Document:

DIGITAL LIGHTWAVE EXHIBIT 10.108

Exhibit 10.108 

DIGITAL LIGHTWAVE, INC. 

NINTH AMENDED AND RESTATED SECURITY AGREEMENT

 

This Ninth Amended and Restated Security Agreement (this " Agreement ") is made as of June 12, 2003, by and between Digital Lightwave, Inc., a Delaware corporation (the " Debtor "), in favor of Optel, LLC (the " Secured Party "). 

RECITALS

 

The Debtor and the Secured Party are parties to (i) that certain Secured Promissory Note dated as of February 14, 2003 in the original principal amount of $800,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, (ii) that certain Secured Promissory Note dated as of February 26, 2003 in the original principal amount of $650,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, (iii) that certain Secured Promissory Note dated as of March 28, 2003 in the original principal amount of $450,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, (iv) that certain Secured Promissory Note dated as of April 2, 2003 in the original principal amount of $60,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, (v) that certain Secured Promissory Note dated as of April 29, 2003 in the original principal amount of $500,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, (vi) that certain Secured Promissory Note dated as of May 14, 2003 in the original principal amount of $400,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, (vii) that certain Secured Promissory Note dated as of May 19, 2003 in the original principal amount of $620,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, (viii) that certain Secured Promissory Note dated as of May 29, 2003 in the original principal amount of $520,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time, and (ix) that certain Secured Promissory Note dated as of the date hereof in the original principal amount of $500,000 upon the terms and subject to the conditions set forth therein, and as the same may be increased, amended, modified or extended from time to time (collectively, the "
Notes
"). The parties intend that the Debtor’s obligations to repay the Notes be secured by all of the assets of the Debtor.

AGREEMENT

 

In consideration of the purchase of the Notes by the Secured Party and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Debtor hereby agrees with the Secured Party as follows: 

1.    Grant of Security Interest . 

(a)    To secure the Debtor’s full and timely performance of the Obligations, the Debtor hereby grants to the Secured Party a continuing Lien on and security interest (the " Security Interest ") in, all of the Debtor’s right, title and interest in and to all of its personal property and assets (both tangible and intangible), including, without limitation, the following, whether now owned or hereafter acquired and wherever located: (a) all Receivables; (b) all Equipment; (c) all Fixtures; (d) all General Intangibles; (e) all Inventory; (f) all Investment Property; (g) all Deposit Accounts; (h) all Cash; (i) all other Goods of the Debtor; (j) all Intellectual Property; and (l) all Proceeds of each of the foregoing and all accessions to, and replacements for, each of the foregoing (collectively, the " Collateral "). The Security Interest shall be a first and prior interest in all of the Collateral, provided , however , that the Security Interest shall be subordinated with respect to any Collateral that is subject to the Prior Security Interests (as defined below). 

(b)    The following terms shall have the following meanings for purposes of this Agreement: 

"Account" means any "Account," as such term is defined in the UCC now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest and, in any event, shall include, without limitation, all accounts receivable, book debts, rights to payment and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments) now owned or hereafter received or acquired by or belonging or owing to the Debtor whether or not arising out of goods or software sold or services rendered by the Debtor or from any other transaction, whether or not the same involves the sale of goods or services by the Debtor and all of the Debtor’s rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, and all of the Debtor’s rights to any goods represented by any of the foregoing, and all monies due or to become due to the Debtor under all purchase orders and contracts for the sale of goods or the performance of services or both by the Debtor or in connection with any other transaction (whether or not yet earned by performance on the part of the Debtor), now in existence or hereafter occurring, including, without limitation, the right to receive the proceeds of said purchase orders and contracts, and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing. 

"Cash" means all cash, money, currency, and liquid funds, wherever held, in which the Debtor now or hereafter acquires any right, title, or interest. 

"Chattel Paper" means any "Chattel paper," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"Commercial Tort Claim" shall have the meaning given to that term in Section 2(e) of this Agreement. 

"Credit Documents" means this Agreement, the Notes and any UCC-1 Financing Statement filed herewith. 

"Deposit Accounts" means any "Deposit accounts," as such term is defined in the UCC, and includes any checking account, savings account, or certificate of deposit, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"Documents" means any "Documents," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"Electronic Chattel Paper" means any "Electronic chattel paper," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"Equipment" means any "Equipment," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest and any and all additions, upgrades, substitutions and replacements of any of the foregoing, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires interest. 

"Fixtures" means any "Fixtures," as such term is defined in the UCC, together with all right, title and interest of the Debtor in and to all extensions, improvements, betterments, accessions, renewals, substitutes, and replacements of, and all additions and appurtenances to any of the foregoing property, and all conversions of the security constituted thereby, immediately upon any acquisition or release thereof or any such conversion, as the case may be, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"General Intangible" means any "General intangible," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest and, in any event, shall include, without limitation, all right, title and interest that the Debtor may now or hereafter have in or under any contracts, rights to payment, payment intangibles, confidential information, interests in partnerships, limited liability companies, corporations, joint ventures and other business associations, permits, goodwill, claims in or under insurance policies, including unearned premiums and premium adjustments, uncertificated securities, deposit, checking and other bank accounts, but shall not include any Intellectual Property (including the right to receive all proceeds and damages therefrom), rights to receive tax refunds and other payments and rights of indemnification. 

"Goods" means any "Goods," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"Instruments" means any "Instrument," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"Intellectual Property" means, collectively, all rights, priorities and privileges of the Debtor relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, inventions, patents, patent licenses, trademarks, trademark licenses and trade secrets (including customer lists), domain names, Web sites and know-how , including, but not limited to, the patents, trademarks and copyrights set forth on Schedule    2 . 

"Inventory" means any "Inventory," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest, and, in any event, shall include, without limitation, all inventory, goods and other personal property that are held by or on behalf of the Debtor for sale or lease or are furnished or are to be furnished under a contract of service or that constitute raw materials, work in process or materials used or consumed or to be used or consumed in the Debtor’s business, or the processing, packaging, promotion, delivery or shipping of the same, and all finished goods, whether or not the same is in transit or in the constructive, actual or exclusive possession of the Debtor or is held by others for the Debtor’s account, including, without limitation, all goods covered by purchase orders and contracts with suppliers and all goods billed and held by suppliers and all such property that may be in the possession or custody of any carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or other Persons. 

"Investment Property" means any "Investment property," as such term is defined in the UCC, and includes certificated securities, uncertificated securities, money market funds and U.S. Treasury bills or notes, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"Letter of Credit Right" means any "Letter of credit right," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest, including any right to payment or performance under any letter of credit. 

"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and the filing of any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the UCC or comparable law of any jurisdiction. 

"Obligations" shall mean and include all loans, advances, debts, liabilities and obligations, however arising, owed by the Debtor to the Secured Party of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of the Notes, or any of the other Credit Documents or otherwise, including without limitation all interest, fees, charges, expenses, attorneys’ fees and accountants’ fees chargeable to the Debtor or payable by the Debtor thereunder. 

"Permitted Liens" shall mean (a) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith, provided that adequate reserves for the payment thereof have been established in accordance with generally accepted accounting principals, (b) Liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords and other similar Liens imposed by law incurred in the ordinary course of business for sums not overdue more than 45 days or being contested in good faith, provided that adequate reserves for the payment thereof have been established in accordance with generally accepted accounting principals, (c) deposits under workers' compensation, unemployment insurance and social security laws or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure statutory obligations of surety or appeal bonds or to secure indemnity, performance or other similar bonds in the ordinary course of business, (d) zoning restrictions, easements, rights-of-way, title irregularities and other similar encumbrances, which alone or in the aggregate are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Debtor, (e) banker's Liens and similar Liens (including set-off rights) in respect of bank deposits, (f) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties and in connection with the importation of goods in the ordinary course of the Debtor’s business, (g) Liens on the property or assets of any subsidiary of the Debtor in favor of the Debtor, (h) purchase money Liens that will be discharged upon the Debtor’s payment of the purchase price for the applicable property, to the extent such Liens relate solely to the property so purchased and (j) the security interests set forth on Schedule   1 (the " Prior Security Interests "); provided, however, that except for the Prior Security Interests, that in each case, such Lien is not senior or prior to the Security Interest created hereunder. 

"Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof). 

"Proceeds" means "Proceeds," as such term is defined in the UCC and, in any event, shall include, without limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other forms of money or currency or other proceeds payable to the Debtor from time to time in respect of the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Debtor from time to time with respect to any of the Collateral, (c) any and all payments (in any form whatsoever) made or due and payable to the Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority), (d) the proceeds, damages, or recovery based on any claim of the Debtor against third parties (i) for past, present or future infringement of any copyright, patent or patent license or (ii) for past, present or future infringement or dilution of any trademark or trademark license or for injury to the goodwill associated with any trademark, trademark registration or trademark licensed under any trademark license and (e) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. 

"Receivables" means all of the Debtor’s Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations, and letters of credit and Letter of Credit Rights. 

"Supporting Obligation" means any "Supporting obligation," as such term is defined in the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now holds or hereafter acquires any interest. 

"UCC" means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of Florida; provided , that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Secured Party’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Florida, the term "UCC" shall mean the Uniform Commercial Code as enacted and in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. 

Unless otherwise defined herein, all capitalized terms used herein and defined in the Notes shall have the respective meaning given to those terms in the Notes, and terms that are defined in the UCC and used herein shall have the meanings given to them in the UCC. 

2.    Representations and Warranties . The Debtor hereby represents and warrants to the Secured Party that: 

(a)    Ownership of Collateral . The Debtor is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time the Debtor acquires rights in the Collateral, will be the legal and beneficial owner thereof). Except for the Security Interest granted to the Secured Party pursuant to this Agreement, the Debtor has rights in or the power to transfer the Collateral free and clear of any adverse Lien, security interest or encumbrance except as created by this Security Interest, except for Permitted Liens. Except for the financing statements listed in Schedule   3 , no financing statements covering any Collateral or any proceeds thereof are on file in any public office (other than filings listing the Secured Party as the secured party). 

(b)    Valid Security Interest . The Security Interest granted pursuant to this Agreement will constitute a valid and continuing first priority, perfected security interest in favor of the Secured Party in the Collateral for which perfection is governed by the UCC or filing with the United States Copyright Office or United States Patent and Trademark Office. Such Security Interest will be prior to all other Liens on the Collateral, except for Permitted Liens. 

(c)    Organization and Good Standing . The Debtor has been duly incorporated, and is validly existing and in good standing, under the laws of the State of Delaware. 

(d)    Location, State of Organization and Name of the Debtor . The Debtor’s state of organization is Delaware and the Debtor’s exact legal name as it appears in the official filings in the State of Delaware is as set forth in the first paragraph of this Agreement. The Debtor has only one jurisdiction of organization. 

(e)    Location of Equipment and Inventory . All Equipment and Inventory are (i) located at the locations indicated on Schedule 4 (ii) in transit to such locations or (iii) in transit to a third party purchaser which will become obligated on a Receivable to the Debtor upon receipt. Except for Equipment and Inventory referred to in clauses (ii) and (iii) of the preceding sentence, the Debtor has exclusive possession and control of the Inventory and Equipment. 

(g)    Delivery of Items . Schedule   5 lists all Instruments (other than checks received in the ordinary course of business), letter-of-credit rights, Electronic Chattel paper and Chattel Paper of the Debtor as of the date hereof. The Debtor has delivered to the Secured Party, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all Receivables consisting of instruments and Chattel Paper and the originals of all certificated securities owned directly by the Debtor. 

(h)    Receivables . Each Receivable is genuine and enforceable against the party obligated to pay the same (an " Account Debtor ") free from any right of rescission, defense, setoff or discount. 

(i)    Insurance . Each insurance policy maintained by the Debtor is validly existing and is in full force and effect. The Debtor is not in default in any material respect under the provisions of any insurance policy, and there are no facts which, with the giving of notice or passage of time (or both), would result in such a default under any material provision of any such insurance policy. Set forth in Schedule   6 is a complete and accurate list of the insurance of the Debtor in effect on the date of this Agreement covering fire, public liability, property damage and worker’s compensation, showing as of such date, (i) the type of insurance carried, (ii) the name of the insurance carrier, and (iii) the amount of each type of insurance carried. 

(j)    This Agreement is effective to create a valid and continuing Lien upon the Collateral. All action by the Debtor necessary to protect and perfect such Lien on each item of the Collateral has been duly taken. 

3.    Covenants . The Debtor covenants and agrees with the Secured Party that, from and after the date of this Agreement until the Obligations are paid in full: 

(a)    Other Liens . Except for the Security Interest and Permitted Liens, the Debtor has rights in or the power to transfer the Collateral and its title and will be able to do so hereafter free from any adverse Lien, security interest or encumbrance, and the Debtor will defend the Collateral against the claims and demands of all persons at any time claiming the same or any interest therein. 

(b)    Further Documentation . At any time and from time to time, upon the writ­ten request of the Secured Party, and at the sole expense of the Debtor, the Debtor will promptly and duly authenticate and deliver such further instruments and documents and take such further action as the Secured Party may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted including, without limitation, filing any financing or continuation statements under the UCC in effect with respect to the Liens created hereby. The Debtor also hereby authorizes the Secured Party to file any such financing, amendment or continuation statement without the authentication of the Debtor to the extent permitted by applicable law. A reproduction of this Agreement shall be sufficient as a financing statement (or as an exhibit to a financing statement on form UCC-1) for filing in any jurisdiction. 

(c)    Indemnification . The Debtor agrees to defend, indemnify and hold harmless the Secured Party against any and all liabilities, costs and expenses (including, without limitation, legal fees and expenses) (" Liabilities "): (i) with respect to, or resulting from, any delay in paying, any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral, (ii) with respect to, or resulting from, any delay in complying with any law, rule, regu­lation or order of any governmental authority applicable to any of the Collateral or (iii) in connection with any of the transactions contemplated by this Agreement. 

(d)    Maintenance of Records . The Debtor will keep and maintain at its own expense complete and satisfactory, in all material respects, records of the Collateral. 

(e)    Inspection Rights . The Secured Party shall have full access during normal business hours, and upon prior notice, to all the books, corre­spondence and other records of the Debtor relating to the Collateral. The Secured Party or its repre­sentatives may examine such records and make photocopies or otherwise take extracts from such records. The Debtor agrees to render to the Secured Party, at the Debtor’s expense, such clerical and other assistance as the Secured Party may request with regard to the exercise of its rights pursuant to this paragraph. 

(f)    Compliance with Laws, etc. The Debtor (i) will comply with all laws, rules, regulations and orders of any governmental authority applicable to any part of the Collateral or to the operation of the Debtor’s business , the failure of which to comply with will have a material adverse effect on the Debtor, and (ii) shall not use or permit any Collateral to be used in violation of any provision of any Credit Document, any law, rule or obligation or order of any governmental authority, or any policy of insurance covering the Collateral; provided , however , that in each case, the Debtor may contest any such law, rule, regulation or order; in any reasonable manner which does not, in the reasonable opinion of the Secured Party, adversely affect the Secured Party’s rights or the priority of its Liens on the Collateral. 

(g)    Payment of Obligations . The Debtor will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Collateral or with respect to any its income or profits derived from the Collateral, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral. 

(h)    Limitation on Liens on Collateral . The Debtor will not create, incur or permit to exist, will defend the Collateral against, and will take such other action as is necessary to remove, any Lien or claim on or to the Collateral, other than the Security Interest and Permitted Liens, and will defend the right, title and interest of the Secured Party in and to any of the Collateral against the claims and demands of all other persons. 

(i)    Limitations on Dispositions of Collateral . The Debtor will not sell, transfer, lease, or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so other than dispositions of Inventory in the ordinary course of the Debtor’s business; provided , however that the Debtor will be allowed to grant licenses to its products and related documentation in the ordinary course of business and to establish or provide for escrows of related intellectual property in connection therewith. 

(j)    Further Identification of Collateral . The Debtor will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may request, all in detail acceptable to the Secured Party. 

(k)    Notice of Change of State of Incorporation . Without 30 days’ prior written notice to the Debtor shall not (i) change the Debtor’s name, state of incorporation or organization, organizational identification number or place of business (or, if the Debtor has more than one place of business, its chief executive office), or the office in which the Debtor’s records relating to Receivables are kept, or (ii) keep Collateral consisting of Chattel Paper and documents at any location other than its chief executive office. 

(l)    Future Commercial Tort Claims . The Debtor will promptly give notice to the Secured Party upon the initiation of any Commercial Tort Claim. The Debtor hereby authorizes the Secured Party to amend this Agreement (without any further action or consent from the Debtor) to include any such Commercial Tort Claim as Collateral hereunder. 

(m)    Deposit Accounts . For each deposit account maintained by the Debtor, the Debtor shall, along with the bank or other depository institution at which such deposit account is maintained (the " Depositary Bank "), execute and deliver to the Secured Party a Deposit Account Control Agreement in form and substance reasonably satisfactory to the Secured Party. If requested by the Secured Party, the Debtor shall also obtain a blocked account, lockbox or similar agreement with all or certain Depository Banks. Without ten days prior written notice to the Secured Party, the Debtor shall not establish any deposit account not set forth on Schedule   6 . 

(n)    Collection of Receivables . The Debtor shall collect, enforce and receive delivery of the Receivables in accordance with past practice . 

(q)    Insurance . The Debtor shall (i) maintain and keep in force insurance of the types and in amounts customarily carried from time to time during the term of this Agreement in its lines of business, including fire, public liability, property damage and worker’s compensation, such insurance to be carried with companies and in amounts satisfactory to the Secured Party, (ii) deliver to the Secured Party from time to time, as the Secured Party may request, schedules setting forth all insurance then in effect, and (iii) deliver to the Secured Party copies of each policy of insurance which replaces, or evidences the renewal of, each existing policy of insurance at least 15 days prior to the expiration of such policy. The Secured Party shall be named as additional insured or additional loss payee, as appropriate, on all liability and property insurance of the Debtor and such policies shall contain such additional endorsements as shall be required by the Secured Party. 

(r)    Mortgagee Waivers . The Debtor shall use its best efforts to obtain waivers or subordinations of Liens from landlords and mortgagees, and the Debtor shall, in all instances, obtain signed acknowledgements of the Secured Party’s Liens from bailees having possession of any of the Debtor’s Collateral that they hold such Collateral for the benefit of the Secured Party pursuant to Section 9313(c) of the UCC. 

(s)    Letters of Credit . If the Debtor is or becomes the beneficiary of a letter of credit, the Debtor shall promptly, and in any event within two business days after becoming a beneficiary, notify the Secured Party thereof and enter into a tri-party agreement with the Secured Party and the issuer or confirmation bank with respect to such Letter of Credit Rights assigning such Letter of Credit Rights to the Secured Party and directing all payments thereunder to the Secured Party, all in form and substance satisfactory to the Secured Party. 

(t)    Electronic Chattel Paper . The Debtor shall take all steps reasonably necessary to grant the Secured Party control of all Electronic Chattel Paper in accordance with the UCC and all "transferable records" as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act. 

(u)    Intellectual Property Matters . The Debtor shall notify the Secured Party immediately if it knows or has reason to know (i) that any application or registration relating to any of its Intellectual Property that is material to the operation of its business may become abandoned or dedicated, or (ii) of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court) regarding the Debtor’s ownership of any Intellectual Property that is material to the operation of its business, its right to register the same, or to keep and maintain the same. 

(v)    Intellectual Property Applications . In no event shall the Debtor, either itself or through any agent, employee, licensee or designee, file an application for the registration of any patent, trademark or copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency without giving the Secured Party prior written notice thereof, and, upon request of the Secured Party, the Debtor shall execute and deliver any and all security documents as the Secured Party may request to evidence the Secured Party’s Lien on such Intellectual Property and the general intangibles of the Debtor relating thereto or represented thereby. The Debtor hereby authorizes the Secured Party to amend this Agreement (without any further action or consent from the Debtor) to include any such patent, trademark or copyright as Collateral hereunder. 

(w)    Intellectual Property Abandonment . The Debtor shall take all actions reasonably necessary or requested by the Secured Party to maintain and pursue each application, to obtain the relevant registration and to maintain the registration of its Intellectual Property, including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and opposition and interference and cancellation proceedings. 

(x)    Protection of Intellectual Property . In the event that any of the Debtor’s Intellectual Property is infringed upon, or misappropriated or diluted by a third party, the Debtor shall notify the Secured Party promptly after the Debtor learns thereof. The Debtor shall, unless the Secured Party shall determine that such Intellectual Property is in no way material to the conduct of its business or operations, promptly sue for, and seek recovery of any and all damages resulting from such infringement, misappropriation or dilution, and shall take such other actions as the Secured Party shall deem necessary under the circumstances to protect such Intellectual Property. 

(y)    Chattel Paper . The Debtor shall type, print or stamp conspicuously on the face of all original copies of all Collateral consisting of Chattel Paper and Documents not in the possession of the Secured Party having a value in excess of $100,000 a legend satisfactory to the Secured Party indicating that such Chattel Paper is subject to the security interest granted hereby. 

(z)    Limitation on Filing of Financing Statements . The Debtor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of the Secured Party and agrees that it will not do so without the prior written consent of the Secured Party, subject to the Debtor’s rights under Section 9509(d)(2) of the UCC. 

4.    Event of Default; the Secured Party’s Appointment as Attorney-in-Fact . 

(a)    Event of Default . For purposes of this Agreement, the occurrence of any one of the following events (each, an " Event of Default ") shall constitute a default hereunder and under the Notes or any of the other Credit Documents: 

(i)    The Debtor’s failure to pay or discharge the Obligations in full in accordance with the terms of the Notes or any of the other Credit Documents; 

(ii)    A breach of any representation or warranty made by the Debtor under the this Agreement, the Notes or any of the other Credit Documents as of the date thereof or any other document or instrument entered into between the Debtor and the Secured Party in connection herewith. 

(iii)    The Debtor’s failure to observe or perform any other covenant, obligation, condition or agreement contained in this Agreement, the Notes or any of the other Credit Documents and such failure shall continue for 10 days after the earlier of (i) the Debtor’s written acknowledgement of such failure and (ii) written notice by the Secured Party to the Debtor of such failure. 

(iv)    The insolvency of the Debtor, the commission of any act of bankruptcy by the Debtor, the execution by the Debtor of a general assignment for the benefit of creditors, the filing by or against the Debtor of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without dismissal for a period of 90 days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Debtor. 

(v)    A default shall occur under the Notes or any of the other Credit Documents, or any other agreement entered into between the Debtor and the Secured Party in connection herewith. 

(b)    Powers . The Debtor hereby appoints the Secured Party and any officer or agent of the Secured Party, with full power of substitution, as its attorney-in-fact with full irrevocable power and authority in the place of the Debtor and in the name of the Debtor or its own name, from time to time in the Secured Party’s discretion so long as an Event of Default has occurred and is continuing, for the purpose of carrying out the terms of this Agreement, to take any appropriate action and to authenticate any instrument which may be necessary or desirable to accomplish the purposes of this Agreement. Without limiting the foregoing, so long as an Event of Default has occurred and is continuing, the Secured Party shall have the right, without notice to, or the consent of, the Debtor, to do any of the following on the Debtor’s behalf: 

(i)    to pay or discharge any taxes or Liens levied or placed on or threatened against the Collateral; 

(ii)    to direct any party liable for any payment under any of the Collateral to make payment of any and all amounts due or to become due thereunder directly to the Secured Party or as the Secured Party directs; 

(iii)    to ask for or demand, collect, and receive payment of and receipt for, any payments due or to become due at any time in respect of or arising out of any Collateral; 

(iv)    to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to enforce any right in respect of any Collateral; 

(v)    to defend any suit, action or proceeding brought against the Debtor with respect to any Collateral; 

(vi)    to settle, compromise or adjust any suit, action or proceeding described in subsection (v) above and to give such discharges or releases in connection therewith as the Secured Party may deem appropriate; 

(vii)    to assign any patent right included in the Collateral of the Debtor (along with the goodwill of the business to which any such patent right pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Secured Party shall in its sole discretion determine; and 

(viii)    generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral and to take, at the Secured Party’s option and the Debtor’s expense, any actions which the Secured Party deems necessary to protect, preserve or realize upon the Collateral and the Secured Party’s Liens on the Collateral and to carry out the intent of this Agreement, in each case to the same extent as if the Secured Party were the absolute owner of the Collateral for all purposes. 

The Debtor hereby ratifies whatever actions the Secured Party shall lawfully do or cause to be done in accordance with this Section 4. This power of attorney shall be a power coupled with an interest and shall be irrevocable. 

(c)    No Duty on the Secured Party’s Part . The powers conferred on the Secured Party by this Section 4 are solely to protect the Secured Party’s interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Secured Party nor any of its officers, directors, employees or agents shall, in the absence of willful misconduct or gross negligence, be responsible to the Debtor for any act or failure to act pursuant to this Section 4. 

5.    Performance by the Secured Party of the Debtor’s Obligations . If the Debtor fails to per­form or comply with any of its agreements or covenants contained in this Agreement and the Secured Party performs or complies, or otherwise causes performance or compliance, with such agreement or covenant in accordance with the terms of this Agreement, then the expenses of the Secured Party incurred in connection with such performance or compliance shall be payable by the Debtor to the Secured Party on demand and shall constitute Obligations secured by this Agreement. 

6.    Remedies . If an Event of Default has occurred and is continuing, the Secured Party may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the foregoing, the Secured Party, without demand of performance or other demand, present­ment, protest, advertisement or notice of any kind (except any notice required by law) to or upon the Debtor or any other person (all of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances collect, receive, appropriate and realize upon any or all of the Collateral, and/or may sell, lease, assign, give an option or options to purchase, or otherwise dispose of and deliver any or all of the Collateral (or contract to do any of the foregoing), in one or more parcels at a public or private sale or sales, at any exchange, broker’s board or office of the Secured Party or elsewhere upon such terms and conditions as the Secured Party may deem advisable, for cash or on credit or for future delivery without assumption of any credit risk. The Secured Party shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase all or any part of the Collateral so sold, free of any right or equity of redemption in the Debtor, which right or equity is hereby waived or released. The Secured Party shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable expenses incurred therein or in connection with the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Secured Party under this Agreement (including, without limitation, reasonable attorneys’ fees and expenses) to the payment in whole or in part of the Obligations, in such order as the Secured Party may elect, and only after such application and after the payment by the Secured Party of any other amount required by any provision of law, need the Secured Party account for the surplus, if any, to the Debtor. To the extent permitted by applicable law, the Debtor waives all claims, damages and demands it may acquire against the Secured Party arising out of the exercise by the Secured Party of any of its rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten days before such sale or other disposition. The Debtor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Secured Party to collect such deficiency. 

7.    Limitation on Duties Regarding Preservation of Collateral . The Secured Party’s sole duty with respect to the custody, safekeeping and preservation of the Collateral, under Section 9207 of the UCC or otherwise, shall be to deal with it in the same manner as the Secured Party deals with similar property for its own account. Neither the Secured Party nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Debtor or otherwise. 

8.    Powers Coupled with an Interest . All authorizations and agencies contained in this Agreement with respect to the Collateral are irrevocable and are powers coupled with an interest. 

9.    No Waiver; Cumulative Remedies . The Secured Party shall not by any act (except by a written instrument pursuant to Section 11(a) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default under the Notes or any of the other Credit Documents or in any breach of any of the terms and conditions of this Agreement. No failure to exer­cise, nor any delay in exercising, on the part of the Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Secured Party of any right or remedy under this Agreement on any one occasion shall not be construed as a bar to any right or remedy which the Secured Party would otherwise have on any subsequent occasion. The rights and remedies provided in this Agreement are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 

10.    Termination of Security Interest . Upon satisfaction of the Debtor’s obligations pursuant to the Notes, the security interest granted herein shall terminate and all rights to the Collateral shall revert to the Debtor. Upon any such termination, the Secured Party shall authenticate and deliver to the Debtor such documents as the Debtor may reasonably request to evidence such termination. 

11.    Miscellaneous . 

(a)    Amendments and Waivers . Any term of this Agreement may be amended with the written consent of the parties or their respective successors and assigns. Any amendment or waiver effected in accordance with this Section 11(a) shall be binding upon the parties and their respective successors and assigns. 

(b)    Transfer; Successors and Assigns . The terms and conditions of this Agreement shall be binding upon the Debtor and its successors and assigns, as well as all persons who become bound as a debtor to this Agreement and inure to the benefit of the Secured Party and its successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 

(c)    Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. 

(d)    Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 

(e)    Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 

(f)    Notices . Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice. 

(h)    Payments Free of Taxes, Etc. All payments made by the Debtor under this Agreement shall be made by the Debtor free and clear of and without deduction for any and all present and future taxes, levies, charges, deductions and withholdings. In addition, the Debtor shall pay upon demand any stamp or other taxes, levies or charges of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Agreement. Upon request by the Secured Party, the Debtor shall furnish evidence satisfactory to the Secured Party that all requisite authorizations and approvals by, and notices to and filings with, governmental authorities and regulatory bodies have been obtained and made and that all requisite taxes, levies and charges have been paid. 

(i)    Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms. 

(j)    Entire Agreement . This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto concerning such subject matter are expressly canceled. 

(k)    Amendment and Restatement . Effective upon execution of this Agreement by both parties, the Eighth Amended and Restated Security Agreement dated as of May 29, 2003 between the Debtor and the Secured Party is hereby amended and restated in its entirety to read as set forth in this Agreement. 

 

 

The Debtor and the Secured Party have caused this Agreement to be duly executed and delivered as of the date first above written. 

 

	 	 DEBTOR:
	 	 DIGITAL LIGHTWAVE, INC.
	 	 
	 	
 By: /s/ James R. Green

	 	

	 	
 Name: James R. Green

	
 
	
 Title: CEO

	 	 
	 	 
	 	SECURED PARTY:
	 	OPTEL,  LLC
	 	 
	 	 By: /s/ Chris Phillips
	 	

	 	 Name: Chris Phillips
	 	 Title: CFOExhibit 4.1

                             PROCERA NETWORKS, INC.

                             SUBSCRIPTION AGREEMENT

                   RESTRICTED COMMON STOCK AT $2.00 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").

     (b)     Before  this  subscription  for  the  Shares  is  considered,  the
Participant  must  complete,  execute  and deliver to the Company the following:

          (i)     This  Subscription;

          (ii)    The Registration Rights Agreement, attached hereto as Exhibit
                                                                        -------
B;

          (iii)   The Warrant  Agreement,  attached hereto as Exhibit D, whereby
                                                              ---------
the  Participant  shall  acquire  the right to purchase one Share for each Share
purchased  pursuant  to  this  Subscription;  and

          (iv)    The  Participant's  check in the amount of $__________________
in  exchange  for  ____________shares  purchased, or wire transfer sent with the
following  instructions:

                      COMERICA BANK
                      275 Battery Street, Suite 1100
                      San Francisco, CA 94111
                      Attention: Special Corporate Financial Services, Br #80947
                      Routing Number:        121137522
                      Account Name:          Comerica Bank
                      Account No:            1892247352
                      Special Instructions:  Escrow #49508-0088SUB
                      Benefit Of:            Procera Networks

     (c)     This  Subscription  is  irrevocable  by  the  Participant.

     (d)     This  Subscription  is  not  transferable  or  assignable  by  the
Participant.

     (e)     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.

     (f)     This  Offering,  as defined in the Private Placement Memorandum, is
scheduled  to  close on December 5, 2003 at 1:00 p.m. Pacific Standard Time (the
"Closing  Date"),  provided

                                      A-1
<PAGE>
the Company has received the Minimum Offering of $3,000,000. The Target Offering
is  $6,000,000.

2.  REPRESENTATIONS BY PARTICIPANT. In consideration of the Company's acceptance
of  the Subscription, I make the following representations and warranties to the
Company, to its principals, and to participating broker-dealers, if any, jointly
and severally, which warranties and representations shall survive any acceptance
of  my  subscription  of  the  Shares:

     (a)     I  have  had  the  opportunity  to  ask  questions  and receive any
additional information from persons acting on behalf of the Company to verify my
understanding  of  the  terms  thereof  and of the Company's business and status
thereof,  and  that  no  oral  information  furnished  to  the undersigned or my
advisors  in  connection  with my subscription of the Shares has been in any way
inconsistent  with  other  documentary  information  provided.

     (b)     I  acknowledge that I have 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 my 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.  I or my agents or investment advisors have such knowledge
and  experience in financial and business matters that will enable me to utilize
the  information  made  available  to  me in connection with the purchase of the
Shares  to  evaluate  the  merits  and  risks  thereof  and  to make an informed
investment  decision.

     (d)     I  acknowledge  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 my representations, warranties and agreements made herein.

     (e)     Other  than  the  rights specifically set forth in the Registration
Rights  Agreement,  I  represent,  warrant  and  agree  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)     I  represent that I meet the criteria for participation because (i)
I  have  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  my business or financial experience, or by reason of the business or
financial experience of my 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, I am capable of evaluating the risk and merits of
an  investment  in  the  Shares  and  of  protecting  my  own  interests;  AND

          (i)     I have minimum net worth in excess of $1,000,000, or

          (ii)    I  have  income  in excess of $200,000 or joint income with my
spouse in excess of $300,000 in each of the two most recent years, and I/we have
a  reasonable expectation of reaching the same income level in the current year;
or

                                      A-2
<PAGE>
          (iii)    I am 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)     I  understand  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  I  may not be able to sell or dispose of the Shares, or to
utilize  the  Shares  as  collateral for a loan.  I must not purchase the Shares
unless  I have liquid assets sufficient to assure myself that such purchase will
cause  me  no  undue  financial difficulties and that I can still provide for my
current  and possible personal contingencies, and that the commitment herein for
the  Shares,  combined with other investments of mine, is reasonable in relation
to  my  net  worth.

     (h)     I  understand  that  my  right  to  transfer  the  Shares  will  be
restricted  against  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)     I  have  been  advised to consult with my 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 I
consider  necessary.

     (j)     I  acknowledge  that the tax consequences to me of investing in the
Company will depend on my 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  me of an investment in the Company.  I will look solely to and
rely  upon  my  own  advisers  with  respect  to  the  tax  consequences of this
investment

     (k)     All  information  which  I  have provided to the Company concerning
myself, my financial position and my knowledge of financial and business matters
is  truthful,  accurate,  correct  and complete as of the date set forth herein.

3.     REPRESENTATIONS  AND  WARRANTIES  BY THE COMPANY.  The Company represents
and  warrants  that:

     (a)     Due  Incorporation.  The  Company  is a corporation duly organized,
             ------------------
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

                                      A-3
<PAGE>
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  of the Company have been duly authorized and validly issued and are fully
paid  and  non-assessable.

     (c)     Authority;  Enforceability.  This  Subscription,  the  Warrant
             --------------------------
Agreement,  the Registration Rights Agreement and any other agreements 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 Warrant Agreement, the
Registration  Rights  Agreement  and  such  other  agreements and to perform its
obligations hereunder and under all other agreements entered into by the Company
relating  hereto.

     (d)     Additional  Issuances.  There  are  no  outstanding  agreements  or
             ---------------------
preemptive  or similar rights affecting the Company's common stock or equity and
no  outstanding  rights,  warrants  or  options  to  acquire,  or  instruments
convertible  into  or  exchangeable  for,  or  agreements or understandings with
respect  to  the sale or issuance of any shares of common stock or equity of the
Company or other equity interest in the Company, except as described on Schedule
                                                                        --------
2  attached  hereto.
-

     (e)     Consents.  No  consent,  approval,  authorization  or  order of any
             --------
court,  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.

     (f)     No  Violation  or  Conflict.  Assuming  the  representations  and
             ---------------------------
warranties  of  the  Participants in Section 2 are true and correct, neither the
issuance and sale of the Shares nor the performance of the Company's obligations
under  this  Subscription  and  all other agreements entered into by the Company
relating  thereto  by  the  Company  will:

          (i)     violate, conflict with, result in a breach of, or constitute a
default  (or  an  event  which with the giving of notice or the lapse of time or
both  would  be  reasonably  likely  to  constitute  a  default) under:  (A) the
articles  of  incorporation,  charter  or  bylaws  of  the  Company;  (B) to the
Company's  knowledge, any decree, judgment, order, law, treaty, rule, regulation
or  determination applicable to the Company of any court, governmental agency or
body,  or arbitrator having jurisdiction over the Company or over the properties
or  assets  of  the  Company;  (C) the terms of any bond, debenture, note or any
other  evidence of indebtedness, or any agreement, stock option or other similar
plan, indenture, lease, mortgage, deed of trust or other instrument to which the
Company  or  any of its affiliates is a party, by which the Company is bound, or
to  which  any  of the properties of the Company is subject; or (D) the terms of
any  "lock-up"  or similar provision of any underwriting or similar agreement to
which the Company is a party, except the violation, conflict, breach, or default
of which would not have a material adverse effect on the Company; or

                                      A-4
<PAGE>
          (ii)     result  in  the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company.

     (g)     The  Shares.  The  Shares  upon  issuance:
             -----------

          (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.

     (h)     Litigation.  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
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.

     (i)     Reporting  Company.  The Company is a publicly-held company subject
             ------------------
to  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.

     (j)     No  Market  Manipulation.  The  Company has not taken, and will not
             ------------------------
take,  directly  or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the  common  stock of the Company to facilitate the sale or resale of the Shares
or affect the price at which the Shares may be issued or resold.

     (k)     Stop  Transfer.  The  Shares,  when  issued,  will  be  restricted
             --------------
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.

                                      A-5
<PAGE>
     (l)     Defaults.  The  Company  is  not  in  violation  of its Articles of
             --------
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.

     (m)     No  Integrated  Offering.  Neither  the  Company,  nor  any  of its
             -------------------------
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.

     (n)     No  General  Solicitation.  Neither  the  Company,  nor  any of its
             -------------------------
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.

     (o)     Listing.  The  Company's  common stock is listed for trading on the
             -------
OTC 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.

     (p)     No  Undisclosed  Liabilities.  The  Company  has  no liabilities or
             ----------------------------
obligations which are material, individually or in the aggregate, which have not
been disclosed to Participants, other than those incurred in the ordinary course
of  the  Company's business, since September 30, 2003 and which, individually or
in the aggregate, would reasonably be expected to have a material adverse effect
on  the  Company's  financial  condition.

     (q)     No  Undisclosed Events or Circumstances.  Since September 30, 2003,
             ---------------------------------------
no  event  or circumstance has occurred or exists with respect to the Company or
its  businesses,  properties,  operations  or  financial  condition, that, under
applicable  law,  rule or regulation, requires public disclosure or announcement
prior  to  the  date  hereof  by  the Company but which has not been so publicly
announced  or  disclosed  in  the  Reports.

     (r)     Capitalization.  The  authorized  and  outstanding capital stock of
             --------------
the  Company  as  of  the date of this Subscription and the Closing Date are set
forth  on  Schedule  1  attached hereto and in the Private Placement Memorandum.
           -----------
Except  as  set  forth  on  Schedule  2  attached  hereto, there are no options,
                            -----------
warrants,  or  rights  to  subscribe  to,  securities,  rights  or  obligations
convertible  into  or  exchangeable for or giving any right to subscribe for any
shares of capital stock of the

                                      A-6
<PAGE>
Company.  All of the outstanding shares of Common Stock of the Company have been
duly  and  validly  authorized  and issued and are fully paid and nonassessable.

     (s)     Dilution.  The  Company's  executive  officers  and  directors have
             --------
studied  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.

     (t)     Correctness  of  Representations.  The  Company represents that the
             --------------------------------
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  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  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
             -------------------
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  the  purposes set forth in the Private Placement Memorandum and may not and
will  not  be used for accrued and unpaid officer and director salaries, payment
of  financing related debt, redemption of redeemable notes or equity instruments
of the Company nor non-trade obligations outstanding on the Closing Date, except
as  set  forth  on  Schedule  2  attached  hereto.

     (e)     Reservation  of  Common  Stock.  The  Company undertakes to reserve
             ------------------------------
from  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)     Taxes.  For  a  period  of two (2) years after the date hereof, the
             -----
Company  will  promptly  pay  and discharge, or cause to be paid and discharged,
when  due and payable, all

                                      A-7
<PAGE>
lawful  taxes,  assessments  and governmental charges or levies imposed upon the
income,  profits,  property  or business of the Company; provided, however, that
any  such  tax,  assessment,  charge  or  levy  need not be paid if the validity
thereof  shall  currently  be contested in good faith by appropriate proceedings
and  if  the  Company  shall  have set aside on its books adequate reserves with
respect  thereto,  and  provided,  further,  that  the Company will pay all such
taxes,  assessments,  charges  or  levies  forthwith  upon  the  commencement of
proceedings to foreclose any lien which may have attached as security therefore.

     (g)     Insurance.  For  a  period  of two (2) years after the date hereof,
             ---------
the  Company will keep its assets which are of an insurable character insured by
financially  sound  and  reputable  insurers  against  loss  or  damage by fire,
explosion  and  other  risks  customarily  insured  against  by companies in the
Company's  line  of  business, in amounts sufficient to prevent the Company from
becoming a co-insurer and not in any event less than 100% of the insurable value
of  the  property insured; and the Company will maintain, with financially sound
and  reputable insurers, insurance against other hazards and risks and liability
to  persons and property to the extent and in the manner customary for companies
in  similar  businesses  similarly  situated  and  to  the  extent  available on
commercially  reasonable  terms.

     (h)     Books  and  Records.  For  a period of two (2) years after the date
             -------------------
hereof,  the  Company will keep true records and books of account in which full,
true  and  correct  entries  will  be  made  of  all dealings or transactions in
relation  to  its  business  and  affairs  in accordance with generally accepted
accounting  principles  applied  on  a  consistent  basis.

     (i)     Governmental  Authorities.  For a period of two (2) years after the
             -------------------------
date hereof, the Company shall duly observe and conform in all material respects
to all valid requirements of governmental authorities relating to the conduct of
its  business  or  to  its  properties  or  assets.

     (j)     Intellectual  Property.  For  a  period  of two (2) years after the
             ----------------------
date  hereof,  the Company shall maintain in full force and effect its corporate
existence,  rights  and  franchises  and  all  licenses  and other rights to use
intellectual  property  owned  or  possessed  by  it and reasonably deemed to be
necessary  to  the  conduct  of  its  business.

     (k)     Properties.  For  a  period of two (2) years after the date hereof,
             ----------
the  Company  will  keep  its  properties  in  good  repair,  working  order and
condition,  reasonable  wear  and  tear excepted, and from time to time make all
needful  and  proper repairs, renewals, replacements, additions and improvements
thereto;  and  the  Company  will at all times comply with each provision of all
leases  to which it is a party or under which it occupies property if the breach
of  such  provision  could  reasonably  be  expected  to have a material adverse
effect.

     (l)     Confidentiality.  For  a  period  of  two  (2) years after the date
             ---------------
hereof,  the  Company agrees that it will not disclose publicly or privately the
identity  of  the  Subscribers  unless  expressly  agreed  to  in  writing  by a
Participant  or  only  to  the  extent  required  by  law.

     (m)     Offering  Restrictions.  The  Company  will  not  issue any equity,
             ----------------------
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 ("Exclusion Period") without the
prior  written  consent of the Subscriber, 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 2003 Stock Option Plan.

                                      A-8
<PAGE>
     (n)     Anti-Dilution  Protection.  If  during  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  Subscriber  still holding Shares (the "Triggering Event"), then the
Company shall issue, for each such Triggering Event, additional shares of Common
Stock  to the Subscriber (the "Additional Shares") so that the average per share
purchase  price  of the shares of Common Stock issued to the Subscriber is equal
to  such  other  lower  price  per share.  The delivery to the Subscriber of the
Additional  Shares  shall  be  on  or  before the closing date of the Triggering
Event.  The  Additional  Shares  shall  be delivered to the Subscriber 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(n) shall apply only if the
Company  violates the provisions of Section 4(m) 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.

6.     AGREEMENT  TO  INDEMNIFY  COMPANY.  I  hereby agree to indemnify and hold
harmless  the  Company,  its  principals,  the  Company's  officers,  directors
attorneys,  and  agents, from any and all damages, costs and expenses (including
actual  attorneys'  fees)  which  they  may incur (i) by reason of my failure to
fulfill  any of the terms and conditions of this subscription, (ii) by reason of
my  breach  of  any  of  my  representations, warranties or agreements contained
herein;  (iii)  with  respect  to  any  and  all claims made by or involving any
person,  other than me personally,

                                      A-9
<PAGE>
claiming  any  interest,  right,  title,  power  or  authority in respect to the
Shares.  I  further  agree  and  acknowledge  that  these indemnifications shall
survive  any  sale or transfer, or attempted sale or transfer, of any portion of
the  Shares.

7.     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.

8.     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.

9.     ADOPTION OF TERMS AND PROVISIONS.  The Participant hereby adopts, accepts
and  agrees  to  be  bound  by  all  the  terms  and  provisions  hereof.

10.     GOVERNING  LAW.  This Subscription shall be construed in accordance with
the  laws  of  the  State  of  California.

                                      A-10
<PAGE>
11.     INVESTOR  INFORMATION:

(The  information below should 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.  Subscribers 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.

_____ 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)

                                      A-11
<PAGE>
_____ 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.)

     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, 2003, at______________,_______________.

                                       [See Schedule 3]
                                       ------------------------------
                                       Participant

The Company has accepted this subscription this 5th day of December, 2003.

                                       "COMPANY"

                                       PROCERA  NETWORKS,  INC.,
                                       A NEVADA CORPORATION

                                       By: /s/ Douglas J. Glader
                                           ---------------------
                                            Douglas Glader, CEO

                                       Address for notice:

                                       Procera Networks, Inc.
                                       3175 South Winchester Boulevard
                                       Campbell, CA 95008
                                       Attn: Jay Zerfoss

                                      A-12
<PAGE>
                                   SCHEDULE 1
                                   ----------

                                CAPITALIZATION.

Pro forma Capitalization as of November 14, 2003:

<TABLE>
<CAPTION>
                       AUTHORIZED  OUTSTANDING
                       ----------  -----------
<S>                    <C>         <C>
Preferred Stock         5,000,000            0
Common Stock           50,000,000   21,227,947
Common Stock Warrants         ---    1,732,375
                                   -----------
Pro Forma              55,000,000   22,960,322
</TABLE>

                                      A-13
<PAGE>
                                   SCHEDULE 2
                                   ----------

                              ADDITIONAL ISSUANCES

1.   Warrants issued to 19 Holders to purchase 1,157,375 shares of the Company's
common  stock  at  a  total  purchase  price  of  $403,450.

<TABLE>
<CAPTION>
         NO. OF HOLDERS  FACE AMOUNT   WARRANTS ISSUED
         --------------  ------------  ---------------
<S>      <C>             <C>           <C>
Group 1               3  $         75           75,000
Group 2               1         4,000          400,000
Group 3               4        17,625          235,000
Group 4               8       303,000          404,000
Group 5               1         6,000            6,000
Group 6               2        74,750           37,375
Totals               19  $    403,450        1,157,375
</TABLE>

2.   Non-qualified stock options granted to 3 Holders to purchase 575,000 shares
of  the  Company's  common  stock  at  a  total  purchase  price  of  $73,750.

3.   In  October  2003,  issued  an unsecured convertible promissory note in the
amount of $500,000 to an investor.  The principal amount of the convertible note
payable, together with interest at 8% per annum, is due and payable on April 22,
2004.  The  outstanding  principal  and  accrued  interest  of  the  note  is
convertible, at the option of the holder, into common stock at a conversion rate
of  $2.00  per  share.

                                      A-14
<PAGE>

<TABLE>
<CAPTION>
                               SCHEDULE 3
                               ----------

                  SIGNATORIES TO SUBSCRIPTION AGREEMENT

                           DECEMBER INVESTORS
------------------------------------------------------------------------------
SIGNATORY                                                               DATE
--------------------------------------------------------------------  --------
<S>                                                                   <C>
Platinum Partners Value Arbitrage Fund LP                              12/1/03
--------------------------------------------------------------------  --------
Castle Creek Technology Partners LLC                                   12/4/03
--------------------------------------------------------------------  --------
Capital Ventures International                                         12/4/03
--------------------------------------------------------------------  --------
Gamma Opportunity Capital Partners LP                                  12/2/03
--------------------------------------------------------------------  --------
Alpha Capital AG                                                       12/2/03
--------------------------------------------------------------------  --------
StoneStreet LP                                                        11/26/03
--------------------------------------------------------------------  --------
Professional Traders Fund LLC                                          12/1/03
--------------------------------------------------------------------  --------
First Mirage, Inc.                                                     12/1/03
--------------------------------------------------------------------  --------
Greenwich Growth Fund Limited                                         11/28/03
--------------------------------------------------------------------  --------
Whalehaven Fund Limited                                               11/28/03
--------------------------------------------------------------------  --------
Platinum Partners Global Macro Fund                                    12/1/03
--------------------------------------------------------------------  --------
OTAPE Investments LLC                                                  12/2/03
--------------------------------------------------------------------  --------
WEC Partners LLC                                                       12/1/03
--------------------------------------------------------------------  --------
                            AUGUST INVESTORS
--------------------------------------------------------------------  --------
SIGNATORY                                                               DATE
--------------------------------------------------------------------  --------
John Liviakis                                                          7/31/03
--------------------------------------------------------------------  --------
John A. Sobrato 1979 Revocable Trust                                   7/15/03
--------------------------------------------------------------------  --------
Bear Stearns Securities Corp, custodian for James R. Berdell           7/23/03
--------------------------------------------------------------------  --------
Kirk Rossman                                                           7/22/03
--------------------------------------------------------------------  --------
Phil Economopoulos                                                     7/16/03
--------------------------------------------------------------------  --------
Tom Lenner                                                             7/15/03
--------------------------------------------------------------------  --------
PJE Investments #2                                                     7/16/03
--------------------------------------------------------------------  --------
Thomas R. Grimm                                                        7/15/03
--------------------------------------------------------------------  --------
MLPF&S Custodian FBO Michael L. Peterson IRA                           7/22/03
--------------------------------------------------------------------  --------
Gita V. Iyer                                                           7/15/03
--------------------------------------------------------------------  --------
Jupiter Partners                                                       7/31/03
--------------------------------------------------------------------  --------
Alan R. Brudos                                                         7/31/03
--------------------------------------------------------------------  --------
Bradley Rotter                                                         7/31/03
--------------------------------------------------------------------  --------
Charles Nelson                                                         7/18/03
--------------------------------------------------------------------  --------
Bob L. Arnett & Joan E. Arnett                                         7/17/03
--------------------------------------------------------------------  --------
Mark & Giovanna Bernhard                                               7/31/03
--------------------------------------------------------------------  --------
Joseph B. Childrey                                                     8/21/03
--------------------------------------------------------------------  --------
Patrick DeSilva                                                        7/15/03
--------------------------------------------------------------------  --------

                                      A-15
<PAGE>
--------------------------------------------------------------------  --------
Edward J. Burke                                                        7/15/03
--------------------------------------------------------------------  --------
Robert W. Ledoux                                                       7/31/03
--------------------------------------------------------------------  --------
James A. Wolfenberger/Ann-Marie Wolfenberger                           7/23/03
--------------------------------------------------------------------  --------
Karen L. Hanson                                                        7/16/03
--------------------------------------------------------------------  --------
                            BRIDGE LENDERS
--------------------------------------------------------------------  --------
SIGNATORY                                                               DATE
--------------------------------------------------------------------  --------
Berg McAfee Companies LLC                                              7/31/03
--------------------------------------------------------------------  --------
Eric Mcafee                                                            7/31/03
--------------------------------------------------------------------  --------
Clyde Berg                                                             7/31/03
--------------------------------------------------------------------  --------
Christina Jones                                                        7/31/03
--------------------------------------------------------------------  --------
Elizabeth Rose                                                         8/26/03
--------------------------------------------------------------------  --------
The Minnis Living Trust DTD 3/05/97                                    8/15/03
--------------------------------------------------------------------  --------
Anthony Romano                                                         8/25/03
--------------------------------------------------------------------  --------
Walter B. and Patricia E. Samuelson Revocable Trust DTD May 25, 1996   8/20/03
--------------------------------------------------------------------  --------
W. D. Smythe Revocable Trust DTD 5/15/87                                8/8/03
--------------------------------------------------------------------  --------
Ravinder Sajwan                                                         8/6/03
--------------------------------------------------------------------  --------
Lyles Diversified, Inc.                                                8/22/03
--------------------------------------------------------------------  --------
Wil Lyles                                                              8/22/03
--------------------------------------------------------------------  --------
George Roberts                                                          8/6/03
--------------------------------------------------------------------  --------
                            JUNE INVESTORS
--------------------------------------------------------------------  --------
SIGNATORY                                                               DATE
--------------------------------------------------------------------  --------
Matthew R. Iwasaka                                                     6/19/03
--------------------------------------------------------------------  --------
Pepper Snyder                                                          6/19/03
--------------------------------------------------------------------  --------
Kenneth A. Ikemiya                                                     6/18/03
--------------------------------------------------------------------  --------
David J. Scoffone                                                      6/18/03
--------------------------------------------------------------------  --------
James Svoboda                                                          6/18/03
--------------------------------------------------------------------  --------
Albert Kogura                                                          6/19/03
--------------------------------------------------------------------  --------
Iwasaka 2000 Living Trust                                              6/19/03
--------------------------------------------------------------------  --------
Anthony and Ramona M. Giuliani                                         6/19/03
--------------------------------------------------------------------  --------
Tom Marsella and Darin Marsella                                        7/16/03
--------------------------------------------------------------------  --------
</TABLE>

                                      A-16
<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}]]