PROCERA NETWORKS, INC. REGISTRATION RIGHTS AGREEMENT
Exhibit
4.14
PROCERA
NETWORKS, INC.
THIS
REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made as of _________,
2003, by and among Procera Networks, Inc., a Delaware corporation (the
“Company”), and the undersigned holders of common stock of the Company
together with their qualifying transferees (the “Holders”).
RECITALS:
A. The
Company has sold shares of common stock (“Common Shares”) to the Holders
pursuant to one or more Registrable Common Stock Subscription
Agreements.
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 shall have the following respective
meanings:
1.1.1 The
terms “register”, “registered” and “registration” 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
registration statement.
1.1.2 The
term “Registrable Securities” means (i) any and all shares of Common
Stock of the Company issued and sold by the Company pursuant to the Registrable
Common Stock Subscription Agreement (which shares of Registrable Common Stock
are referred to herein as the “Common Shares”); (ii) stock issued in
lieu of the stock referred to in (i) in any reorganization which has not
been sold to the public; or (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.
1.1.3 The
terms “Holder” or “Holders” means any person or persons to whom
Registrable Securities were originally issued or qualifying transferees under
subsection 1.9 hereof who hold Registrable Securities.
1.1.4 The
term “Initiating Holders” means any Holder or Holders, of 40% or greater
of the aggregate of the Registrable Securities then outstanding.
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1.1.5 The
term “SEC” means the Securities and Exchange Commission.
1.1.6 The
term “Registration Expenses” shall mean all expenses incurred by the
Company in complying with subsections 1.2, 1.3 and 1.4 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.
1.2.1 Registration. If
at any time or from time to time, the Company shall determine to register any
of
its securities, for its own account or the account of any of its shareholders,
other than a registration on Form S-8 relating solely to employee stock
option or purchase plans, or a registration on Form S-4 relating solely to
a SEC Rule 145 transaction, the Company will:
1.2.1.A promptly
give to each Holder written notice thereof at least 30 days prior to the initial
filing of the registration statement relating to such offering; and
1.2.1.B include
in such registration (and compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests,
made
within 20 days after receipt of such written notice from the Company, by any
Holder or Holders, except as set forth in subsection 1.2(b) below.
1.2.2 Underwriting.
1.2.2.A
If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to subsection
1.2(a)(i). In such event the right of any Holder to registration
pursuant to subsection 1.2 shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company and the other shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company.
1.2.2.B Notwithstanding
any other provision of this subsection 1.2, if the underwriter managing
such public offering determines that marketing factors require a limitation
of
the number of shares to be underwritten, and (A) if such registration is
the first registered offering of the sale of the Company’s securities to the
general public, the underwriter may limit the number of Registrable Securities
to be included in the registration and underwriting, or may exclude Registrable
Securities entirely from such registration and underwriting, or (B) if such
registration is other than the first registered offering of the sale of the
Company’s securities to the general public, the underwriter may limit the amount
of securities to be included in the registration and underwriting by the
Company’s shareholders; provided however, the number of Registrable Securities
to be included in such registration and underwriting under this
subsection 1.2(b)(ii) shall not be reduced to less than thirty percent
(30%) of the aggregate securities included in such registration without the
prior consent of at least a majority of the Holders who have requested their
shares to be included in such registration and underwriting. The Company shall
so advise all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among Holders requesting registration in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities
held
by each of such Holders as of the date of the notice pursuant to subsection
1.2(a)(i) above; provided that the number of shares of Registrable
Securities requested to be included in such underwriting shall not be reduced
unless all other securities being sold by shareholders other than the Holders
are first entirely excluded from the Underwriting. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
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1.3 Form S-3. In
addition to the rights and obligations set forth in subsection 1.2 above, if
Holders request that the Company file a registration statement on Form S-3
(or any successor to Form S-3) for a public offering of shares of
Registrable Securities, the reasonably anticipated aggregate price to the public
of which (net of underwriting discounts and commissions) would exceed $5,000,000
and the Company is then a registrant entitled to use Form S-3 to register
the shares for such an offering, the Company shall use its best efforts to
cause
such shares to be registered for the offering as soon as practicable on
Form S-3 (or any successor form to Form S-3); provided, however the
Company shall not be required to effect a registration pursuant to this
subsection 1.3:
1.3.1 in
any particular jurisdiction in which the Company would be required to execute
a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service
in
such jurisdiction and except as may be required by the Securities
Act;
1.3.2 during
the period starting with the date of filing of, and ending on a date 90 days
following the effective date of, a registration statement pursuant to subsection
1.2, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective
and
further provided that no other person or entity could require the Company to
file a registration statement in such period;
1.3.3 if
the Company has effected a registration pursuant to this subsection 1.3 within
a
12-month period from the date of such request; or
1.3.4 if
the Company shall furnish to such Initiating Holders a certificate signed by
the
President of the Company stating that in the good faith judgment of the Board
of
Directors of the Company, it would be detrimental to the Company and its
shareholders for such registration statement to be filed on or before the date
filing would be required and it is therefore essential to defer the filing
of
such registration statement, in which case the Company shall have the right
to
defer such filing for a period of not more than 90 days after the furnishing
of
such a certificate of deferral, provided that the Company may not defer such
filing pursuant to this subsection 1.3 more than once in any six month
period.
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In
the
event such Initiating Holders propose to offer the shares of Registrable
Securities pursuant to this subsection 1.3 by means of an underwriting, the
proposed underwriter(s) shall be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the
Company. The Company shall give written notice to all Holders of the
receipt of a request for registration pursuant to this subsection 1.3 and
shall provide a reasonable opportunity for other Holders to participate in
the
registration. The right of any Holder to registration pursuant to this
subsection 1.3 shall be conditioned upon such Holder’s participation in
such underwriting and the inclusion of such Holder’s Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest
of
the Initiating Holders and such Holder) to the extent provided
herein. The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters. Notwithstanding any other provision of this
subsection 1.3, if the underwriter advises the Company in writing that
marketing factors require a limitation of the number of shares to be
underwritten, the Company shall so advise all Holders, and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities
held
by such Holders; provided, however, that the number of shares of Registrable
Securities to be included in such underwriting shall not be reduced unless
all
other securities are first entirely excluded from the
underwriting. If any Holder of Registrable Securities disapproves of
the terms of the underwriting, such Holder may elect to withdraw therefrom
by
written notice to the Company, the underwriter and the Initiating
Holders. Any Registrable Securities which are excluded from the
underwriting by reason of the underwriter’s marketing limitation or withdrawn
from such underwriting shall be withdrawn from such registration.
1.4 Expenses
of Registration. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to this
Section 1 shall be borne by the Company except as follows:
1.4.1 The
Company shall not be required to pay for expenses of any registration proceeding
begun pursuant to subsection 1.3, the request for which has been
subsequently withdrawn by the Initiating Holders, in which latter such case,
such expenses shall be borne by the Holders requesting such
withdrawal. In the event that a withdrawal by the Holders is based on
material adverse information relating to the Company that is different from
the
information known or available to the Holders requesting registration at the
time of their request for registration under subsection 1.3, such registration
shall not be treated as a counted requested registration for the purposes of
subsection 1.3 hereof, and in which case, such expenses shall be borne by the
Company.
1.4.2 The
Company shall not be required to pay fees or disbursements of more than one
firm
of legal counsel to the Holders, such fees to not exceed $10,000 in the
aggregate.
1.4.3 The
Company shall not be required to pay underwriters’ fees, discounts or
commissions relating to Registrable Securities.
1.5 Registration
Procedures. In the case of each registration, 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 1.4, at its expense the Company will:
1.5.1 Prepare
and file with the SEC a registration statement with respect to such Registrable
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
Registrable 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.
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1.5.2 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.
1.5.3 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 Registrable Securities owned by
them.
1.5.4 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.
1.5.5 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.
1.5.6 Notify
each Holder of Registrable 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.
1.5.6.A 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 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.
1.5.6.B use
its best efforts to cause all Registrable 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;
1.5.6.C cause
to be provided to the Holders that are selling Registrable 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 a
customary “cold comfort” letter of independent auditors (a “Comfort
Letter”) in each case addressed to such Holders and managing underwriter, if
any;
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1.5.6.D notify
in writing the Holders that are selling Registrable 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
Registrable 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
Registrable 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 Registrable 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.
1.5.6.E provide
and cause to be maintained a transfer agent and registrar for all such
Registrable Securities covered by such registration statement not later than
the
effective date of such registration statement;
1.5.6.F 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 Registrable 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;
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1.5.6.G
use its best efforts to obtain the withdrawal of any order suspending the
effectiveness of the registration statement;
1.5.6.H
provide a CUSIP number for all Registrable Securities not later than the
effective date of the registration statement;
1.5.6.I make
reasonably available its employees and personnel and otherwise provide
reasonable assistance to the underwriters in the marketing of Registrable
Securities in any underwritten offering;
1.5.6.J 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 Registrable 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
1.5.6.K cooperate
with the sellers of Registrable Securities and the managing underwriter, if
any,
to facilitate the timely preparation and delivery of certificates not bearing
any restrictive legends representing the Registrable Securities to be sold,
and
cause such Registrable Securities to be issued in such denominations and
registered in such names in accordance with the underwriting agreement prior
to
any sale of Registrable Securities to the underwriters or, if not an
underwritten offering, in accordance with the instructions of the sellers of
Registrable Securities at least three business days prior to any sale of
Registrable Securities.
1.6 Indemnification.
1.6.1 The
Company will indemnify and hold harmless to the fullest extent permitted by
law
each Holder of Registrable 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 Registrable Securities held by or issuable to such 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
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 1.6(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.
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1.6.2 Each
Holder will, if Registrable 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 1.6(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 1.6(b) shall not in any event
exceed the net proceeds received by such Holder from the sale of Registrable
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 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.
1.6.3 Each
party entitled to indemnification under this subsection 1.6 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such
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.
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1.6.4 If
for any reason the foregoing indemnity is unavailable or is insufficient to
hold
harmless an indemnified party under Section 1.6, 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 1.6(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 1.6(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 1.6 to the contrary, no Indemnifying Party (other
than the Company) shall be required pursuant to this Section 1.6(d) to
contribute any amount in excess of the net proceeds received by such
Indemnifying Party from the sale of Registrable 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
1.6.
1.6.5 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 Registrable Securities
by any such party.
1.7 Information
by Holder. Any Holder or Holders of Registrable 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.
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1.8 Rule
144 Reporting. With a view to making available to Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees at all times to:
1.8.1 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;
1.8.2 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
1.8.3 so
long as a Holder owns any Registrable 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.
1.9 Transfer
of Registration Rights. Holders’ rights to cause the Company to
register their securities and keep information available, granted to them by
the
Company under subsections 1.2, 1.3 and 1.8, 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 1.9 to any proposed transferee or assignee who
the
Company reasonably believes is a competitor of the
Company. Notwithstanding anything else in this subsection 1.9, any
Holder may transfer rights to a transferee of a Holder’s Registrable Securities
if such transferee is a partner, member or shareholder or a retired partner,
member or shareholder of such Holder.
1.10 Limitations
on Subsequent Registration Rights. From and after 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 Registrable 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 including any
registration rights similar to those rights described in subsection 1.3 or
include such securities in any registration filed under subsections 1.2 or
1.3 hereof if such inclusion would adversely affect the rights of any Holder
(or
any qualifying transferee under subsection 1.9) under such
subsections.
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1.11 “Market
Stand-Off” Agreement. Each Holder hereby agrees 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:
1.11.1 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 Registrable Securities of each Holder (and
the
shares of securities of every other person subject to the foregoing restriction)
until the end of such period.
1.12 Delay
of Registration. No Holder shall have any rights to 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.
1.13 Termination
of Registration Rights. No holder shall be 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 each Holder
of at least ten thousand (10,000) Registrable Securities (a “Qualified
Holder”) as soon as practicable after the end of each fiscal year of the
Company, but in any event within 90 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 public accountants selected by the Company’s Board of
Directors.
2.2 Inspection. The
Company shall permit each Qualified Holder, 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.
2.3 Termination
of Information Covenants and Confidentiality of Information. The
covenants of the Company set forth in subsections 2.1 and 2.2 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 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.
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3 General.
3.1 Waivers
and Amendments. With the written consent of the record holders of
at least a majority of the Registrable 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 Registrable Securities without
the consent of all of the Holders of the Registrable 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 Registrable 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 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.
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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.
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
Delaware corporation
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By:
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▇▇▇▇
▇▇▇▇▇▇, Chief Executive Officer
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Date:
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____________,
2003
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“HOLDER”
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||
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By:
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Print:
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Date:
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_______________,
2003
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