EXHIBIT 10.1
EXHIBIT B
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PROCERA NETWORKS, INC.
SUBSCRIPTION AGREEMENT
RESTRICTED COMMON STOCK AT $.80 PER SHARE
1. SUBSCRIPTION:
(a) The undersigned (individually and/or collectively, the "PARTICIPANT")
hereby applies to purchase shares of restricted common stock (the "Shares" or
the "COMMON STOCK") of Procera Networks, Inc., a Nevada corporation (the
"COMPANY"), in accordance with the terms and conditions of this Subscription
Agreement (the "SUBSCRIPTION") and the private placement memorandum to which
this Subscription is attached (the "MEMORANDUM").
(b) In addition to the Shares, the Participant shall receive warrants to
purchase Common Stock of the Company (the "WARRANTS"). The Warrants shall be
exercisable for the number of Shares equal to Sixty Percent (60%) of the Shares
purchased pursuant to this Subscription. The Warrants shall be priced, as set
forth in those certain Warrant Agreements of even date herewith, as follows:
(i) 50% shall be priced at $1.25 per share; and (ii) 50% shall be priced at
$1.37 per share.
(c) Before this Subscription is considered, the Participant must complete,
execute and deliver to the Company the following:
(i) This Subscription Agreement;
(ii) The Registration Rights Agreement, attached to the Memorandum
as EXHIBIT C (the "RIGHTS AGREEMENT"), whereby the Participant shall acquire the
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right to have his or her Shares registered for resale; and
(iii) The Participant's wire transfer in the amount of $_____________
in exchange for ________________________ Shares purchased, sent to the Company
as follows:
PAY TO: Silicon Valley Bank
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: ROUTING NO.:
FOR CREDIT OF: Procera Networks, Inc.
CREDIT ACCOUNT NO.:
(d) This Subscription is irrevocable by the Participant.
(e) This Subscription is not transferable or assignable by the
Participant.
(f) This Subscription may be rejected in whole or in part by the Company
in its sole discretion. In the event this Subscription is rejected by the
Company, all funds and documents tendered by the Participant shall be returned.
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(g) This Offering, as defined in the Offering Memorandum, is scheduled
to close on December 10, 2004 at 5:00 p.m. Pacific Standard Time (the "Closing
Date"), provided the Company has received the Minimum Offering of $500,000. The
Target Offering is $4,000,000.
2. REPRESENTATIONS BY PARTICIPANT. In consideration of the Company's
acceptance of the Subscription, Participant makes the following representations
and warranties to the Company and to its principals, jointly and severally,
which warranties and representations shall survive any acceptance of the
Subscription by the Company:
(a) Participant has had the opportunity to ask questions and receive any
additional information from persons acting on behalf of the Company to verify
Participant's understanding of the terms thereof and of the Company's business
and status thereof, and that no oral information furnished to the undersigned or
its advisors in connection with the Subscription has been in any way
inconsistent with other documentary information provided.
(b) Participant acknowledges that Participant has not seen, received, been
presented with, or been solicited by any leaflet, public promotional meeting,
newspaper or magazine article or advertisement, radio or television
advertisement, or any other form of advertising or general solicitation with
respect to the Shares.
(c) The Shares are being purchased for Participant's own account for
long-term investment and not with a view to immediately re-sell the Shares. No
other person or entity will have any direct or indirect beneficial interest in,
or right to, the Shares. Participant or its agents or investment advisors have
such knowledge and experience in financial and business matters that will enable
Participant to utilize the information made available to it in connection with
the purchase of the Shares to evaluate the merits and risks thereof and to make
an informed investment decision.
(d) Participant acknowledges that the Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
qualified under the California Securities Law, or any other applicable blue sky
laws, in reliance, in part, on Participant's representations, warranties and
agreements made herein.
(e) Other than the rights specifically set forth in this Subscription and
the Rights Agreement, Participant represents, warrants and agrees that the
Company and the officers of the Company (the "COMPANY'S OFFICERS") are under no
obligation to register or qualify the Shares under the Securities Act or under
any state securities law, or to assist the undersigned in complying with any
exemption from registration and qualification.
(f) Participant represents that Participant meets the criteria for
participation because (i) Participant has a preexisting personal or business
relationship with the Company or one or more of its partners, officers,
directors or controlling persons or (ii) by reason of Participant's business or
financial experience, or by reason of the business or financial experience of
its financial advisors who are unaffiliated with, and are not compensated,
directly or indirectly, by the Company or any affiliate or selling agent of the
Company, Participant is capable of evaluating the risk and merits of an
investment in the Shares and of protecting its own interests; AND
(i) Participant has minimum net worth in excess of $1,000,000; or
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(ii) Participant has income in excess of $200,000 or joint income with
his or her spouse in excess of $300,000 in each of the two most recent years,
and Participant, with his or her spouse, has a reasonable expectation of
reaching the same income level in the current year; or
(iii) Participant is a director or executive officer of the Company;
or
(iv) If a trust, the trust has total assets in excess of $5,000,000
and was not formed for the specific purpose of acquiring the Shares and the
purchase was directed by a sophisticated person as described in 7 CFR Sec.
230.506(b)(2)(ii); or
(v) If a corporation or partnership, the corporation or partnership
has total assets in excess of $5,000,000 and was not formed for the specific
purpose of acquiring the Shares; or
(vi) If an entity, all of the equity owners meet the criteria for
participation set forth in this Paragraph 2(f).
(g) Participant understands that the Shares are illiquid, and until
registered with the Securities Exchange Commission or an exemption from
registration becomes available, cannot be readily sold as there will not be a
public market for them and that Participant may not be able to sell or dispose
of the Shares, or to utilize the Shares as collateral for a loan. Participant
must not purchase the Shares unless Participant has liquid assets sufficient to
assure Participant that such purchase will cause it no undue financial
difficulties and that Participant can still provide for current and possible
personal contingencies, and that the commitment herein for the Shares, combined
with other investments of Participant's, is reasonable in relation to its net
worth.
(h) Participant understands that the right to transfer the Shares will be
restricted unless the transfer is not in violation of the Securities Act, the
California Securities Law, and any other applicable state securities laws
(including investment suitability standards), that the Company will not consent
to a transfer of the Shares unless the transferee represents that such
transferee meets the financial suitability standards required of an initial
participant and that the Company has the right, in its absolute discretion, to
refuse to consent to such transfer.
(i) Participant has been advised to consult with its own attorney or
attorneys regarding all legal matters concerning an investment in the Company
and the tax consequences of purchasing the Shares, and have done so, to the
extent Participant considers necessary.
(j) Participant acknowledges that the tax consequences of investing in the
Company will depend on particular circumstances, and neither the Company, the
Company's Officers, any other investors, nor the partners, shareholders,
members, managers, agents, officers, directors, employees, affiliates or
consultants of any of them, will be responsible or liable for the tax
consequences to Participant of an investment in the Company. Participant will
look solely to and rely upon its own advisers with respect to the tax
consequences of this investment
(k) All information which Participant has provided to the Company
concerning Participant, its financial position and its knowledge of financial
and business matters is truthful, accurate, correct and complete as of the date
set forth herein.
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3. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company represents and
warrants that:
(a) Due Incorporation. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by it
makes such qualification necessary, other than those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the business,
operations or financial condition of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital stock
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of the Company have been duly authorized and validly issued and are fully paid
and non-assessable.
(c) Authority; Enforceability. This Subscription and the Warrant and
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Rights Agreement delivered together with this Subscription or in connection
herewith have been duly authorized, executed and delivered by the Company and
are valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and the Company
has full corporate power and authority necessary to enter into this
Subscription, the Rights Agreement and the Warrant to perform its obligations
hereunder and under all other agreements entered into by the Company relating
hereto.
(d) Consents. No consent, approval, authorization or order of any court,
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governmental agency or body or arbitrator having jurisdiction over the Company,
the National Association of Securities Dealers, Inc., the Over the Company
Bulletin Board (the "OTC Bulletin Board"), nor the Company's stockholders is
required for execution of this Subscription, and all other agreements entered
into by the Company relating thereto, including, without limitation, the
issuance and sale of the Shares, and the performance of the Company's
obligations hereunder and under all such other agreements.
(e) The Shares. The Shares upon issuance:
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(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
Securities Act and any applicable state securities laws;
(ii) have been, or will be, duly and validly authorized and on the
date of issuance, and upon exercise of the Warrants, the Warrant Shares will be
duly and validly issued, fully paid and nonassessable (and if registered
pursuant to the Securities Act, and resold pursuant to an effective registration
statement will be free trading and unrestricted, provided that each Participant
complies with the prospectus delivery requirements of the Securities Act and any
state securities laws);
(iii) will not have been issued or sold in violation of any preemptive
or other similar rights of the holders of any securities of the Company; and
(iv) will not subject the holders thereof to personal liability by
reason of being such holders.
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(f) Litigation. There is no pending or, to the best knowledge of the
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Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company
that would affect the execution by the Company or the performance by the Company
of its obligations under this Subscription, and all other agreements entered
into by the Company relating hereto. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, which litigation, if adversely determined, could have a
material adverse effect on the Company.
(g) Reporting Company. The Company is a publicly held company subject to
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reporting obligations pursuant to Sections 15(d) and 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and has a class of common
shares registered pursuant to Section 12(g) of the Exchange Act. Pursuant to
the provisions of the Exchange Act, the Company has filed all reports and other
materials required to be filed thereunder with the Commission during the
preceding twelve months.
(h) Stop Transfer. The Shares, when issued, will be restricted
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securities. The Company will not issue any stop transfer order or other order
impeding the sale, resale or delivery of any of the Shares, except as may be
required by any applicable federal or state securities laws. Except as
described in this Subscription, the Company will not issue any stop transfer or
other order impeding the sale, resale or delivery of the Shares unless
contemporaneous notice of such instruction is given to the Participants.
(i) Defaults. The Company is not in violation of its Articles of
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Incorporation or Bylaws. The Company is (i) not in default under or in
violation of any other material agreement or instrument to which it is a party
or by which it or any of its properties are bound or affected, which default or
violation would have a material adverse effect on the Company, (ii) not in
default with respect to any order of any court, arbitrator or governmental body
or subject to or party to any order of any court or governmental authority
arising out of any action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair competition or
similar matters, or (iii) to its knowledge in violation of any statute, rule or
regulation of any governmental authority which violation would have a material
adverse effect on the Company.
(j) No Integrated Offering. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the Shares
pursuant to this Subscription to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of the OTC Bulletin Board, nor will the Company or any of its
affiliates or subsidiaries take any action or steps that would cause the offer
of the Shares to be integrated with other offerings. The Company will not
conduct any offering other than the transactions contemplated hereby that will
be integrated with the offer or issuance of the Shares.
(k) No General Solicitation. Neither the Company, nor any of its
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affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of the Shares.
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(l) Listing. The Company's common stock is listed for trading on the OTC
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Bulletin Board. The Company has not received any oral or written notice that its
common stock will be delisted from the OTC Bulletin Board nor that its common
stock does not meet all requirements for the continuation of such quotation and
the Company satisfies the requirements for the continued listing of its common
stock on the OTC Bulletin Board.
(m) Dilution. The Company's executive officers and directors have studied
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and fully understand the nature of the Shares being sold hereby and recognize
that they have a potential dilutive effect on the interests of other holders of
the Company's securities. The board of directors of the Company has concluded,
in its good faith business judgment that such issuance is in the best interests
of the Company.
(n) Correctness of Representations. The Company represents that the
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foregoing representations and warranties are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing Date
in all material respects, and, unless the Company otherwise notifies the
Participants prior to the Closing Date, shall be true and correct in all
material respects as of the Closing Date. The foregoing representations and
warranties shall survive the Closing Date for a period of one year.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Participants as follows:
(a) Stop Orders. The Company will advise the Participants promptly after
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it receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.
(b) Listing. The Company will maintain the listing of its Common Stock on
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the OTC Bulletin Board (the "Principal Market"), and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the Principal Market, as applicable.
(c) Market Regulations. If required, the Company shall notify the
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Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, if any, of the transactions contemplated by this
Subscription, and shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Shares to the participants, including the filing of a
Form 8-K with the Securities and Exchange Commission.
(d) Use of Proceeds. The Purchase Price will be used by the Company for
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the purposes described in the Memorandum.
(e) Reservation of Common Stock. The Company undertakes to reserve from
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its authorized but unissued common stock, at all times that Warrants and options
remain outstanding, a number of common shares equal to the amount of common
shares issuable upon exercise of the Warrants and options.
(f) Offering Restrictions. The Company will not issue any equity,
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convertible debt or other securities convertible into common stock on any terms
more favorable to such other investor than any of the terms of the Offering,
until after 180 days from the Closing Date
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("Exclusion Period") without the prior written consent of the Participant, which
consent may be withheld for any reason. Notwithstanding the above, this
provision shall not apply to the issuance of incentive stock options under the
Company's 2004 Stock Option Plan or any amendment thereto or any successor
employee incentive plans.
(g) Anti-Dilution Protection. If during the period beginning on the
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Closing Date and continuing for a period of 180 days thereafter (the "Exclusion
Period"), the Company shall offer, issue or agree to issue any Common Stock or
securities convertible into or exercisable for shares of Common Stock to any
person, firm or corporation at a price per share or conversion or exercise price
per share which shall be less than the per share purchase price of the Shares,
without the consent of Participant still holding Shares (the "Triggering
Event"), then the Company shall issue, for each such Triggering Event,
additional shares of Common Stock to the Participant (the "Additional Shares")
so that the average per share purchase price of the shares of Common Stock
issued to the Participant is equal to such other lower price per share. The
delivery to the Participant of the Additional Shares shall be on or before the
closing date of the Triggering Event. The Additional Shares shall be delivered
to the Participant under the same terms as the shares issued pursuant to the
Triggering Event. For purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company carrying the right to
convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of the Additional
Shares upon the issuance of such convertible security, warrant, right or option
and again upon any subsequent issuances of shares of Common Stock upon exercise
of such conversion or purchase rights if such issuance is at a price lower than
the then purchase price per share of the shares of Company Stock. This Section
4(g) shall apply only if the Company violates the provisions of Section 4(f)
above, and this provision shall not apply to the issuance of incentive stock
options under the Company's 2003 Stock Option Plan.
5. COVENANTS OF THE COMPANY AND PARTICIPANT REGARDING INDEMNIFICATION.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
the Participants, the Participants' officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Participant or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
Company or breach of any warranty by Company in this Subscription or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other agreement entered into by the
Company and Participant relating hereto.
(b) Each Participant agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers, directors, agents,
affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Participant
in this Subscription or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any breach or default in performance by such Participant of any
covenant or undertaking to be performed by such Participant hereunder, or any
other agreement entered into by the Company and Participants relating hereto.
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6. SUBSCRIPTION BINDING ON HEIRS, ETC. This Subscription, upon acceptance by
the Company, shall be binding upon the heirs, executors, administrators,
successors and assigns of the Participant. If the undersigned is more than one
person, the obligations of the undersigned shall be joint and several and the
representations and warranties shall be deemed to be made by and be binding on
each such person and his or her heirs, executors, administrators, successors,
and assigns.
7. EXECUTION AUTHORIZED. If this Subscription is executed on behalf of a
corporation, partnership, trust or other entity, the undersigned has been duly
authorized and empowered to legally represent such entity and to execute this
Subscription and all other instruments in connection with the Shares and the
signature of the person is binding upon such entity.
8. ADOPTION OF TERMS AND PROVISIONS. The Participant hereby adopts, accepts
and agrees to be bound by all the terms and provisions hereof.
9. GOVERNING LAW. This Subscription shall be construed in accordance with the
laws of the State of California.
10. INVESTOR INFORMATION: (This must be consistent with the form of ownership
selected below.)
Name (please print): _____________________________________________________
If entity named above, By: ________________________________________________
Its: ________________________________________________
Social Security or Taxpayer I.D. Number: _________________________
Business Address (including zip code): ______________________________
______________________________
Business Phone: _________________________________
Residence Address (including zip code):_____________________________________
________________________________________________________________________________
Residence Phone:_______________________________________________________________
All communications to be sent to:
____ Business or ____ Residence Address
Please indicate below the form in which you will hold title to your
interest in the Shares. PLEASE CONSIDER CAREFULLY. ONCE YOUR SUBSCRIPTION IS
ACCEPTED, A CHANGE IN THE FORM OF TITLE CONSTITUTES A TRANSFER OF THE INTEREST
IN THE SHARES AND MAY THEREFORE BE RESTRICTED BY THE TERMS OF THIS SUBSCRIPTION,
AND MAY RESULT IN ADDITIONAL COSTS TO YOU. Participants should seek the advice
of their attorneys in deciding in which of the forms they should take ownership
of the interest in the Shares, because different forms of ownership can have
varying gift tax, estate tax, income tax, and other consequences, depending on
the state of the investor's domicile and his or her particular personal
circumstances.
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____ INDIVIDUAL OWNERSHIP (one signature required)
____ JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENANTS IN COMMON
(both or all parties must sign)
____ COMMUNITY PROPERTY (one signature required if interest held in one name,
i.e., managing spouse; two signatures required if interest held in both names)
____ TENANTS IN COMMON (both or all parties must sign)
____ GENERAL PARTNERSHIP (fill out all documents in the name of the
PARTNERSHIP, by a PARTNER authorized to sign)
____ LIMITED PARTNERSHIP (fill out all documents in the name of the LIMITED
PARTNERSHIP, by a GENERAL PARTNER authorized to sign)
____ LIMITED LIABILITY COMPANY (fill out all documents in the name of the
LIMITED LIABILITY COMPANY, by a member authorized to sign)
____ CORPORATION (fill out all documents in the name of the CORPORATION, by the
President or other officer authorized to sign)
____ TRUST (fill out all documents in the name of the TRUST, by the Trustee,
and include a copy of the instrument creating the trust and any other documents
necessary to show the investment by the Trustee is authorized. The date of the
trust must appear on the Notarial where indicated.)
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Subject to acceptance by the Company, the undersigned has completed this
Subscription Agreement to evidence his/her subscription for participation in the
Shares of the Company, this _____ day of ___________________, 2004, at
_______________________________________.
PARTICIPANT
___________________________________
(Signature
By:________________________________
Its:_______________________________
The Company has accepted this subscription this _____ day of _________________,
2004.
"COMPANY"
PROCERA NETWORKS, INC.,
A NEVADA CORPORATION
By:________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
Address for notice:
Procera Networks, Inc.
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Attn: ▇▇▇ ▇▇▇▇▇▇▇
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