Document:

Exhibit 10.3

    
      

    

    EXHIBIT
      10.3

     

     

    CONFIDENTIAL
      PRIVATE PLACEMENT MEMORANDUM

    SUPPLEMENT
      NO 1

     

    

    

    

    

    Target
      Offering: 15,000,000 Shares of

    COMMON
      STOCK

    $6,000,000
      at $0.40 per Share

    

     

    We
      are
      providing this Confidential Supplement (“Supplement”) to potential investors to
      update information contained in our Confidential Private Placement Memorandum
      (the “PPM”) dated December 7, 2005, which describes the private offering of our
      common shares. Except as otherwise noted, all terms and provisions of the PPM
      are in full force and effect and all terms shall maintain the meaning given
      to
      them in the PPM.

     

    This
      Supplement updates information contained in the PPM and should be read together
      with the PPM. The purpose of this Supplement is to notify prospective investors
      (1) of an increase in the maximum amount of the offering by an additional
      7,500,000 Shares of Common Stock ($3,000,000) for maximum total of 15,000,000
      shares of Common Stock ($6,000,000); and (2) that this Offering shall terminate
      on February 28, 2006. Since the date of the original PPM, there are no other
      material updates.

     

    This
      Supplement should be read in its entirety, and should be read in conjunction
      with, not in lieu, of the PPM. Any statement in the PPM, including statements
      in
      exhibits, will be deemed to be modified and superceded to the extent discussed
      in this Supplement.

     

    Investing
      in the common stock is speculative and involves a high degree of risk. You
      should not invest in the common stock unless you are in a position to lose
      the
      entire amount of your investment. See “RISK
      FACTORS,”
      from our Annual Report on Form 10-KSB (the “Form 10-KSB”), filed with the
      Securities and Exchange Commission (the “SEC”) on March 31, 2005, and our
      Quarterly Report on Form 10-QSB for the period ended October 2, 2005 (the “3Q05
      10-QSB”), filed with the SEC on November 16, 2005 (collectively, the Form 10-KBS
      and the 3Q05 10-QSB, and all other public filings with the SEC are referred
      to
      hereinafter as the “Public Filings”), and are incorporated herein by reference.
      This offering is not complete without reviewing the information presented in
      these documents. You can review these documents free of charge at the SEC
      website, www.SEC.gov.
      

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    THE
      SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OR
      UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND ARE BEING
      OFFERED AND SOLD SOLELY WITHIN THE UNITED STATES EXCLUSIVELY TO ACCREDITED
      INVESTORS (AS DEFINED IN RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT)
      IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
      ACT AND SUCH LAWS. 

    

    THIS
      MEMORANDUM SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
      TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
      WOULD BE UNLAWFUL. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR
      DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
      COMMISSION OR ANY OTHER REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY
      IS UNLAWFUL.

    
 

    The
      common stock of the Company (the “Common
      Stock)
      is
      listed on the Over the Counter Bulletin Board (the “OTCBB”)
      under
      the symbol “PRNW”.
      The
      closing price for the Common Stock on the OTCBB on February 6, 2005 was $0.73.
      The price of the Offered Shares will be Forty Cents ($0.40) per
      share.

     

    
 

     

    The
      date of this Supplement is February 7, 2005.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    PROCERA
      NETWORKS, INC.

    
 

    15,000,000
      Shares of Common Stock

    ($6,000,000)

     

    Summary
      of the Offering

     

    The
      following is a summary of certain aspects of this Amendment to the Memorandum.
      This summary is qualified in its entirety by the more detailed information
      appearing elsewhere in this Amendment and the Memorandum, including the exhibits
      hereto, and the description of any document is qualified in its entirety by
      the
      terms of such document.

    

    
      	
              Issuer:

            	 	
              PROCERA
                NETWORKS, INC., a Nevada corporation (the “Company”).

            
	
              Securities
                Offered:

            	 	
              Up
                to 15,000,000 Shares of ($6,000,000) Common stock of Procera (the
                “Offered
                Shares”).
                The Offered Shares will have certain registration rights as more
                fully
                described in the Registration Rights Agreement. Except as set forth
                in
                such Agreement, Procera will have no other obligation to register
                the
                Offered Shares.

            
	
              Offering
                Price:

            	 	
              Forty
                Cents ($0.40) per Share of Common Stock (the “Offering
                Price”).

            
	
              Common
                Stock Outstanding

            	 	
              Amount
                Prior to the Offering:

            
	 	 	
              30,780,317
                shares of Common Stock (1)

            
	 	 	
              Amount
                After Maximum Offering:

            
	 	 	
              45,780,317
                shares of Common Stock (assuming maximum amount of 15,000,000 shares
                are
                sold) (1)
                (2)

            
	 	 	 	
              (1)
                Excludes 7,500,000 shares of our common stock reserved for issuance
                under
                our two stock option plans under, 

            
	 	 	 	
              (2)
                which options to acquire approximately 3,856,000 shares of our common
                stock were issued and remain outstanding, and 3,644,000 remain available
                for issuance as of February 7, 2006. An additional 150,000 options
                were
                granted outside of the Company’s stock option plans. This also excludes
                7,121,910 shares of Common Stock reserved for issuance upon the exercise
                of warrants issued prior to this Offering.

            
	 	 	 	
              (3)
                Excludes
                up to 1,500,000 shares of common stock issuable upon the exercise
                of
                warrants that we will be issued to the Placement Agent if the maximum
                amount of 15,000,000 Shares are sold in this offering. 

            
	
              Closing
                Date:

            	 	
              The
                Company anticipates closing the Offering on February 28, 2006.Exhibit 10.4

    
      

    

    EXHIBIT
      10.4

    PROCERA
      NETWORKS, INC.

    REGISTRATION
      RIGHTS AGREEMENT

     

    THIS
      REGISTRATION RIGHTS AGREEMENT (the “Agreement”)
      is
      made as of ________________, by and among Procera Networks, Inc., a Nevada
      corporation (the “Company”),
      and
      the undersigned holders of common stock of the Company together with their
      qualifying transferees (the “Holders”).
      Capitalized terms used herein but not otherwise defined shall have the meaning
      assigned to them in the Private Placement Memorandum, dated December 7, 2005
      (the “Memorandum”).

     

    RECITALS:

     

    A.   The
      Company has sold shares of common stock (“Common
      Stock”)
      to the
      Holders pursuant to one or more Subscription Agreements (each a “Subscription”),
      as
      described in the Memorandum. 

    

    B.    The
      sale
      of the Common Stock is conditional upon the extension of the rights set forth
      herein, and by this Agreement the Company and the Holders desire to provide
      for
      certain rights as set forth herein.

    

    NOW,
      THEREFORE, in consideration of the foregoing and of the mutual promises and
      covenants contained herein, the parties, severally and not jointly, hereby
      agree
      as follows:

    

    AGREEMENT:

    

    
      	 	
              1.

            	
              Registration
                Rights.

            

    

    

    1.1    Definitions.
      As used
      in this Agreement, the following terms shall have the following respective
      meanings:

    

    (a)    The
      terms
“register,”
      “registered,”
and
      “registration”
refer
      to a registration effected by preparing and filing a registration statement
      in
      compliance with the Securities Act of 1933, as amended (the “Securities
      Act”),
      and
      the declaration or ordering of the effectiveness of such registration
      statement.

    

    (b)    The
      term
“Restricted
      Securities”
means:
      (i) any and all shares of Common Stock of the Company issued and sold by
      the Company pursuant to the Subscription Agreement (which shares of Restricted
      Common Stock are referred to herein as the “Common
      Stock”);
      (ii) stock issued in lieu of the stock referred to in (i) in any
      reorganization which has not been sold to the public; and (iii) stock
      issued in respect of the stock referred to in (i) and (ii) as a result
      of a stock split, stock dividend, recapitalization or the like, which has not
      been sold to the public.

    

    (c)    The
      terms
“Holder”
or
      “Holders”
means
      any person or persons to whom Restricted Securities were originally issued
      or
      qualifying transferees under subsection 1.8 hereof who hold Restricted
      Securities.

    

    (d)    The
      term
“Initiating
      Holders”
means
      any Holder or Holders, of 40% or greater of the aggregate of the Restricted
      Securities then outstanding.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e)    The
      term
“SEC”
means
      the Securities and Exchange Commission.

    

    (f)    The
      term
“Registration
      Expenses”
shall
      mean all expenses incurred by the Company in complying with subsections 1.2
      and
      1.3 hereof, including, without limitation, all registration, qualification
      and
      filing fees, printing expenses, escrow fees, fees and disbursements of counsel
      for the Company, blue sky fees and expenses, and the expense of any special
      audits incident to or required by any such registration (but excluding the
      compensation of regular employees of the Company which shall be paid in any
      event by the Company.)

    

    (g)    The
      term
“Effective
      Date”
shall
      be the final closing date of the entire Offering described in the Subscription
      and the Memorandum.

    

    1.2   Company
      Registration.
      The
      Company shall use commercially reasonable efforts to file a registration
      statement, on the appropriate form, with the SEC, within ninety (90) days of
      the
      Effective Date. Such registration shall include all of the Restricted Securities
      sold in the Offering and other restricted common stock of the Company selected
      by the Company.

    

    1.3   Expenses
      of Registration.
      All
      Registration Expenses incurred in connection with any registration,
      qualification, or compliance pursuant to this Section 1 shall be borne by
      the Company except as follows:

    

    (a)    The
      Company shall not be required to pay fees or disbursements of legal counsel
      for
      the Holders; and

    

    (b)    The
      Company shall not be required to pay underwriters’ fees, discounts, or
      commissions relating to Restricted Securities.

    

    1.4   Registration
      Procedures.
      In the
      case of each registration, qualification, or compliance effected by the Company
      pursuant to this Rights Agreement, the Company will keep each Holder
      participating therein advised in writing as to the initiation of each
      registration, qualification, and compliance and as to the completion thereof.
      Except as otherwise provided in subsection 1.3, at its expense, the Company
      will:

    

    (a)    Prepare
      and file with the SEC a registration statement with respect to such Restricted
      Securities and use its best efforts to cause such registration statement to
      become effective, and, upon the request of the Holders of a majority of the
      Restricted Securities registered thereunder, keep such registration statement
      effective for up to 120 days, or if such registration statement is on Form
      S-3
      (or any successor to Form S-3) and provides for sales of securities from time
      to
      time pursuant to Rule 415 under the Securities Act, for up to one
      year;

    

    (b)    Prepare
      and file with the SEC such amendments and supplements to such registration
      statement and the prospectus used in connection with such registration statement
      as may be necessary to comply with the provisions of the Securities Act with
      respect to the disposition of all securities covered by such registration
      statement;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)    Furnish,
      without charge, to the Holders such numbers of copies of a prospectus, including
      each preliminary prospectus, in conformity with the requirements of the
      Securities Act, and such other documents as they may reasonably request in
      order
      to facilitate the disposition of Restricted Securities owned by
      them;

    

    (d)    Use
      its
      best efforts to register and qualify the securities covered by such registration
      statement under such other securities or Blue Sky laws of such jurisdictions
      as
      shall be reasonably requested by the Holders or any managing underwriter,
      provided that the Company shall not be required, in connection therewith or
      as a
      condition thereto, to qualify to do business or to file a general consent to
      service of process in any such states or jurisdictions;

    

    (e)    In
      the
      event of any underwritten public offering, enter into and perform its
      obligations under an underwriting agreement, in usual and customary form, with
      the managing underwriter of such offering. Each Holder participating in such
      underwriting shall also enter into and perform its obligations under such an
      agreement;

    

    (f)    Notify
      each Holder of Restricted Securities covered by such registration statement
      at
      any time when a prospectus relating thereto is required to be delivered under
      the Securities Act or the happening of any event as a result of which the
      prospectus included in such registration statement, as then in effect, includes
      an untrue statement of a material fact or omits to state a material fact
      required to be stated therein or necessary to make the statements therein not
      misleading in the light of the circumstances then existing;

    

    (g)    Make
      available for inspection by a representative of the Holders, the managing
      underwriter participating in any disposition pursuant to such registration
      statement and one firm of attorneys designated by the Holders (upon execution
      of
      customary confidentiality agreements reasonably satisfactory to the Company
      and
      its counsel), at reasonable times and in reasonable manner, financial and other
      records, documents and properties of the Company that are pertinent to the
      conduct of due diligence customary for an underwritten offering, and cause
      the
      officers, directors, and employees of the Company to supply all information
      reasonably requested by any such representative, underwriter, or attorney in
      connection with a registration statement, as shall be necessary to enable such
      persons to conduct a reasonable investigation within the meaning of Section
      11
      of the Securities Act;

    

    (h)    Use
      its
      best efforts to cause all Restricted Securities covered by a registration
      statement to be listed on any securities exchange or any automated quotation
      system on which similar securities issued by the Company are then
      listed;

    

    (i)    
Cause
      to
      be provided to the Holders that are selling Restricted Securities pursuant
      to
      such registration statement and to the managing underwriter, if any disposition
      pursuant to such registration statement is an underwritten offering, upon the
      effectiveness of such registration statement, a customary opinion of independent
      counsel (an “Opinion”)
      and a
      customary “cold comfort” letter of independent auditors (a “Comfort
      Letter”)
      in
      each case addressed to such Holders and managing underwriter, if
      any;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (j)    
Notify
      in
      writing the Holders that are selling Restricted Securities pursuant to such
      registration statement and any managing underwriter if any disposition pursuant
      to such registration statement is an underwritten offering: (i) when the
      registration statement has become effective and when any post-effective
      amendment thereto has been filed and becomes effective; (ii) of any request
      by
      the SEC or any state securities authority for amendments and supplements to
      the
      registration statement, or of any material request by the SEC or any state
      securities authority for additional information after the registration statement
      has become effective; (iii) of the issuance by the SEC or any state securities
      authority of any stop order suspending the effectiveness of the registration
      statement, or the initiation of any proceedings for that purpose; (iv) if,
      between the effective date of the registration statement and the closing of
      any
      sale of Restricted Securities covered thereby, the representations and
      warranties of the Company contained in any underwriting agreement, securities
      sales agreement, or other similar agreement, including this Agreement, relating
      to disclosure cease to be true and correct in all material respects or if the
      Company receives any notification with respect to the suspension of the
      qualification of the Restricted Securities for sale in any jurisdiction or
      the
      initiation of any proceeding for such purpose; (v) of the happening of any
      event
      during the period the registration statement is effective such that such
      registration statement or the related prospectus contains an untrue statement
      of
      a material fact or omits to state a material fact required to be stated therein
      or necessary to make statements therein not misleading (in the case of a
      prospectus, in light of circumstances under which they were made); and (vi)
      of
      any determination by the Company that a post-effective amendment to the
      registration statement would be appropriate. The Holders hereby agree to
      suspend, and to cause any managing underwriter to suspend, use of the prospectus
      contained in a registration statement upon receipt of such notice under clause
      (iii), (v) or (vi) above until, in the case of clause (iii), such stop order
      is
      removed or rescinded or, in the case of clauses (v) and (vi), the Company has
      amended or supplemented such prospectus to correct such misstatement or omission
      or otherwise;

    

    If
      the
      notification relates to an event described in clauses (v) or (vi), the Company
      shall promptly prepare and furnish to such seller and each underwriter, if
      any,
      a reasonable number of copies of a prospectus supplemented or amended so that,
      as thereafter delivered to the purchasers of such Restricted Securities, such
      prospectus shall not include an untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading;

    

    (k)    Provide
      and cause to be maintained a transfer agent and registrar for all such
      Restricted Securities covered by such registration statement not later than
      the
      effective date of such registration statement;

    

    (l)    
Deliver
      promptly to each Holder participating in the offering and each underwriter,
      if
      any, copies of all correspondence between the SEC and the Company, its counsel
      or auditors and all memoranda relating to discussions with the SEC and its
      staff
      with respect to the registration statement, other than those portions of any
      such correspondence and memoranda which contain information subject to
      attorney-client privilege with respect to the Company, and, upon receipt of
      such
      confidentiality agreements as the Company may reasonably request, make
      reasonably available for inspection by any Holder of such Restricted Securities
      covered by such registration statement, by any underwriter, if any,
      participating in any disposition to be effected pursuant to such registration
      statement and by any attorney, accountant or other agent retained by any such
      Holder or any such underwriter, all pertinent financial and other records,
      pertinent corporate documents and properties of the Company, and cause all
      of
      the Company’s officers, directors and employees to supply all information
      reasonably requested by any such Holder, underwriter, attorney, accountant,
      or
      agent in connection with such registration statement;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (m)    Use
      its
      best efforts to obtain the withdrawal of any order suspending the effectiveness
      of the registration statement;

    

    (n)    Provide
      a
      CUSIP number for all Restricted Securities not later than the effective date
      of
      the registration statement;

    

    (o)    Make
      reasonably available its employees and personnel and otherwise provide
      reasonable assistance to the underwriters in the marketing of Restricted
      Securities in any underwritten offering;

    

    (p)    Promptly
      prior to the filing of any document which is to be incorporated by reference
      into the registration statement or the prospectus (after the initial filing
      of
      such registration statement) provide copies of such document to counsel to
      the
      seller of Restricted Securities and to the managing underwriter, if any, and
      make the Company’s representatives reasonably available for discussion of such
      document and make such changes in such document concerning such sellers prior
      to
      the filing thereof as counsel for such sellers or underwriters may reasonably
      request; and

    

    
      	 	
              1.5

            	
              Indemnification.

            

    

    

    (a)    The
      Company will indemnify and hold harmless to the fullest extent permitted by
      law
      each Holder of Restricted Securities and each of its officers, directors and
      partners, and each person controlling such Holder, with respect to which such
      registration, qualification, or compliance has been effected pursuant to this
      Agreement, and each underwriter, if any, and each person who controls any
      underwriter of the Restricted Securities held by or issuable to such Holder,
      against all claims, losses, expenses, damages, and liabilities (or actions
      in
      respect thereto) arising out of or based on: (i) any untrue statement (or
      alleged untrue statement) of a material fact contained in any registration
      statement under which such securities were registered under the Securities
      Act
      or the omission or alleged omission to state therein a material fact required
      to
      be stated therein or necessary to make the statements therein not misleading;
      (ii) any untrue statement (or alleged untrue statement) of a material fact
      contained in any preliminary, final or summary prospectus, offering circular,
      or
      other document (including any related registration statement, notification
      or
      the like) incident to any such registration, qualification, or compliance,
      or
      based on any omission (or alleged omission) to state therein a material fact
      required to be stated therein or necessary to make the statement therein, in
      light of the circumstances under which they were made, or not misleading; or
      (iii) any violation (or alleged violation) by the Company of the Securities
      Act,
      the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”),
      or
      any state securities law applicable to the Company, or any rule or regulation
      promulgated under the Securities Act, the Exchange Act, or any such state law
      and relating to action or inaction required of the Company in connection with
      any such registration, qualification, or compliance, and will reimburse each
      such Holder, each of its officers, directors, and partners, and each person
      controlling such Holder, each such underwriter and each person who controls
      any
      such underwriter, within a reasonable amount of time after incurred, for any
      reasonable legal and any other expenses incurred in connection with
      investigating, defending, or settling any such claim, loss, damage, liability,
      or action; provided, however, that the indemnity agreement contained in this
      subsection 1.5(a) shall not apply to amounts paid in settlement of any such
      claim, loss, damage, liability, or action if such settlement is effected without
      the consent of the Company (which consent shall not be unreasonably withheld);
      and provided further, that the Company will not be liable in any such case
      to
      the extent that any such claim, loss, damage, or liability arises out of, or
      is
      based on, any untrue statement or omission based upon written information
      furnished to the Company by an instrument duly executed by such Holder or
      underwriter specifically for use therein.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)    Each
      Holder will, if Restricted Securities held by or issuable to such Holder are
      included in the securities as to which such registration, qualification or
      compliance is being effected, severally and not jointly, indemnify and hold
      harmless to the fullest extent permitted by law the Company, each of its
      directors and officers, each underwriter, if any, of the Company’s securities
      covered by such a registration statement, each person who controls the Company
      within the meaning of the Securities Act, and each other such Holder, each
      of
      its officers, directors, and partners and each person controlling such Holder,
      against all claims, losses, expenses, damages and liabilities (or actions in
      respect thereof) arising out of or based on any untrue statement (or alleged
      untrue statement) of a material fact contained in any such registration
      statement, prospectus, offering circular, or other document, or any omission
      (or
      alleged omission) to state therein a material fact required to be stated therein
      or necessary to make the statements therein not misleading, and will reimburse
      the Company, such Holders, such directors, officers, partners, persons, or
      underwriters for any reasonable legal or any other expenses incurred in
      connection with investigating, defending, or settling any such claim, loss,
      damage, liability or action, in each case to the extent, but only to the extent,
      that such untrue statement (or alleged untrue statement) or omission (or alleged
      omission) is made in such registration statement, prospectus, offering circular,
      or other document in reliance upon and in conformity with written information
      furnished to the Company by the Holder in an instrument duly executed by such
      Holder specifically for use therein; provided, however, that the indemnity
      agreement contained in this subsection 1.5(b) shall not apply to amounts paid
      in
      settlement of any such claim, loss, damage, liability, or action if such
      settlement is effected without the consent of the Holder (which consent shall
      not be unreasonably withheld); provided further, that the total amount for
      which
      any Holder shall be liable under this subsection 1.5(b) shall not in any event
      exceed the net proceeds received by such Holder from the sale of Restricted
      Securities held by such Holder in such registration; and provided further,
      that
      a Holder will not be liable in any such case to the extent that any such claim,
      loss, damage, or liability arises out of or is based on any untrue statement
      or
      omission based upon written information furnished to the Holder by an instrument
      duly executed by the Company or underwriter specifically for use
      therein.

    

    (c)    Each
      party entitled to indemnification under this subsection 1.5 (the
“Indemnified
      Party”)
      shall
      give notice to the party required to provide indemnification (the “Indemnifying
      Party”)
      promptly after such Indemnified Party has actual knowledge of any claim as
      to
      which indemnity may be sought, and shall permit the Indemnifying Party to assume
      the defense of any such claim or any litigation resulting therefrom; provided
      that counsel for the Indemnifying Party, who shall conduct the defense of such
      claim or litigation, shall be approved by the Indemnified Party (whose approval
      shall not be unreasonably withheld), and the Indemnified Party may participate
      in such defense at such party’s expense; and provided further, that the failure
      of any Indemnified Party to give notice as provided herein shall not relieve
      the
      Indemnifying Party of its obligations hereunder, except to the extent such
      failure resulted in material prejudice to the Indemnifying Party; and provided
      further, that an Indemnified Party (together with all other Indemnified Parties
      which may be represented without conflict by one counsel) shall have the right
      to retain one separate counsel, with the fees and expenses to be paid by the
      Indemnifying Party, if representation of such Indemnified Party by the counsel
      retained by the Indemnifying Party would be inappropriate due to actual or
      potential differing interests between such Indemnified Party and any other
      party
      represented by such counsel in such proceeding. No Indemnifying Party, in the
      defense of any such claim or litigation, shall, except with the consent of
      each
      Indemnified Party, consent to entry of any judgment or enter into any settlement
      which does not include as an unconditional term thereof the giving by the
      claimant or plaintiff to such Indemnified Party of a release from all liability
      in respect to such claim or litigation.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)    If
      for
      any reason the foregoing indemnity is unavailable or is insufficient to hold
      harmless an indemnified party under Section 1.5, then each Indemnifying Party
      shall contribute to the amount paid or payable by such Indemnified Party as
      a
      result of any Claim in such proportion as is appropriate to reflect the relative
      fault of the Indemnifying Party, on the one hand, and the Indemnified Party,
      on
      the other hand, with respect to such offering of securities. The relative fault
      shall be determined by reference to, among other things, whether the untrue
      or
      alleged untrue statement of a material fact or the omission or alleged omission
      to state a material fact relates to information supplied by the Indemnifying
      Party or the Indemnified Party and the parties' relative intent, knowledge,
      access to information, and opportunity to correct or prevent such untrue
      statement or omission. If, however, the allocation provided in the second
      preceding sentence is not permitted by applicable law, then each Indemnifying
      Party shall contribute to the amount paid or payable by such Indemnified Party
      in such proportion as is appropriate to reflect not only such relative faults,
      but also any other relevant equitable considerations. The parties hereto agree
      that it would not be just and equitable if contributions pursuant to this
      Section 1.5(d) were to be determined by pro rata allocation or by any other
      method of allocation which does not take into account the equitable
      considerations referred to in the preceding sentences of this
      Section 1.5(d). The amount paid or payable in respect of any Claim shall be
      deemed to include any legal or other expenses reasonably incurred by such
      Indemnified Party in connection with investigating or defending any such Claim.
      No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f)
      of the U.S. Securities Act) shall be entitled to contribution from any person
      who was not guilty of such fraudulent misrepresentation. Notwithstanding
      anything in this Section 1.5
      to the contrary, no Indemnifying Party (other than the Company) shall be
      required pursuant to this Section
      1.5(d) to contribute any amount in excess of the net proceeds received by such
      Indemnifying Party from the sale of Restricted Securities in the offering to
      which the losses, claims, damages, or liabilities of the Indemnified Parties
      relate, less the amount of any indemnification payment made pursuant to Section
      1.5.

    

    (e)    The
      indemnity agreements contained herein shall be in addition to any other rights
      to indemnification or contribution which any Indemnified Party may have pursuant
      to law or contract and shall remain operative and in full force and effect
      regardless of any investigation made or omitted by, or on behalf of, any
      Indemnified Party and shall survive the transfer of the Restricted Securities
      by
      any such party.

    

    1.6   Information
      by Holder.
      Any
      Holder or Holders of Restricted Securities included in any registration shall
      promptly furnish to the Company such information regarding such Holder or
      Holders and the distribution proposed by such Holder or Holders as the Company
      may request in writing and as shall be required in connection with any
      registration, qualification, or compliance referred to herein.

    

    1.7   Rule
      144 Reporting.
      With a
      view to making available to Holders the benefits of certain rules and
      regulations of the SEC which may permit the sale of the Restricted Securities
      to
      the public without registration, the Company agrees at all times to use best
      efforts to:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    (a)    make
      and
      keep public information available, as those terms are understood and defined
      in
      SEC Rule 144, beginning 90 days after the effective date of the first
      registration filed by the Company for an offering of its securities to the
      general public;

    

    (b)    file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the Securities Act and the Exchange Act (at any time after it
      has
      become subject to such reporting requirements); and

    

    (c)    so
      long
      as a Holder owns any Restricted Securities, to furnish to such Holder forthwith
      upon request a written statement by the Company as to its compliance with the
      reporting requirements of said Rule 144 (beginning 90 days after the
      effective date of the first registration statement filed by the Company for
      an
      offering of its securities to the general public), and of the Securities Act
      and
      the Exchange Act (at any time after it has become subject to such reporting
      requirements), a copy of the most recent annual or quarterly report of the
      Company, and such other reports and documents so filed by the Company as the
      Holder may reasonably request in complying with any rule or regulation of the
      SEC allowing the Holder to sell any such securities without
      registration.

    

    1.8   Transfer
      of Registration Rights.
      Holders’ rights to cause the Company to register their securities and keep
      information available, granted to them by the Company under subsections 1.2
      and 1.7, may be assigned to a transferee or assignee of: (i) at least
      100,000 shares (as adjusted for stock splits, stock dividends, recapitalizations
      and like events); (ii) the transfer is in connection with the transfer of
      all shares of a Holder; or (iii) to any constituent partners or members of
      a Holder which is a partnership or limited liability company, or to affiliates
      (as such term is defined in Rule 405 of the Securities Act) of a Holder,
      provided, that (a) the Company is given written notice by such Holder at the
      time of or within a reasonable time after said transfer, stating the name and
      address of said transferee or assignee and identifying the securities with
      respect to which such registration rights are being assigned; and (b) solely
      as
      to transfers pursuant to clause (iii) above, any transferees or assignees
      agree to act through a single representative. The Company may prohibit the
      transfer of any Holders’ rights under this subsection 1.8 to any proposed
      transferee or assignee who the Company reasonably believes is a competitor
      of
      the Company. Notwithstanding anything else in this subsection 1.8, any Holder
      may transfer rights to a transferee of a Holder’s Restricted Securities if such
      transferee is a partner, member, or shareholder or a retired partner, member,
      or
      shareholder of such Holder. 

    

    1.9   Delay
      of Registration.
      No
      Holder shall have any rights to take any actions to restrain, enjoin, or
      otherwise delay any registration as the result of any controversy that might
      arise with respect to the interpretation or implementation of this Section
      1.

    

    1.10        
      Termination
      of Registration Rights.
      No
      holder shall be entitled to exercise any right provided for in this Section
      1 at
      any time when such Holder may sell all its shares in a three (3) month period
      under Rule 144 of the Securities Act.

    

    
      	 	
              2.

            	
              General.

            

    

    

    2.1   Waivers
      and Amendments.
      With
      the written consent of the record holders of at least a majority of the
      Restricted Securities, the obligations of the Company and the rights of the
      parties under this Agreement may be waived (either generally or in a particular
      instance, either retroactively or prospectively, and either for a specified
      period of time or indefinitely), and with the same consent the Company, when
      authorized by resolution of its Board of Directors, may enter into a
      supplementary agreement for the purpose of adding any provisions to or changing
      in any manner or eliminating any of the provisions of this Agreement; provided,
      however, that no such modification, amendment, or waiver shall reduce the
      aforesaid percentage of Restricted Securities without the consent of all of
      the
      Holders of the Restricted Securities. Notwithstanding the foregoing,
      subsections 2.1, 2.2, 2.3, 2.4 and 2.7 may be amended only with the written
      consent of the Company and a majority of the shares then held by Qualified
      Holders. Upon the effectuation of each such waiver, consent, agreement of
      amendment or modification, the Company shall promptly give written notice
      thereof to the record holders of the Restricted Securities or Qualified Holders,
      as the case may be, who have not previously consented thereto in writing. This
      Agreement or any provision hereof may be changed, waived, discharged, or
      terminated only by a statement in writing signed by the party against which
      enforcement of the change, waiver, discharge, or termination is sought, except
      to the extent provided in this subsection 3.1. In addition, the Company
      will grant the Holders any rights of first refusal or registration rights
      granted to subsequent purchasers of the Company’s equity securities to the
      extent that such subsequent rights are superior, in good faith judgment of
      the
      Company’s Board of Directors, to those granted in connection with the
      transaction.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.2   Governing
      Law.
      This
      Agreement shall be governed in all respects by the laws of the State of
      California as such laws are applied to agreements between California residents
      entered into and to be performed entirely within California without regard
      to
      its conflict of law principles.

    

    2.3   Successors
      and Assigns.
      Except
      as otherwise expressly provided herein, the provisions hereof shall inure to
      the
      benefit of, and be binding upon, the successors, assigns, heirs, executors
      and
      administrators of the parties hereto.

    

    2.4   Entire
      Agreement.
      Except
      as set forth below, this Agreement and the other documents delivered pursuant
      hereto constitute the full and entire understanding and agreement between the
      parties with regard to the subjects hereof and thereof, and this Agreement
      shall
      supersede and cancel all prior agreements between the parties hereto with regard
      to the subject matter hereof.

    

    2.5   Notices,
      etc.
      All
      notices and other communications required or permitted hereunder shall be in
      writing and shall be delivered by overnight courier service, or mailed by first
      class mail, postage prepaid, certified or registered mail, return receipt
      requested, addressed: (a) if to any Purchaser, at such party’s address as
      set forth in the Company’s records, or at such other address as such party shall
      have furnished to the Company in writing; or (b) if to the Company, at such
      address as the Company shall have furnished to the Purchaser in
      writing.

    

    2.6   Severability.
      In case
      any provision of this Agreement shall be invalid, illegal, or unenforceable,
      the
      validity, legality, and enforceability of the remaining provisions of this
      Agreement or any provision of the other Agreements shall not in any way be
      affected or impaired thereby.

    

    2.7   Titles
      and Subtitles.
      The
      titles of the sections and subsections of this Agreement are for convenience
      of
      reference only and are not to be considered in construing this
      Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.8   Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      an original, but all of which together shall constitute one
      instrument.

    

    IN
      WITNESS WHEREOF, the parties hereby have executed this Agreement on the date
      set
      forth underneath their respective signatures below.

    

    
      	 	 	 	
              “COMPANY”

            	 
	 	 	 	 	 	 
	 	 	 	
              PROCERA
                NETWORKS, INC.,

            	 
	 	 	 	
              a
                Nevada corporation

            	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	
              By:
                

            	 	 
	 	 	 	
              Doug
                Glader, Chief Executive Officer

            	 
	 	 	 	 	 	 
	 	 	 	
              Date:

            	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	"Holder"	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	
              By:
                

            	 	 
	 	 	 	 	 	 
	 	 	 	
              Its:
                

            	 	 
	 	 	 	 	 	 
	
              Date:

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