||
The
undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Peninsula Bank Business Funding,
a division of The Private Bank of the Peninsula.
*Commitment
Amount will be increased to $3,000,000 upon satisfaction of conditions specified
in the Loan and Security Agreement.
PROCERA
NETWORKS, INC.
|
By:
|
|
|
|
Authorized
Signer
|
||
EXHIBIT
D
COMPLIANCE
CERTIFICATE
|
TO:
|
PENINSULA
BANK BUSINESS FUNDING, A DIVISION OF THE PRIVATE BANK OF THE
PENINSULA
|
|
FROM:
|
PROCERA
NETWORKS, INC.
|
The
undersigned authorized officer of PROCERA NETWORKS, INC. hereby certifies that
in accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (i) Borrower is in complete
compliance in all material respects for the period ending _______________ with
all required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the
required documents supporting the above certification. The Officer
further certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.
Please
indicate compliance status by circling Yes/No under “Complies”
column.
|
Reporting Covenant
|
Required
|
Complies
|
||||
|
Monthly
financial statements
|
Monthly
within 30 days
|
Yes
|
No
|
|||
|
Annual
(CPA Audited)
|
FYE
within 120 days
|
Yes
|
No
|
|||
|
10K
and 10Q
|
(as
applicable)
|
Yes
|
No
|
|||
|
A/R
& A/P Agings, Borrowing Base Cert.
|
Monthly
within 20 days
|
Yes
|
No
|
|||
|
A/R
Audit
|
Initial
and Semi-Annual
|
Yes
|
No
|
|||
|
IP
Report
|
Quarterly
within 30 days
|
Yes
|
No
|
|||
|
Financial Covenant
|
Required
|
Actual
|
Complies
|
|||||||
|
Minimum
Operating Margin
|
$
|
$
|
Yes
|
No
|
||||||
|
Minimum
Cash
|
$
|
$
|
Yes
|
No
|
||||||
|
Comments Regarding
Exceptions: See Attached.
|
BANK
USE ONLY
|
|||||
|
Received
by:
|
||||||
|
Sincerely,
|
AUTHORIZED
SIGNER
|
|
||||
|
Date:
|
||||||
|
Verified:
|
||||||
|
SIGNATURE
|
AUTHORIZED
SIGNER
|
|||||
|
Date:
|
||||||
|
TITLE
|
||||||
|
Compliance
Status
|
Yes
|
No
|
||||
|
DATE
|
||||||
SCHEDULE
OF EXCEPTIONS
Permitted
Indebtedness (Section 1.1)
None
Permitted
Investments (Section 1.1)
None
Permitted
Liens (Section 1.1)
None
Inbound
Licenses (Section 5.6)
None
Prior
Names (Section 5.7)
None
Litigation (Section
5.8)
None
CORPORATE
RESOLUTIONS TO BORROW
|
Borrower: PROCERA
NETWORKS, INC.
|
I, the
undersigned Secretary or Assistant Secretary of PROCERA NETWORKS, INC. (the
“Corporation”), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of Nevada.
I FURTHER
CERTIFY that attached hereto as Attachments 1 and 2 are true and complete copies
of the Articles of Incorporation, as amended, and the Restated Bylaws of the
Corporation, each of which is in full force and effect on the date
hereof.
I FURTHER
CERTIFY that at a meeting of the Directors of the Corporation, duly called and
held, at which a quorum was present and voting (or by other duly authorized
corporate action in lieu of a meeting), the following resolutions (the
“Resolutions”) were adopted.
BE IT
RESOLVED, that any one (1) of the following named officers, employees, or agents
of this Corporation, whose actual signatures are shown below:
|
NAMES
|
POSITION
|
ACTUAL SIGNATURES
|
||
|
▇▇▇▇▇ ▇▇▇▇▇
|
Chief Executive Officer
|
|||
|
▇▇▇▇ ▇▇▇▇▇▇
|
iCFO/Vice President Finance
|
|||
acting
for and on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To
borrow from time to time from Peninsula Bank Business Funding, a division of The
Private Bank of the Peninsula (“Bank”), on such terms as may be agreed upon
between the officers, employees, or agents of the Corporation and Bank, such sum
or sums of money as in their judgment should be borrowed, without
limitation.
Execute Loan
Documents. To execute and deliver to Bank that certain Loan
and Security Agreement dated as of March 13, 2009 (the “Loan
Agreement”) and any other agreement entered into between Corporation and Bank in
connection with the Loan Agreement, including any amendments, all as amended or
extended from time to time (collectively, with the Loan Agreement, the “Loan
Documents”), and also to execute and deliver to Bank one or more renewals,
extensions, modifications, refinancings, consolidations, or substitutions for
the Loan Documents, or any portion thereof.
Grant
Security. To grant a security interest to Bank in the Collateral
described in the Loan Documents, which security interest shall secure all of the
Corporation’s Obligations, as described in the Loan Documents.
Negotiate Items. To
draw, endorse, and discount with Bank all drafts, trade acceptances, promissory
notes, or other evidences of indebtedness payable to or belonging to the
Corporation or in which the Corporation may have an interest, and either to
receive cash for the same or to cause such proceeds to be credited to the
account of the Corporation with Bank, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.
Warrants. To issue
Bank warrants to purchase the Corporation’s capital stock.
Letters of
Credit. To execute letter of credit applications and other
related documents pertaining to Bank’s issuance of letters of
credit.
Corporate Credit
Cards. To execute corporate credit card applications and
agreements and other related documents pertaining to Bank’s provision of
corporate credit cards.
Further Acts. In
the case of lines of credit, to designate additional or alternate individuals as
being authorized to request advances thereunder, and in all cases, to do and
perform such other acts and things, to pay any and all fees and costs, and to
execute and deliver such other documents and agreements as they may in their
discretion deem reasonably necessary or proper in order to carry into effect the
provisions of these Resolutions.
BE IT
FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions
and performed prior to the passage of these resolutions are hereby ratified and
approved, that these Resolutions shall remain in full force and effect and Bank
may rely on these Resolutions until written notice of their revocation shall
have been delivered to and received by Bank. Any such notice shall
not affect any of the Corporation’s agreements or commitments in effect at the
time notice is given.
I FURTHER
CERTIFY that the officers, employees, and agents named above are duly elected,
appointed, or employed by or for the Corporation, as the case may be, and occupy
the positions set forth opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever.
IN
WITNESS WHEREOF, I have hereunto set my hand on March 13, 2009 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
|
CERTIFIED
AND ATTESTED BY:
|
||
|
X
|
||