QUENTRA NETWORKS, INC.
STOCK PURCHASE AGREEMENT
by and among
QUENTRA NETWORKS, INC.
(the Company), and
Each of the Investors (the Investors)
Listed in Schedule A
As amended on October 10, 2000
Table of Contents
Page No.
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Article I DEFINED TERMS...........................................................................................1
Article II PURCHASE AND SALE TERMS................................................................................3
Section 2.01. Purchase and Sale............................................................................3
Section 2.02. Closing......................................................................................3
Section 2.03. Payment......................................................................................3
Section 2.04. Transfer Legends and Restrictions............................................................4
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................5
Section 3.01. Organization of the Company..................................................................5
Section 3.02. Company Capital Structure....................................................................5
Section 3.03. Authority....................................................................................6
Section 3.04. Valid Issuance of Warrants and Common Stock..................................................6
Section 3.05. No Conflict..................................................................................6
Section 3.06. Securities Laws..............................................................................6
Section 3.07. SEC Filings..................................................................................7
Section 3.08. Subsequent Events............................................................................7
Section 3.09. Brokers, etc.................................................................................7
Article IV REGISTRATION RIGHTS....................................................................................8
Section 4.01. Registration Rights..........................................................................8
Article V REPRESENTATIONS AND WARRANTIES OF THE INVESTORS........................................................10
Section 5.01. Power and Authority.........................................................................10
Section 5.02. Purchase for Investment.....................................................................10
Section 5.03. Financial Matters...........................................................................11
Section 5.04. Brokers, etc................................................................................11
Section 5.05. Subscription Agreements.....................................................................11
Article VI CLOSING CONDITIONS....................................................................................11
Section 6.01. Closing Conditions..........................................................................11
Article VII MISCELLANEOUS........................................................................................12
Section 7.01. Expenses....................................................................................12
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Section 7.02. Remedies Cumulative.........................................................................12
Section 7.03. Severability................................................................................12
Section 7.04. Parties in Interest.........................................................................13
Section 7.05. Notices.....................................................................................13
Section 7.06. No Waiver...................................................................................13
Section 7.07. Amendments and Waivers......................................................................13
Section 7.08. Rights of Investors.........................................................................13
Section 7.09. Survival of Agreements; Indemnification.....................................................13
Section 7.10. Construction................................................................................14
Section 7.11. Entire Understanding........................................................................14
Section 7.12. Counterparts................................................................................14
Section 7.13. Assignment; No Third-Party Beneficiaries....................................................15
Section 7.14. Exhibits....................................................................................15
Article VIII TERMINATION.........................................................................................15
Section 8.01. Termination.................................................................................15
Section 8.02. Effect of Termination.......................................................................15
Schedule A Investors
Exhibit A Form of Escrow Agreement
Exhibit B Form of Subscription Agreement
Exhibit C Form of Warrant
Exhibit D Form of Opinion
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement"), dated September 21, 2000 (the "Effective Date"), between
Quentra Networks, Inc., a Delaware corporation with its principal place of business at 0000 X. Xxxxxxxxx Xxxx.,
Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx, 00000, and each of the Investors listed in Schedule A.
PREAMBLE
The Company wishes to obtain equity financing. The Investors are willing, on the terms and conditions
contained in this Agreement, to purchase the Units with each "Unit" being comprised of four (4) shares of Common
Stock and a Warrant. Capitalized terms are defined in the first Article. Exhibits are incorporated by reference
into this Agreement as though such exhibits were set forth at the point of such reference.
ARTICLE I
DEFINED TERMS
The following terms, when used in this Agreement, have the following meanings, unless the context
otherwise indicates:
"33 Act" means the Securities Act of 1933, as amended, or any similar federal law then in force.
"34 Act" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force.
"Acceptable Currency" means wire transfer of immediately available funds to the Escrow Account.
"Affiliate" means, with respect to any specified Person, (i) any other Person who, directly or
indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such
specified Person, (ii) any other Person who is a director, officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, of the specified Person or a Person
described in clause (i) of this paragraph, (iii) another Person of whom the specified Person is a director,
officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of
equity securities, (iv) another Person in whom the specified Person has a substantial beneficial interest or as
to whom the specified Person serves as trustee or in a similar capacity, or (v) any relative or spouse of the
specified Person or any of the foregoing Persons, any relative of such spouse or any spouse of any such relative;
provided, however, that at any time after the Closing Date, the Company and the Subsidiaries on the one hand and
Investor and its Affiliates (other than the Company and the Subsidiaries) shall not be deemed to be Affiliates of
each other.
"Board of Directors" means the board of directors of the Company.
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"Bylaws" means the bylaws of the Company, as amended.
"Certificate of Incorporation" means the certificate of incorporation of the Company, as originally
filed with the Delaware Secretary of State together with all amendments thereto.
"Closing" shall have the meaning specified in Section 2.02.
"Closing Date" means the date on which the Closing occurs or occurred.
"Closing Location" shall have the meaning specified in Section 2.02.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the $1.00 par value common stock of the Company.
"Company Capital Stock" means (i) shares of Common Stock, (ii) shares of preferred stock of the Company,
and (iii) any other capital stock of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Account" means the account established pursuant to the Escrow Agreement.
"Escrow Agent" means Old Kent Bank.
"Escrow Agreement" means the form attached hereto as Exhibit A, by and among the Company, Advanced
Equities, Inc. and Old Kent Bank
"Investor" means a Person (or its successors or assigns) who purchases Units under this Agreement.
"Losses" shall have the meaning specified in Section 7.09(b).
"Material Adverse Effect" means any material adverse change in, or material adverse effect on, the
business, assets, results of operations, value or financial or other condition of the Company.
"Minimum Amount" means $6,000,000, which amount may be waived by the Company in its sole discretion,
provided that in no event will such amount be less than $5,000,000.
"Person" means an individual, corporation, partnership, association, trust or other entity or
organization, including a government or political subdivision or agency or instrumentality thereof.
"Shares" means any shares of the Common Stock and Shares of Common Stock issued upon exercise of the
Warrants purchased in accordance with the terms of this Agreement, as the context requires.
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"Subscription Agreement" means the Subscription Agreement and Letter of Investment Intent, in the form
of Exhibit B hereto, to be executed by each Investor, the terms of which are incorporated herein and made a part
hereof.
"Subsidiary" or "Subsidiaries" of any Person means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or indirectly owned or controlled by such Person or
one or more Subsidiaries of such Person.
"Transaction Documents" means the Warrant, the Escrow Agreement and the Subscription Agreement.
"Warrant" shall mean a warrant to purchase one share of Common Stock at an exercised price of $2.75 per
share in accordance with the terms an provisions contained in the form of Warrant attached hereto as Exhibit C.
The masculine form of words includes the feminine and the neuter and vice versa, and, unless the context
otherwise requires, the singular form of words includes the plural and vice versa. The words "herein," "hereof,"
"hereunder," and other words of similar import when used in this Agreement refer to this Agreement as a whole,
and not to any particular section or subsection.
ARTICLE II
PURCHASE AND SALE TERMS
Section 2.01. Purchase and Sale. Subject to the terms of this Agreement, the Company shall issue and sell to
the Investors and each Investor shall purchase from the Company at the Closing the number of Units at the
aggregate purchase price set forth opposite its name in Schedule A with respect to the Closing. The obligation
of each Investor to purchase is several and not joint.
Section 2.02. Closing. The purchase and sale of the Units shall take place at such place as the Company and
the Investors mutually agree upon, orally or in writing (the "Closing").
Section 2.03. Payment. Each of the Investors shall pay the purchase price of the Units purchased by it in
full upon execution of this Agreement and acceptance of the Subscription Agreement at the Closing in Acceptable
Currency. Each party to this Agreement acknowledges and understands that purchase price shall not be released to
the Company under the Escrow Agreement until (1) the Company has entered into a definitive agreement to acquire
HomeAccess Microweb, Inc. ("HomeAccess"), through the merger of a wholly owned subsidiary of the Company with and
into HomeAccess, with HomeAccess being the surviving entity (the "Merger"), which Merger will occur
simultaneously with the disbursement of the escrow funds to the Company; or (2) the Company has filed a
preliminary proxy statement on Schedule 14(A) with the Commission seeking stockholder approval of the Merger; and
(3) the Minimum Amount has been received by the Escrow Account (the "Escrow Release Conditions").
Section 2.04. Transfer Legends and Restrictions. The transfer of the Shares or Warrants will be restricted
in accordance with the terms hereof. Each certificate evidencing the Shares or Warrants, including any
certificate issued to any transferee thereof, shall be imprinted with legends in substantially the following form
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(unless otherwise permitted under this Section 2.04 or unless such Shares or Warrants shall have been effectively
registered and sold under the 33 Act and the applicable state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE LAWS
AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION PERTAINING TO SUCH SECURITIES. THEY MAY
NOT BE OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE UNLESS (I) A REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 IS IN EFFECT OR (II) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
The holder of any Shares or Warrants by acceptance thereof agrees, so long as any legend described in
this Section 2.04 shall remain on the certificates evidencing the Shares or Warrants, prior to any transfer of
any of the same (except for a transfer effected pursuant to an effective registration statement under the 33 Act
or in compliance with Rule 144 or Rule 144A thereunder), to give written notice to the Company of such holder's
intention to effect such transfer and agrees to comply in all material respects with the provisions of this
Section 2.04. Such notice, if required, shall describe the proposed method of transfer of the Shares or Warrants
in question. Upon receipt by the Company of such notice, if required, and if in the opinion of counsel to such
holder, which opinion shall be reasonably satisfactory to the Company, the proposed transfer may be effected
without registration under the 33 Act in compliance with an exemption therefrom and under applicable state
securities laws, then the proposed transfer may be effected; provided, however, that in the case of any holder
which is a corporation, trust, partnership or limited liability company, no such opinion of counsel shall be
necessary for a transfer by such Person to a shareholder of such corporation, beneficiary of such trust, partner
of such partnership or member of such limited liability company, as the case may be, or a retired partner of such
partnership or a retired member of such limited liability company, as the case may be, who retires after the date
such Person became a holder, or the estate of any such partner or retired partner or member or retired member, as
the case may be, if the transferee agrees in writing to be subject to the terms of this Section 2.04 to the same
extent as if such transferee were originally a signatory to this Agreement. Upon receipt by the Company of such
opinion and of such agreement by the transferee to be bound by this Section 2.04, the holder of such Shares or
Warrants shall thereupon be entitled to transfer the same in accordance with the terms of the notice (if any)
delivered by such holder to the Company. Each certificate evidencing the Shares issued upon any such transfer
shall bear the legend set forth in this Section 2.04. Upon the written request of a holder of the Shares or
Warrants, the Company shall remove the foregoing legend from the certificates evidencing such Shares or Warrants
and issue to such holder new certificates therefor, free of any transfer legend if, with such request, the
Company shall have received an opinion of counsel selected by the holder, such opinion to be reasonably
satisfactory to the Company, to the effect that any transfers by said holder of such Shares or Warrants may be
made to the public without compliance with either Section 5 of the 33 Act or Rule 144 thereunder and applicable
state securities laws. In no event will such legend be removed if such opinion is based solely upon the "private
offering" exemption of Section 4(2) of the 33 Act.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of the Investors and as of the Closing that:
Section 3.01. Organization of the Company. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company has the corporate power to own its
properties and to carry on its business. The Company is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each jurisdiction in which it conducts business, except where the failure to
so qualify will not cause a Material Adverse Effect on the Company.
Section 3.02. Company Capital Structure. As of the date hereof, the authorized capital stock of the Company
consisted of 70,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). As of the date hereof: (i) 19,176,130 shares of Common Stock are issued and
outstanding; (ii) 708,692 shares of Common Stock are held in the treasury; (iii) 700 shares of Series A
Convertible Preferred Stock are authorized for issuance of which 124 shares are issued and outstanding; (iv)
3,157,895 shares of Series B Convertible Preferred Stock are authorized for issuance of which 3,157,895 shares
are issued and outstanding; and (v) 6,841,405 shares of undesignated Preferred Stock are authorized but unissued.
In addition, as of the date hereof: (A) the Company has reserved for issuance under various stock
option plans of the Company (the "Plans") 7,090,463 shares of Common Stock of which 1,363,229 shares have been
issued and 5,523,512 shares are subject to outstanding unexercised options; and (B) 11,702,986 shares of Common
Stock are subject to outstanding options, warrants or restricted stock awards granted outside the Plans. No
Person is entitled to any preemptive right or right of first refusal with respect to the issuance of the Shares
and the Warrants as contemplated by this Agreement. As of the date hereof, all outstanding shares of Company
Capital Stock were duly authorized, validly issued, fully paid and nonassessable. The Company has no other
capital stock authorized, issued or outstanding.
Section 3.03. Authority. The Company has all requisite power and authority to enter into this Agreement and
the Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company, and no
further action is required on the part of the Company to authorize this Agreement and the Transaction Documents
and the transactions contemplated hereby and thereby. This Agreement and the Escrow Agreement have been, and the
Subscription Agreements and Warrants will be as of the Closing Date, duly executed and delivered by the Company.
Assuming the due authorization, execution and delivery by the other parties to this Agreement and of the
Transaction Documents, this Agreement and the Escrow Agreement constitute, and the Subscription Agreements and
the Warrants when executed will constitute, the valid and binding obligations of the Company, enforceable in
accordance with their terms, except as such enforceability may be limited by principles of public policy and
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subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and to
rules of law governing specific performance, injunctive relief or other equitable remedies.
Section 3.04. Valid Issuance of Warrants and Common Stock. The Shares and Warrants that are being purchased
by the Investors hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be
free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable
state and federal securities laws. The shares of Common Stock issuable upon exercise of the Warrants have been
duly and validly reserved for issuance and, upon issuance in accordance with the terms and provisions of the
Warrant, will be duly and validly issued, fully paid, and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under applicable state and federal
securities laws.
Section 3.05. No Conflict. The execution and delivery by the Company of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and thereby will not conflict with or
result in any violation of or default under (with or without notice or lapse of time, or both) or give rise to a
right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under
(i) any provision of the Certificate of Incorporation and Bylaws of the Company, (ii) any mortgage, indenture,
lease, contract or other agreement or instrument filed as an exhibit to the Company's 34 Act reports to which the
Company or any of its properties or assets is currently subject, or (iii) any material judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its properties or assets.
Section 3.06. Securities Laws. In reliance upon the representations of the Investors contained in this
Agreement and the Subscription Agreement, no consent, authorization, approval, permit or order of or filing with
any governmental or regulatory authority is required under current laws and regulations in connection with the
execution and delivery of this Agreement or the offer, issuance, sale or delivery of the Units, other than (i)
the filing of a Form D pursuant to Regulation D under the Act; (ii) the filing, if required, of any notice with
any state whose laws require such filing; and (iii) the qualification thereof, if required, under the other
applicable state laws, which qualification has been or will be effected as a condition of the offering.
Section 3.07. SEC Filings. The Company has furnished, or made available to each Investor through the XXXXX
Internet web site of the Commission, true and complete copies of its SEC Filings including the risk factors
("Risk Factors") contained in Annual Report on Form 10-K for the year ended March 31, 2000 (the "Annual Report"),
the Quarterly report on Form 10-Q for the quarter ended June 30, 2000 and the Company's definitive proxy
statement for the Annual Meeting of Stockholders held on July 27, 2000 (collectively, the "SEC filings"). Except
as set forth on Schedule 3.07 to this Agreement, as of their respective filing dates, the SEC Filings complied as
to form in all material respects with the applicable requirements of the 34 Act, and the rules and regulations
promulgated thereunder. Except as set forth on Schedule 3.07 to this Agreement, none of the SEC Filings, as of
their respective dates, and taken as a whole with the Risk Factors, contained any untrue statement of a material
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fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were made, not misleading.
Section 3.08. Subsequent Events. Since June 30, 2000, the Company has not incurred any liability or
obligation, contingent or otherwise, that taken as a whole, is material in the aggregate to the Company, except
(i) in the ordinary course of business consistent with past practices, or (ii) as reflected in or reserved
against in the balance sheet of the Company as of June 30, 2000. Since June 30, 2000, the Company has conducted
its business in the ordinary course of business consistent with past practices, and except as contemplated under
this Agreement and the Transaction Documents, there has not been any Material Adverse Effect and there is no
condition existing that could reasonably be expected to result in a Material Adverse Effect on the business of
the Company.
Section 3.09. Brokers, etc. Any fees payable by the Company to any financial advisor, broker, finder, or
other similar Person in connection with the offer or sale of the Units and the transactions contemplated by this
Agreement, shall be the sole and absolute responsibility of the Company and no Investor shall be liable for the
payment of any such fees.
ARTICLE IV
REGISTRATION RIGHTS
Section 4.01. Registration Rights.
(a) The Company agrees that it shall, as its sole expense, use its best efforts to file, within sixty (60)
days of the Closing Date, a registration statement (the "Registration Statement") with the Commission to
register under the 33 Act, for resale by the Investors, the Common Stock purchased pursuant to this
Agreement and the Subscription Agreement, including the Common Stock underlying the Warrants
(collectively the "Registrable Securities"); (i) use its best efforts to cause the Registration
Statement to become effective under the 33 Act as soon as possible after it is filed; (ii) after the
Registration Statement is declared effective under the 33 Act, furnish the undersigned with such number
of copies of the final prospectus included in the Registration Statement as an Investor may reasonably
request to facilitate the resale of the Common Stock; and (iii) use its best efforts to cause such
Registration Statement to remain effective for a period of three (3) years after the Closing Date.
(b) If the Registration Statement is not declared effective by the Commission on or before the date one
hundred and twenty (120) days after the Closing Date (the "Final Filing Date"), each Investor shall be
entitled to receive, on the date after the Final Filing Date (the "First Payment Date") and on each
thirty (30) day anniversary of the First Payment Date thereafter (each a "Penalty Payment Date") until
the Registration Statement is declared effective, the following penalty payments ("Penalty Payments"):
(i) with respect to each of the first four (4) Penalty Payment Dates, (A) that number of additional
shares of Common Stock as is equal to two percent (2%) of the aggregate number of shares of Common
Stock, plus (B) the aggregate number of shares of Common Stock issuable upon exercise of the Warrant,
each as held by such Investor on the Closing Date (the "Additional Securities"); and (ii) with respect
to each of the last four Penalty Payment Dates, cash in an amount equal to $2.75 per share times that
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number of Additional Securities that would otherwise be issuable under Section 4.01(b)(i) on such
Penalty Payment Date; provided, however, that regardless of whether the Registration Statement is
declared effective by the Commission, the Company shall not be obligated to make more than eight (8)
Penalty Payments and the Company shall pay cash in lieu of Additional Securities as a Penalty Payment if
the issuance of such Additional Securities would result in the issuance of greater than 19.90% of the
Company's issued and outstanding Common Stock at the time of the closing of the offering (taking into
account the shares issuable upon the exercise of the Warrants and upon the exercise of warrants issuable
to the Company's financial advisors in connection with the offering). In addition, no Penalty Payment
shall be due and payable with respect to any Penalty Payment Date if the Registration Statement was
declared effective on any date within the thirty (30) days immediately preceding such Penalty Payment
Date.
(c) The Company shall notify each Investor promptly (i) when the Registration Statement or any amendment or
supplement thereto has been filed and when the same (as amended or supplemented, as the case may be) has
become effective, (ii) of the issuance by the Commission 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, (iii) of the receipt by the Company of any notification with respect to the suspension
of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (iv) of the happening of any event or the discovery
of any facts that makes any statement made in the Registration Statement, the prospectus constituting a
part thereof or any document incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, the prospectus constituting a part
thereof or any document incorporated therein by reference in order to make the statements therein not
contain an untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein not misleading. The Company shall make every effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest possible time.
(d) Each Investor agrees that it may not participate in or have its Registrable Securities included in the
Registration Statement unless such Investor completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements or to ensure compliance with the requirements of the 33 Act.
(e) In addition to the information required to be provided in a notice and questionnaire by each Investor to
the Company, the Company may require each Investor to furnish to the Company such additional information
regarding such Investor and such Investor's intended method of distribution of the Registrable
Securities as the Company may from time to time reasonably request in writing, but only to the extent
that such information is required in order to comply with the 33 Act. Each Investor agrees to notify
the Company as promptly as practicable of any inaccuracy or change in information previously furnished
by such Investor to the Company or of the occurrence of any event in either case as a result of which
any prospectus contains or would contain an untrue statement of a material fact regarding such Investor
or such Investor's intended method of disposition of the Registrable Securities or omits to state any
material fact regarding such Investor or such Investor's intended method of disposition of the
Registrable Securities required to be stated therein or necessary to make statements therein not
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misleading in light of the circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished information or required
so that such prospectus shall not contain, with respect to such Investor or the disposition of the
applicable Registrable Securities 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 in light
of the circumstances then existing.
(f) The Company agrees to indemnify, to the extent permitted by law, each Investor and if an entity, such
Investor's directors, officers, trustees, members and each person that controls the undersigned (as
"control" is defined in the 33 Act), against all losses, claims, damages, liabilities and expenses
including, without limitation, reasonable attorneys' fees, caused by any untrue or alleged untrue
statement of material fact contained in the Registration Statement, any prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information furnished in writing to the
Company by such Investor for use therein or by such Investor's negligence, willful misconduct or failure
to deliver a copy of the prospectus, which forms a part of the Registration Statement, or any amendments
or supplements thereto.
(g) Each Investor agrees to indemnify, to the extent permitted by law, the Company, its directors and
officers and each person who controls the Company (within the meaning of the 33 Act) against any and all
losses, claims, damages, liabilities and expenses, including, without limitation, reasonable attorneys'
fees, caused by any untrue or alleged untrue statement of material fact contained in the Registration
Statement, any prospectus or preliminary prospectus or any amendment thereof or supplement thereto or
any omission or alleged omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, insofar as such losses, claims, damages, liabilities and expenses
are caused by any such untrue statement or omission or alleged untrue statement or omission furnished by
such Investor in writing to the Company for use therein or such Investor's failure to provide the
prospective purchaser with a copy of the current prospectus, which forms a part of the Registration
Statement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each of the Investors severally represents and warrants to the Company, at and as of the Closing that:
Section 5.01. Power and Authority. Such Investor has full power and authority and, if not an individual
Investor, has taken all required corporate (or trust, partnership or other entity, as the case may be) and other
action necessary to permit it to execute and deliver this Agreement, and all other documents or instruments
required by this Agreement, and to carry out the terms of this Agreement and of all such other documents or
instruments.
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Section 5.02. Purchase for Investment. Such Investor is purchasing the Shares and Warrants and any Common
Stock issuable upon exercise of the Warrants for its own account and not for the account of any Employee Benefit
Plan (as defined in ERISA) (or if such Units are being acquired for the account of any such Plan, such
acquisition does not involve a nonexempt prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code) and not with a view to distribution thereof, except for transfers permitted hereunder.
Such Investor understands that the Shares and Warrants and any Common Stock issuable upon exercise of the
Warrants must be held indefinitely unless they are registered under the 33 Act or an exemption from such
registration becomes available, and that the Shares and Warrants and any Common Stock issuable upon exercise of
the Warrants may only be transferred as provided in this Agreement and the Subscription Agreement.
Section 5.03. Financial Matters. Such Investor understands that the purchase of the Units involves
substantial risk and that its financial condition and investments are such that it is in a financial position to
hold the Shares and Warrants for an indefinite period of time and to bear the economic risk of, and withstand a
complete loss of, its investment. In addition, by virtue of its expertise, the advice available to it and
previous investment experience, such Investor has extensive knowledge and experience in financial and business
matters, investments, securities and private placements and the capability to evaluate the merits and risks of
the transactions contemplated by this Agreement. Such Investor is not relying upon any of the Company's
financial advisors, including Advanced Equities, Inc., in any manner whatsoever with respect to evaluating the
merits and risks of investment, including but not limited to performing due diligence and/or financial analysis,
with respect to its decision to purchase the Units and has been advised to seek the advice of an attorney and/or
tax counsel regarding its investment in the Units.
During the negotiation of the transactions contemplated herein, the Investors and their representatives
have been afforded full and free access to corporate books, financial statements, records, contracts, documents,
and other information concerning the Company and to its offices and facilities, have been afforded an opportunity
to ask such questions of the Company's officers and employees concerning the Company's business, operations,
financial condition, assets, liabilities and other relevant matters as they have deemed necessary or desirable,
and have been given all such information as has been requested, in order to evaluate the merits and risks of the
prospective investment contemplated herein.
Section 5.04. Brokers, etc. Such Investor has dealt with no broker, finder, commission agent, or other
similar person in connection with the offer or sale of the Units and the transactions contemplated by this
Agreement, and is under no obligation to pay any broker's fee, finder's fee, or commission in connection with
such transactions.
Section 5.05. Subscription Agreements. Such Investor has entered into a Subscription Agreement and all
representations made by such Investor in such agreement are true and correct as of the date hereof.
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ARTICLE VI
CLOSING CONDITIONS
Section 6.01. Closing Conditions. The obligation of each Investor to purchase the Units at the Closing shall
be subject to satisfaction of the following conditions at and as of the Closing:
(a) Issuance of Common Stock and Warrants. The Company shall have duly issued and delivered certificates to
each of the Investors for the number shares of the Common Stock and Warrants at the Closing as provided
in Exhibit 2.01.
(b) Certificate of Officer of the Company. The representations and warranties made by the Company in
Article III shall be true and correct, and the Company shall have delivered to the Investors a
certificate of its chief executive, dated the Closing Date, to the effect that the representations and
warranties of the Company are true at and as of the Closing Date as if made at and as of such date, and
that each of the conditions in this Article VI has been satisfied.
(c) Performance. The Company shall have performed and complied with all agreements and conditions contained
herein required to be performed or complied with by it prior to or at the Closing Date, and the Company
shall have certified to such effect to the Investors in writing.
(d) Escrow Release Conditions. The Escrow Release Conditions shall have been satisfied.
(e) Opinion. On or prior to the Closing Date the Investors shall have received copies of an opinion of
Xxxxxxxx + Xxxxxxxx LLP, counsel to the Company, substantially in the form of Exhibit D attached hereto.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Expenses. The Company and the Investors will each bear their own expenses, including legal
fees, in connection with this Agreement.
Section 7.02. Remedies Cumulative. The remedies provided herein shall be cumulative and shall not preclude
assertion by any party hereto of any other rights or the seeking of any other remedies against the other party
hereto.
Section 7.03. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provisions shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Agreement.
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Section 7.04. Parties in Interest. All covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the respective legal representatives,
successors and assigns of the parties hereto whether so expressed or not.
Section 7.05. Notices. Notices required under this Agreement shall be deemed to have been adequately given
if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with acknowledgement of complete transmission), to an Investor
at its address set forth in Exhibit 2.01 or to the Company at the address set forth in the first paragraph of
this Agreement or such other address as such party may from time to time designate in writing.
Section 7.06. No Waiver. No failure to exercise and no delay in exercising any right, power or privilege
granted under this Agreement shall operate as a waiver of such right, power or privilege. No single or partial
exercise of any right, power or privilege granted under this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in
this Agreement are cumulative and are not exclusive of any rights or remedies provided by law.
Section 7.07. Amendments and Waivers. Except as herein provided, this Agreement may be modified or amended
only by a writing signed by the Company and by the holders of seventy-five percent (75%) of the Units (the
"Required Majority"). Each Investor acknowledges that by the operation of this Section 7.07 the Required
Majority will have the right and power to diminish or eliminate all rights of such Investor under this Agreement.
Section 7.08. Rights of Investors. Each holder of Units shall have the absolute right to exercise or refrain
from exercising any right or rights that such holder may have by reason of this Agreement, including without
limitation the right to consent to the waiver of any obligation of the Company under this Agreement and to enter
into an agreement with the Company for the purpose of modifying this Agreement or any agreement effecting any
such modification, and such holder shall not incur any liability to any other holder or holders of Units with
respect to exercising or refraining from exercising any such right or rights.
Section 7.09. Survival of Agreements; Indemnification.
(a) All agreements, covenants, representations and warranties contained in this Agreement or made in writing
by or on behalf of the Company or the Investors in connection with the transactions contemplated by this
Agreement shall survive the execution and delivery of this Agreement, the Closing, and any investigation
at any time made by or on behalf of any Investor. Notwithstanding the preceding sentence, however, all
such representations (other than intentional misrepresentations) and warranties, but no such agreements
or covenants, shall expire two years after the date of this Agreement.
(b) The Company will defend, indemnify and hold each of the Investors or any other holder of all or any part
of the Units harmless from and against any and all actions, suits, losses, damages, liabilities, claims,
obligations and expenses (including, but not limited to, legal fees and court costs) ("Losses"), whether
or not resulting from judgments or arbitration awards, that shall be suffered or incurred by any such
Investor or holder, as the case may be, resulting from or arising out of any breach of any of the
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representations or warranties of the Company contained in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or to be furnished by the Company hereunder or
thereunder. The Company will defend, indemnify and hold each of the Investors or any other holder of
all or any part of the Units harmless from and against any and all actions, suits, losses, damages,
liabilities, claims, obligations and expenses (including, but not limited to, legal fees and court
costs), whether or not resulting from judgments or arbitration awards, that shall be suffered or
incurred by any such Investor or holder, as the case may be, resulting from or arising out of any breach
of the covenants of the Company contained in this Agreement.
(c) Each Investor will defend, indemnify and hold the Company harmless from and against any and all Losses,
whether or not resulting from judgments or arbitration awards, that shall be suffered or incurred by the
Company resulting from or arising out of any breach of any of the representations or warranties of such
Investor contained in this Agreement or the Subscription Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by such Investor hereunder or thereunder.
Section 7.10. Construction. This Agreement shall be governed by and construed in accordance with the
procedural and substantive laws of the State of Delaware without regard for its conflicts-of-laws rules. The
Company agrees that it may be served with process in the State of Delaware and any action for breach of this
Agreement prosecuted against it in the courts of that State.
Section 7.11. Entire Understanding. This Agreement expresses the entire understanding of the parties and
supersedes all prior and contemporaneous agreements and undertakings of the parties with respect to the subject
matter of this Agreement.
Section 7.12. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which taken together shall constitute one agreement.
Section 7.13. Assignment; No Third-Party Beneficiaries.
(a) This Agreement and the rights hereunder shall not be assignable or transferable by the Investors or the
Company (except in the case of the Company by operation of law in connection with a merger,
consolidation or sale of substantially all the assets of the Company) without the prior written consent
of the other parties hereto. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their respective successors and
assigns.
(b) This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
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Section 7.14. Exhibits. The information disclosed in any Section or Exhibit hereto shall be deemed to be
disclosed and incorporated in any other Section or Exhibit hereto provided that such disclosure is
cross-referenced elsewhere as applicable or unless it is apparent from the express disclosure made that an
exception is being made to such representation or warranty.
ARTICLE VIII
TERMINATION
Section 8.01. Termination. This Agreement may be terminated at any time prior to the Closing by mutual
consent of the Required Majority and the Company;
Section 8.02. Effect of Termination. If this Agreement shall be terminated pursuant to Section 8.01, all
obligations, representations and warranties of the parties hereto under the Agreement shall terminate and there
shall be no liability, except for any breach of this Agreement prior to such termination, of any party to another
party.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officer or person as of the Effective Date.
QUENTRA NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Business Development
and General Counsel
INVESTORS:
If an Individual:
----------------
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[Type or Print Name]
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[Signature]
If an Entity:
------------
----------------------------------
[Type or Print Entity Name]
By:
------------------------------
[Signature]
Name:
-----------------------------
[Type or Print Name]
Title:
----------------------------
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Sch. A-1
SCHEDULE A
INVESTORS
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A-1
EXHIBIT A
FORM OF ESCROW AGREEMENT
[See Attached]
B-1
EXHIBIT B
FORM OF SUBSCRIPTION AGREEMENT
[See Attached]
C-1
EXHIBIT C
FORM OF WARRANT
[See Attached]
D-1
EXHIBIT D
FORM OF OPINION
[See Attached]
