ESCROW AGREEMENT
EXHIBIT
2.5
THIS
ESCROW AGREEMENT
(the
“Agreement”) is entered into this 13th
day of
November, 2006, by and between Heritage Bank of Commerce, (the "Escrow Agent"),
and Procera Networks, Inc., a Nevada corporation (the "Company"). The Escrow
Agent and the Company are hereafter collectively referred to as “Parties”.
RECITALS
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A.
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The
Company proposes to offer shares of Common Stock (the “Shares”) for an
aggregate Offering of up to $5,000,000 ("the Offering") as more
particularly described in the Confidential Private Placement Memorandum
(“the Offering Materials”) issued by the
Company.
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B.
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The
Offering is intended to be exempt from registration under the Securities
Act of 1933 (the “Act”), as amended, pursuant to Section 3(a) (11) thereof
and Rule 147 promulgated
thereunder.
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C.
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The
Escrow Agent has agreed to act as the Escrow Agent for the proposed
Escrow
Account on the terms and conditions set forth
below.
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AGREEMENT
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties agree as follows:
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1.
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Establishment
of an Escrow Account:
By
execution of this Agreement the parties establish an interest bearing
Escrow Account entitled Heritage Bank of Commerce, Escrow Agent
UTC
Procera Networks, Inc. Escrow No. 161888 (the “Escrow Account”). All funds
deposited in the Escrow Account shall be held in trust for the
benefit of
the parties entitled thereto pursuant to the terms of this
Agreement.
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2.
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Deposits
of Subscription Proceeds.
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a.
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The
Escrow Agent from time to time will receive from the Company, the
Company’s representitaves or directily from the investors funds
representing subscription payments for Shares. All checks representing
subscription payments shall be made payable to the order of Heritage
Bank
of Commerce, Escrow 161888. All wire transfers shall be made to
following
account: Heritage Bank of Commerce, Escrow Services Department,
000
Xxxxxxx Xxxxxxxxx, Xxx Xxxx, XX 00000, Attn: Chloe A. Flowers,
ABA No. 000
000 000, Account Name: Corporate Escrow Services, Account Number:
0000000,
For Further Credit to: Escrow No. 161888. In the event any checks
are made
payable to a party other than the Escrow Agent, such checks shall
be
returned to the Company. Escrow Agent agrees to hold all documents,
terms
and conditions of this Escrow in strict
confidentiality.
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b.
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The
Company agrees that it shall provide a written account of each
sale, which
account shall set forth, among other things, the investor's name
and
address, the number of Shares purchased, and the amount paid
therefore.
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1
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c.
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All
checks received by the Escrow Agent are subject to the check clearing
schedule of the Escrow Agent, as amended from time to time, and
the funds
represented by such checks cannot be drawn upon or bear interest
until
such time as the Escrow Agent has collected such checks and has
received
all funds which have cleared normal checking channels. The cleared
funds
shall be referred to as “Collected Funds”. Upon the return of any checks
to the Escrow Agent as uncollectible, the Escrow Agent is authorized
to
charge any uncollected checks to the Escrow Account. The Escrow
Agent, may
at its option, redeposit such checks for collection or return the
uncollected check to the Company, however, in no instance shall
a check be
presented for collection more than two (2) times unless Escrow
Agent is
authorized, in writing or by verbal instructions, by the Company.
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3.
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Rejection
of Subscriptions.
The Company warrants and represents that pursuant to the terms
of the
subscription agreements the Company may accept or reject a subscription
in
whole or in part for any reason. In the event the Company elects
to reject
the subscription of any subscriber whose subscription payment has
been
deposited into the Escrow Account, the Company or any Company shall
deliver written notice of the rejection to the Escrow Agent setting
forth
the name, address, taxpayer identification number or social security
number and subscription amount of the subscriber whose subscription
has
been rejected. The Escrow Agent shall return to the investor its
subscription amount as specified by the Company when the funds
have been
collected pursuant to paragraph 2(c) of this Agreement. The Escrow
Agent
shall not be responsible for the decision by the Company to accept
or
reject a subscription.
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4.
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Release
of funds.
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a.
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The
Escrow Agent is authorized to make multiple releases of the subscription
funds from the Escrow Account (1) upon notice from the Company
that such
subscription funds should be released, and (2) on or before the
later of
(A) November 27, 2006, or (B) thirty (30) calendar days after the
effective date of withdrawal of the registration statement under
Rule 477
of the Act, pursuant to Section 155 thereof, (the “Closing Date”). Once
the escrow conditions set forth in this subsection (“the Escrow
Condition”) are satisfied, any subscriptions deposited in the Escrow
Account at that time may be released by the Escrow Agent in accordance
with the distribution instructions, at the direction of the Company.
The
parties acknowledge that the Company reserves the right to utilize
multiple closings during this Escrow, at the Company’s discretion.
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b.
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If
the Escrow Condition is not satisfied by the March 3, 2007, the
Escrow
Agent shall send via certified mail, return receipt requested,
to each
investor a check made payable to the investor in an amount equal
to the
investors subscription payment plus the amount of accrued interest
with
respect to each investors subscription
payment.
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c.
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In
the event the Company decides to cancel the Offering prior to the
Closing
Date, and upon receipt of the written instructions from the Company,
the
Escrow Agent shall send via certified mail, return receipt requested,
to
each investor a check made payable to the investor in an amount
equal to
the investors subscription payment plus the amount of accrued interest
with respect to each investors subscription
payment.
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d.
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Any
subscription funds returned to investors pursuant to written instructions
furnished to the Escrow Agent by the Company pursuant to paragraphs
4(b)
or 4(c) of this Agreement shall be without deduction or offset
for any fee
or compensation due Escrow Agent. The amount of any fee or other
compensation due Escrow Agent will remain payable by the
Company.
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2
| e. |
The
Company expressly acknowledges that prior to the release of the
Escrow
Amount pursuant to paragraph 4(a) above, that the Company has not
had and
will not have any interest in or claim to the escrowed funds nor
are the
escrowed funds subject to claims of creditors of the
Company.
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5.
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Segregation
of Funds.
The subscription funds deposited into the Escrow Account and any
interest
earned thereon shall be kept separate from all other funds in the
custody
of the Escrow Agent, including any other funds that may be deposited
with
the Escrow Agent, the Company or any of their
affiliates.
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6.
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Investment
of Funds.
All Collected Funds received by the Escrow Agent shall be invested
in the
name of Escrow Agent as agent for the Company. The Collected Funds
may
only be invested in short term securities issued or guaranteed
by the U.
S. Government, interest bearing bank accounts, short term bank
certificates of deposit, or bank money market accounts, including
those
accounts issued or offered by the Escrow Agent, as directed by
the
Company. The maturity date of any investment may not extend past
the
Closing Date, unless the investment may be disposed of by the Closing
Date
without any dissipation of the funds. Funds shall not be invested
in
money-market funds, corporate equity or debt securities, repurchase
agreements, banker's acceptances, commercial paper, or municipal
securities.
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7.
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Duties
of the Escrow Agent:
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a.
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The
Escrow Agent shall maintain (i) accurate and complete records regarding
all transactions relating to the Escrow Account and the funds deposited
therein, (ii) copies of the appropriate signatures pages from the
Offering
Materials and other documents received from the
Company.
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b.
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The
Escrow Agent acts as a depositary only and is not responsible or
liable in
any manner whatsoever for the sufficiency, correctness, genuineness,
or
validity of any instrument deposited under this Agreement. The
Escrow
Agent makes no representation whatsoever as to the compliance of
the
Offering of Shares with any applicable state or federal laws, regulations,
or rulings. The Escrow Agent has not made, nor will make, any
representation regarding the Offering, or the Company, or the Offering
Materials. Further, the Escrow Agent shall not be responsible for
any
representations or warranties made by the Company concerning the
Company.
Furthermore, the Escrow Agent shall not be responsible for the
application
or use of any funds released from the Escrow Account pursuant to
this
Agreement.
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c.
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Except
as expressly provided in this Agreement, the Escrow Agent shall
be
entitled to act entirely on the basis of written instructions received
from the Company as provided in this Agreement and shall have no
independent duty of inquiry regarding the basis for such
instructions.
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d.
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The
Escrow Agent shall not be liable for any error of judgment or for
any act
taken or omitted by it in good faith or for any mistake of fact
or law, or
for anything which it may do or refrain from doing in connection
with this
Agreement except for its own willful misconduct, and the Escrow
Agent
shall have no duties to anyone except the
Company.
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| e. |
The
Escrow Agent may consult with legal counsel in the event of any
dispute or
question as to the construction of this Agreement or the Escrow
Agent's
duties under this Agreement, and the Escrow Agent shall incur no
liability
and shall be fully protected in acting in accordance with the opinion
and
instructions of counsel. Notwithstanding the Escrow Agent's consultation
with counsel, the Escrow Agent is not obligated to institute, defend
or
participate in any litigation regarding a dispute arising from
the Escrow
Account or this Agreement.
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f.
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In
the event of any controversy or disagreement concerning this Agreement,
the Escrow Account, or any matter related thereto, resulting in
diverse
claims and demands being made in connection with any papers, money,
or
property deposited under this Agreement, the Escrow Agent shall
be
entitled, at its option, to refuse to comply with any such claims
or
demands, so long as such disagreement shall continue. The Escrow
Agent
shall not be or become liable for damages or interest to the Sales
Agent
or to any other person for the Escrow Agent's failure or refusal
to comply
with any such claims or demands, and the Escrow Agent shall be
entitled to
continue to refrain and refuse to act
until
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i.
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the
rights of the adverse claimants have been finally adjudicated or
arbitrated in a court assuming and having jurisdiction of the parties
and
the money, paper, and property deposited under this Agreement;
or
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ii.
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all
differences shall have been adjusted by agreement, and the Escrow
Agent
shall have been notified thereof in writing by all of the persons
interested; or
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iii.
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in
the event of such disagreement, the Escrow Agent may, at its option,
file
a suit in interpleader for the purpose of having the respective
rights of
the claimants adjudicated and deposit with the court all documents
and
property held by the Escrow Agent.
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8.
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Fee.
For its ordinary services rendered pursuant to this Agreement,
the Escrow
Agent is entitled to fees as
follows:
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a.
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$900.00
Initial set-up fee non-refundable and payable concurrently with
the
execution of this Agreement and additional compensation as
follows:
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b.
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$1.00
per thousand of funds deposited into
escrow.
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c.
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$10.00
Outgoing Wire Fee, NSF check charge or for investor
refunds.
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d.
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In
the event:
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i.
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that
the Escrow Agent performs any service not specifically provided
in this
Agreement; or
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ii.
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that
there is any assignment, modification, or attachment of any interest
in
the subject matter of this Agreement;
or
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iii.
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that
any controversy arises under this Agreement;
or
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iv.
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that
the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to this Agreement, the Escrow Agent shall be reasonably
compensated and reimbursed for all costs and expenses (including,
without
limitation, attorney's fees whether or not suit is instituted)
occasioned
thereby. The Escrow Agent shall have a first lien on the money,
property,
and papers held by it under this Agreement for its compensation
and
expenses, and the Company agrees to pay such compensation and expenses;
provided, however, that the lien shall attach only if the conditions
set
forth in paragraph 4(a) of this Agreement have been
met.
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9.
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Resignation
of Escrow Agent.
The Escrow Agent reserves the right to resign as escrow holder
at any time
by giving thirty (30) days prior written notice of such resignation
to the
Company; provided, however, that Escrow Agent may not resign without
the
consent of the Company. In the event of such resignation by the
Escrow
Agent, the Escrow Agent shall deliver the funds then held in the
Escrow
Account and all related records to any replacement escrow holder
appointed
by the Company. If the Company fails to notify the Escrow Agent
in writing
as of the identity of such replacement escrow holder within thirty
(30)
days after receiving the notice of the Escrow Agent's resignation,
the
Escrow Agent will be entitled to return to each investor whose
subscription payment is then being held in the Escrow Account the
amount
of such investor's subscription payment plus the net amount of
interest
earned with respect to such investor's subscription payment.
Notwithstanding the resignation of the Escrow Agent, the Company
shall
remain liable for all fees payable to the Escrow Agent pursuant
to the
terms of this Agreement.
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10.
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Representations
and Warranties of the Sales Agent: The
Company represents and warrants as follows:
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a.
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The
Offering complies with all other applicable federal and state laws,
rules
and regulations.
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b.
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This
Agreement does not conflict with any representation, written or
oral, made
by the Company to any person, organization, or governmental agency
in
connection with the Offering.
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c.
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The
Company has not agreed to pay to investors any interest on subscription
payments, unless all subscription payments are refunded to the
investors
pursuant to paragraphs 4(b) or
4(c).
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11.
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Offering
Materials.
The Company shall cause substantially all of the following language
to be
included in any and all Offering materials that refer to the Escrow
Agent,
including, without limitation, the Confidential Private Placement
Memorandum, any prospectus, subscription agreement, and/or supplemental
sales literature, as follows:
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Heritage
Bank of Commerce's sole role in this Offering is that of Escrow Holder, and
Heritage Bank of Commerce has not reviewed any of the Offering materials
and
made no representation whatsoever as to the nature of this Offering or its
compliance, or lack thereof, with any applicable state or federal laws, rules
or
regulations.
Heritage
Bank of Commerce does not represent the interests of the Investors or potential
investors. Heritage Bank of Commerce's duties are limited as expressly set
forth
in the Agreement and interested parties may request a copy of the Agreement
from
the Company.
The
Company shall not make any other references, written or oral, to or regarding
the Escrow Agent without the prior written consent of the Escrow
Agent.
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12.
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Indemnification
of Escrow Agent.
Except with respect to any willful misconduct of the Escrow Agent,
the
Company shall indemnify and hold the Escrow Agent, its directors,
officers, employees and agents harmless from and against any and
all
liability, demands, claims, actions, losses, interest, costs of
defense,
and expenses (including reasonable attorney's fees) which arise
out of the
Escrow Agent's acts or omissions to act in accordance with this
Agreement.
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13.
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Additional
Instructions.
This Agreement is subject to the additional instructions, if any,
and the
delivery of the documents, if any, listed on the attached Exhibit
"D".
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14.
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Notices.
Notice required to be given pursuant to the terms of this Agreement
shall
be personally delivered or sent by registered or certified mail,
return
receipt requested:
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a.
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If
to the Company:
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Procera
Networks, Inc.
000
X
Xxxxxx Xxxxx
Xxx
Xxxxx, Xxxxxxxxxx 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
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b.
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If
to the Escrow Agent:
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Heritage
Bank of Commerce
Corporate
Escrow Services
000
Xxxxxxx Xxxxxxxxx
Xxx
Xxxx,
XX. 00000
Tel:
000-000-0000
Fax:
000-000-0000
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15.
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Miscellaneous.
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a.
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The
provisions of this Agreement shall be binding upon and inure to
the
benefit of the parties hereto and their respective legal representatives,
heirs, successors or assigns.
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b.
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This
Agreement may be executed in two or more counterparts, each of
which shall
be deemed an original, but all of which together shall constitute
one and
the same instrument.
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c.
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This
Agreement shall be governed, by and construed in accordance with,
the laws
of the State of California, and the Superior Courts in the City
and County
of San Francisco shall be the proper forum and venue for any action
arising from this Agreement.
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d.
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All
captions contained in this Agreement are for convenience only and
are not
to be deemed part of the agreement or to be referred to in connection
with
the interpretation of this
Agreement.
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e.
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Whenever
required by the context of this Agreement, the singular number
shall
include the plural, and vice versa; the masculine gender shall
include the
feminine and neuter genders; and the neuter gender shall include
the
masculine and feminine genders.
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f.
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This
Agreement shall not be subject to rescission or modification except
on
receipt by the Escrow Agent of the written instructions of the
Company or
its successors in interest, and no such modification shall be effective
unless and until consented in writing by the Escrow
Agent.
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g.
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The
failure of any party hereto to insist upon strict adherence to
any term of
this Agreement on one or more occasions shall not be considered
a waiver
or deprive such party of the right thereafter to insist upon strict
adherence to such term or any other term of this Agreement. Any
waiver
must be in writing.
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IN
WITNESS WHEREOF, the Parties have signed this Agreement as of the Effective
Date.
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THE
COMPANY:
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PROCERA NETWORKS, INC. | |
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By:
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Its:
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Date:
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ESCROW
AGENT
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HERITAGE BANK OF COMMERCE | |
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By:
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Its:
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Date:
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