WARRANT AGREEMENT TO PURCHASE COMMON STOCK OF PROCERA NETWORKS, INC.
TO
PURCHASE COMMON STOCK OF
PROCERA
NETWORKS, INC.
THE
SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY INVESTOR FOR INVESTMENT
AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL SATISFACTORY IN FORM
AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH STATE LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND SUCH
STATE LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY,
NOR
HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF
THIS
OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THE
COMPANY IS RELYING ON CERTAIN FEDERAL AND STATE LAWS, POLICIES AND JUDICIAL
PRECEDENTS WHICH EXEMPT THIS OFFERING FROM THE NECESSITY OF
REGISTRATION. AS A CONSEQUENCE, SUCH SECURITIES WILL BE REQUIRED TO
BE HELD INDEFINITELY UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THERE
IS NO PUBLIC MARKET FOR THE SECURITIES AND NONE IS LIKELY TO
DEVELOP. THE COMPANY IS UNDER NO OBLIGATION TO REGISTER THE
SECURITIES UNDER THE SECURITIES ACT.
1
This
Warrant Agreement (the "Agreement") is entered into this _________day of
___, 2003, by and between Procera Networks, Inc. (the "Company”)
and
(the Holder"). For good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Issuance
of Warrants. The Company, subject to the terms and conditions
hereinafter set forth, hereby issues Warrants (“Warrants”) to purchase one share
of Company Common Stock (the “Share” or “Shares”) for each two shares of Company
Common Stock purchased by Holder pursuant to that certain Subscription
Agreement, dated, executed and delivered by Holder to Company (the
“Subscription”). The Purchase Price upon exercise of the Warrants
shall be Seventy-Five Cents ($0.75) per Share of Common Stock Purchased subject
to adjustment in accordance with Paragraph 5 of this Agreement.
2. Term. The
Warrants may be exercised at any time after the Effective Date set forth on
the
signature page hereof and.
3. Exercise.
(a) The
Holder shall exercise the Warrants granted hereunder, in whole or in part,
by
delivering to the Company at the office of the Company, or at such other address
as the Company may designate by notice in writing to the holder hereof, (1)
the
Notice of Exercise attached hereto as Exhibit A (or the Notice of Net
Issue Exercise attached hereto as Exhibit B) and incorporated herein by
reference and, (2) a certified check or wire transfer in lawful money of the
United States in the amount of the Purchase Price multiplied by the number
of
Shares to be received (except in the case of a Net Issue Exercise).
(b) Upon
delivery of the items set forth in (a) above, the Holder shall be entitled
to
receive a certificate or certificates representing the Shares issued upon
exercise of the Warrants. Such Shares shall be validly issued, fully
paid and non-assessable.
(c) Warrants
shall be deemed to have been exercised immediately prior to the close of
business on the day of such delivery, and the Holder shall be deemed the holder
of record of the Shares issuable upon such exercise at such time. The
Warrants may be exercised in whole or in part and from time to time as the
Holder may determine.
(d) Upon
any partial exercise, at the request of the Company, this Agreement shall be
surrendered and a new Warrant Agreement evidencing the right to purchase the
number of Shares not purchased upon such exercise shall be issued to the
Holder.
(e) Net
Issue Exercise.
(i) In
lieu of exercising this Warrant in the manner provided above in Section 3(a),
the Holder may elect to receive Shares equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election in which
event the Company shall issue to the Holder a number of Shares computed using
the following formula:
X
= (P)(Y)(A -
B)
A
Where
X =
The number of Shares to be issued to the Holder for the portion of the Warrant
being converted;
P
= The
portion of the Warrant being converted expressed as a decimal
fraction;
2
Y
= The
number of Shares purchasable under this Warrant (as adjusted under Section
5
herein, on the date of such calculation);
A
= The
fair market value of one Share (at the date of such calculation);
and
B
= The
Purchase Price (as adjusted under Section 5 herein, on the date of such
calculation).
(ii) For
purposes of this Section 3(e), the fair market value of one Share on the date
of
calculation shall mean:
(A) If
the exercise is in connection with a public offering of Company’s Common Stock,
and if a Registration Statement relating to such public offering has been
declared effective by the Securities and Exchange Commission, then the fair
market value per Share shall be the initial per share "Price to Public"
specified in the final prospectus with respect to the offering;
(B) If
(A) is not applicable, the fair market value of a Share shall be at the highest
price per Share which the Company could obtain on the date of calculation from
a
willing buyer (not a current employee or director) for Shares sold by the
Company, from authorized but unissued Shares, as determined in good faith by
the
Board of Directors, unless the Company is at such time subject to an
acquisition, in which case the fair market value of one Share shall be deemed
to
be the per-share value received by the holders of such stock pursuant to such
acquisition.
(f) Any
portion of this Warrant that is converted shall be immediately
canceled. This Warrant or any portion hereof shall be deemed to have
been converted immediately prior to the close of business on the date of its
surrender for conversion as provided above, and the person entitled to receive
the shares of stock issuable upon such conversion shall be treated for all
purposes as Holder of such shares of record as of the close of business on
such
date. As promptly as practicable after such date, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares issuable upon such
conversion. If the Warrant shall be converted for less than the total
number of shares of the Warrant then issuable upon conversion, promptly after
surrender of the Warrant upon such conversion, the Company will execute and
deliver a new Warrant, dated the date hereof, evidencing the right of the Holder
to the balance of the shares purchasable hereunder upon the same terms and
conditions set forth herein.
4. Representations
and Warranties of the Holder. The Holder hereby represents and
warrants to the Company as follows:
(a) Sophistication.
The Holder has (i) a preexisting personal or business relationship with the
Company or one or more of its officers, directors, or control persons; or
(ii) by reason of the Holder’s business or financial experience, or by
reason of the business or financial experience of the Holder’s financial advisor
who is unaffiliated with and who is not compensated, directly or indirectly,
by
the Company or any affiliate or selling agent of the Company, the Holder is
capable of evaluating the risks and merits of this investment and of protecting
the Holder’s own interests in connection with this investment.
(b) Accredited
Investor. The Holder is an "accredited investor" as such term is
defined under Regulation D of the Securities Act of 1933 as amended (the
"Securities Act").
(c) Investment
Intent. The Holder is purchasing the Shares solely for its own
account for investment. The Holder has no present intention to resell
or distribute the Warrants or the Shares or any portion thereof.
(d) Information
Concerning Company. The Holder is aware of the business affairs and
financial condition of the Company and has acquired sufficient information
about
the Company to make an informed and knowledgeable decision to purchase the
Warrants and the Shares.
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(e) Economic
Risk. The Holder realizes that the purchase of the Warrants and the
Shares will be a highly speculative investment and involves a high degree of
risk. The Holder is able, without impairing his or her financial condition,
to
hold the Warrants and/or the Shares for an indefinite period of time and to
suffer a complete loss of the Holder’s investment.
5. Anti-dilution
Adjustments. The Warrants granted hereunder and the Purchase
Price thereof shall be subject to adjustment from time to time upon the
happening of certain events as set forth below. Notwithstanding the
above or any provision of this Agreement, no adjustment shall be made to the
Purchase Price or the amount of Warrants granted hereunder once the shares
of
Company’s Common Stock have been offered for sale in connection with an initial
public offering.
(a) Stock
Splits and Dividends. If outstanding shares of the Company Common
Stock shall be split into a greater number of shares or a dividend in Common
Stock shall be paid in respect of Common Stock, the Purchase Price in effect
immediately prior to such split or at the record date of such dividend shall
simultaneously with the effectiveness of such split or immediately after the
record date of such dividend be proportionately reduced. If
outstanding shares of Common Stock shall be combined into a smaller number
of
Shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made
in the Purchase Price, the number of Shares purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
(b) Reclassification,
Etc. In case there occurs any reclassification or change of the
outstanding securities of the Company or of any reorganization of the Company
(or any other corporation the stock or securities of which are at the time
receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
Holder, upon the exercise hereof at any time after the consummation of such
reclassification, change, or reorganization shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property
to
which the Holder would have been entitled upon such consummation if the Holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment pursuant to the provisions of this Section.
(c) Adjustment
Certificate. When any adjustment is required to be made in the Shares
or the Purchase Price pursuant to this Section, the Company shall promptly
mail
to the Holder a certificate setting forth (i) a brief statement of the facts
requiring such adjustment, (ii) the Purchase Price after such adjustment and
(iii) the kind and amount of stock or other securities or property into which
this Warrant shall be exercisable after such adjustment.
6. Reservation
of Shares. The Company shall at all times keep reserved a
sufficient number of authorized Shares to provide for the exercise of the
Warrants in full.
4
7. Non-Transferability. The
Warrants issued hereunder and any and all Shares issued upon exercise of the
Warrants are not transferable.
8. Voting. Nothing
contained in this Agreement shall be construed as conferring upon the Holder
the
right to vote or to receive dividends or to consent or receive notice as a
shareholder in respect to any meeting of shareholders for the election of
directors of the Company or for any other purpose not specified
herein.
9. Miscellaneous.
(a) Amendment.
This Agreement may be amended only by written agreement between the Company
and
the Holder.
(b) Notice.
Any notice, demand or request required or permitted to be given under this
Agreement will be in writing and will be deemed sufficient when delivered
personally or with a commercial courier service, with postage prepaid, and
addressed, if to the Company, at its principal place of business, attention
the
President, and if to the Holder, at the Holder’s address as shown on the stock
records of the Company.
(c) Further
Assurances. Both parties agree to execute any additional documents
necessary to carry out the purposes of this Agreement.
(d) Severability. If
any provision of this Agreement is held by any court of competent jurisdiction
to be illegal, unenforceable or void, such provision will be enforced to the
greatest extent possible and all other provisions of this Agreement will
continue in full force and effect.
(e) Governing
Law. This Agreement will be interpreted and enforced in accordance with
California Law as applied to agreements made and performed in
California.
(f) Entire
Agreement; Successors and Assigns. This Agreement and the documents
and instruments attached hereto constitute the entire agreement between the
Holder and the Company relative to the subject matter hereof. Any
previous agreements between the parties are superseded by this
Agreement. Subject to any exceptions specifically set forth in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective executors, administrators, heirs,
successors and assigns of the parties.
(g) Headings. The
headings of the Paragraphs of this Agreement are for convenience and shall
not
by themselves determine the interpretation of this Agreement.
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the date first written above (“Effective Date”).
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The
Company:
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PROCERA
NETWORKS, INC.
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Xxxxxxx
X. Xxxxxx, President
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The
Holder:
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6
EXHIBIT
A
WARRANT
NOTICE
OF EXERCISE
To: PROCERA
NETWORKS, INC.
(1)
("Holder") hereby elects to purchase ______________ shares of Common Stock
of
Procera Networks, Inc. (the “Company”) pursuant to the terms of the Warrant
Agreement executed by the Holder and the Company, datedand tenders herewith
payment of the purchase price in full, together with all applicable transfer
taxes, if any.
(2) Please
issue a certificate or certificates representing said shares in the name of
the
Holder or in such other name as is specified below.
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The
Holder:
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Date:
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7
EXHIBIT
B
WARRANT
NOTICE
OF NET ISSUE EXERCISE
To: PROCERA
NETWORKS, INC.
(1) (“Holder”)
hereby elects to acquire ______________ shares of Common Stock of Procera
Networks, Inc. (the “Company”), pursuant to the terms of the Warrant Agreement
executed by the Holder and the Company, dated , by conversion of
_____________ percent (________ %) of the Warrant.
(2) Please
issue a certificate or certificates representing said shares in the name of
the
Holder or in such other name as is specified below.
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The
Holder:
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Date:
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