Exhibit 4.3
PROCERA NETWORKS, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of
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December 5, 2003, by and among Procera Networks, Inc., a Nevada corporation (the
"Company"), and the undersigned holders of common stock of the Company together
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with their qualifying transferees (the "Holders"). Capitalized terms used herein
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but not otherwise defined shall have the meaning assigned to them the Private
Placement Memorandum, dated November 14, 2003.
RECITALS:
A. The Company has sold shares of common stock ("Common Shares") to the
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Holders pursuant to one or more Restricted Common Stock Subscription Agreements
(each a "Subscription").
B. The sale of the Common Shares is conditional upon the extension of
the rights set forth herein, and by this Agreement the Company and the Holders
desire to provide for certain rights as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties, severally and not jointly,
hereby agree as follows:
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
1. REGISTRATION RIGHTS.
1.1 Definitions. As used in this Agreement, the following terms
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shall have the following respective meanings:
(a) The terms "register", "registered" and "registration"
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refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of the effectiveness of such
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registration statement.
(b) The term "Restricted Securities" means (i) any and all
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shares of Common Stock of the Company issued and sold by the Company pursuant to
the Restricted Common Stock Subscription Agreement or the Common Stock Special
Warrant Agreement (which shares of Restricted Common Stock are referred to
herein as the "Common Shares"); (ii) stock issued in lieu of the stock referred
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to in (i) in any reorganization which has not been sold to the public; (iii)
stock issued in respect of the stock referred to in (i) and (ii) as a result of
a stock split, stock dividend, recapitalization or the like, which has not been
sold to the public; and (iv) Common Shares issued to a Holder pursuant to that
certain Warrant Agreement of even date herewith and attached hereto as Exhibit
D.
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(c) The terms "Holder" or "Holders" means any person or
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persons to whom Restricted Securities were originally issued or qualifying
transferees under subsection 1.9 hereof who hold Restricted Securities.
(d) The term "Initiating Holders" means any Holder or
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Holders, of 40% or greater of the aggregate of the Restricted Securities then
outstanding.
(e) The term "SEC" means the Securities and Exchange
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Commission.
(f) The term "Registration Expenses" shall mean all expenses
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incurred by the Company in complying with subsections 1.2 and 1.3 hereof,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company.)
1.2 Company Registration.
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(a) Registration. The Company shall register the Restricted
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Securities, within thirty (30) days of the Closing Date. Such registration
shall include all of the Restricted Securities sold in the Offering and other
restricted common stock of the Company.
(b) Effective Date. The Company shall use its best efforts
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to have the registration statement whereby the Restricted Securities are
registered (the "Registration Statement") declared effective (the "Effective
Date") by the SEC on or before 120 days after the Closing Date, as such term is
defined in the Subscription. In the event that the Registration Statement is
not declared effective on or before 120 days after the Closing Date, then:
(i) The Company shall pay to each Holder a cash payment
(the "Delay Payment"). The amount of the Delay Payment shall be 1% of the
Offering Price of the Common Shares purchased by the Holder in the Offering.
(ii) In the event that the Registration Statement is not
declared effective on or before 151 days after the Closing Date, then the
Company shall pay a second Delay Payment with the identical terms provided for
Section 1.2(b)(i) above, provided however, that the amount of the Delay Payment
shall be 2% of the Offering Price of the Common Shares purchased by the Holder
in the Offering. Thereafter, for every 30 days after 151 days after the Closing
Date that the Registration Statement is not effective, the Company shall pay a
second Delay Payment to each Holder with the identical terms provided for
Section 1.2(b)(i) above, until the Registration Statement has been declared
effective, provided, however, that the amount of the Delay Payment shall be 2%
of the Offering Price of the Common Shares purchased by the Holder in the
Offering.
(iii) Notwithstanding the above, the total amount of the
Delay Payments paid pursuant to Section 1.2 shall not exceed 10% of the
Restricted Securities purchased by the Holder in the Offering. Any Delay
Payments shall be by wire transfer and delivered to the Holder within two
business days after they become due.
1.3 Expenses of Registration. All Registration Expenses incurred
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in connection with any registration, qualification or compliance pursuant to
this Section 1 shall be borne by the Company except as follows:
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(a) The Company shall not be required to pay fees or
disbursements of legal counsel to the Holders.
(b) The Company shall not be required to pay underwriters'
fees, discounts or commissions relating to Restricted Securities.
1.4 Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Rights
Agreement, the Company will keep each Holder participating therein advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. Except as otherwise provided in subsection
1.3, at its expense the Company will:
(a) Prepare and file with the SEC a registration statement
with respect to such Restricted Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Restricted Securities registered thereunder, keep
such registration statement effective for up to 120 days or if such registration
statement is on Form S-3 (or any successor to Form S-3) and provides for sales
of securities from time to time pursuant to Rule 415 under the Securities Act
for up to one year.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish, without charge, to the Holders such numbers of
copies of a prospectus, including each preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of Restricted
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders or any managing underwriter, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Restricted Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act or the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(i) make available for inspection by a representative of
the Holders, the managing underwriter participating in any disposition pursuant
to such registration statement and one firm of attorneys designated by the
Holders (upon execution of customary confidentiality agreements reasonably
satisfactory to the Company and its counsel), at reasonable
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times and in reasonable manner, financial and other records, documents and
properties of the Company that are pertinent to the conduct of due diligence
customary for an underwritten offering, and cause the officers, directors and
employees of the Company to supply all information reasonably requested by any
such representative, underwriter or attorney in connection with a registration
statement as shall be necessary to enable such persons to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act.
(ii) use its best efforts to cause all Restricted
Securities covered by a registration statement to be listed on any securities
exchange or any automated quotation system on which similar securities issued by
the Company are then listed;
(iii) cause to be provided to the Holders that are
selling Restricted Securities pursuant to such registration statement and to the
managing underwriter if any disposition pursuant to such registration statement
is an underwritten offering, upon the effectiveness of such registration
statement, a customary "10b-5" opinion of independent counsel (an "Opinion") and
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a customary "cold comfort" letter of independent auditors (a "Comfort Letter")
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in each case addressed to such Holders and managing underwriter, if any;
(iv) notify in writing the Holders that are selling
Restricted Securities pursuant to such registration statement and any managing
underwriter if any disposition pursuant to such registration statement is an
underwritten offering, (A) when the registration statement has become effective
and when any post-effective amendment thereto has been filed and becomes
effective, (B) of any request by the SEC or any state securities authority for
amendments and supplements to the registration statement or of any material
request by the SEC or any state securities authority for additional information
after the registration statement has become effective, (C) of the issuance by
the SEC or any state securities authority of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose, (D) if, between the effective date of the registration
statement and the closing of any sale of Restricted Securities covered thereby,
the representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, including this
Agreement, relating to disclosure cease to be true and correct in all material
respects or if the Company receives any notification with respect to the
suspension of the qualification of the Restricted Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (E) of the
happening of any event during the period the registration statement is effective
such that such registration statement or the related prospectus contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make statements therein not misleading (in
the case of a prospectus, in light of circumstances under which they were made)
and (F) of any determination by the Company that a post-effective amendment to
the registration statement would be appropriate. The Holders hereby agree to
suspend, and to cause any managing underwriter to suspend, use of the prospectus
contained in a registration statement upon receipt of such notice under clause
(C), (E) or (F) above until, in the case of clause (C), such stop order is
removed or rescinded or, in the case of clauses (E) and (F), the Company has
amended or supplemented such prospectus to correct such misstatement or omission
or otherwise.
If the notification relates to an event described in clauses (E) or (F),
the Company shall promptly prepare and furnish to such seller and each
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to the purchasers of such Restricted
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein no misleading.
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(v) provide and cause to be maintained a transfer agent
and registrar for all such Restricted Securities covered by such registration
statement not later than the effective date of such registration statement;
(vi) deliver promptly to each Holder participating in
the offering and each underwriter, if any, copies of all correspondence between
the SEC and the Company, its counsel or auditors and all memoranda relating to
discussions with the SEC and its staff with respect to the registration
statement, other than those portions of any such correspondence and memoranda
which contain information subject to attorney-client privilege with respect to
the Company, and, upon receipt of such confidentiality agreements as the Company
may reasonably request, make reasonably available for inspection by any Holder
of such Restricted Securities covered by such registration statement, by any
underwriter, if any, participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such Holder or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Company, and
cause all of the Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney,
accountant or agent in connection with such registration statement;
(vii) use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of the registration statement;
(viii) provide a CUSIP number for all Restricted
Securities not later than the effective date of the registration statement;
(ix) make reasonably available its employees and
personnel and otherwise provide reasonable assistance to the underwriters in the
marketing of Restricted Securities in any underwritten offering;
(x) promptly prior to the filing of any document which
is to be incorporated by reference into the registration statement or the
prospectus (after the initial filing of such registration statement) provide
copies of such document to counsel to the seller of Restricted Securities and to
the managing underwriter, if any, and make the Company's representatives
reasonably available for discussion of such document and make such changes in
such document concerning such sellers prior to the filing thereof as counsel for
such sellers or underwriters may reasonably request; and
(xi) cooperate with the sellers of Restricted Securities
and the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Restricted Securities to be sold, and cause such Restricted Securities to be
issued in such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Restricted Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the sellers of Restricted Securities at least three business
days prior to any sale of Restricted Securities.
1.5 Indemnification.
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(a) The Company will indemnify and hold harmless to the
fullest extent permitted by law each Holder of Restricted Securities and each of
its officers, directors and partners, and each person controlling such Holder,
with respect to which such registration, qualification or compliance has been
effected pursuant to this Rights Agreement, and each underwriter, if any, and
each person who controls any underwriter of the Restricted Securities held by or
issuable to such
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Holder, against all claims, losses, expenses, damages and liabilities (or
actions in respect thereto) arising out of or based on (i) any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement under which such securities were registered under the Securities Act
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
(ii) any untrue statement (or alleged untrue statement) of a material fact
contained in any preliminary, final or summary prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under which they were made, or not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Securities Exchange Act of 1934, as amended, (the "Exchange Act") or any
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state securities law applicable to the Company or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any such state law and
relating to action or inaction required of the Company in connection with any
such registration, qualification of compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, within a reasonable amount of time after incurred for any
reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.5(a) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld);
and provided further, that the Company will not be liable in any such case to
the extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter specifically for use therein.
(b) Each Holder will, if Restricted Securities held by or
issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, severally and not
jointly, indemnify and hold harmless to the fullest extent permitted by law the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company within the meaning of the Securities Act, and each other
such Holder, each of its officers, directors and partners and each person
controlling such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, partners, persons or underwriters for any reasonable legal or any
other expenses incurred in connection with investigating, defending or settling
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by the Holder in an
instrument duly executed by such Holder specifically for use therein; provided,
however, that the indemnity agreement contained in this subsection 1.5(b) shall
not apply to amounts paid in settlement of any such claim, loss, damage,
liability or action if such settlement is effected without the consent of the
Holder, (which consent shall not be unreasonably withheld); provided further,
that the total amount for which any Holder shall be liable under this subsection
1.5(b) shall not in any event exceed the net proceeds received by such Holder
from the sale of Restricted Securities held by such Holder in such registration;
and provided further, that a Holder will not be liable in any such case to the
extent that
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any such claim, loss, damage or liability arises out of or is based on any
untrue statement or omission based upon written information furnished to the
Holder by an instrument duly executed by the Company or underwriter specifically
for use therein.
(c) Each party entitled to indemnification under this
subsection 1.5 (the "Indemnified Party") shall give notice to the party required
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to provide indemnification (the "Indemnifying Party") promptly after such
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Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, except to the extent such
failure resulted in material prejudice to the Indemnifying Party; and provided
further, that an Indemnified Party (together with all other Indemnified Parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
Indemnifying Party, if representation of such Indemnified Party by the counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) If for any reason the foregoing indemnity is unavailable
or is insufficient to hold harmless an indemnified party under Section 1.5, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of any Claim in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party, on the one hand, and
the Indemnified Party, on the other hand, with respect to such offering of
securities. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying Party or the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. If, however, the allocation provided
in the second preceding sentence is not permitted by applicable law, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party in such proportion as is appropriate to reflect not only such
relative faults, but also any other relevant equitable considerations. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 1.5(d) were to be determined by pro rata allocation or
by any other method of allocation which does not take into account the equitable
considerations referred to in the preceding sentences of this Section 1.5(d).
The amount paid or payable in respect of any Claim shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such Claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the U.S.
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding anything in this
Section 1.5 to the contrary, no Indemnifying Party (other than the Company)
shall be required pursuant to this Section 1.5(d) to contribute any amount in
excess of the net proceeds received by such Indemnifying Party from the sale of
Restricted Securities in the offering to which the losses, claims, damages or
liabilities of the Indemnified Parties relate, less the amount of any
indemnification payment made pursuant to Section 1.5.
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(e) The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
Indemnified Party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by, or on behalf of, any Indemnified Party and shall survive the
transfer of the Restricted Securities by any such party.
1.6 Information by Holder. Any Holder or Holders of Restricted
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Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
1.7 Rule 144 Reporting. With a view to making available to
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Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Restricted Securities to the public without registration,
the Company agrees at all times to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, after 90 days after the
effective date of the first registration filed by the Company for an offering of
its securities to the general public;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) so long as a Holder owns any Restricted Securities, to
furnish to such Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as the Holder may reasonably request in complying with any rule
or regulation of the SEC allowing the Holder to sell any such securities without
registration.
1.8 Transfer of Registration Rights. Holders' rights to cause the
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Company to register their securities and keep information available, granted to
them by the Company under subsections 1.2 and 1.7, may be assigned to a
transferee or assignee of (i) at least 100,000 shares (as adjusted for stock
splits, stock dividends, recapitalizations and like events), (ii) the transfer
is in connection with the transfer of all shares of a Holder, or (iii) to any
constituent partners or members of a Holder which is a partnership or limited
liability company, or to affiliates (as such term is defined in Rule 405 of the
Securities Act) of a Holder, provided, that (a) the Company is given written
notice by such Holder at the time of or within a reasonable time after said
transfer, stating the name and address of said transferee or assignee; and
identifying the securities with respect to which such registration rights are
being assigned; and (b) solely as to transfers pursuant to clause (iii) above,
any transferees or assignees agree to act through a single representative. The
Company may prohibit the transfer of any Holders' rights under this subsection
1.8 to any proposed transferee or assignee who the Company reasonably believes
is a competitor of the Company. Notwithstanding anything else in this
subsection 1.8, any Holder may transfer rights to a transferee of a Holder's
Restricted Securities if such transferee is a partner, member or shareholder or
a retired partner, member or shareholder of such Holder.
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1.9 Limitations on Subsequent Registration Rights. From and after
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the date hereof, the Company shall not, without the prior written consent of the
Holders (which consent will not be unreasonably withheld) of not less than a
majority of the Restricted Securities then outstanding enter into any agreement
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder to demand any registration if such
inclusion would adversely affect the rights of any Holder (or any qualifying
transferee under subsection 1.8) under such subsections.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees
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that, during the period of duration (not to exceed 90 days) specified by the
Company and an underwriter of common stock or other securities of the Company
following the effective date of an IPO or reverse merger with a public company,
it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase, pledge or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an offering.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Restricted Securities of each
Holder (and the shares of securities of every other person subject to the
foregoing restriction) until the end of such period.
1.11 Delay of Registration. No Holder shall have any rights to
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take any actions to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.12 Termination of Registration Rights. No holder shall be
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entitled to exercise any right provided for in this Section 1 at any time when
such Holder may sell all its shares in a three (3) month period under Rule 144
of the Act.
2. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
2.1 Annual Financial Information. The Company shall deliver to
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each Holder of at least ten thousand (10,000) Restricted Securities (a
"Qualified Holder") as soon as practicable after the end of each fiscal year of
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the Company, but in any event within 120 days thereafter, statements of
operations, shareholders' equity and cash flows of the Company for such year,
and a balance sheet of the Company as of the end of such year, such year-end
financial reports to be in reasonable detail, prepared in accordance with
generally accepted accounting principles ("GAAP"), and audited by independent
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public accountants of national standing selected by the Company's Board of
Directors.
2.2 Inspection. The Company shall permit each Qualified Holder,
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at such Qualified Holder's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Qualified Holder; provided, however,
that the Company shall not be obligated pursuant to this subsection to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
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2.3 Termination of Information Covenants and Confidentiality of
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Information. The covenants of the Company set forth in subsections 2.1 and 2.2
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shall terminate as to the Qualified Holder and be of no further force or effect
when the Company first becomes subject to the periodic reporting requirements of
Section 12(g) or 15(d) of the Securities Exchange Act of 1934, as amended. Each
Qualified Holder agrees that it will keep confidential and will not disclose or
divulge any confidential, proprietary or secret information which such Purchaser
may obtain from the Company, and which the Company has prominently marked
"confidential", "proprietary" or "secret" or has otherwise identified as being
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such, pursuant to financial statements, reports and other materials submitted by
the Company as required hereunder, unless such information is or becomes known
to the Qualified Holder from a source other than the Company without violation
of any rights of the Company, or is or becomes publicly known, or unless the
Company gives its written consent to the Qualified Holder's release of such
information, except that no such written consent shall be required (and the
Qualified Holder shall be free to release such information to such recipient) if
such information is to be provided to a Qualified Holder's counsel or accountant
(and the provision of such information is directly necessary in order for such
recipient provide services to Qualified Holder), or to an officer, director or
partner of a Qualified Holder, provided that the Qualified Holder shall inform
the recipient of the confidential nature of such information, and such recipient
agrees in writing in advance of disclosure to treat the information as
confidential.
2.4 Right of First Refusal. Until 180 days after the Effective
-------------------------
Date, the Holder shall be given not less than seven (7) business day's prior
written notice (the "Rights Notice") of any proposed sale by the Company of its
common stock or other securities or debt obligations, except in connection with:
(i) employee stock options or compensation plans; or (ii) full or partial
consideration in connection with any merger, consolidation or purchase of
substantially all of the securities or assets of any corporation or other
entity. The Holder shall have the right upon receipt of the Rights Notice to
purchase such offered common stock, debt or other securities in accordance with
the terms and conditions set forth in the Rights Notice for a period of seven
(7) days. In the event that the terms and conditions in the Rights Notice are
materially altered after delivery to the Holder and prior to the closing of such
sale, then this Right of First Refusal shall be reset, such that Holder shall
have an additional seven (7) days to purchase the common stock, debt or other
securities.
3. GENERAL.
3.1 Waivers and Amendments. With the written consent of the
------------------------
record holders of at least a majority of the Restricted Securities, the
obligations of the Company and the rights of the parties under this Agreement
may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), and with the same consent the Company, when authorized by
resolution of its Board of Directors, may enter into a supplementary agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement; provided, however, that no
such modification, amendment or waiver shall reduce the aforesaid percentage of
Restricted Securities without the consent of all of the Holders of the
Restricted Securities. Notwithstanding the foregoing, subsections 2.1, 2.2, 2.3,
2.4 and 2.7 may be amended only with the written consent of the Company and a
majority of the shares then held by Qualified Holders. Upon the effectuation of
each such waiver, consent, agreement of amendment or modification, the Company
shall promptly give written notice thereof to the record holders of the
Restricted Securities or Qualified Holders, as the case may be, who have not
previously consented thereto in writing. This Agreement or any provision hereof
may be changed, waived, discharged or terminated only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, except to the extent provided in this subsection 3.1.
In addition, the Company will grant the Holders any rights of first refusal or
registration rights granted to subsequent purchasers of the Company's equity
securities
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to the extent that such subsequent rights are superior, in good faith judgment
of the Company's Board of Directors, to those granted in connection with the
transaction.
3.2 Governing Law. This Agreement shall be governed in all
--------------
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California without regard to its conflict of law principles.
3.3 Successors and Assigns. Except as otherwise expressly
------------------------
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
3.4 Entire Agreement. Except as set forth below, this Agreement
-----------------
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and this Agreement shall supersede and cancel all prior
agreements between the parties hereto with regard to the subject matter hereof.
3.5 Notices, etc. All notices and other communications required
-------------
or permitted hereunder shall be in writing and shall be delivered by overnight
courier service or mailed by first class mail, postage prepaid, certified or
registered mail, return receipt requested, addressed (a) if to any Purchaser, at
such party's address as set forth in the Company's records, or at such other
address as such party shall have furnished to the Company in writing, or (b) if
to the Company, at such address as the Company shall have furnished to the
Purchaser in writing.
3.6 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Agreement or any provision of the other
Agreement s shall not in any way be affected or impaired thereby.
3.7 Titles and Subtitles. The titles of the sections and
----------------------
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
3.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereby have executed this Agreement on the date
set forth underneath their respective signatures below.
"COMPANY"
PROCERA NETWORKS, INC.,
A NEVADA CORPORATION
By: /s/ Xxxx Xxxxxx
---------------------------------------
Xxxx Xxxxxx, Chief Executive Officer
Date: December 5 , 2003
-------------------
"HOLDER"
By: /s/
---------------------------------------
Print: [signed by all Holders]
---------------------------------------
Date: December 5 , 2003
-------------------
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